Facebook has thrown its hat into the crypto ring by announcing its plans to launch a global currency. What to make of this initiative? What is its origin and where is it leading to? In this article, we examine these questions from the perspective of consumers and citizens and from what we refer to as the consumer-citizen deadlock that individuals across the world are caught in.
As it turns out, Facebook’s initiative is only making this predicament worse. The internet, as the old cliché says, has made our world smaller. Geographical borders have become less relevant in recent decades. It is not only trade, commerce and the flow of information that are less bound to geography, it is also what we do and what we want. Our day-to-day life is now coupled with issues for which the national scale is irrelevant or ineffective. In many ways, we are citizens of the world in addition to being citizens of our respective nation states.
Hence, it is not surprising that our governments are struggling (and often failing) to represent our preferences on issues which are not inherently national, for example regulating global corporations or protecting the environment. This is one face of the deadlock; citizens are no longer effectively represented by their nation states.
Who do corporations represent?
The digital revolution, coupled with globalisation and the agility, motivation and efficiency of the private sector have all contributed to a growing role for corporations in our everyday lives. Large businesses are seemingly filling a void left by governments. But unlike governments, corporations do not represent the interests of their consumers. Instead, they hold one central and legitimate aim — maximising their shareholders’ wealth. So by definition, they cannot fill the representational void. In other words, powerful economic players which have a significant and growing presence in our lives, and are literally shaping them, do not have the best interests of consumers at their heart.
This is the essence of the consumer-citizen deadlock — we are caught between our nation-state that cannot effectively represent many of our preferences as citizens, and corporations that are agile and effective but do not aim to represent us.
Global money and Facebook’s Libra
The efforts to create global money demonstrate this deadlock. Until not long ago, national currencies served most of our needs as trade and commerce occurred within the borders of our nation. This is clearly not the situation today, and the need for a global currency is becoming evident.
Nation states and international institutions have been unable or unwilling to provide a global solution. In this respect, Facebook is trying to fill the void with Libra. But Facebook and the other corporations involved act on behalf of their shareholders, and not in the interest of the Libra’s general holders — whose interests would be weakly represented, if at all.
In theory, market forces can protect the interests of consumers as long as the market is competitive and consumers have the liberty to choose the service provider that best represents their needs. In reality, we have seen that market forces can lead to unacceptable outcomes. In this respect, Facebook’s move to gather a network of strong commercial partners around Libra limits the potential of issuing competing currencies and will further limit consumers’ choice.
From the perspective of the citizen-consumer deadlock, Libra is a development for the worse. Money — a fundamental public service — is moving from the hands of representative entities (even if they have limited effectiveness) to entities with a narrow focus on profit and shareholder wealth maximisation to the exclusion of other interests. Moreover, Facebook’s initiative potentially usurps and damages governments’ essential role — protecting their citizens. Harshly put, it is another nail in the coffin of the individual’s ability to influence those in power and protect their fundamental interests.
In our view, the solution to the consumer-citizen deadlock is to create organisations that operate globally and represent their users. This would create a new ‘class’ — not consumers, nor citizens, but participants. Participants would define the future by taking part in these non-national representative organisations. Such organisations should work in parallel and together with nation-states to represent citizens, especially where nation states are struggling and failing.
In stark contrast, Libra will create a centralised structure governed by an unelected “association” composed exclusively of large institutions who have purchased their voting rights, while the holders of Libra will have no voice. And it is time we understood that nation-states and corporations cannot deliver many of our needs and legitimate expectations and that the digital revolution also necessitates new forms of representational governance.
By Ido Sadeh, Founder and President, Saga Foundation
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.