The new iteration of the internet is coming with a groundbreaking technology that promises to disrupt current financial systems eliminating the need for intermediaries. That is the promise of Web3. However, a huge claim such as this must have major consequences on the current financial hierarchical systems. Implementing the blockchain and decentralizing powers of control has ramifications, and it’s crucial to discuss the possible economic aftermath. What’s the relation between Web3 and capitalism? Is Web3 promoting socialism? What would Karl Marx think of Web3?
This article will discuss Web3’s core values, its potential to democratize the workplace, and the possibilities of the post-blockchain era.
The Ideology of Web3
In an interview with Yahoo Finance, the Marxist academic Professor Richard D Wolf finds similarities between Web3 and the libertarian free market, as both ideologies’ roots came from the distrust of government and central banking after the 2008 recession.
This is a true claim. Web3 technologies such as blockchains, cryptocurrencies, and non-fungible tokens (NFTs) aim to disrupt the hierarchical power structure by eliminating third parties. Cryptocurrencies and NFTs are based on the blockchain, a distributed digital ledger that runs on a peer-to-peer network. Instead of trusting centralized banks, people can conduct transactions without intermediaries by executing a certain consensus.
Decentralized Autonomous Organizations (DAOs) are blockchain-based entities that are fully autonomous, with smart contracts laying the foundational rules of governance. Thus, the decentralization of DAOs tries to achieve democratic control by utilizing the automation of administration delivered by the blockchain. Which is again, a kind of societal and hierarchical reform that Web3 is trying to accomplish.
These DAOs can create a revolutionary change in how traditional corporation work, where enterprises can be based on collective decision-making. Shifting the hierarchical organizational structure to a distributed structure places individuals on a horizontal plane instead of a vertical one, which can ultimately have financial and political consequences.
Is Web3 Redefining Capitalism?
This monumental shift in organizational structure has effects on the current system of capitalism. This is because, capitalism built on a decentralized ledger requires different economic policies to industrial capitalism, the one built on centralized ledgers. The aim of blockchains then extends far beyond a radical shift in private money payments to a more of a transformation of the economic structure of capitalism.
In a paper under the title of “Capitalism after Satoshi”, economies are claimed to be built mainly on trust. So, institutions that can incite trust will facilitate economic corporation. The current market systems rely on trust manifested in central organizations with concentrated power clusters. However, blockchain is a technology that lowers that trust.
Blockchains to Remove Capitalistic Hierarchy
If blockchains are to be widely adopted, the capitalist economy will have its infrastructure based on a decentralized ledger. Such as payments, property rights, transfer and settlement, commercial contracting, and other regulations. Here, capitalism will become distributed and polycentric, with less centralized governmental control.
Back in 2009, the technological revolution disrupted the capitalist system providing greater access to the means of production. However, still, laborers do not possess or have any claim to these means of production as well as their inability to have a say in the finished product or gain any related profit. And thus, because of this imbalance, capitalists exploit workers. This is the result of hierarchical centralization.
Harvard professor and Marxist Stephen Marglin addressed the exploitation theory by raising an important question. “What circumstances gave rise to the boss-worker pyramid that characterizes capitalist production? And what social function does the capitalist hierarchy serve?”. His answer was that hierarchy serves nothing and only promotes further exploitation.
Here comes Web3’s influence on capitalism. The introduction of blockchain technology causes disintermediation, or the removal of central intermediaries. As well as dehierarchicalisation, or the disruption of structural hierarchy. This new era of trustless systems urges the reformulation of capitalism to expand the horizontal plane of power and diminishes the vertical one.
What Would Karl Marx Think?
The diminishing of the hierarchal structure might raise the debate of whether Web3 ideologies are too leftist. For example, Ethereum proponents have shared their ideologies of what distributed governance should look like and the importance of the fair distribution of wealth. However, they are not keen on being associated with socialism or classical leftist views.
Nevertheless, in theory, the anti-authoritarian potential of Web3 might be indeed what Karl Marx has long spoken about. The distrust of big banks and the focus on democratic ownership are rooted in the Marxism ideology. In his Communist Manifesto, Marx states that the upper-class bourgeoise’s accumulation of capital is done on the basis of worker exploitation. Which, might make Marx an advocate for the blockchain.
However, Marx’s aversion to capitalism resided in the misallocation of capital and the gain of profit for only profit’s sake. This is not the current case. Non-fungible tokens are further confirming what Marx was against. Instead of being used as certificates of ownership, NFTs are useless JPEG images being bounced around for a quick profit.
Is Web3 Reinforcing Current Capitalism?
In this frame of view, Web3 ideologies might be reforming capitalism in theory. However, the current direction it’s taking is deviating from its path. In a Jacobin article, senior lecturer in political science James Muldoon states that Web3 isn’t as anti-capitalist as it seems to be.
“The utopian rhetoric around freedom, decentralization, and an ownership economy might help investors sleep at night. But at its core, it’s just a way of selling a new generation of products to the public.”
Muldoon further places emphasis on the horizontalism of Web3 and its trustless nature. He stated that if the trust should be placed in DAOs with autonomous governance, and if code is law, that doesn’t necessarily mean the abolishment of centralized power. Power always reappears in organizations. Decentralization in this case doesn’t mean democratization. This is because someone has to write that code.
Some argued that Web3 is less of a socialist regime and more of a mass capitalistic structure where everyone is a shareholder. However, Muldoon states that the main proponents of Web3 arent “progressives committed to notions of social justice”, rather are individuals trying to get rich by flipping JPEGs.
Decentralized Financial Systems
If we take a step back to see Web3 from a wider lens, the view that we previously discussed to be the catalyst of capitalist reforms, true decentralization of economic systems might be what we need after the continuous banking crisis. The disruption of hierarchal structures of power doesn’t have to necessarily mean a classical leftist approach to economic systems or a socialist movement. A reformulation of capitalism can be sufficient for a fairer economical structure.
However, implementing cryptocurrencies, DAOs, and other blockchain-based technologies without subordination to the current capitalistic structure can be idealistic. Blockchains might be subordinated in a way where the parts that fit the capitalistic structure would remain, and the parts that challenge it would be discarded.
Nevertheless, if directed right, the advent of technological advancement can play a pivotal role in disrupting the current financial systems in favor of creating a horizontal balance in power, instead of private profit.