There are a lot of reasons to cast a hairy eyeball at Libra, the proposed global currency with its own central bank owned and operated by a team of multinational corporations. We’ve already seen the surprising arrival of totalitarian corporations that presume to decide for us what we’re allowed to say in public, and we’re also witnessing the rise of Social Justice Banking, which only lends to businesses that pass a rigorous screen for political correctness. The combination of the two, if allowed to proceed, can bring us only sorrow.
You can read elsewhere about the nifty way the reserves are set up so that any profits earned by the reserves go to the member corporations, while any losses are borne by the currency holders. Or the possibility, all too real, that Libra could quickly become too big to fail, potentially requiring a bail-out of the member companies by the taxpayers of the world.
We need to talk about how Uber got established. This is relevant for a couple of reasons, not least of which is that Uber itself is one of the founding corporations of Libra (so is Lyft). They remember what they did. And how well it worked.
Proposing to enter a market like “taxicabs in New York City” does not sound like something that would make it past the mail room at a venture capital firm. It’s a mature market, saturated, and heavily regulated. Breaking into something like that is a long, slow, slog. No thanks.
But that’s only true if you go in the front door. Uber didn’t, and in the process proved the axiom that “it’s easier to get forgiveness than permission”. Basically they snuck in the side door, and moved very quickly. By the time regulators woke up to the fact that there were taxicabs operating all over New York with no medallions, and drivers they knew nothing about, Uber had made enough friends among the voters that the regulators couldn’t touch them; the politicians were bending to popular will. The same model was used all around the world, wherever regulators controlled the taxicab business.
Even though banking regulators have been quick to see Libra coming, and even though they are nowhere near as blind to technology as the taxi regulators were, the “Uber model” of dealing with regulators could still work here. Consider that Facebook — a founding member — has more users than the combined populations of the U.S. and China. That’s a lot of political power, amassed very quickly if they can entice users to sign up. If Libra can make enough friends before a posse of government-powered bureaucrats can get their act together, Libra could achieve escape velocity before Elizabeth Warren could vow to put them out of business.
The main problem here is that we haven’t really figured out yet how we’re going to deal with private entities that wish to dabble in functions that we have historically associated with government. In the U.S., we haven’t had private entities issuing their own currency since 1935. Corporations that want to regulate political speech, or control what the public can buy, were unheard of until recently. But we can already see the future of it, and it is ugly indeed. The prospect of Facebook, with its track record of invading privacy and playing at “policymaker,” controlling a global payments system that could separate individuals from their money at whim, with no due process and no enumerated rights, is terrifying. We need to recognize how rapidly this could happen.
We’ve been so busy worrying about government ownership of the means of production that we forgot about private ownership of the means of governance.