Is Free Money Even Better than Free Cheese?
Don’t let the headline fool you. This is about freedom, not whether you have to pay.
It is about free cheese though…free cheese samples in 1989.
But we’re going to start in North Korea, where there isn’t much cheese, but food really is free. Sort of.
The North Korean government provides rations of staples like rice. These were cut by 20% this year, to 300 grams of rice per person, per day.
On important days, like the Dear Leader’s birthday, North Koreans get some meat too. But almost half remain undernourished. Despite food aid from South Korea.
When North Koreans decide they’ve had enough of this and make a dash south, they struggle with the amount and choice of food on offer.
The difference? In one nation, the government runs food distribution. In the other, the free market does.
Surrender to capitalism
In 1989, Boris Yeltsin toured an American supermarket. Here’s how the New Haven Register described it:
‘Yeltsin, then 58, “roamed the aisles of Randall’s nodding his head in amazement,” wrote Asin. He told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, “there would be a revolution.”
‘Yeltsin asked customers about what they were buying and how much it cost, later asking the store manager if one needed a special education to manage a store. In the Chronicle photos, you can see him marveling at the produce section, the fresh fish market, and the checkout counter. He looked especially excited about frozen pudding pops.
‘“Even the Politburo doesn’t have this choice. Not even Mr. Gorbachev,” he said. When he was told through his interpreter that there were thousands of items in the store for sale he didn’t believe it. He had even thought that the store was staged, a show for him. Little did he know there countless stores just like it all over the country, some with even more things than the Randall’s he visited.
‘The fact that stores like these were on nearly every street corner in America amazed him. They even offered him free cheese samples.’
Boris Yeltsin surrenders to capitalism
in its most sacred place — a shop
Source: New Haven Register
There are plenty of noticeable bits in that story. But the most important one never gets any attention. It’s this bit: ‘[…] later asking the store manager if one needed a special education to manage a store.’
This sounds stupid to us. A special education to manage a store?!
It’s precisely this gap in presumptions which I think is the key to prosperity and freedom. This distinguishes the North Koreans from the South.
Now, food is an essential. It’s more important than just about anything. And yet, in Australia, we entrust its provision to the private sector. That’s crazy, isn’t it? Surely it’s too important to leave to the whims of profit-hungry corporations?
No doubt North Koreans can’t imagine the private sector providing food for the masses. Just as Yeltsin couldn’t.
What would we have without the government? More…
How could the free market possibly make sure that there’s the right amount of the right thing at the right time in the right place with the right price? Surely we need a wise official with special qualifications to organise all this?
The rest of us see it in precisely the opposite way. The government couldn’t possibly get it right. And university degrees would make them even worse at it.
My question is, if food is so incredibly important — too important to leave to government bureaucrats to get wrong — then why do we trust those same bureaucrats with other essential functions?
There are still all sorts of economic functions we consider too important for the private sector to do.
Things like money, setting the interest rate, roads, healthcare and plenty more.
In 2016 I toured Europe with the Free Market Road Show.
Halfway through, I changed my speech because I noticed something. Each nation has a completely different perception of what only government and what only the private sector could possibly do. And they’re all adamant about it.
Tell a person in Teneriffe that only the government can provide water infrastructure and they’ll laugh at you.
Tell people in Georgia that only the government can provide a police force and they’ll tell you the government is too corrupt to do it properly, so they privatised theirs.
Tell an American that air traffic control doesn’t need to be government run and they’ll never fly to Europe again.
Tell people in Moldova that the government must control the border to stop smuggling and they’ll be mystified. ‘Who do you think does the smuggling in the first place!? That’s why they created the border and the laws that incentivise smuggling! It’s why they enforce it — to prevent competition with the politicians’ source of campaign funding.’
Ask an Australian who would build the roads if the government didn’t and they’ll answer, ‘Well, I do. Because the government won’t build them on remote properties, the landowners have to build their own.’
The British privatised their rail services, but not the underlying infrastructure. Because that’d be impossible. And yet, it’s what the Japanese did. Where do you think the trains run on time? Where do you think the transport museum’s exhibits are used as replacement parts?
In other words, the distinction between what only government could possibly do, and what only the private sector could possibly do, completely contradicts between countries.
That was the focus of my speech at the Free Market Road Show. If only we looked at each other, like Yeltsin did in 1989, we’d realise our perceptions are bogus.
The private sector does a better job of it all.
But the final bastion in all of this is money.
Until recently, very few people argued for free money — money provided by the private sector instead of the government.
And yet, historically speaking, it was. The word banknote is the giveaway.
The best money wins
Each time the government commandeered the currency, things would start to go wrong. But that’s another story.
What exactly changed recently?
A new form of money was born. In the private sector, where it’s outside of government control. It’s international and there are already hundreds of different currencies with different features.
Governments and central bankers are terrified.
Only recently German Finance Minister Olaf Scholz declared these parallel currencies must be stopped. If the new money is better than the government’s, the whole monetary system could collapse. People could avoid taxes and evade capital controls.
The new economic revolution doesn’t seek to change the government. It simply ignores it altogether. That’s why I call it free money. And why it is proving hard to fight off. And it’s surging in popularity and value too.
One of its most beautiful features is competition and innovation.
When a government nationalises the money supply, it becomes uniform. Even if Scottish banks still print their own distinct banknotes, they are identical in value to Bank of England pounds. Free money can be different.
It can be gold-backed, or backed by any other asset. It can be limited in supply, or grow. It can be anonymous or open. It can be issued by a strong central authority and intermediary, or open source. There are all sorts of features that can compete.
And it doesn’t matter what you, I, politicians, government bureaucrats, founders, innovators, investors or anyone else thinks.
Only the choice of users matters. And that means the best currency wins.
The question is, which currency is best?
Until next time,