Thoughts in Between

by Matt Clifford

TiB 121: The geopolitics of digital currencies; how to avoid a civil war; experiments in techno-populism; and more...

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The geopolitics of digital currencies

The US’s coronavirus response seems to be going horribly wrong and some are wondering - if it takes the US much longer than the rest of the developed world to get back to social and economic normality - whether it marks the beginning of the end of the dollar’s dominance (Others are skeptical). At the same time, the US’s competitors are making moves to disentangle themselves from the dollar (we talked about this briefly before), as this interesting short piece on China’s experiments with creating "digital Renminbi" shows.

As it happens, Havard’s Belfer Center ran a simulation of a very similar situation back in November, with Larry Summers, Ash Carter and others roleplaying a US Cabinet confronting an international crisis in a world where digital RMB had gone mainstream. You can see the video here and read a recap here. The important takeaway is how much the US relies on its dominance of the international payments system to impose sanctions and achieve its foreign policy goals - and how much that’s undermined by the emergence of digital currencies.

The dollar’s status as the global reserve currency has been a cornerstone of US geopolitical power. But, as this simulation shows, even if it maintains that position, the emergence of alternative payments infrastructures could seriously diminish the US’s sway. I’ve said before that Henry Farrell’s concept of “weaponised interdependence” is one of the most important ideas for understanding how technology is changing geopolitics. Until now, the US has been the primary beneficiary, but that could all unravel very quickly. 

What does "techno-populism" look like in practice?

Like it or not (and I don’t), populism is unlikely to disappear any time soon. Political elites’ views differ wildly from the population’s, at least in the UK, as this new data shows, which suggests populism will have enduring electoral appeal. One challenge for populists, however, is competence. It’s striking, for example, that populist governments seem to have presided over some of the worst coronavirus outcomes so far.

So, attempts to marry technocratic practices with populist values - some have called this “techno-populism” - are likely to be an important theme of the next decade (I suspect, for example, that this is one likely direction for the post-Trump Republican Party). Michael Gove, a UK Cabinet member, gave a major speech this weekend in which he laid out a vision for government reform along these lines: in short, for a bureaucracy that’s less metropolitan and more technically literate. There’s a good summary thread here.

The speech has its fans, but the critiques are more interesting. Ian Mulheirn points out that the castigated social elite are (largely) the same people as the celebrated technical elite. Chris Yiu, echoing Martin Gurri, argues that Gove needs to reckon with how fundamentally the internet has changed policymaking. My own question is why there is so much emphasis on the production of better data science in government (a favourite theme of Dominic Cummings, a Gove ally, as previously discussed) and so little on how to make politicians better consumers of it. If we want more competent government, recent events suggest that's a good place to start. 

"Elite overproduction" and avoiding civil war

There’s a theory - associated with Peter Turchin (who we’ve discussed before) that a major cause of civilisational collapse is “elite over production”. Over time, the size of the elite that gains a certain level of wealth or education grows, but supply of key status goods (such as political office or places for offspring at top institutions) remains fixed. This results in more intra-elite competition, which has damaging effects ranging from rent-seeking to full-blown civil war. Turchin summarises the argument here.

A recent TiB preoccupation has been the question of whether there are too many entrepreneurs (see here and here). Turchin’s theory seems like one more reason to see any growth in the number of founders as a relatively benign phenomenon. Turchin has argued that a “lawyer glut” could “ruin America” by pushing elites into a brutal zero sum game for status. Startups, by contrast, are a positive sum game (albeit one with a lot of losers).

Moreover, as the excellent Byrne Hobart argues this week in a brilliant essay, entrepreneurship is actually a convenient way to nudge a society’s most ambitious (and so presumably most dangerous?) people into big but often unglamorous industries. As Hobart says:

A founder thinks “For someone with big dreams like me, there’s no choice but to found a tech company in Silicon Valley,” and a decade later that same founder is running a hotel company, a cab company, or a grocery store.” [i.e. Airbnb / Uber / Instacart]

Not even I would claim that “too many entrepreneurs” will save us from civil war, but it’s a start. 

Quick links

  1. Compensating differentials. Is the salary gap between the big tech firms explained by toxic employer brand?
  2. Canary in the... The surprisingly rapid collapse of coal in the US.
  3. Indistinguishable from magic? Arthur C Clarke predicts the future of technology in the 1960s (See also: Apple is making Foundation into a TV show)
  4. Clear the air. Pollution continues to be way worse than you could have imagined.
  5. A pitch to change your mind? The neurological effects of a startup pitch. (See also: the benefits of founder/investor contact)

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Until next week,

Matt Clifford