ZoneBitcoin EditorialIn a world where financial inequalities are increasingly glaring, Bitcoin is emerging as a promising solution to resolve the Cantillon effect and reduce economic disparities. The Cantillon effect, theorized by the Irish economist Richard Cantillon in the 18th century, describes how monetary creation primarily favors the first beneficiaries, to the detriment of those furthest from the source of monetary creation.
However, Bitcoin offers a radically different alternative in terms of monetary distribution. As a decentralized cryptocurrency, Bitcoin offers a more equitable and transparent approach, helping to reduce the Cantillon effect and promote a more egalitarian redistribution of wealth.
In this article, we will explore how Bitcoin can reduce the Cantillon effect and the financial inequality that results from it.
The phenomenon of the Cantillon effect
The Cantillon effect, also known as the "differentiated inflation theory," describes how money creation has a gradual and differentiated impact on prices as money spreads through the economy. According to Richard Cantillon, the beneficiaries of money creation depend on the institutional configuration of the state. In the 18th century, this meant that those closest to the king and the wealthy benefited more, while those further away were harmed.
In his theoretical work, Essay on the nature of commerce in general", Richard Cantillon explains that an injection of currency in the economy will have a progressive and differentiated effect on price as currency circulates from the point where it was issued.
In other words, when there is an increase in the money supply, those who benefit first may see their wealth increase, while those who benefit last may experience an increase in prices and a devaluation of their power to invest. purchase.
The Cantillon effect is more relevant than ever, especially with the economic crisis caused by the COVID-19 pandemic. According to a publication by the Banque de France, the monetary growth rate has “increased from 5% to around 12%, which corresponds to an annual flow of €1 billion.
The monetary policies of central banks have led to an explosion in the fortunes of billionaires, as the newspaper LeMonde tells us, which relies on figures given by the agency. Oxfam. During the COVID-19 crisis, “the combined wealth of billionaires increased by $5 trillion, reaching its highest level to date, $000 trillion.”
"The rich are even richer two years after the start of the Covid-19 pandemic." What's more, there is "now a new billionaire every twenty-six hours, while 160 million people have fallen into poverty during the same period, calculates the NGO.
The COVID crisis, which has led to an unprecedented increase in the money supply, has made the richest richer and the poorest poorer. This increase in inequality raises concerns about global equity and financial stability.
Bitcoin as a solution to the Cantillon effect
Un democratic access to money
Bitcoin offers a radically different alternative in terms of monetary distribution. Unlike fiat currencies controlled by central banks, Bitcoin is a decentralized cryptocurrency that is based on blockchain technology.
Instead of allowing central banks to create money out of thin air, Bitcoin uses a process called “mining” to introduce new bitcoins into the system. Bitcoin miners solve complex mathematical problems and secure the network in exchange for bitcoin rewards. This mathematical approach ensures that money creation does not benefit just a select few, but rather those who contribute to the security and stability of the Bitcoin network.
Transparency and equal opportunities
Another key feature of Bitcoin is its transparency. All transactions made with Bitcoin are recorded immutably on the blockchain, a public ledger accessible to everyone. This means that every transaction is verifiable and auditable, eliminating the possibility of manipulation and favoritism.
Additionally, Bitcoin provides equal opportunity for all participants. Anyone with Internet access can participate in the Bitcoin network as a user, miner, or trader. Absolutely, there are no entry barriers or restrictions based on social status, nationality or wealth. This opens up new economic opportunities for people who are underbanked or excluded from the traditional financial system.
However, it is important to remember that mining equipment is becoming ever more expensive, making the mining activity ever more financially selective.
Protection against inflation and devaluation of fiat currencies
Bitcoin May Also Provide Protection Against Inflation and the devaluation of fiat currencies. Unlike national currencies, whose supply is controlled by central banks, Bitcoin was designed as a currency with strict bitcoin issuance. The number of bitcoins limited to 21 million makes excessive monetary creation impossible. Bitcoin is then a currency " deflationary " on principle because supply is limited while demand can always grow.
Additionally, Bitcoin is a decentralized asset and independent of governments and financial institutions. This means that fluctuations in the value of Bitcoin are not directly linked to the monetary or economic policies of a specific country. As an alternative store of value, Bitcoin offers protection against the devaluation of fiat currencies, and greater long-term financial stability.
The limits of Bitcoin to reduce inequalities
Bitcoin offers a promising solution to resolve the Cantillon effect and reduce financial inequality. As a decentralized cryptocurrency, Bitcoin offers fairer distribution of wealth, increased transparency, and protection against inflation and devaluation of fiat currencies.
While the monetary policies of central banks continue to print money according to circumstances and rescue plans, Bitcoin is emerging as an egalitarian and inflation-resistant alternative.
However, Bitcoin cannot completely solve the Cantillon effect, as it does not eliminate the inequalities and wealth disparities that exist in society. One can indeed note the unequal initial distribution of Bitcoin. The first Bitcoin miners and holders were able to accumulate significant amounts of this cryptocurrency at a relatively low cost. This created a wealth disparity from the beginning, which is in fact, somewhat similar to the Cantillon effect where those who benefit first have an advantage over others. Thus, what is called the " Whales ») can manipulate prices. Likewise, personalities who have the most bitcoin, like Michael saylor could enjoy an “aristocratic” privilege over other holders.
Final word
To conclude, even if Bitcoin can help reduce inequalities, it cannot eradicate them with the wave of a magic wand. The problems of inequality and unequal distribution of wealth must be addressed by broader economic and social policies and cannot be solved solely through the use of Bitcoin or other cryptocurrencies.
See as well:
