Deglobalization is happening. Crypto is part of the answer
We woke up this morning to two very different but deeply related pieces of news. In the Baltics, President Vladimir Putin announced that Russia would annex four regions of Ukraine, signaling the continued intensity of the war there. And in Florida, Hurricane Ian has caused catastrophic damage, unprecedented even for the perennially hurricane-prone state.
In different ways, both events highlight the need to reshape the basic infrastructure of human society into something more robust, transnational, individualized and fluid. That includes the need for economic networks that cannot be severed by autocratic leaders or destroyed by natural disasters.
This article is taken from The Node, CoinDesk’s daily roundup of the top stories in blockchain and crypto news. You can subscribe to get the whole newsletter here.
These points were perhaps less obvious when the Bitcoin project was launched in 2009. Russia was still plausibly moving towards Western liberalization, and more generally there was a sense that democratic politics and market economies would become the universal standard. And although events such as the 2005 Hurricane Katrina had already provided many warnings about the effects of climate change, many were still in denial. Americans in particular still believed they were living in the capitalist utopia of Francis Fukuyama’s “End of History,” or its far more simple-minded cousin, Thomas Friedman’s “Flat” world.
Friedman wasn’t entirely wrong, of course. The world has “flattened” in the sense that we can now communicate over long distances far more efficiently than was possible even two decades ago. But in many cases it only provides a better view of unfolding tragedies.
Globalized communications, for example, have allowed us to see far more clearly the disconnect between Russia’s kleptocratic leadership and its people, who are as divided and diverse as any other population on earth. Vast numbers of Russians loathe Putin and everything he stands for, but are nonetheless in danger of being ostracized from the international community by forces effectively beyond their control.
See also: Apolitical crypto networks in times of sanctions and war | The node
Regardless of the outcome of Putin’s aggression, individuals doing business in Russia are likely to have far less access, above all, to international logistics systems including payments, shipping and transportation. These systems have become much more open over the past half century, but there are still bottlenecks at the nation-state level. SWIFT, the network that connects banks across borders, has kicked out at least seven Russian banks, for example.
The increasing frequency of massive natural disasters, driven by climate change, has similar disruptive effects. Things are bad in Florida, but they are even worse in Pakistan, where floods this month have caused 1,500 deaths. In any area vulnerable to these changes, even the most basic infrastructure can simply be wiped away with one crash. Climate change is also expected to exacerbate political divisions as waves of refugees leave these vulnerable places.
Political and ecological instability are two aspects of an increasingly recognized process of ‘deglobalisation’. If the 20th century was marked by economic integration and a greater awareness of our shared humanity, the 21st seems to be re-inscribing differences and boundaries, even as we all stare across those gaps in each other’s TikTok posts. Basic economics tells us that this fragmentation will make us all poorer, even if we are not directly affected.
It would be Thomas Friedman-caliber hubris to claim that blockchain and cryptocurrency networks are the answer to these growing systemic crises. They can certainly provide a way for individuals to trade despite things like the SWIFT outage, and a form of financial record keeping that cannot be undone by a tornado hitting the building where your bank balance is stored. But they also face a number of fundamental limits, such as the vulnerability of internet access in destabilized areas.
See also: Why Russia Doesn’t Trust Crypto to Avoid Sanctions | Opinion
But blockchain and crypto at least provide an innovative and even inspiring model for how systems can transcend and resist the forces of deglobalization, a technical means to provide services across borders without relying on fragile political trust. Truly censorship-resistant and decentralized systems cannot be attacked politically through simple bottlenecks. Despite their severe limitations today, we are already seeing the appeal of these tools in places as diverse as Iran, Kenya and Argentina.
The emergence of a common global financial infrastructure will continue as the international landscape becomes even more fragmented, simply because it becomes more necessary. The successive waves of speculative crypto hype over the past decade have provided plenty of cover for bad actors and incompetent rubes to misdirect that narrative towards pure self-enrichment. But days like today are a reminder of how important it is to get it right.
