SLP446 Alex Gladstein The Scourge of “Structural Adjustment”

Posted in: bitcoin Posted on Posted in: , , , , , , , , , ,

Alex Gladstein of HRF rejoins me on the show to chat about: 

  • Attending Africa Bitcoin Conference
  • How the World Bank and IMF keep poorer countries in a debt trap
  • The ‘strings’ attached to debt
  • Odious debt
  • Cash crops 
  • How does this resolve? 
  • Will Bitcoin help fix this? 

Links:

Sponsors:

Stephan Livera links:

Podcast Transcript:

Stephan Livera – 00:00:08:

Hi and welcome to Stephan Livera podcast, show about Bitcoin, brought to you by Swan Bitcoin. Today my guest is Alex Gladstein of HRF, so he’s rejoining me on the show. As many of you know, he’s the CSO of HRF Human Rights Foundation, and he’s been writing recently. He’s got a cool article out about structural adjustments, so we chat about that and also his experience attending Africa Bitcoin Conference. Swan Bitcoin is the easy way to buy and learn about Bitcoin, and especially as we’re going through this bear cycle. If you want to engage in a smash buy or check out your DCA and regular cost averaging into Bitcoin, Swan Bitcoin now has a mobile application, so you can use this to buy sats on the go. It’s a really convenient application. You can get it on the Google Play or Apple App Stores, and there is also a range of information. So for those of you who want to stay up to date on what’s going on with Bitcoin, as well as see awesome content from Swan’s blog, as well as the Rabbit Hole, the Canons, there is all kinds of educational material that you can find there in the app. So it’s on the App Store, search for Swan Bitcoin. Now for the builders out there, I know a lot of builders listen to the show. Build On L2 is a community for Bitcoin builders by Blockstream. So if you are in need of ways to connect with other builders, whether that is through events, whether that’s through programs to help fast track your success, whether you need to showcase your work or your skills to the community, Build On L2 can help you here. Now, there are two main tracks. There’s one related more to Core Lightning and another related to building on Liquid. So if you’re interested to sign up, go to the website. It’s BuildOnL2.com. Another important need is the need for connection with other bitcoiners. For those of you especially in Europe, BTC Prague is an important one. It’s coming up June 8 to 10th in Prague, Czech Republic. It’s going to be awesome. There are going to be 10,000 people there. There will be Bitcoin whales, there’ll be business insiders, developers, fresh newbies, Bitcoin miners, you name it. There are awesome connection opportunities, whether you are looking for a job, you’re looking for content, you’re looking for people to meet, friends to make. There’s just an awesome opportunity available with more than 60 world-class speakers and 100 companies. I’m going to be the host for one of the days on the main stage, and I’m really looking forward to it. Also, for those of you who are looking for a holiday, Prague is a fantastic place. It’s a beautiful city with awesome beer and affordable prices, so you can go to btcprague.com, use code Livera to get your discounted ticket, and I’m looking forward to seeing you there in Prague. And now on to the show with Alex. Alex, welcome back to the show.

Alex Gladstein – 00:02:38:

Happy to be here.

Stephan Livera – 00:02:39:

So, Alex, I know obviously you’ve been doing some great work recently with your writing, and I also wanted to chat about the Africa Bitcoin Conference. I know you were just there, and you’re obviously quite vocal about it. I want to hear a little bit about it. What was your experience there like?

Alex Gladstein – 00:02:53:

Yeah, well, I think that the essay that we’re going to talk about when it comes to global economic power structures and the Africa Bitcoin Conference were actually quite related. I was inspired in part to do the research when I was learning about what the IMF and World Bank had done in countries like Ghana. And I think what Farida Nabourema and her team accomplished in Accra with hosting the Africa Bitcoin Conference was really monumental in that aspect, in that it really hit the nail on the head in terms of exposing the fact that the financial system in Africa and in most of the global south is essentially still a colonial framework. That’s what she said in her opening remarks. The lead organizer of the Africa Bitcoin Conference is basically a civil liberties advocate from Togo, which is a country that fell under French colonialism for many, many years and still is victim of what is known as the French colonial currency, the CFA, where Paris and Europe still sort of control a lot of the financial aspects of the way that people live in about 15 African countries. So I was very captivated by her story and how she explained to me once that… I basically knew her before I realized that there was like a Bitcoin connection or like a monetary freedom connection. We met her through her democracy work and her human rights work in Togo because the country is ruled by a corrupt dictator, and she’s been involved, and her family has been involved for generations, in fighting against colonialism and now against dictatorship. But essentially she taught me that after colonization formally ended around 1960, the Togolese people elected a leader named Sylvanus Olympio. And one of the first things he wanted to do as president was create a currency for the country to get off of the French colonial system. And I think just sort of days before he was able to get this done, he was actually assassinated by French-trained troops. So I guess for the Togolese people in this country, in west Africa, their human rights struggle has always been about monetary freedom. I always thought that was really interesting. So from there, she learned about Bitcoin and has put it forward as kind of an anti-colonial currency. And I think that that’s really apt and very true. It’s an anti-imperial currency. I think that’s one of the coolest parts about Bitcoin. It provides an escape. And as we’ll get into, people in the global south have always kind of lived under the thumb of foreign powers, and until recently, they didn’t really have a way out. Like, if you were living in a country in Latin America or South Asia or Africa, in the 80s, you were kind of stuck. You had the fiat currency that you were born into, which normally would be devalued either by foreign powers or by your local dictator, and you were largely kind of kept isolated from financial networks. And it was really at the Africa Bitcoin Conference, through learning from the speakers there, that I kind of started to put all the pieces together in my head and realized that one of the reasons why places like Africa are financially isolated and split apart is not by sort of destiny or circumstance. It’s by design. So actually, when the colonial powers kind of chopped up this part of the world, the banking system was implemented not to connect people, but to actually to make money off providing a service between them, right? So instead of being a link, they were intermediaries. So you have, like, 41 central banks in Africa, and Jack Mallers actually spoke about this in his keynote speech down there, and so did Bernard Parah from Bitnob. They talked about how divided Africa was, and again, Farida talked about how the whole system is like a colonial framework, but essentially you have 41+ central banks. None of them are interoperable. So you have all these people with different fiat currencies, and then you have colonial currencies, and none of them are interoperable. And it’s very hard to move money from the outside world into Africa, and it’s very hard to move money from one African country to another. So even if you have, let’s say, M-Pesa value in Kenyan currency, it’s very difficult to move money to Ghanaian Cedis or South African Rand or something like that. It’s very difficult to move money within Africa, and it’s even harder to move it kind of from without. And one of the facts that I learned, I can’t remember the exact percentage, Jack and Bernard both spoke about it in their speech, but I think it was something like 80% of the fees that are taken from moving money within Africa go to foreign companies. And that, to me, is really, like, the true sign of the colonial framework still existing. Right? So when Africans are trying to move money to each other, you’ve got, like, massive rent seeking by essentially what you could still call colonialism, like, essentially, like, financial colonialism, right? Like, these western companies are siphoning off all the value when people are just trying to do business with each other or send money to their family. So Bitcoin is, like, a reaction to that, and I think that it’s very deep and very profound, and the community that gathered there was really striking and very impressive. I know a good amount about Bitcoin in Africa, I would say, like, more than the average person, probably, and I was, like, just totally staggered at what I saw and the people I met. I mean, we’re talking Bitcoin entrepreneurs and communities in infamous conflict zones and countries that Americans can’t even put on a map or even know exist. I mean, I met people from Somalia, DR Congo, Cameroon, Somalia, and Libya. We’re talking about countries that most people would say are the poorest or the most war-torn countries in the world, and there are thriving Bitcoin communities in these places. So I think it’s really neat, I guess, to summarize, that Bitcoin is being used not just more broadly by people in countries that have been screwed over by the IMF and World Bank historically, that’s kind of where the per capita usage is the highest in many cases. If you’re actually looking at the numbers, and you look at countries like Argentina or Nigeria or the Philippines or Indonesia or Turkey or even Ukraine. Basically countries where foreign powers have come in and messed around, these are places where Bitcoin is really providing a lot of value and then even more so, like places that are currently being devastated. The value proposition of Bitcoin really shines through. So I was totally staggered by what I saw there. Deeply inspired. And yeah, I’ve been reflecting a lot about capitalism also as the second part of this, which is like I really like Allen Farrington’s piece about This Is Not Capitalism. And I’m sure most people listening would agree that, like, the system we live in is definitely not capitalism because it’s a post 71 fiat or whatever you want to call it, right? It’s centrally planned.

Stephan Livera – 00:10:15:

I mean, the central banking, the control of the credit.

Alex Gladstein – 00:10:19:

But at the same time, I think we need to sympathize, or at least I’m trying to sympathize with the fact that, okay, so what are the Marxists criticizing, then? So the Marxists are criticizing global capitalism. We need to have a name for it. Right? So what they’re calling capitalism, meaning these big multinational companies that come into these poor countries and basically exploit people, I think, okay, on the one hand, fine, we could say that’s not capitalism, but what is it? We need to have a word for it. Right?

Stephan Livera – 00:10:45:

I think people might use the term crony capitalism, but I understand, let’s say a Marxist may not like that or may not like that characterization.

Alex Gladstein – 00:10:53:

And it’s not just a Marxist. It’s just like the people of the Third World, right? They’ve seen this movie before. They’ve lived decades and decades where foreign corporations come in unfavorable terms and they extract value from these countries and they leave. And that is the legacy of what is known as capitalism more broadly to the mainstream. Right. I think that’s just something interesting to reflect on. And whatever that is, it’s fun to play with because we could say, well, it’s not really capitalism, but then we’re kind of doing the No true Scotsman thing where it’s like the communists say, well, communism has never been tried either. So it’s kind of funny to think about.

Stephan Livera – 00:11:29:

I’m sympathetic to that. But I think for me, where I draw the line is ultimately, do you have private property rights? Right? Do you actually have genuine private property rights? Or let’s say, is there a government or a state somewhere intervening and forcefully impeding on that? And I think that’s where you’re getting out with your article. Of course, the whole structural adjustment idea.

Alex Gladstein – 00:11:49:

Right, so that people in these poor countries don’t actually have property rights. Or they don’t have the same rights as foreign corporations, right? And I want to be empathetic to that. And that’s what I’ve reflected a lot on. And what’s interesting is whatever you want to call the system we have today, the dominant American-led, Western bank-led system that’s implemented by the IMF and World Bank and where the most prominent pieces are giant companies like Coca Cola, Walmart, et cetera. Whatever this thing is, one of the things it does is exploit, and its incentive system is structured to gear towards monopolies. It basically creates monopolies, and then those monopolies do rent-seeking and rent-extraction and exploitation. And that’s what the left is criticizing is that. What I think is really interesting is Bitcoiners are also criticizing that from a different perspective. And I think that’s when you have two very different groups of people criticizing the same thing, it usually means they’re correct, right, I guess is what I want to say. So a lot of my what I’ve been working on in the last few months, doing the research for the piece on the IMF and the World Bank, what was so interesting is that you had libertarians and Marxists agreeing that these institutions were awful. And I think that’s something you’re going to see as well as we start to talk more about monetary policy in the Third World, in the developing world, is you’re going to have people who are anti-imperial or anticolonial or more traditionally on the left, maybe coming over to Bitcoin because they see it as kind of like a third way, just in general. And just to finish, what was most inspiring, what I saw there in Accra was that maybe we could have a different incentive mechanism, right? So maybe you could have instead of a system where it’s built to extract value as people transact with each other, maybe we could have a cooperative open system where what ends up happening is entrepreneurship, maybe drives down prices for people and creates more value. That would be a different system. And that was sort of when you think about what Strike is doing with Bitnob and you start to observe how they interact with this open, global 24/7 Liquid protocol, I think you could start to actually see that happening. And I think that would be really exciting. So I think what you’re seeing maybe being born at the Africa Bitcoin Conference are conversations and companies and theories and concepts that are I think what we’ve all been waiting for for many decades, is some sort of third way between Marxism and crony capitalism. And I think that that’s kind of the big thing I’m reflecting on.

Stephan Livera – 00:14:29:

Yeah. And so, I mean, bringing it then to your actual article, which is about this concept of let’s call it structural adjustment, or that’s the term you have. And basically, as I read it, essentially it’s that some of these kind of intergovernmental or international financial institutions like the World Bank and the IMF have basically, in a way, they’ve parasitically taken controls in certain ways, or they essentially play this game of, oh, we’ll give you a loan, but here are the strings attached, and that ends up really harming the people in those countries that they are purportedly or supposedly trying to help. Right. So do you want to maybe set a bit of the scene there? Like, what are these organizations like, what are they doing? What are they meant to be doing, at least?

Alex Gladstein – 00:15:13:

Yeah. Well, I think there’s a lot to be said for just adding some context with traditional colonialism and then the demise of colonialism and then post 1960, you didn’t have it anymore. And I think if you don’t look at that lens, you miss what the World Bank and IMF like, essentially ended up doing, if you’re not looking at the legacy of colonialism. And I think that too few people actually look at colonialism carefully enough, and they don’t allow it to kind of penetrate their thinking enough. To the point where as I was doing a lot of the research over the last few months for this, I found some pretty compelling theories by people from the global south, like, who were basically saying, like, for example, like, look at the Great Depression, like, and we we have the traditional kind of Austrian-Keynesian debate over why did the Great Depression in the west happen? Right? Was it because we left the gold standard or didn’t leave it fast enough or whatever? Right. So this is the debate, right? There are a bunch of Indian academics who did kind of a databased analysis, and they were like, well, wait a second. What if part of it was that, like, this colonial drain that these Western powers had feasted on for centuries started to slow down and wane? Wouldn’t that also cause economic problems in the West? Wouldn’t that also cause recessionary and volatile issues? And so they put forward this thesis in this book called Capital and Imperialism, and I certainly don’t agree with the authors on that many things, but I thought that this was kind of interesting, and it helped me start to understand what would later happen with the IMF World Bank, in that the whole point of colonialism in the first place was essentially that foreign powers would go into a peripheral, what they would call the peripheral place, right, and they would extract value either through labor, slavery, or cheap labor, or they would just take stuff, and then they would, like, manufacture that stuff at home with industry, and then they would sell the finished goods back to these, like, peripheral places. And that would crowd out any sort of local manufacturer. So that was, like, the traditional sort of mechanism of colonialism. And then the outcome, or I guess the point of it all was essentially that in the West, we faced a crisis of inflation, and we always have had a crisis of inflation. And to keep inflation reasonable and to keep living standards good, like, let’s say, in the West, required an external output, right? So what colonialism allowed were European empires to basically subsidize living standards at home by having an input of really cheap goods and labor from abroad. And this is sort of, again, like the colonial system. And really, it was about wage deflation. You would get wage deflation in the periphery, where, over time, people are working more and more hours for the same thousand calories of rice. That’s kind of what I’m really talking about here. That is how you would subsidize the way of life in what they would call the core countries. So that was, like, a huge benefit to, let’s say, Germany, France, the United Kingdom, even the United States, Japan, all of these imperial powers for centuries. This is really what helped us advance. And, look, I’m a human rights advocate, and I focus on individual freedoms and liberties. And clearly, I think one of the reasons why Western civilization has been so prosperous and effective are because of free speech and property rights and all the things that I fight for. But in doing this research, it’s really made me reflect and realize that, well, yes, it’s a lot of that, 100%, but it’s also because we basically stole stuff from poor countries for a long time. And I think that if we don’t acknowledge that, we’re kind of missing a piece of history. So that’s really what I’ve been reflecting on a lot. Like, when you’re in a beautiful city like London or New York City or Tokyo, yes, you’re looking at the fruits of liberty and freedom, but you’re also looking at the fruits of exploitation of poor countries far away. That is absolutely part of what you’re looking at when you’re looking at this gorgeous architecture and art and culture and all these things. So that’s like a deep reflection I had. And I think what you realize then is when you’re looking at the history of the Bretton Woods system, Bretton Woods was initially created, the institutions inside Bretton Woods, like the IMF World Bank, were initially sort of created to rebuild Europe and Japan right after World War II, with the World Bank being the development bank, which would come in and pay for infrastructure that private capital wasn’t incentivized to fund. And with the IMF being the lender of last resort, that would come in and, quote unquote, bail out countries that face an import export crisis, where their imports were just bigger, more than their exports for some time, and they faced an account deficit. These two institutions were initially designed to just sort of help pull these core countries out of the rubble after the Second World War. And of course, on America’s terms, right, they were designed to help America become the center of everything, as we know. I mean, the dollar system, right? But as colonialism sort of really collapsed and faded away and we used 1960 as kind of the formal end of it. That’s really helpful to think about because by 1960, Europe, Japan, America were really sort of back on their feet as industrial powers and were, like, really dominant again in many ways. And their their societies had really been, let’s say, repaired from the destruction that they had, you know, essentially inflicted on each other. And at that point, the World Bank and IMF conveniently sort of, I guess they they sort of that’s when they start to shift their attention to the Third World or developing world, whatever we want to call it. And I think what ends up happening and I don’t think there was like a meeting where three guys figured it out. I think this was sort of something that was I don’t know whether you want to call it path dependent or structural or whatever, but what ends up happening is that the IMF and World Bank start to replace what traditional colonialism did through their policies. So they started to replace what was done once with warships and guns, except the new weapon was with debt, right? So that was the idea. So again, traditionally, you had foreign powers coming in and just literally stealing and extracting minerals and timber and goods and enslaving people. So what the IMF and World Bank did is they would do this in a disguised way. They would do it in the name of development. They would do it in the name of improving the quality of life for people in these countries. And that’s really, I think, the most twisted part about the whole thing is that you look at these photos of the World Bank IMF headquarters in DC, and there’s like a giant sign that says “end poverty” on it. But in reality, they’re kind of doing the opposite. They’re really exploiting people and impoverishing them. And again, like, they’re extracting value. And through what I’ll describe and I’ll explain the structural adjustment policies, they’re doing wage deflation, right? They’re doing what traditional colonialism would end up inflicting on these poorer parts of the world. You sort of get the same effect. You get you get a subsidized way of life in the core countries, meaning the IMF creditors, the the five countries that traditionally have been the creditors to the IMF, which are the US… The G5: the US, Germany, Japan, France, and England. They’re getting this benefit to their societies and to their allies by reducing the quality of life and reducing consumption and reducing industry and productivity in the poor countries. So, unfortunately, that’s the reality, is that the world is a little bit of a zero-sum game, and and and these systems have exploited and so many and that’s why I think we need to just have an honest conversation about what they are and what their impact has been, and hopefully we can get rid of them. They’ve been so awful.

Stephan Livera – 00:23:09:

Yeah, of course. Certainly if the message is, let’s abolish the IMF and the World Bank, I’m 100% on board. But let me pose one question to you that might be interesting, right? So if you look at I’m sure you’re probably familiar with something like ourworldindata.org, right? And if you look on the stats there, you’ll see something like, oh, look how many hundreds of millions of people were lifted out of poverty over the last 30 or 40 years. And so someone could look at us and say, well, hang on. Is it that all these people have been raised out of poverty? And that’s factually true, except for maybe it’s last two years of lockdown and so on. But aside from if we looked at the numbers in 2019, we would have seen, look at all these people coming out of poverty. So is the argument we’re making here more like more people would have been raised out of poverty? Like, they would be even richer than they are today? Is that the way to frame it?

Alex Gladstein – 00:23:59:

Yeah, I think there’s two really big factors there. So one is general technology innovation, which has resulted in massive increases in life expectancy and in general, productivity. Like 100 years ago, life expectancy in many countries was like 20 years old, okay? So you’ve had scientific medical innovations that have allowed people to just live longer, and you have had productivity innovations, which are technical in nature, which have allowed people to become better farmers, okay, and to sustain and to get more calories out of a certain amount of land. Right? So these are happening. And secondly, you have China, okay? So usually when you look at the Our World In Data stuff, what’s really important is to remove China from the data set, actually, because China accounts for such a huge percentage of what you see as countries coming out of poverty or the poverty rate rising. And China is a completely separate topic, and we could go on and on about this, but China came out of a super-closed communist system where you basically had hyper central planning leading to people who didn’t know how to farm, being forced to farm and starving, et cetera, et cetera, and vice versa, cultural revolution stuff. And then you had the sort of slow introduction of personal freedoms and financial freedoms over time, which led to enormous gains in productivity and in income and stuff like that. I think that’s a very different paradigm than what you saw across what would really be called the Third World, where maybe between 1960 and 1990, you saw massive gains in China. You didn’t see that in Latin America and in Africa and parts of South Asia. In fact, you saw in some cases a decline in countries that were structurally adjusted. You saw actual contractions of GDP despite population going up. You had the total amount of value created in real terms by these countries going down, which is really crazy. So I think that’s really important to look at and to point out. But in general yes. What we’re saying here, or at least of what my thesis would be, is that the Third World or the developing countries would be much, much richer were it not for these IMF and World Bank policies. Now, would they be as rich as England or America? No, of course not. But they’d be a lot richer than they are now. Right?

Stephan Livera – 00:26:31:

Yeah.

Alex Gladstein – 00:26:32:

And that’s as I get into in the article, not just because of what the IMF World Bank do, but also because of the general policies of these nations. These nations pride themselves as capitalist nations that focus on free markets right, and free trade. And that’s kind of how they project themselves to the world. As opposed to the Soviet Union. Right. Or as opposed to the CCP. And there’s a lot of truth in that. Of course. Of course there’s a lot of truth in that. Of course there is a lot of truth in saying that America is a capitalist nation. Of course. I mean, I’m not going to argue that. I know we could nitpick with that for sure. But when we compare America to the Soviet Union, come on, right? So we would say it’s a capitalist power. Right. That being said, since World War II, what these nations did is they used centralized planning and what you would basically call socialized sort of measures to protect their economies. Okay? So what I’m talking about here are things like tariffs and subsidies. So countries like America have subsidized agriculture and have put tariffs against the import of agricultural goods from places like Africa. So what this has done is essentially it’s crippled the ability of other countries to actually be prosperous and to have like a fair fair, free and fair sort of open trading ground. So you have countries like the United States, you know, paying an enormous amount of money to keep peanut farmers profitable, like literally just paying them to do this. And that makes it really difficult for poor countries to grow peanuts in a profitable way and leads to horrendous labor exploitation, et cetera. Now, this is all done in the name of food security. So for the United States and Europe, everything’s been about food security. So and that’s becoming really clear now, like post-Russian invasion of Ukraine. We’re starting to see why that’s important. Right? We’re starting to. See these two concepts which weren’t really that popular to talk about, like even in the Bitcoin circles like previous to this year, really, to be honest, people didn’t really talk about energy sovereignty or food security that much. But these two things have really become now they’re part of our discourse and now it’s sort of fitting in the hindsight obvious that these two things are so critical, but food security and energy sovereignty are really what it’s all about. I use a quote in my piece by a friend of mine. I want to read it because I thought it’s really pithy. It’s by a friend of mine named Murtaza Hussain. He’s a journalist and he says, “If you turned off the electricity for a few months in any developed Western society, 500 years of supposed philosophical progress about human rights and individuals and would quickly evaporate like they never happened.” And it’s a little bit of an exaggeration, but the point stands that it’s really about food security and energy sovereignty. And if you don’t have these things…

Stephan Livera – 00:29:18:

Yeah, I mean, you see riots. I mean, even totally, to me, as someone born in Sri Lanka just recently, right, there was crazy protesting and rioting. And a big part of that was the island was not getting fuel, people couldn’t drive. 

Alex Gladstein – 00:29:33:

Totally. So the point is that these supposedly capitalist nations had used centrally planned and enforced by violence, actually, but centrally planned structures to sort of artificially increase their own food security and energy sovereignty at the expense of others, right? That’s what you’ve had. So it’s a whole system of double standards. So we meaning like America, Britain, France, we subsidize our societies, meaning we pay farmers and we protect them and we protect our steel industries and we give free health care to people, quote unquote, free health care and all this stuff and cheaper energy. And these have been key reasons why standards of living have been so high in Western countries for so long. And this is being done over here. But on the other hand, we go to these poor countries. Like Sri Lanka is a great example. So, like, in the 60s, Sri Lanka gave like some free rice to its people, like some certain amount of basic free rice. So you could compare that to like minimum wage in America or something like that, right? What’s ironic though, is that, like, the British who give all kinds of free stuff to their people and who, who give who massively protect their industries at home, they would go to a country like Sri Lanka and say, oh, you guys have a balance of payments crisis. Oh, no, so you’re going to go bankrupt. Okay, we’ll give you this loan, but only if you stop giving free rice to your people. Right? That was like the idea. And of course, giving free rice is probably a bad economic idea, but the point is when you have people who are used to having free rice and then all of a sudden it’s not free anymore. Well, a lot of people are going to starve, right? So that’s kind of the callousness that these policies were imposed on by the World Bank and IMF over the years. And it’s really important to understand that double standard piece of it. All of the things and we can now get into structural adjustment and what it is but all the things that were asked of these poor countries when they would have to structurally adjust in order to get a loan those things were never asked of the empires. They were never asked of America or Britain or Germany or Japan, more or less. And what’s crazy is America is the biggest debt empire of all. And in my previous writing and work I’ve written about the fact that America is the biggest debtor nation. It’s literally the world runs on American debt. But we’ve never had to structurally adjust, right? We’ve never had to structurally adjust. And I just think those double standards are really at the heart of why the world is so unequal in many ways. But anyway, so structural adjustment is the title of the article, and what it really meant is that from inception the IMF and then later, after 1980 especially, the World Bank would do this as well. But like they would basically make a loan. And again, these are loans, these are not gifts. So these loans are profit making for the IMF or the World Bank. They make money largely through the global Cantillon effect. We often talk about the Cantillon effect, like in our own societies in Bitcoin, like whether it’s in the United States or Australia or whatever. We talk about how Wall Street benefits from being close to the source of fiat creation, et cetera, et cetera. Well, there’s also a global Cantillon effect, right? So Western capital banks, they can get cheaper loans, they can get cheaper money than Ghana, let’s say, or Sri Lanka, much cheaper. So what the World Bank or IMF would do is they would make money off that spread. So they would sort of borrow from creditors back in the day, let’s say 5, 6% and and then they would loan it out to poor countries at 8, 9, 10%, whatever. So not only are they like making money in that sense and you know, in general, like we have to people forget in development economics, but when loans are made, the borrower pays back more than what they borrowed to the creditor, to the tune of, for example, let’s say a country borrows a billion dollars. When all said and done, they probably have paid back a billion and a half at the end of the day. Something like that.

Stephan Livera – 00:33:33:

The interest keeps compounding and all that.

Alex Gladstein – 00:33:35:

Oh yeah, 100%. Some of these loans get there’s something called the Paris Club, which is an institution where debt would get kind of rescheduled and rescheduled and rescheduled and rescheduled. So sometimes these loans and IMF loans were meant to be sort of relatively short term couple of year loans, world bank loans were longer, but a lot of these loans would just get rescheduled and rescheduled and rescheduled. So the point is not only were the IMF World Bank kind of benefiting and the creditors of the IMF World Bank benefiting by, quote unquote development, like the idea that the very word aid and assistance and development I mean, it sounds like we’re trying to be helping these poor countries, but the basic fact is we’re making money off them. Right? Like through the loans. So you have that piece and then even beyond that, beyond the fact that we’re making money off them, they would have to structurally adjust. So what that would mean is that they would need to follow a bunch of essentially like rules or like a playbook that the IMF would impose. And these would include things like currency devaluation, shrinking domestic bank credit. They would include favorable rules for foreign companies. They would include raising taxes. They would include getting rid of any subsidies on food or energy. They would include kind of getting rid of any sort of wage subsidy and also putting actually a ceiling on wages. They would include selling off state owned enterprises, et cetera. So probably like a mix of policies that Bitcoin would be aghast at and others where they’d probably be like, oh, that sounds like a good idea, right? But in any event, like, it’s sort of a mixed bag. But this is what you’d really be describing as like, quote unquote liberalization, right? So countries like Sri Lanka or Ghana, not only they would take the loan and then the taxpayers there would be on the hook for PNI over time, but they’d also have to do all these things which would lead to short-term impoverishment and reduction in quality of life for the population. And you could argue, well, maybe 20, 30 years later you’d see upside. But in the immediate sense like five to ten year period of time, you’re going to have a rough time when you have what these are essentially austerity measures, right? And I think what was interesting is when you zoom out and look at these structural adjustment policies that were imposed across a third world for decades and decades, is that what they really were doing is they were forcing countries to reduce consumption and industry in favor of export. So the productive energy of the country would be diverted from feeding itself and from developing and from creating unique industries and it would be diverted towards making stuff for us. So making stuff for the rich West or whatever, or the North or whatever you want to say.

Stephan Livera – 00:36:31:

And this is what you’re referring to, the cash crops instead of food crops, as one example in the article.

Alex Gladstein – 00:36:36:

Yeah, there’s a clip going around Bitcoin Twitter recently, a guy named Michael Hudson, who I’ve written about in the past, and he’s in the clip explaining why African debt is different from American debt. And he’s talking about food policy, and he’s talking about how in a country like Ghana, it’s different from the US. The US prints the reserve currency, so we can just file paperwork and buy oil or food or whatever we need if we had to. And we tend to try and make sure we don’t have to do that, but we can, right? Ghana can’t do that. So the Ghanaian Cedi is not convertible on world markets. So Ghana can’t just print a bunch of money. Neither can Sri Lanka, et cetera. They can’t just press the fiat button, money printer go burr, and go buy stuff. No. If they want tractors or fertilizer or oil or heavy machinery or anything like that, or in many cases, wheat, they actually have to provide a service to the outside world and then export things, goods, minerals, timber, whatever. And then they earn foreign hard currency. And then with those receipts, then they can go and buy the wheat or the tractor or whatever. So what ends up happening with a lot of these poor countries is that, first of all, they’re paying like 40% to 50%, in some cases of their income, foreign hard currency income, to pay back the debt that they’ve incurred over the years. This is dollar denominated debt to the World Bank and IMF, right? So, like, a huge percentage of their productivity as a nation is going to pay off debt and interest. And then with whatever’s left over, you would often have the corrupt rule. These countries were usually ruled by dictators or unaccountable rulers. They would take off another 20, 30% for their cronies, their palaces, their wine collection, their cars, their palaces in France, whatever. And what would be left over for the population was really small. So you would not only have, essentially the engineering of these economies away from growing substance food, whether it be beef or rice or whatever, you’d not only have it be diverted so that those farmers were now growing things. Inedible things typically like coffee or cocoa or cotton or rubber or palm oil or whatever. Not only were they growing things they couldn’t eat, but they were only seeing, like, a tiny fraction of the profits. And so what ends up happening over time is that you have these poor countries where people were very poor in the past, but they could feed themselves. Okay? And what people call it globalization, one of the big effects, as I’ve been describing, is that you now have poor countries where people are still very poor, but they can’t feed themselves. They have to go buy stuff in the in the in the market from abroad. And I think one fact is so staggering that it just it kind of sums this up, is that today Africa imports 85% of its food, and that to me is just like so awful and obviously so anti free market like Africa should be producing food for the world. It’s like a bread basket, right? So if we lived in this neat little free market utopia, that’s what would be happening. Like Africa has a comparative advantage in this area and they would be providing food for the world and they certainly wouldn’t need to import any food for themselves. But because of the legacy of colonialism and now of the World Bank and IMF, a handful of countries that were dominant structured the world so that African countries were forced to buy food from them and instead divert their agricultural energies towards making other stuff that we wanted. And it’s just sort of a grim situation, if that makes sense.

Stephan Livera – 00:40:16:

Back to the show in a moment. Coldcard.com are making Bitcoin hardware. So for many Bitcoiners, there’s a time in your journey when you start out with a phone wallet, but over time it’s time to use hardware. Coldcard is the leading hardware wallet or hardware signing device in my opinion. It is so reliable, it’s really secure. It has a range of features that you can use to help secure your clients. Whether you’re using it as part of a single signature setup, whether you’re using multisignature, whether you are using features like BIP 85 and child seeds, meaning you just have one master seed and generate some child seeds to use for other wallets. Coldcard supports all of these things and you can get it over at coldcard.com. Make sure you use the code Livera to get a discount on your Coldcard. So when we send our Bitcoin transactions, I like to check my fee on mempool.space. Mempool.space is the leading Bitcoin blockchain explorer. It shows Bitcoin as a fully fledged multilayer ecosystem. Now, mempool.space is really intelligent with how they show you the estimated fee. So if you are looking for your transaction to get confirmed really quickly, you can use the high fee setting. And if you are more patient, if you have a lower time preference, you can use the low or medium settings there. And so that’s a really cool tool. It is integrated in some different wallets. And of course, you can self-host your own instance of mempool.space. It’s free and open source software. Now, if you’re with an enterprise, mempool.space offers custom features such as a custom mempool instance. With your company’s branding. You can get increased API limits and access to the team. For feature requests, go to mempool.space/enterprise for that. And finally, Unchained Capital are industry leaders in the multi-signature and guided pathway solutions for customers out there. So for those of you who want to make sure you are removing single points of failure, you are not just trusting the exchange, you are not just trusting a custodian, you are holding your own private keys. And so with multisig you can hold two keys in different locations and Unchanged can hold the third key. They can help you set this up. They’ve got a concierge onboarding program and now it also comes with an inheritance protocol because most of us have heirs or family that we want to pass Bitcoin down to. So this inheritance package and protocol is going to help you do that. It has step by step checklists, it has letters for the executor or trustee and a tamper-proof bag and some additional content there. So go and sign up it’s over at unchained.com/concierge. Use code Livera for a discount. Back to the show. It’s so unjust and because one way to think of it as well is that there’s a big problem of debt and people taking on too much debt. And really what’s going on here is it’s not just individuals in those countries, it’s some dictator or some government and they’ve gone on taking on all this debt and now all these people are stuck with the bag, they’re stuck paying it off. And in your article, as all you mentioned, this concept of odious debt. So do you mind explaining a bit about that concept and the injustice of it?

Alex Gladstein – 00:43:06:

Sure. Well, context is, what is the world’s largest Ponzi scheme? And I’m always looking at TV and people are talking about FTX. No, this is not the world’s largest Ponzi scheme. The world’s largest Ponzi scheme was not the .com bubble, it was not the subprime bubble, it was not Madoff or FTX. It was not even the stimulus bubble. It’s the sovereign debt bubble. And this bubbles trillions and trillions of dollars. And what ends up happening is that a lot of the sovereign debt is incurred by countries that are ruled by either dictators, autocrats, or unaccountable rulers, or in the past, even colonialists. Right. So the concept of odious debt dates back to the end of the 19th century from the Spanish-American War, when American policymakers courts basically said that once the Spanish were defeated, the Cuban people didn’t owe them, didn’t owe the debts the Spanish had incurred, because the Spanish was subjugating the Cubans. So that made sense, right? So they called that odious debt and that was sort of like written off. The thing is, the IMF and World Bank have never followed that sort of legal precedent, right. So even though you had literal colonialists like the Portuguese and the British, I mean, they were borrowing money in places like Rhodesia or Mozambique or whatever, and then even after they left, those nations were still saddled with that debt, the Dutch in Indonesia, et cetera, et cetera. And then later it was dictators, right? So whether it was Suharto in Indonesia or Marcos in the Philippines or Portillo in Mexico, et cetera, et cetera, these dictators would borrow billions of dollars. Mobutu in Zaire a good example. And they would get overthrown, or they would leave power, and the people of the country still had to pay the debt back, which to me, is like crazy. So, so much of the massive sovereign debt bubble in the world today is basically what we would call odious debt. And I don’t know how that ends up being wound down in the future. I think that we start to see that happen as we transition more towards a Bitcoin standard, maybe in the future. But the point is that so much of what’s owed today was borrowed illegally, essentially, and that has led to the maldevelopment of so many countries and populations. Like the fact that as an example, I cite in my essay, I think when Marcos was tossed out of the Philippines in 86, for the following few years after that, the Filipino people were paying something like 40% of their revenue as a nation was being directed towards debt service on that. So you can think about how crippling that is to a country that’s trying to grow and that is growing in terms of humans, in terms of birth rate, that the country is actually growing. But a huge percentage of its of its lifeblood, of its of its income is being directed towards paying interest and debt back on stuff borrowed by some dictator who was totally not elected. Yeah. So this is, this is the issue of odious debt. And if you just look at the external debt of poor countries since 71, really, the wtfhappenedin1971.com, but really since the late 60s, early 70s, it’s astonishing. I mean, again, these countries were poor, but they didn’t have a whole lot of debt. And then today their debt is so astounding I looked at this one country, Bangladesh, which had a couple of hundred million dollars in foreign debt in the early seventy s, and today it has $100 billion in foreign debt. The IMF and World Bank, the mechanism was like the bailout, right? It was like the moral hazard that we often talk about that Satoshi was actually criticizing when they actually created Bitcoin. Right. So you see that on the global level, right? So what’s happening is that the IMF and World Bank make the impossible possible. They make it possible for these poor countries to borrow so much that they could never, ever pay back. And that’s because what’s happening at the heart of the system is that these dictators would in the 70s and 80s and 90s, they would essentially borrow this money and then the World Bank or the IMF would say, hey, it’s time to pay. Mobutu would say, I don’t have the money, I’m sorry. And instead of taking, like, basically, instead of writing down that loan, instead of that country going bankrupt or whatever, because that would result in the bank or the funds creditors having to reduce their balance sheet. Right. That would result in an asset on their balance sheet, because that loan is an asset on their balance sheet getting written down. Instead of taking the zero on that, they would say, no, just give them another loan, right?

Stephan Livera – 00:47:41:

Keep the cycle going.

Alex Gladstein – 00:47:44:

Exactly. Because it’s a fiat system, this is not possible in a Bitcoin standard, but because it’s a fiat standard system, they could continue to just do this over and over and over again. So because the IMF and World Bank are essentially dollar creatures, the dollar system was able to continue to just bail out these countries. And a lot of that was like Cold War politics right at the beginning, right? Like Mobutu, the US needed him to fight the communist uprisings in Central Africa or whatever, which it is what it is, but we would just continue to bail him out over and over and over again. So there was no economic sense here. There was just enormous amount of moral hazards. You had all these dictators around the world who would just come back to the IMF or World Bank say, hey, all that money we borrowed to fix our crisis or build this dam like we don’t have it, so they would just get another loan. And this was not done in a free market sense. This was not done with any sort of economic wisdom in mind. This was a pure political decision. It was a fiat decision. So this is why you have this absolute explosion of foreign debt in poor countries. And really they’re stuck. It’s called the debt trap because they’re stuck. I mean, there’s nothing they can do. I mean, you talk to people who live in these countries and it’s tough to tell them to their face, you shouldn’t take this loan, right, because the loan in an immediate sense, gives capital to the country which might be starving right now. Of course, we all know that again, you have to pay back more than you’re given and it puts you further into debt, bondage, et cetera. But for people who are starving today, it’s very difficult for them to say no to the money, right? So it’s kind of like I use the parable or the metaphor of the drug dealer. Like the IMF and World Bank are drug dealers, debt is the drug. And these dictators and unaccountable rulers in the developing world are addicts. And nobody wants to go to rehab. There’s no incentive for that. There’s no therapist being like, hey, maybe you should not take that loan. Maybe you should figure out a different way. There’s no one saying that today, so there’s no one going to rehab. And you just have people getting deeper and deeper into debt and eventually you die. And that’s what ended up happening. So the conclusion essentially the sad part, the human toll here is that, again, you had countries that due to structural adjustment and due to just borrowing and borrowing and borrowing and borrowing, over decades, their GDP or GDP per capita was decreasing in real terms, even though their population was growing. And there’s some studies I show, but in general you can think of like a country like Mexico where one study was done where with every 2% reduction in GDP per capita, you’d have like a 1% increase in mortality rate. Okay. For example, okay, so that would mean a 2% contraction of GDP per capita in a 100-million-person country like Mexico would mean a million people die. Right. So in a lot of these countries around the world, you had a 15, 20, 30% contraction of GDP over time. So we’re talking tens of millions of people were killed by these policies, which is just really crazy, and no one’s ever done an accounting of it. And we just will never know. And here’s the thing. None of these World Bank or IMF officials will ever go to prison. There’s not going to be, certainly not. They’re partying right now. They’re living in their wonderful estates in Virginia or wherever, and they’re getting fetted at dinners and stuff. And I just think it’s so grotesque. I don’t know.

Stephan Livera – 00:51:12:

Yeah, of course. And there are some real structural issues that come up in the different countries. Even when I talk to people in Sri Lanka with the recent crisis there, they’d sort of be mentioning, oh, look, I heard there’s another IMF loan coming.

Alex Gladstein – 00:51:26:

As if it’s going to save them, right?

Stephan Livera – 00:51:28:

Right, yeah.

Alex Gladstein – 00:51:29:

In the short term.

Stephan Livera – 00:51:30:

Exactly. And so it’s quite real when you’re on the ground in these countries, and it’s quite confronting, obviously.

Alex Gladstein – 00:51:37:

We should also very briefly mention China, and I think this chapter is sort of closing, but what you had here also was like China as this rising power. China looking at what the US did with the World Bank and IMF and being like, oh my God, we should do that too. And between basically 2007 and maybe 2021, China, through the belt and road had a similar kind of similar more to the World Bank, but they had essentially a development bank through, like through all kinds of proxies. But essentially, if you took it as a whole, I think by 2018, 2019, they may even been given more money out per year than the World Bank at a particular time. But here’s the thing. China doesn’t have the reserve currency, so they would be giving these loans out, and they don’t have any structural adjustment conditions. They just give the loans out. So a lot of countries would flock to China, and when the countries would go bankrupt, like Sri Lanka is right now, Sri Lanka owes a bunch of money to China right now. Right? China can’t just print a bunch of reserve currency to bail out Sri Lanka again. It doesn’t have the ability to print dollars. So what it can do is it can seize national industry. Yeah, exactly. But you know what? Here’s the thing. Does China really want the Sri Lankan telecom? I’m serious. What’s ended up happening across Africa and a lot of the world is like, you’ve got China who’s like, okay, so we could come in and take this state enterprise, but do we really want this? We have to enforce it and hire security guards and deal with it. And what’s happening is they’re actually retreating from a lot of these places right now, as they have their own currency crisis and they’re about to have this real estate collapse and all these things. China is even worse in my view, than the IMF World Bank in many ways because, look, this is a country committing acts of genocide, et cetera, et cetera. But what’s interesting is that they could never do what the IMF World Bank did over time because they don’t mint the reserve currency. But it is worth mentioning that they tried to copy the system and certainly that I think their loans, they ended up backing all kinds of dictators as well. So certainly not any better and in many ways worse, but that may be winding down. And in the meantime, the IMF and World Bank are bigger than ever. I mean, dude, the IMF is now a trillion dollar institution and the World Bank’s got 250, 300 plus billion dollars of loans out there. And a lot of people, like, think that these things are no longer relevant. And that all we had all this debate in the about these institutions and well, they’re not that relevant anymore. I mean, they continue to be the most important global financial institutions.

Stephan Livera – 00:54:16:

Yeah, it’s a shame. And I think what happens is the countries get stuck in this debt trap and then they just don’t have a way out. And what it takes is to really go independent from that. And I think you also mentioned this in the article as well, but there’s resistance even inside the country because some people inside the country are benefiting from that system and others are very much not, or others don’t understand the problem. Or as you said, they don’t want to go to rehab, right, because it’s going to be a lot of short term pain, even for that long term gain. And so how do you see a way out of this?

Alex Gladstein – 00:54:52:

Well, I did the piece and I tried to reflect all on this in many ways just to get the info out there. Like, I didn’t know these things, or at least I only knew a small, small amount of them before doing all this research and unearthing all these texts from 20, 30, 40 years ago, 50 years ago. I think the lessons in them are so important and we should just educate ourselves about the legacy of the IMF and World Bank. And that’s like the first step. Like, knowledge is power and we should be knowledgeable about what happened. And I think that’s that’s an important first step because we seem to have lost the public collective knowledge about what the IMF and World Bank were. We may have had that maybe 30 years ago, but anyone younger than like 40 years old probably knows very little about the World Bank or IMF. Even the people who work there don’t know, and there’s a little bit of a banality of evil thing here going on. But most people who work at these institutions are not bad people. They don’t really know what’s kind of meta going on. They see their job as extending capital and credit to countries that couldn’t otherwise get it, and they really think that they’re doing a good job, right? So it’s only when you really zoom out and you see the multidecade impact of these things, where you start to see the massive human and environmental damage that they’ve done. And when we talk about a future well, and I talked to Jeff Booth and Saifedean and a few others, quite a bit about this to try and sculpt my thinking here, but if we have a Bitcoin standard, the IMF and World Bank can’t do what they do. They would not be able to do infinite bailouts. If Brazil wants $30 billion, it’s sort of like, you and whose bitcoins? is sort of what Saifedean said, and it’s true. It’s like that’s got to come from somewhere, right? Today it doesn’t have to come from anywhere. It can be printed. But in a world where no country can print the reserve currency, I think that the World Bank and IMF, if they are to continue to exist, have to be much more careful organizations and have to be much more kind of more like traditional banks where they assess risk and then make decisions based on that as opposed to ignoring risk. Right. And knowing that no matter what, these can be bailed out and creating that global moral hazard for the whole financial system, where you have banks making loans now and doing business in countries that they would never do normally because they know they’ll get bailed out, and all the moral hazard that that creates. So I think as we transition to a Bitcoin standard over the next few decades, we’ll certainly have an unwinding of these institutions. They’ll have to either refocus or just be abolished. And that’s not going to be pretty. I mean, I don’t think that any of this is going to be pretty. I hope it’s a winding down and not a collapse. Sort of the parable of structural adjustment is that, again, when you’re being subsidized, even if that’s a bad decision, economically, we’d probably all agree, but when your subsidy goes to zero, that’s bad. That’s unequivocally bad for the majority of people who live in that particular country is being subsidized. So it’s sort of the same thing. So all these countries are essentially being subsidized by the World Bank and IMF at their expense, long term. If those subsidies go to zero overnight, bad things are going to happen, right? So my hope is that there’s an unwinding that happens and that countries basically start to default. And in many cases, if you have defaults, who actually gets hurt? In many cases, it’s going to be the creditor who made the bad decision in the first place, right? And that would be like free market capitalism at work, right? That’s why bankruptcies are an important part of capitalism, right? You made a bad decision. Okay, you’re going to lose money there, okay? Today it’s like engineered so that the people making the loans are not facing any risk. I mean, it’s not a free market. They’re getting bailed out by the IMF, right? In the same way that the US government has like a put on, whether it be stocks or credit or whatever, you have the nationalization of these things. Well, this is like the supra nationalization of sovereign debt and foreign investment. So if that goes away, I think there’s an unwinding right of total amount of credit in the system in real terms. Over time, I think these institutions either become a lot more careful or disappear. And I think there is still a place in a Bitcoin standard for powerful countries to have a lender of last resort type thing, like the IMF and World Bank were originally drawn up to be before they kind of mutated into this grotesque colonial apparatus. There is a place for, I think, a World Bank type thing that would be funded by deposits from wealthy countries to fund important sustainable projects in poor countries that private markets maybe can’t fund. I think that is absolutely an important thing. But it can’t be funded by fiat bailout money. It’s got to be funded by actual capital. So I think those institutions will be much wiser, much more conservative, much more careful, and much more prudent in terms of the amount of capital they’re giving. It’ll be like a lot more careful. Basically like these projects that were funded by the bank and the fund, simply because they had a quota, these bureaucrats were like they had to lend out 100 billion every year to this part of Africa. That was like in their job. That’s literally their job is find projects and there was no targets, they had to make them up. So you had all this massive waste, right, and it would just go in to line the pockets of government officials and stuff like that, and fund projects in the middle of nowhere. They didn’t do anything. So if you no longer have these fiat targets of like, you have to lend out X. If it’s more like, well, how can we really improve the quality of life for people in this country? I think things are going to be very different. So I’m hopeful about the far future or about at least the medium to far future, but I don’t think there’s any way that the next decade isn’t really rough as some of these countries essentially go to rehab and they get off the fiat system. It’s going to be really tough. I think we should have no illusions about that. It’s going to be really difficult. There’s going to be a lot of suffering because that’s what going to rehab is really painful. So it will be long term healthy for the nation, for these nations and these groups of people as they transition more to a standard where they are independent and sovereign, I think it’ll be much healthier for them, but the system is going to be painful to wean off of for sure. I mean, the other interesting part is the mining piece, and some people are less bullish about this, but I just find it fascinating that like in the future, any country, no matter how small, can create some reserve currency by transforming its latent energy resources directly into that through Bitcoin mining without permission. So today, Malawi again can’t just create dollars, it has to go out and get them, et cetera. It has to do things that the world wants. Well what if Malawi instead can just turn its flowing rivers and sunlight or whatever into Bitcoin? Now it may not be a lot of Bitcoin, but hey, that’s going to be the premium collateral of all financial markets in the world. Like Bitcoin will be very valuable. So I think it’s really cool that maybe in the future you can have even these poorer countries be able to permissionlessly generate the reserve currency. I think that’ll really level the playing field a little bit. That’s something I think about a lot too.

Stephan Livera – 01:02:21:

Yeah, that’s an interesting idea, although I think at one level we could say, look, mining is a business like any other, and we’ve seen in the recent cycle a lot of miners get wrecked. So if those governments don’t have competent and conservative mind, let’s say conservative in the business sense of not getting wrecked in a ball cycle kind of thing, or extending. But I think your point about some of these countries going into default, I think that’s sadly the way some of these things will go and then maybe the IMF and World Bank creditors will have to actually take a loss. They’ll have to take a loss on that loan that they lent out in some cases and we may see.

Alex Gladstein – 01:02:57:

And that will shrink the amount of credit in the world, right? And that’ll start to unwind to this bubble and there’s going to be big effects from that. But I just think we’re headed towards a system at the both the micro and the macro level that is just much more cooperative. Jeff Booth called it forced cooperation. Basically, when you think about the wage disparities in the way that the fiat system and the colonial system created these wage disparities, if you’re living in this world, this new world, where everybody’s on the same monetary standard and there’s no barriers between commerce in the same way. And we’re all just on the same currency system. The arbitrage on wages is going to be much tighter. It’s not going to go away. There’s still going to be benefits to having your company based in America versus Nigeria. All kinds of benefits, security, et cetera, et cetera, whatever language, who knows? Like, all kinds. But if you have talented software developers there, that wage things going to close a little bit. Right. So I think, again, one of the ways that the world is still so divided and still so unequal in many ways is because of the fiat system, where you have all these Fiats and you have 100+ fiats and 40+ central banks on one continent alone, and none of them are interoperable. And everybody’s like, kept in a system where if they want to do commerce or move from one system A to system B, they have to pay rent to some foreign power. That is currently the system. And the answer, as I’m so glad people at the Africa Bitcoin Conference were saying, is not to replace that system with an indigenous system. I think that’s been the problem in post-colonial Africa. Right. That mentor of mine, George, would write about a lot. Like, basically the colonial systems were just like, replaced by dictator systems where the colonialist was just living down the road instead of in Britain and they were like rinsing and repeating the same thing. So the answer is not to nationalize Western Union’s fiat rails in Zimbabwe or whatever and replace them with Zimbabwean fiat rails? No, that’s actually probably going to be even worse. The answer is to switch to Bitcoin. Right. So I think it’s really cool and I think it does have a little bit of that forced cooperation thing that Jeff’s talking about. I’m more optimistic about the future, for sure, but I don’t think people should be under any illusions about how tough it’s going to be for for the next few years. But at least individuals will have an escape. Right. I think that’s the key. We don’t really know how this is all going to shake out at the macro global level, like what the Bitcoin transformation ends up doing to the world. Like, again, I’m optimistic, but what we do know is that as opposed to the 1980s, people in countries like Ghana and Sri Lanka actually have on a micro level, they can opt out. And that’s very valuable.

Stephan Livera – 01:05:41:

Yeah. Especially in this. I think we are seeing a lot more people doing remote work as an obvious example. Right. And if you can do an online skill or job or business earn Bitcoin for that, it’s making a difference. Right. And I think whether you’re in Africa or Asia or South America, there are opportunities there and I think that is going to start rebalancing things and we’ll see. It may be some combination of things, as we were talking about, some defaults in the poorer country. It may be over, like a longer term, maybe. If it’s devaluation of fiat and in favor of Bitcoin, well, that’s going to lift in the system. And I guess one other area I think you touched on this in the article as well, is this idea that maybe people should start pushing against this whole notion of foreign aid or at least government foreign aid, right? And I think that was something you were mentioning as well, I noticed, because the idea is there are some people who are aware about this kind of thing and saying actually some of this foreign aid is part of the problem because it’s going to the dictator. We need to get off the teats.

Alex Gladstein – 01:06:41:

Yeah, well, I wanted to separate aid from assistance. I mean, aid is a small fraction of all assistance, right? Again, remember, most assistants are loans and these are not really assistance. I mean, they’re making money off you. Yeah, but I didn’t want to deride all, I mean, I think that private aid can be very important. Like if a country has an earthquake or something, of course I think it’s quite charitable and admirable to donate. Like let’s say in the wake of the 2000 was it the 2004 tsunami in Asia and in the Indian Ocean, right? The was that it was 2004, right? The horrible killed like 100,000 people. Right? Like in circumstances like that, private aid is is noble and of course it’s ineffective in in many ways it’s inefficient because you have all these fiat rails and third parties in the middle, like bureaucracies, like the Red Cross, et cetera. But the general concept of like making a no strings attached gift to people who have just been devastated by an earthquake or by a famine, I think is really noble and important. The problem is when aid turns into an industry, right? And that’s almost like a separate issue. But yeah, it creates dependence and it creates dependence in the same way that this quote unquote assistance that I’ve been analyzing creates dependence where local industry gets wiped out. You have aid in the form of used clothing being dropped into these countries and it wipes out the local textile manufacturers and it wipes out the ability of local business to produce. Right. So a lot of the aid these countries are victims of both aid and assistance, ironically. The assistance has been indebting them and structuring their economies in ways to help us instead of help them, as I’ve detailed in my article, but separately, aid in some cases, again, a lot of it, as you say, goes to the government officials and doesn’t actually reach all the way down to the people who need it. But it can also create dependency and people like Dembe Samoyo have written a lot about this, but aid can be quite dangerous. But it’s a separate I think it’s important to distinguish that from assistance. Again, aid is only a small percentage, but the one thing I would say is that we didn’t mention that is important is whether it’s aid or assistance. What is always interesting is that western countries consider this. They call it official development assistance ODA, like any sort of aid or assistance. And they’re all comparing who gave the most ODA this year. But what’s crazy is in the ODA, which would be like, maybe, let’s say whatever amount of billions of dollars france gives in ODA every year. The crazy part is oftentimes, as I mentioned in my article, and this goes for the World Bank or IMF too, any sort of large assistance project, the money is, quote unquote, lent out, but immediately comes back to the West. This is called, like, the double loan phenomenon, right? So, for example, I talked about this issue in an example in Ghana. Like, there was a huge dam built in the 60s in Ghana on Lake Volta, created this huge lake you can see from outer space, Lake Volta on the Volta River, the Akosombo Dam. So money was lent by the World Bank in a World Bank like round, and it was lent out to the Ghanaian government, who then immediately hired an Italian company to build the dam. So the money was entirely spent in the West, but the Ghanian taxpayers had to pay the whole thing back plus interest. And then the project itself was going towards an American aluminum company getting really cheap electricity, and nobody in Ghana was actually sort of benefiting from this for, like, many years. I thought that was a great kind of metaphor for what development really is. In many cases, it continues to be foreign exploitation. But that double loan phenomenon is very sinister and happens all the time. Like, the money gets written off or designated as assistance, but in reality, 60% to 80% of it comes right back into the pocket of the donor country or the lending country. So I think that’s been an understudied phenomenon.

Stephan Livera – 01:10:57:

Yeah, that’s so brutal. Yeah, well, yeah, as we were saying, I think the way out is some countries will have to default. Other countries, or at least individuals, will have their way of going to Bitcoin. And so, yeah, I guess that’s really the best we can hope for, is that people are waking up to Bitcoin as the alternative.

Alex Gladstein – 01:11:14:

Yeah. Brick by brick.

Stephan Livera – 01:11:15:

Yeah, that’s right. Also, one other thing. I know you recently had a bunch of grants going out from HRF, so do you want to just tell us a little bit about some of the HRF grants that have gone out recently?

Alex Gladstein – 01:11:28:

Sure. So we’re happy to be able to give out about 2 billion satoshis, which I suspect in ten years will be probably a very large amount. But we’re fortunate to have supporters who are interested in seeing us do this. So we have a program where we give away ten to twelve grants every quarter. Our next one will be in February, our Q1 grants. This was about ten projects around the world focused on core development, scaling, Bitcoin communities, education, and privacy. So some of the recipients included individual core developers, individual Lightning developers, educational groups in places like sub-Saharan Africa or India, actually. And also projects working on privacy, like the Tor project, as well as a conference that was recently held in Mexico that was focused on on chain privacy. So travel grants for students and activists, projects to help men and women, girls and boys of different ages and backgrounds to learn about Bitcoin. So, yeah, it’s kind of like a full-stack approach, I think. But we’re excited to do it. I think it’s somewhat unique in the space, and we’re excited to keep doing it because right now, in many ways, we want to acknowledge that, I think in the breakdown of how much we give, that core development will always be important to an extent, but in many ways, I think you can argue that Bitcoin is good enough as is. Like, it works today, it can do a lot. It could just ossify today and not change at all and still really change the world over the next 40 years. Right? So, like, we keep some for core development, but most of it is is really to expand the number of users of Bitcoin. So communities and education and UX improvements. So I think that’s where we are particularly suited to helping. And a lot of these are going to all going to be in line with our mission. So these developers are mostly or entirely based in authoritarian countries or emerging market countries. And that’s where these initiatives are. Like, Cameroon is a great example, or countries that are facing crises of human rights, like India, even today has a lot of issues. So we’re very proud to support the Indian Bitcoin community. I think they’re going to be very important for Bitcoin in the next decade.

Stephan Livera – 01:13:56:

Yeah, very important country in terms of the size, right. Just the number of people and the.

Alex Gladstein – 01:14:01:

Biggest country in the world. They don’t trust the government. They love cash and they love Bitcoin. They love gold. So I think they’re going to be Bitcoiners for sure. Well, I mean, they have to get past all the altcoins, which is a huge issue, but that’s why the Bitcoin education is so critical.

Stephan Livera – 01:14:18:

Yeah. All right. Well, fantastic. I think that’s a good spot to finish up there, but yeah, I think it’s great the grants and the programs there in terms of building the community and the education. So any closing thoughts or anything else you want to leave the listeners with?

Alex Gladstein – 01:14:33:

Well, it’s all connected. I mean, again, as I said at the beginning, the Africa Bitcoin Conference is one of the things we’ve supported. And it’s kind of this third way movement of people in the global south realizing that they can build on Bitcoin as a reaction against both authoritarians and corrupt local leaders, as well as, like, the IMF and World Bank. Right. So Bitcoin is both anti-authoritarian and anti-imperial. And I think that in many ways, hopefully, our grants can reflect that and we’ll continue to try and support as many Bitcoin projects in the global south as we can. And again, thanks so much for having me on today to talk about these issues.

Stephan Livera – 01:15:10:

Fantastic. Thanks, Alex. Chat soon. I hope you enjoyed the show. Get the show notes at stephanlivera.com/446. Thanks for listening, and I’ll see you in the Citadels.

Leave a Reply