The United States has a highly developed internet infrastructure with incredible successes to its credit. But problematic policy changes being considered in Washington may jeopardize that success. In recent months there have been calls from many to restore net neutrality.
What is net neutrality? Net neutrality is a policy that internet service providers (ISPs) have to give all internet content providers equal access and use of the ISP’s networks, and for no extra cost. Because of this policy, ISPs could not impose any additional charges on a content provider, regardless of how much data the content provider uses in a network.
For instance, a video streaming company might use a large amount of data on an ISP’s system when users accessed the service. Net neutrality would prohibit the ISP from making the video streaming service pay for the extra data that they used. Instead, net neutrality would force the ISP to spread out the data usage costs to the rest of its users.
Net neutrality does not just increase the cost of the internet for the average consumer. Net neutrality also lowers the incentive for ISPs to expand broadband service if there is no competition to host content provider data.
Former FCC Commissioner Ajit Pai removed Obama-era net neutrality rules in 2018. Pai reasoned that net neutrality forced ISPs to charge consumers more to equalize their operating costs across the board. Following the repeal of net neutrality, there was an increase in broadband investment as ISPs moved to make deals with content providers that would prioritize speed and efficiency for those high-usage content providers.
There have been incredible free-market successes in the wake of repealing net neutrality in America. Yet, there are renewed demands from some for the federal government to reinstate net neutrality. Indeed, the Biden administration is considering the reinstatement of net neutrality. While such a move might be popular with certain groups in Washington, state and federal policymakers would do well to consider the negative implications that net neutrality could have on the strength of America’s broadband networks.
The failure of net neutrality in Europe is glaring evidence of how problematic the policy is. Amid the Covid-19 pandemic, there were concerns in Europe that the under-built broadband networks could not handle the uptick in internet usage. This network failure is largely due to the European Union’s net neutrality policies that had discouraged investment in broadband development prior to the pandemic.
The inadequate broadband infrastructure led to pleas from European policymakers that content providers limit the data they were pushing through the internet networks. Meanwhile, due to the higher investments in broadband development, the robust broadband infrastructure in the United States responded quite well during the pandemic compared to its European counterparts.
The success of American broadband comes as little surprise to proponents of the free market competition as the driving force in broadband developments and innovations. As it claims to use the free market as the justification for social media content moderation, Big Tech often insists that companies have the right to decide which entities they will host on their services.
But there appears to be a double standard for many of them regarding the net neutrality issue as these companies themselves feel threatened by the ISPs. The Big Tech companies have a huge market share of internet content. In 2019, just six content providers accounted for 43 percent of all internet traffic. The content providers also can control the content on their massive platforms. Yet, these content providers insist that the ability of ISPs to determine the flow of data on their networks poses a threat to the freedom of the internet.
For instance, Twitter stated with dismay that without net neutrality, “ISPs would even be able to block content they don’t like.” Yet, Twitter and other Big Tech companies have given strong support for other policies, like Section 230, that allow social media companies to moderate, block, or remove certain content from their sites.
Despite the protests of some Big Tech companies, a market without net neutrality has the potential for increased innovation and competition. By allowing for the market to determine which ISPs will prosper as they offer the most attractive services to consumers, there is a real potential for the cycle of competition and innovation to continue. While net neutrality treats the internet simply as a means of broadcasting data in an unsystematic way, a free-market perspective views the internet as a dynamic marketplace commodity that continually responds to supply and demand patterns.
Despite the claims that net neutrality keeps the internet open and accessible, the record shows that net neutrality actually threatens the efficiency of the internet as it erodes the incentives to develop and grow internet infrastructure. Bad policies have harmful consequences. A step back to the failure of net neutrality is a step backward from the success of America’s internet infrastructure.
The Mississippi space industry constitutes a growing role in the state economy with implications across a wide range of areas. The industry brings employment, infrastructure development, and technological innovations that increase the ability of the state and the nation to be internationally competitive in a growing sector.
When understanding the space industry, it is essential to note the private sector shift that has taken place in recent years. Government-funded programs are no longer the sole actor in this enterprise. Instead, private enterprise has entered the picture as a growing contributor to progress in space. It is important not to impede this change in the space industry landscape but to encourage this development as a new and capable form of revenue and job growth.
The state of Mississippi shows great promise in this area. In particular, the Stennis Space Center in Hancock County is projected to be the “home to a modern, sustainable propulsion test enterprise by 2025 [and will provide] world-class test services to NASA, other government agencies, and commercial customers.”
In 2020 alone, it served as a major contributor to the Gulf Coast economies, contributing more than $1 billion to Hancock and Pearl River counties and St. Tammany Parish in Louisiana. Indeed, in 2021 Stennis Space Center conducted the hot fire rocket test for the Artemis I space mission, the first of several missions to space that will eventually culminate with Americans on the moon again.
Inside the center, the E Test Complex provides opportunities for private sector companies such as SpaceX, Blue Origin, and Relative Space to test engines and help innovate this industry to unimaginable heights. It has been such a resource for companies in the space industry that companies have expanded the space center dramatically.
Relativity, announced that they would be further expanding the Stennis Space Center through a $2.4 million investment. This is on top of their $59 million investment that has been reported to have created 190 jobs for locals.
On both a state and federal level, there seems to be increased attention on continuing this growth. In 2019, former Governor Phil Bryant started the Space Initiative, which seeks to attract more space companies like Relativity to Mississippi. He also announced the Mississippi National Guard Space Directorate formation, which is supposed to attract U.S. Department of Defense federal investments through President Trump’s Space Force. Both of these initiatives show promise in furthering innovation developments in the Mississippi space industry.
Mississippi would also do well from federal legislation such as Senator Wicker and Senator Hyde-Smith’s bill, the Licensing Innovations and Future Technologies in Space Act. Such legislation would significantly grow the space opportunities in South Mississippi by directing the Department of Transportation to build a facility in which federal employees can receive training on the process of licensing commercial space launch and reentry activities.
As an important free-market development, it is important to continue to allow growth in this area. The space industry is a continually expanding area of the American economy, both in the private and public spheres. The Mississippi government would do well to work for cooperation with the space industry as it brings matters of regulatory reform and economic freedom to the state.
"Capitalism is the unequal distribution of wealth. Socialism is the equal distribution of poverty." -Winston Churchill
America is at a crossroads regarding its economy and identity. This all comes in the wake of a government that has expanded spending to record levels and a nation that is recovering from government-imposed lockdowns.
As states begin opening back up, the circumstances have created an ideological and economic policy vacuum as various factions clammer to define "the new normal."
Although many would have frowned upon the idea of the government giving out money on such a large scale, the recent events of the past year have further normalized the idea of government handouts to the populace. Despite assertations from many that such programs were only to be utilized during the pandemic, the nature of government has moved these programs closer to a position of permanence.
In the words of Milton Friedman: "Nothing is so permanent as a temporary government program." Indeed, efforts are underway even now to make such handouts the codified law of the land, with many in Washington advocating for an expansion of the welfare state to the extent that the nation has not seen since Lyndon Johnson's disastrous "Great Society."
Yet the question must be asked, what is the real economic benefit of the government handouts that the Left has continually attempted to advance? Although the shortsighted proposals of some promise at least temporary advantages, it is critical to consider whether or not these moves have long-term benefits for the economy. Time and time again, the government has shown itself to be a poor distributor of other people's money.
Handouts stagnate economic growth because there is no exchange of goods or services when the money goes from the taxpayer to the government to the welfare recipient. Under free-market circumstances, economic transactions are voluntary exchanges that occur so that all parties get something of value. When there are more transactions, more economic activity occurs. On the other hand, the government gets the money it uses for the welfare state either by borrowing it on the taxpayers' credit or using force to enact taxation.
For instance, when the government uses one dollar for these entitlement programs, it transfers that dollar from the producer to the recipient by force. This transfer guts the value that could have been put into the economy if the recipient had worked for that dollar. Taking the money that taxpayers earned through their own labor and transferring it to handout recipients that did not work for it disregards the value of the taxpayer's labor.
Yet, the damages from the redistributive entitlement programs do not just end with the disregard of taxpayer labor. Such programs also lower the productivity of the workforce as workers are incentivized not to work. This creates a consuming cycle as the businesses that are dependent upon employees cannot find a labor force to operate the business.
When these places of employment are forced to close their doors because they can't find employees, there are fewer available employment opportunities. Government welfare programs are then further grounded into society to address all of the resulting unemployed. Through a cycle of government dependence and poverty brought about by entitlement programs, communities that were once thriving can be decimated as the whirlpool of government welfare programs consumes the economy.
Finally, government handouts are more than just a problematic economic element. There is perhaps no more destructive force to destroy the motivation and work ethic of a workforce than the sedative of government handouts. When a government doles out the entitlement dollars to the citizens, it sends a message that the nanny state will provide some or all of their income.
The American economy and work ethic are legendary as the world's greatest engine for free enterprise, industry, and innovation. To protect this incredible success, there must be a recognition that destructive consequences come from policy proposals to grow redistributive entitlement programs.
A path of socialist programs is a path to ruin for America. Public policy should prioritize an economic environment where citizens can genuinely experience the value of their own labor and thrive in the success of the free market system.
Regulatory sandboxes are a unique solution to prevent government regulations from smothering new technologies and innovations. The programs allow innovative companies to be temporarily exempt from prohibitive regulations until the state can establish an objectively informed regulatory framework for the innovation.
These programs have been adopted in select states as a unique way to encourage business growth and innovation. Although the programs have come in many forms, policymakers have implemented sandboxes across several different sectors.
In a day of big technology companies, regulatory sandboxes provide a regulatory development platform for all companies so that even small innovators with less political and financial capital can have an established framework to present their new innovations to regulators.
This report highlights innovative legislation and policy ideas that would advance such regulatory reform proposals around the nation:
Financial Technology
The financial technology sector was one of the first sectors to utilize the regulatory sandbox model. This type, known as a “FinTech” regulatory sandbox, has become the most widespread type so far and has seen success across several states.
Financial services are rapidly evolving. These sandboxes provide a regulatory framework for companies to develop innovations that increase access to capital, enable unique financial transaction models, and develop tools to build finance into new technology.
Arizona (2018), Nevada (2019), Utah (2019), Wyoming (2019), Florida (2020), West Virginia (2020)
Bills Introduced:
Illinois (2019), South Carolina (2019), Texas (2019), Connecticut (2021), Louisiana (2021), New York (2021), North Carolina (2021), North Dakota (2021), Oklahoma (2021)
Blockchain
Blockchain is an emerging technology that has quickly been thrust to the forefront of technological development. Using a highly sophisticated record-keeping system, it has applications for a myriad of industries ranging from banking to logistics.
In order to encourage the growth of this technology, the states of Wyoming and Utah both implemented regulatory sandboxes that included blockchain technology. Wyoming and Utah both opted to include blockchain under the umbrella of their FinTech sandboxes.
However, although many proposed bills have placed blockchain under FinTech, other legislation (e.g., Rhode Island) has opted to specify an entirely separate sandbox for blockchain. This specification is based on the understanding that blockchain has more applications than solely the financial sector.
Passed into Law:
Utah (2019), Wyoming (2019), Hawaii (2020)
Bills Introduced:
South Carolina (2019), Idaho (2021), Louisiana (2021), North Carolina (2021), North Dakota (2021), Rhode Island (2021)
Insurance Technology
Insurance is an extraordinarily complex and dynamic industry. Using insurance sandboxes, innovative businesses have the opportunity to provide insurance services that might be outside of the status quo. By having the ability to offer innovative insurance, companies can explore ways that would help them better serve their customers.
Passed into Law:
Kentucky (2019), Vermont (2019), Utah (2020), South Dakota (2021), West Virginia (2021)
Bills Introduced:
New Hampshire (2020), Louisiana (2021), North Carolina (2021)
Legal Services
The state of Utah’s Supreme Court first implemented a legal services sandbox in 2020. Over the last year, the program has seen great success, being utilized by non-profits, non-traditional legal services, and the use of technology for legal services.
According to a recent report, these innovators have provided legal services to hundreds of individuals, and there has not been a single complaint from consumers or entities. In 2020, California also introduced a legal sandbox through its bar association.
Implemented:
Utah (established in 2020 by administrative order of the Utah Supreme Court)
California (established in 2020 by the state bar association)
Agriculture Technology
Agricultural technology has immense potential as a catalyst to grow the industry, increase profitability, and increase efficiency. Self-driving tractors, drone crop analysis, DNA soil sampling, and other innovations will be part of this dynamic transition. In recognition of this, the state of Mississippi was the first state to propose a regulatory sandbox to promote agricultural innovation.
Bills Introduced:
Mississippi (2021)
Digital Medical Technology
Digital medical technologies carry the immense potential to provide health care services by harnessing the power of technologies such as telehealth, mobile apps, artificial intelligence, and wearable devices to deliver higher quality services. The state of Wyoming passed a law implementing the nation’s first and only digital medical technology sandbox.
Passed into Law:
Wyoming (2019)
Energy Technology
Energy technology is one of the fastest-growing sectors in the country. As worldwide energy demand continues to rise, the need to integrate innovative technologies into the energy sector has increased. In recognition of this, Mississippi was the first state to have an energy technology sandbox introduced in the Legislature.
Bills Introduced:
Mississippi (2021)
Property Technology
The innovative applications for technology in the property sector are immense. Some key technologies being used include satellite mapping and surveying, virtual reality, blockchain, and artificial intelligence analysis of market conditions.
In 2019, the Arizona Legislature passed a bill that established a property technology sandbox. This is the only such program in the nation, making Arizona the friendliest state in the nation for property technology innovators.
Passed into Law:
Arizona (2019)
General Sandbox
In order to facilitate innovative technology developments, regardless of industry, some states have looked at the prospect of general regulatory sandboxes. The general sandbox program provides a more comprehensive innovation environment that frees up businesses to explore multiple innovations across different sectors.
In 2021, after the success of its multiple industry-specific sandboxes, Utah was the first state to establish a general sandbox program. This program came after passage of the state’s several industry-specific sandboxes. This has immense economic potential for Utah as innovative start-ups look to open up in Utah. Other state legislatures have introduced general sandboxes.
Passed into Law:
Utah (2021)
Bills Introduced:
Mississippi (2021), Tennessee (2021)
My Father passed away from Alzheimer’s disease this past December. Alzheimer’s is a cruel disease and watching my Dad suffer from it was especially difficult for my entire family.
Before entering a long-term care facility, my Dad received physical therapy in his home as his physical state declined. The visits did little to help, however. My Mother complained that the therapists were so overbooked that they could not schedule nearly as many visits as the doctor had requested. When they did visit, they rarely stayed for more than a few minutes.
My Mother didn’t know it at the time, but the home health agency that provided my Dad’s in-home physical therapy had little incentive to provide time-intensive, quality care. They had a monopoly on home health patients in the area they serviced. They would keep my Dad as a patient whether my Mother was happy with their services or not.
Home health services enable the elderly to receive care in their homes rather than being institutionalized in nursing homes. And the role of home-based care is about to become more important than ever.
The number of Americans over the age of 75 is expected to nearly double over the next twenty years, according to the U.S. Census Bureau. This aging population is expected to place massive burdens on our healthcare system, especially the long-term care industry.
To address this looming crisis, President Biden has proposed spending an additional $400 billion in Medicaid funds on in-home long-term care services. Home-based care can be more cost-effective than nursing home care, and older Americans overwhelmingly prefer to receive care in their own home.
President Biden is right to look for solutions to the problems with long-term care. But a one-time cash infusion for Medicaid home health services would do nothing to change the real problems in the long-term care industry.
Thankfully, Mississippi does not have to wait for solutions from Washington D.C. There are steps we can take right now that would make a real difference in the quality, accessibility, and affordability of the care that our parents and grandparents receive.
The most obvious reform would be to end the monopolies enjoyed by home health agencies like the one that treated my Father. Those monopolies are created by Mississippi’s certificate of need (CON) laws.
CON laws push more seniors into nursing homes by limiting the availability of home health services. Certificate of need laws require anyone wanting to start a healthcare facility to first prove that there is an unmet need for those services in the community. Mississippi is one of only 14 states that impose CON requirements on home health agencies.
Research shows that certificate of need laws serve to limit competition and prevent the expansion of the home health industry. A 2016 paper concluded that CON laws “act as a direct impediment of expansion of home- and community-based care” and “provide nursing homes with some degree of market power that does not allow the market to respond freely to price changes or federal policies.” Other research indicates that certificate of need requirements decrease the quality of care provided by home health agencies.
If our CON law wasn’t bad enough, Mississippi is also the only state in the nation that has imposed a complete ban on the opening of any new home health agencies in the state for the past 40 years. Instead, the state has chosen to allow existing home health agencies to have monopolies in their service areas.
The Mississippi Justice Institute has filed a federal lawsuit seeking to end Mississippi’s 40-year ban on new home health agencies, as well as the state’s home health CON program. But state lawmakers should not wait for that litigation to conclude before taking the initiative to end these senseless policies.
Our parents and grandparents deserve a healthcare system that can adequately care for them. Monopolies that reduce the supply of care available to them, while driving up the price and decreasing the quality of their care should have no place in Mississippi.
The whole point of the American Dream and our free-market system in America is that people from all walks of life have the opportunity to dictate the direction of their own lives.
The entrepreneur is perhaps the most quintessential example of this sentiment. If someone has an innovative and marketable idea that helps people live better lives, America is supposed to be structured so that he can build off that idea.
However, despite this concept of entrepreneurship being inseparable from the American ethos, small businesses are continually struggling to enter the marketplace in an environment that favors big businesses that can weather the regulations and red tape much easier. This creates what some have called an economic "kill zone" for small businesses as they attempt to grow.
Some may suggest that this is a justification for the further institution of government regulation to ensure a "free" and competitive system. However, the solution may rather be the opposite: eliminating and reforming regulations that have hindered startups and small businesses from gaining the capital required to succeed.
Even before the Covid-19 pandemic, small businesses and startups have struggled with gaining enough capital to find a footing with their respective business plans. Although the pandemic has widespread effects that have been felt by businesses of all sizes, for many larger corporations it has been merely a speed bump.
However, the pandemic exasperated the problems that small businesses already face. In the wake of government-imposed lockdowns and their collateral effects, unforeseen obstacles have left many of them crippled. This is especially true regarding the issue of raising capital.
As an issue compounded by the pandemic, the inability to obtain sufficient credit from banks was already one of the biggest problems small businesses face. Since the financial crisis in the late 2000s, government policy has imposed regulations that seek to protect the economy from poor financial investments.
However, as time progresses, large corporations benefit from low-interest loans, while small businesses and startups are left dependent on government assistance programs.
Regulations may seem like the answer, but they often have the effect of bringing about unintended consequences. Just last year, the NFIB Research Center conducted a study asking small businesses what the 75 most important issues that they faced were.
The first three issues were health insurance, finding and retaining good employees, and taxes, respectively. The fourth biggest issue was unreasonable government regulations that leave them effectively crippled in needless expenses and red tape. While these regulations may appear to be placed to protect our economic system, the reality is that regulations often harm the economy they are supposed to protect.
Some may suggest that the Covid pandemic has helped businesses push the reset button on the government regulation problem by forcing them to move to alternative business platforms such as the internet and by benefiting from government assistance.
However, any sort of solution that is specific to the pandemic can only be temporary at best and leaves entrepreneurs reliant on the government at worst. In order to move ahead on promoting entrepreneurship, public policy should not perceive regulations as the tool to promote freedom.
If the goal is for startups to get the credit and capital they need, policies should permit lenders to take the calculated risk, without the government dictating how it is supposed to operate on every level. If small businesses are to benefit from a free market, then it needs to be free!
Josiah Dalke is a Research Intern with the Mississippi Center for Public Policy. He is a Washington State native seeking a government degree at Patrick Henry College.
Some have propounded that America is the epitome of a capitalist nation. With the largest GDP globally and generations of hard-working individuals behind it, the country has become the center of world financial markets. On the fundamental level, the country has free-market economics, a principle that is grounded in the very Constitution itself.
One might think that with such a background of incredible success, the government would not want to enact policies that would go against this foundation of free-market economics. However, this is not always the case. Rather than leave a working system to continue to work, many in the government have continually tried to resize a shoe that already fit.
Over the past several years, many Americans have become increasingly apprehensive of the encroaching power of government. As the federal government has assumed an arbitrary prerogative to interfere in the private sector at will, financial markets have become extremely sensitive to the fact that the government has expanded its intrusion into free markets.
For instance, in recent weeks, investors have been uncertain about the direction of the Federal Reserve as President Biden considers leadership changes that would be in line with his policy priorities of big government expansion and spending. The concerns of investors are not unfounded. The recent administration has increasingly embraced the policies of Keynesian economics that often prioritize government control of the economy as a key to market success.
To recognize the effects of such a posture of government control towards the private sector, one need not look any further than the nation of China. In an attempt to rein in control of financial institutions, the Chinese government banned financial institutions from trading in cryptocurrency.
This led to an 11 percent drop in the value of Bitcoin in less than 2 hours. Many have grappled with this recent spectacular decrease in the value of cryptocurrency. These are ultimately the shockwaves of government overreach being felt. This is all despite the fact that the Chinese government has no direct policy jurisdiction over the American economy.
If the Chinese domestic policies of economic interference and government control can have such a rippling effect on even the American economy, how much more danger is there when American investors have an ever-encroaching government of their own to deal with? Indeed, the United States federal government itself is proposing even more regulations for cryptocurrency that have made many investors uneasy in an already fluctuating market.
Despite the grand plans and agendas of economic bureaucrats and regulators, such plans beg the question of whether or not government oversight has a consistent track record of bringing about prosperity. If America wants a more prosperous economy, is a conglomerate of government bureaucracies really the way to achieve it? The success of free economies suggest otherwise.
“The advantage of a free market is that it allows millions of decision-makers to respond individually to freely determined prices, allocating resources - labor, capital and human ingenuity - in a manner that can't be mimicked by a central plan, however brilliant the central planner.” -F. A. Hayek
One of the dangers of an ever-evolving technological landscape is that people can often get lost in the technical weeds without looking to the practical benefit.
Such is the case when it comes to technological advances in agriculture, especially in regards to government regulation and control.
The state of Mississippi is ripe with opportunities to advance agricultural technology further. AutoProbe, for example, is a rising technology in the state that uses robotics to help gather uniform soil samples and analyze them. This enables farmers to work the land more efficiently and helps with greater crop yields.
Furthermore, farmers use drone technology to make strategic agricultural decisions from information gathered from the air. But not only does this technology enable an aerial view of farms, but drones also help find patterns of defoliation, small canopies, and color changes in crops. All of these factors impact the final crop significantly, and drones can more quickly and efficiently determine this information.
Finally, smart-monitoring technology helps farmers conserve resources and energy to most effectively produce food for consumption. Combines that would take three times as long to harvest a crop can now be done quickly and efficiently thanks to the ability to monitor rain and radar simply from one’s phone. This is even easier to accomplish with hands-free satellite guidance.
Despite these immense benefits, some policies have proved to be a boundary to the prosperity that comes from common-sense policies that allow innovative farmers to be the most effective. The problem is that many state and federal regulations on agriculture are overzealous in the mitigation of safety risks -often to the detriment of agricultural efficiency and innovation.
Take the state of California, for example. According to the California Code of Regulations, an operator must accompany all self-propelled equipment when in motion. This means that regardless of whether the machinery in question needs an operator, an operator is still required to legally handle it, depleting the purpose of the machinery being “autonomous.”
Such a policy may be put in place for the sake of safety but does not consider the practical effects as it dissuades farmers from investing in more efficient, automatic machinery. After all, why would a farmer purchase expensive autonomous machinery over manually operated machinery if regulations remove the practical benefits of automation? It simply does not stand to reason, which is perhaps why not many states have adopted the same policy.
However, unreasonable boundaries to the use of technology in agriculture do not stop with autonomous machinery. Although there may often be freedom to produce certain agricultural products using technological innovation, there have been technology restrictions on how farmers can sell those same products. The regulatory boundaries follow farmers even if they try to use certain technologies to sell what they produce.
For instance, many states, including Mississippi, have “cottage food laws” that prohibit farmers and others from using the internet to sell processed agricultural products, such as pickled products, dried fruits and vegetables, jellies, and many other goods.
This effectively stops the use of mobile apps and other technologies that would allow farmers to use the internet to sell such products to potential customers. By limiting such agricultural activities to in-person sales, there is a government-imposed boundary on farmers trying to take advantage of even basic internet technology to sell their products.
The key to moving agricultural technology policy forward in Mississippi is finding solutions to policy problems, expanding technology horizons, and giving farmers the chance to press ahead without being legally restricted to outdated methods.
Innovation has always been the key to American economic success. Giving our agriculture system the edge it needs to succeed has to be of the highest priority when legislators gather to find solutions.
Mississippi farmers should have the freedom to use technological innovation as a way to work their farms as efficiently as possible as they seek to provide a livelihood for their families. Public policy should take proactive steps to provide safeguards against technology regulations so that they have the full liberty to do just that.
Josiah Dalke is a Research Intern with the Mississippi Center for Public Policy. He is a Washington State native seeking a government degree at Patrick Henry College.
Interest in cryptocurrency, such as Bitcoin and Ethereum, has seen an increase over the last several years. People throughout the globe continue to be intrigued by the concept of a currency that has no physical backing but rather one that is fixed in cyberspace.
This has led to a new playing field that is rapidly working into the mainstream financial system. However, as this new system of currency is becoming less theoretical and more concrete in practice, there is an increasing risk for government control and centralization.
There are currently two primary approaches to digital currency: cryptocurrency and central bank digital currencies (CBDCs). Cryptocurrency is a specific kind of digital currency that holds to the principle of value through scarcity. Rather than having a fluctuating base value like paper currency, Bitcoin and other cryptocurrencies operate in a constrained system (in Bitcoin, for example, there will only ever be 21 million tokens) to establish a base value. Governing bodies do not determine this value, but it instead lives on distributed ledgers or blockchains.
CBDCs, in comparison, operate based on government oversight and centralization of resources through a central bank. This system is newer than other digital currency systems and has grown out of the potential shortcomings of the cryptocurrency system.
For example, some have argued that having a centralized and controlled digital currency system would best allow for tracking transactions between parties and maintaining a country’s capital controls. In other words, by treating CBDCs like cash, the value of the currency can fluctuate based on its variable supply. This makes it easier for the central banking system to regulate how the digital currency operates within the system, allowing for more financial control by the central government.
While the Mississippi legislature has not passed detailed legislation concerning digital currency, state and federal governments across the country have taken a particular interest in this area over the last several days.
For example, U.S. Federal Reserve Chair Jerome Powell has advocated that greater regulation be placed over cryptocurrency (if not establishing a federal CBDC) to mitigate potential risks to financial stability. This announcement came after last week’s discovery that Bitcoin’s worth had dropped nearly 30 percent after China had established new regulations upon the sector and has wavered in value since.
Many interpret these new findings as a justification to increase the government’s involvement with digital currency. However, the danger of CBDCs is that they undercut the free market principle of competition within the context of various methods of currency.
Additionally, cryptocurrency, as it stands, provides a private option that prevents the problem of inflation that we see with government-centralized currency. The mere concern of financial instability is insufficient to justify centralization. After all, as Heritage Foundation’s Stephen Moore notes, “nearly every recession and depression of the last century can be traced to government mistakes, not necessarily private ones.”
As this new system continues to develop, it is all the more crucial to keep in mind the dangers of centralization and the giving up of financial control to the government.
Josiah Dalke is a Research Intern with the Mississippi Center for Public Policy. He is a Washington State native seeking a government degree at Patrick Henry College.