Cryptocurrency and Universal Basic Income: A Collective Action solution to Income Inequality & Inequity in the International System
by Micah Dewey
April 20, 2021
Along with more precarious work, a faltering capitalist market economy has led to ordinary people’s sweeping collective action against established financial and political elites. Citizens of the world are organizing collectively like never before, bringing new technology into a world that previously had been closed off to anyone but the most well-connected in society. Technological advancement and international cooperation could lead society into a new economic reality, thanks in part to cryptocurrencies such as Bitcoin and Ethereum. Cryptocurrencies have advanced far beyond the horizon that Bitcoin had set in 2011, allowing for more complex, trustless services that rely on computer code rather than traditional banking institutions. These new possibilities have led to innovation that could fundamentally change how people perceive money and value. In this paper, I will review numerous academic works on three international relations theories, Realism, Constructivism and Neoliberalism and relate those theories to the concept of a Universal Basic Income to collectively solve the problem of global and national wealth inequality and inequity.
Broadly reviewing existing international relations theories and applying them to the concept and policy of a UBI is essential to comprehend the most likely paths to mass adoption. There are three main theories that this paper will explore: Realism (dominance solution), Constructivism (identity solution) and Neoliberalism (reciprocity solution).
Realist political scholars generally reject the concept or idea of a basic income because it would not lead to a power gain by the politicians involved and therefore will not happen. However, an argument from the realist perspective could be made as per author Hans Morgenthau in A Realist Theory to International Politics, “A theory of politics must be subjected to the dual test of reason and experience. To dismiss such a theory because it had it’s flowering in centuries past is to not present a rational argument but a modernistic prejudice.” Antiquity should not disqualify a policy proposal if it meets the realist’s high standard of truth. In regards to UBI and similar programs, the historical data around trials on ‘mincome’ or GLI (Guaranteed Livable Income) programs have shown better results than was expected by even the most ardent supporters. Therefore, it would be possible, yet still unlikely for a realist to make a “national interest” argument in favor of UBI.
Constructivist theorists believe that all of the things that we take for granted as natural, the existence of states, economic systems, and political parties, are in fact entirely arbitrary. Norms to a constructivist are important, but they can be changed if people decide to change them. At the end of the Cold War when the USSR fell, Realism and Liberalism could not explain why the state fell. Constructivists came in and said that international politics are a social construct. These social constructs would allow an individual state to change the current norms and implement a UBI overnight.
The final theory this paper will consider is that of neoliberalism. Neoliberalism focuses on reciprocity agreements, big structural organizations and the idea that anarchy in the international system can be mitigated. This is the general approach of most proponents of UBIs, a give and take amongst the population combined with cooperation will lead to a better world, at least in theory. This paper will focus on the idea of a global UBI system outside of the policy control of nation-states. An international UBI, something that on the surface, seems preposterous, but in reality, is on the road to being a true success.
UBI Policy Proposals, Meet Blockchain.
There were two questions that I was left with when researching this subject of wealth inequality and the international movements around the topic. First. Are there any current examples of decentralized finance currently utilized today that are actively trying to take a bite out of the international wealth gap? Moreover, are these movements likely to succeed?
The first question can be answered by looking directly at the GoodDollar Organization and the initial white-paper written by the organization’s founder, Yoni Assia. In 2008, Assia published “Good Dollar – The Visible Hand” to his blog. Assia wrote this paper at the height of the 2008 Financial Crisis and shortly after attending the World Economic Forum in Davos. Assia’s primary argument for the creation of a new currency was the argument that “conscious-minded capitalists” have made for nearly the past two hundred years, “…People are asked what the “bad” thing in capitalism is, the most common answer is: The rich get richer, and the poor get poorer.” With the utility of cryptocurrency and the ever-growing decentralized finance (DeFi) ecosystem, many of the goals in Assia’s work are now achievable. GoodDollar has provided real-world utility and value-of-exchange for over 170,000 human beings, many of whom were previously locked out or restricted from using the existing financial systems. The organization that Assia founded, the GoodDollar Organization, is now paying out a daily, free, digital Universal Basic Income to approximately 45,000 people a day and rising.
In order for the reader to fully understand the goals of GoodDollar, we should first examine the idea of what a universal basic income (UBI) is. In the simplest terms, a UBI is a repeating payment of a sum of money equally distributed to the entire citizen population with no strings attached. Some have argued that this amount should be meagre, as has been tried in Finland, or a sum as high as $2,000 per month, every month. In Basic Income for Canadians, Dr. Evelyn Forget argues that a UBI is necessary for the nation-state of Canada to survive and thrive, both during and after the COVID-19 pandemic. Dr. Forget closes her book with this powerful statement,
“The COVID-19 pandemic imposed the time out we thought we couldn’t afford. It reminded all of us, in the most stark and vivid terms, that we are all connected to one another and that the health of one of us affects all of us. This is so for viruses, but it is also true for economic well-being…. The well-being of each one of us depends on the well-being of others. Economic security is not a zero-sum game…Basic income is one component of a robust, responsive and comprehensive economic, health and social safety net…It ensures that everyone has the capacity to live modestly, with dignity.”
In this specific example of a government-run UBI, there can and will be shortfalls. In my opinion, the first problem that Forget does not solve in her analysis is that it is not only those at the bottom that need financial assistance; it is also the rich who need to have their wealth reduced. In reality, many economists agree. “The idea of taxing accrued capital gains or of a wealth tax is viewed by some as radical. Yet, if much of the income of the rich is beyond the scope of traditional tax approaches, such innovative ideas may be the answer.” There are benefits of a proper national UBI program, as both Forget, and the Finnish researchers found. Furthermore, it may be one of the answers to income inequality, but on an international scale, it is hardly a scratch into the deficit that faces the most impoverished humans on Earth.
A different perspective on the idea of a basic income comes from American politician and entrepreneur Andrew Yang. Yang, who ran to be the Democratic nominee for President in 2020, created a working-class coalition drawn to his identity-based rhetoric. While his campaign was ultimately unsuccessful, the idea of cash payments to Americans is now a mainstream policy position that both leading political party candidates have recognized. A recent Pew Research study found that “While majorities of Republicans across age groups oppose the UBI proposal, 41% of Republicans ages 18 to 34 favor it, by far the highest share of any GOP age group.” Identity can be a powerful tool in the hands of a savvy politician like Yang, but it can also backfire into the identity arguments made by the far-right and Donald Trump. At the time of his presidential campaign, Yang was arguing for a $1,000 a month UBI to every American citizen adult over 18. Yang was even able to bring in some Republican support because of his appeal to national identity. Identity is what separates humans from non-human species. Identity is the core of who we are as people, and as time goes on, more people are starting to see the humanity in each other rather than seeing an external enemy. Regarding income inequality and inequity, this is one of the preferred methods of mobilizing populations that has been successful in the past. However, taken to the extreme, society should, and often does, restrain these mobilization efforts because they often end in violent action being taken either by the population or by the government itself. For these reasons, an identity-focused solution to the collective action problem of wealth inequality and inequity is less desirable than either of the other two formally recognized viewpoints.
One perspective that could be taken concerning the collective action problem of global wealth inequality is the same that Assia takes, neoliberalism and reciprocity. Assia argues for the idea that humans have intrinsic value. “Assuming that the administration of a new currency would be fully automated, small deposits should get at least the same interest rates as large ones, and eventually smaller deposits should receive higher interest rates than larger deposits, because [of] intrinsic individual/entity value. The most important intrinsic value is of individuals, since we believe that human life has value, meaning that individuals should get better interest rates than any other entities, hence a better world for all individuals.” This is actually the same argument that is made by Bowles and Gintes in their paper, Homo Economicus and Zoon Politikon: Behavioral Game Theory and Political Behavior. “…employers presumed the strong reciprocity predispositions of the employees, making quite generous wage offers and receiving higher effort, as a means to increase both their own and the employee’s payoff.” When humans can reasonably expect something to happen, in this case, make money on interest earned, and it happens, they are more likely to appreciate and protect that system.
It is my opinion that the reciprocity solution for solving wealth inequality is the most poignant. After almost twelve years of being an idea, the GoodDollar experiment is still in its nascent phase. Since the official token launch in September of 2020, the project has already delivered tangible value to over 170,000 people worldwide as of April 2021. According to the to-market lead for the project, Anna Stone, “on Day 1, we were delivering $15 (USD) worth of G$ a day, and now we deliver over $210 a day. The [initial] $56,000 staked has yielded between $15,000 and $25,000 of UBI delivered to date.” While this is a relatively small amount of money that has been distributed, it is essential to remember that not everyone around the world has the same cost of living. There have already been several projects that have used GoodDollar as a platform to do good in other places. One example of this utilization of the digital basic income comes from Israel, where one man’s passion for cryptocurrency has led to thousands of Tel-Aviv’s homeless and hungry being fed by GoodDollar donations.
Overall, I expect that the advancements in technology will open up new opportunities for humanity to improve their systems and increase inclusiveness and openness. One tool that must not be wasted is that of decentralized finance and cryptocurrencies. Earlier this year, Twitter founder Jack Dorsey auctioned off his first tweet as a NFT (Non-Fungible Token) that raised $3 Million USD on behalf of GiveDirectly, a global leader on UBI pilot projects. The GoodDollar Organization focused on this auction and donation in their March 2021 update. “We need to innovate on how we use principal funds to generate more sustainable impact. The same $3 million could be “staked” in the GoodDollar protocol and support over 5 million people with $30 a month over the next 10 years. $3 billion staked would support 3 billion people with $30 a month. There is already $40 billion staked in DeFi. There are no more excuses. So, what are we waiting for?”
GoodDollar is the clear market favourite for UBI tokens, and has the marketing dollars behind it to really make this dream a reality. A global, digital, Universal Basic Income, especially a decentralized project like GoodDollar, has two significant hurdles to overcome.
- Verification of Unique Claimants
- Equal Distribution of Funds.
So far, the project team has used these two hurdles as jumping-off points. As to verifying unique identities, they had originally resorted to using Zoom’s facial recognition AI to check new users against existing faces in the GoodDollar database. Using Zoom had its own problems, but up until recently, it had been the most user-friendly tool to verify unique claimants. Concerns in the community have been raised about Zoom’s corporate structure, and in the March update, the team announced a new partnership with Facetec SDK. This change of verification providers has alleviated many concerns thanks to the security and non-corporate nature of Facetec.
As to the equal distribution of funds, this is where some of the magic of DeFi and cryptocurrency, specifically Ethereum Smart Contracts, come into play. There are three significant contracts that GoodDollar utilizes. One is referred to as the GoodReserve, where new GoodDollars are minted through staked Compound Dai in an endowment contract and from interest earned from the staked cDai. The second is called GoodDAO, which commands the third contract, GoodStaking, to collect interest from external contracts daily. The GoodDAO is also the contract responsible for distributing the daily UBI. GoodStaking then reinvests the interest it received from GoodDAO back into the GoodReserve, and by doing so, the project effectively has a closed loop of investment-divestment through the use of three contracts.
This decentralization and universality that Assia and the GoodDollar Organization have created have effectively opened a new chapter about what we as humans can do for our fellow man or woman. There is no longer required citizenship or birthplace that separates the user from other recipients; there is no longer a nation-state pushing unwelcome rules or regulations on who gets what and when. Through the power of Ethereum Smart Contracts and the proliferation of mobile internet networks, people from Zimbabwe to Argentina have been actively claiming, spending and donating their earned GoodDollars now, and hopefully, perpetually into the future.
Wealth inequality and inequity has many potential solutions that could resolve this collective action problem. We have looked over three prominent International Relations theories and have determined that while all three ‘could’ support a UBI program, neoliberalism would likely be the correct theory to match the need. Thanks to businesspeople like Jack Dorsey, Andrew Yang and Yoni Assia, the idea of UBI is now a front-facing policy proposal in numerous countries around the world. The GoodDollar Organization and token has already made a difference in countless thousands of lives in the first few months post launch and it will be interesting to see how this project develops into the future. Blockchain technology has opened up a new world of possibilities to deal with some of the world’s most pressing inequities, the only question I am left with is this. Will these same DeFi systems that have been developed with noble, anti-financial establishment goals, be turned against the same communities that they were designed to liberate?
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Notes: For Gallimore, Theory in Action: Constructivism, on Youtube, Dr Gallimore did a presentation in 2011 on collectivist theory for Soomo Publishing. Dr. Gallimore is a professor of international affairs at UL Lafayette. https://internationalaffairs.lafayette.edu/people/caleb-gallemore/