The Peer-to-Peer Economy: Death Blow to the State

The most radical application of this idea concerns money and finance. After one-hundred years of government production of currency, and government sponsorship of banking institutions, P2P networks are now providing payments systems, loan markets, and even currency units such as Bitcoin. The implications of this are of course remarkable to consider. It’s one thing to dispense with the need for film processing; its something else entirely to toss away central banks, regulated stock markets, and departments of treasury. These are the heart and soul of political power itself.

The term P2P originated as a description of file-sharing systems — used popularly only in the 21st century — in which each party has the capacity to be both a consumer and producer of the same good or service. I can download music and seed it. I can host or consume or both at the same time. The term here is “equipotency,” equal power.

Neither party has to rely on some third-party trust relationship or external intermediary to achieve the aim. There is not disproportionately in available tools. There are no external rule makers, rule givers, or rule enforcers. It’s structure evolves organically. When big shots try to get their way, they only incentivize entrepreneurs to find new ways to do the same thing. An example is the take down of online pharmacies ten years ago (they are all back) and the Silk Road only last year (distributed versions of the same are now everywhere). Attempts to control lead to loss of control. That’s why the distributed system is ever evolving in unpredictable ways.

Now we are seeing the term P2P being used to describe not just distributed Internet networks but social and economic systems. There is an emerging literature on the democratization of innovation, the makers movement, the open-source revolt against patents and copyrights, the movement of hactivists to bust old-style regulatory structures, new patterns of economic development, the sharing economy, and even the end of the nation-state in light of global P2P relationships. (I still don’t think the definitive treatise on this topic has been written.)

Free enterprise in the digital age is taking on a different form than in the past, or, at the very least, the trajectory toward connecting us ever more directly with each other — with equipotency as producers and consumers — is accelerating dramatically thanks to digital technology. And this could really matter for the future of how the debate over government control takes place. The institutions that people inhabit on a daily basis dictate their self interest, and that in turn influences the type of impositions on their freedom that they will and will not tolerate.

Great liberal thinkers have always understood that institutions matter for the resilience of freedom itself.

This agricultural model of social organization was clearly out by the 20th century, and the debate between state control and free enterprise came to be recast again. It was set up as a great choice — and a false choice! — between being ruled by public-spirited political elites and rapacious captains of industry. Never mind that they have been working hand-in-hand for more than one hundred years.
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What the terms of this debate between big business and big government leave out is you and me and everyone else. This is what the emerging technologies of the P2P world is fixing for us. We are gaining new types of tools that underscore in the most salient possible way that a free economy really is about relationships between people. It is about much more of course — property rights, prices, large-scale production, capital, free information flows — but most fundamentally the free economy is about mutually beneficial exchange.

First, this inaugurates a new political dynamic. P2P systems give every person a direct stake in free economic structures. It makes a liberal economic order in everyone’s self interest. We’ve seen this already when city officials try to shut down things like Uber taxis or Airbnb rentals or marijuana dispensaries. Those who benefit from these services — not via giant corporate third parties but directly — can get quite annoyed. The case for reigning in the supposed power of private parties is not as compelling when these relationships are P2P. They resist and stand up for their rights.

Second, there are implications for the effectiveness of the state itself. Distributed systems have no central point of failure. Government can regulate only that which it can control, and it cannot control a distributed system. It is far easier for politicians and bureaucracies to make a deal with General Motors than with a network that lives on millions and billions of servers, and can move and be adapted to conform with market needs that are ever changing. Governments are good at the physical world, but not so hot at managing the distributed digital world and its P2P energy. Government can slow it down but it can’t stop it.

Third, P2P systems care nothing for the nation state. Think about the latest apps from among the millions available that you might have downloaded for your smartphone or your tablet computer. What is the nationality of the maker? You don’t know and there is no reason to care. In a P2P world, we are all citizens — consumers and producers — of the world. Economic relationships delineated by arbitrary lines on a map, as drawn by politicians, just don’t matter.

The P2P economy is the next stage in the great march of history away from despotism toward freedom. It’s all happened without much mainstream attention and virtually no public consciousness. The emergence of it has been spread out over some 15 years, too slow to notice with full awareness and too fast to fully dissect and understand. It is now a fixture and a foreshadowing of a world to come.

That doesn’t mean we don’t have to fight for it. But this fight is no longer about muskets and barricades. It’s about innovation, cleverness, and being the revolution in our own lives and economic relationships.