Tom Pepinsky

Category: Politics

  • Cryptocurrencies and the Political Economy of Money

    Cryptocurrencies and the Political Economy of Money

    At a time when the U.S. government has floated the idea of a Strategic Bitcoin Reserve, and tech oligarchs question the viability of the sovereign state in the age of blockchains, there is a need for some clear and analytical thinking on the political economy implications of cryptocurrency.

    An old college buddy of mine has contributed some much-needed clarity by studying the possibility of regulation under decentralized finance. In a world where trusted intermediaries are no longer necessary due to the availability of smart contracts, can a decentralized and permissionless system provably guarantee that some transactions are forbidden? The answer is no. He and his coauthors write,

    As these new developments use computational systems, they must be bound by existing results from computation theory.

    The implication of their argument is that financial regulators cannot rely on a DeFi architecture if they also want to do things like implement exchange controls or ban money laundering.

    The same constraints bind when we consider the political economy of cryptocurrencies. We can adapt the quote above accordingly: as crypto engages with political and economic systems, it is bound by existing findings from political economy.

    Inspired by these ideas, Mark Copelovitch and I have recently completed a working paper that contributes some analytical clarity to current debates about blockchains, cryptocurrency, and state sovereignty in an international system in which states issue fiat currency. The basic premise of our argument is that crypto is, aspirationally, money—a medium of exchange, a store of value, and a unit of account. Thinking about crypto this way clarifies which kinds of actors value crypto and for what purpose, the role of ideas in supporting crypto, and the stakes of crypto as a complement (or substitute) for fiat currency at the national and international system levels.

    Our working title is “The Political Economy of Shitcoins.” And here is the abstract:

    We study the political economy of cryptocurrency in a global economy comprised of states that issue fiat currency, considering the implications of crypto from the position of users, issuers, states, and the international system. The political implications of cryptocurrency follow from its ability to perform the three function of money: unit of account, medium of exchange, and store of value. From these foundations, we draw on the established literature on the political economy of international monetary relations and international finance to derive predictions about the future of cryptocurrency in a world of sovereign states. We describe four possible futures for the international monetary system: a world without cryptocurrency, a world in which cryptocurrency exists alongside fiat currency, a world in which cryptocurrency has replaced traditional fiat currency, and a techno-futuristic world in which cryptocurrency spells the end of the Westphalian state system. We evaluate the political and economic stability of each of these four scenarios. We conclude that the most like scenario is one in which crypto survives alongside traditional fiat currency, but also highlight that the future of cryptocurrency is a battle over the future of sovereign authority itself. 

    Lest you think that this is a niche topic, the author of The Network State is a former Andreesen Horowitz partner who has a Substack where he recently posted that All Property Becomes Cryptography. He has also set up shop for his Network School in the failed megaproject of Forest City, Malaysia. This is relevant to my interests on so many levels.

  • State and Society in an Era of Backsliding

    State and Society in an Era of Backsliding

    In a new working paper, I argue that comparative politics scholarship on democratic backsliding needs to think explicitly about state-society relations. Here is the abstract.

    Recent scholarship on democratic backsliding has focused on measuring its global prevalence and identifying the causal processes and mechanisms that produce or inhibit backsliding around the world. But many of the political dynamics that motivate both scholarly and popular concern about the state of democracy are about the desired model of society and the proper role of the state rather than about electoral democracy. This manuscript examines pluralist, populist, corporatist, and integralist models of state-society relations, conceptualizing them with reference to normative models of the modern state and beliefs about the nature of society, and using them to identify distinct varieties of democratic backsliding and axes of conflict within backsliders. Treating conflict over the social ontology of the modern state as “democratic backsliding” obscures a deeper politics of state-society relations, and how those politics independently shape regime contestation in contemporary electoral regimes.

    My argument is mainly conceptual, eclectic, and polemical. I want this to be read by scholars and citizens who see the world around us in terms of democratic backsliding, who wonder what it would mean for politics to be actually fascist, who wonder what specifically is populist about Fidesz rule in Hungary or corporatist about Golkar in Indonesia, and who want to organize the cacophony of antiliberal arguments made by actors who support backsliding in the United States and around the world.

    I also think that it would do good to move beyond the question of whether or how democratic backsliding takes places, and towards deeper analyses of why and what for. I have been thinking about this quote from Jan-Werner Müller‘s Contesting Democracy:

    …seeing the twentieth century simply as an age of irrational extremes or even as an ‘age of hatred’ means failing to understand that ordinary men and women—and not just intellectuals and political leaders—saw many of the ideologies contained in abstruse books (and the institutions that we justified with their help) as real answers to their problems… Many of the institutions…made a further promise to function much better than those of liberalism, which in the eyes of many Europeans seemed like a hopelessly outdated relic of the nineteenth century.

    Here is Table 1, the classic comparative politics 2×2 table. (Please read the paper before you get upset about my terminology.)

    And here are the conjectures with which I close the essay.*

    • Former Soviet and Eastern European countries lived under a form of nondemocratic rule with an explicitly categorical social ontology in the form of Soviet communism in the former USSR and related variants in Eastern Europe. These political orders varied over time and across countries between integralism and corporatism (see e.g. Bunce 1983). Might this history have created a political vocabulary and a societal experience that makes the corporatism of Gladden Pappin (2020) and the integralism of Aleksandr Dugin (2014) particularly resonant within these countries?
    • Within modern American conservatism, can we better understand the political alignments that separate Steve Bannon, Stephen Miller, and Elon Musk by focusing on how they imagine the desired the role of the state and their normative model of society (see also Zúquete and Hawley 2024)?
    • When conceptualizing Chinese, Saudi, Russian, or any other form of nondemocratic politics, how important is their common absence of competitive elections relative to their distinct models of state-society relations?
    • Two what degree is contemporary concern with democratic backsliding actually a defense of pluralism, the model of state-society relations that is most amenable to a liberal, republican, constitutional government?
    • To what extent do different types of antiliberal politics—as actually practiced in organizational and partisan form—map onto left-right or second dimension politics?
    • What other political alignments (racial identitarianism with social welfarism, technolibertarianism with populism, unionism with clericalism) might be explained by their common social ontologies? To what extent are such alignments anti-democratic by definition?

    NOTE

    * If you were wondering what could possibly lead me to read Aleksandr Dugin and his political theory of neo-Eurasianism (large PDF), this is why.