Short Version/abstract:
Right now, there are digital expats who work online from abroad. They can earn the same income, even in low-income countries with a lower cost of living, allowing their paychecks to go further. As this lifestyle becomes more prevalent, it will have a negative impact on first worlders who do jobs which can easily be done by locals from poorer nations, mainly retail. This will lead to calls for politicians to institute capital controls to prevent income from leaving the country and perhaps also prohibitions on leaving the country.
3D printing will reduce the economies of scale for manufacturing, creating a more even playing field for manufacturers and killing manufacturing jobs. It will also decrease the scale for violence by making weapons easier to make, which will become important later.
Of course, you have automation.
Cryptocurrency and blockchain will decentralize the internet. Right now, they're less efficient than the centralized internet but will see increased usage as digital expats and businesses try to find ways to evade capital controls and taxes. Also expect increased usage of ToR and possibly even a ban on ToR.
Eventually, the tax evasion will become enough that governments collapse, leaving a power vacuum. Crime will shoot through the sky, reaching levels only seen in Haiti, El Salvador, Honduras, and certain parts of Mexico. Eventually though, when no gang gets an advantage, they will settle with the territory they got. Gangs will become cartels. Cartels will become city states. City states will become corporations.
Eventually, the same thing will happen with the now once poorer nations, enriched by money flowing from the once developed world. People from places like India will start doing the same online work that people from the global north did, pushing down wages and also profits as businesses from that area also start to emerge.
Long Version:
I recently read a book called The Sovereign Individual which predicts an upcoming new paradigm. The short summary is that the internet will undermine economies of scale, putting businesses on a more even playing field, regardless of size and that digital money (this book was written in 1997 and it literally predicted cryptocurrency) will enable tax evasion which will cause the erosion of the state.
The longer summary is that there are three ways to influence other people: hard power, soft power, and trade.
Hard power involves force or the threat of force. Slavery and any mala in se crime would fall under this category. The state also falls under this category because that's how it sustains itself. Most people follow the law without the need for violence but, as sovereign citizens learn the hard way, all laws are backed by guns and tasers.
Soft power: Soft power involves influencing people to do what you want. Instead of forcing people to give you money, you either convince them that you will use the money for a noble cause or that you have a direct connection with God.
Trade: The last way to influence someone is to promise that person something in return. This is how businesses operate. Customers give the business money in return for a good or service. Employees work for the company in return for a wage.
These three, according to the book, have existed in varying amounts throughout history. When we were hunter-gatherers, the return to violence wasn’t too great because there simply wasn’t much to gain. The main thing to fight over was access to food. This means that when there wasn’t a huge surplus in food, there was essentially nothing to fight over. That all changed during the age of agriculture. All the sudden, there was now a food surplus worth fighting over. This set a new paradigm in which empires and civilizations would dominate; the modern state was born.
The medieval era was one dominated by knights and the Catholic Church. The reason why knights dominated was because they wore steel armor which was quite expensive. This gave those who wore this armor, knew how to use a sword, and rode on a horse a lot of leverage over kings. The Catholic Church was enabled by the fact that it essentially had a monopoly on knowledge. Copying books was very difficult. And while Martin Luther did play a role in bringing forth the Protestant Reformation, it wasn't nearly as decisive as the printing press, invented by Gutenberg. That development decentralized soft power, allowing Protestant denominations to compete. Knights were gradually phased out, thanks to gunpowder giving ordinary soldiers a bit more of an edge.
Then we have the industrial revolution. This did several things but at the center of it all, what it really did was it brought forth economies of scale in a very big way. This led to the centralization of the economy which, alongside much faster communication, enabled the establishment of large corporations. The returns to violence increased because the establishment of a strong government became easier and unions were able to take advantage of fixed capital and fewer businesses to compete with.
This brings us to the dawn digital age, in 1997. There will be decreasing returns to violence because it can't be done over the internet. This means that the nation-state will be replaced by more localized governments, existing only to facilitate commerce. As such taxes will be very low. There will also be no unions, allowing the best and the brightest to really shine.
Governments can be divided into three types based on who they're incentivized to cater to: proprietor states, employee states, and customer states.
Proprietor states are incentivized to enrich those running it. The main form of such a state is a monarchy. They typically have high taxes and low spending, even on militaries (this is why Poland got conquered in the early mdoern era).
Employee states are incentivized to spread the good fortunes to all citizens. The main form of this is democracy. Employee states have a multitude of programs to keep poverty low. Spending is high and as such, employee states have the most invested into militaries since that creates jobs.
Customer states essentially act like businesses. Spending and taxes are low because customer states merely exist to facilitate rule of law (basically a watchman state). There are no modern examples today but there were free cities in the medieval days as well as merchant states like Venice.
My take
There are two minor nitpicks when it comes to the book's coverage of premodern history. Firstly, we probably didn't start to see enormous returns to violence in the neolithic era. Sure, there was a surplus but everyone had stone tools. We probably didn't start seeing it until the bronze age as that was when bronze tools became available. The thing about bronze is that it requires specialization to make them. The economic principle known as division of labor gave advantage to larger civilizations. Iron tools were cheaper, enabling empires to grow bigger. The other nitpick is that gunpowder existed alongside knights for a couple of centuries. In addition to political inertia keeping knights around, castles initially didn't go away but rather adapted in the form of slanted walls. Gunpowder did play a role in bringing about the current paradigm though, as Constantinople, which had been under siege for 200 years, only fell when the Ottomans started to use gunpowder.
Then we get to the industrial revolution. The book leaves out that the reason why unions formed in the first place was to counteract the negative social effects of economies of scale. An oligopoly made coordinating between unions easier but it also gave businesses more leverage in pressing down wages. Another thing, which Marx noted, is that with feudalism, the lords made the peasants do work but they didn't work them so hard so as to provoke a revolution. Capitalist businesses didn't have that luxury unless they were a monopoly (which came with its own problems), and so competition would push wages down and make workers work longer hours in less than ideal conditions. This was also what led to the progressive movement.
The new and upcoming paradigm leaves me with a mixed reaction. On one hand, the book predicted cryptocurrency. On the other, the book failed to predict the centralization of the tech sector. This is likely because web browsers and search engines rely on economies of scale due to the centralization of data collection. There was competition back when the book was written but eventually, Internet Explorer became the universal web browser while Yahoo became the most used search engine. This is not to say that they could stay there forever. Even with an advantage, if a competitor does something innovative and different, they will likely lose that position. Almost none of the big tech companies were first movers. Facebook overtook MySpace. Google overtook Yahoo and Chrome overtook IE. Apple is now competing with Microsoft on even ground. Amazon started out as an online bookstore, and it wasn't the only one. Nevertheless, there are a handful of large tech companies which have a great deal of leverage over the internet.
But not all hope is lost. In the past decade, we've seen the rise of cryptocurrency. The idea of digital money actually dates quite back a ways which is why this book was able to predict it. Satoshi Nakomoto didn't revolutionize the world by inventing digital money. Rather, he revolutionized it by inventing the blockchain. This was an important development because prior to that, digital money would require a central authority to verify transactions to prevent the digital currency from being duplicated. The blockchain allows transactions to be verified, preserving the value of crypto. Blockchain contrasts with databases in that while the latter are centralized, the former is distributed. This means that while databases favor large companies, blockchains don't belong to anyone and crypto belongs to everyone who uses the currency. Today, the blockchain is less efficient than databases which is why we still have databases. The biggest blockchain right now is the Ethereum blockchain.
Before the big update, it handled 15 transactions per second, a sure improvement over Bitcoin's 7 per second.
By comparison, Visa runs 1,700 transactions per second with an upward limit of 24,000. MasterCard can process up to 5,000. PayPal processes 197 per second; it's still faster than many cryptocurrencies and it has a bad reputation for being slow.
Now to Ethereum's credit, the new update did speed it up to 100,000 transactions per second. However, it still charges a gas fee of $10-200. Bitcoin is a bit less pricy, charging $1-10. The transaction fee for credit cards very but the absolute most expensive is 3.3%+$0.10. In other words, if your total transaction is less than $27.28, your transaction fee is guaranteed to be smaller for credit cards than for Bitcoin or Ethereum. Granted, there are cryptocurrencies with lower transaction costs like Solana but it seems like the only real use of crypto at this point is because you distrust the fiat monetary system and you want anonymity. Crypto can be a hedge against inflation in places like Turkey, which is why it has the highest ownership rate of crypto. But in the US where the dollar is the most used currency in the world, crypto will probably be much more hard pressed to become widespread.
But cryptocurrency could play a major role in the future. Right now, you're seeing a growing number of digital expats. These people work from another country whilst earning the same income, something which is possible because people can now work fully online. They can move to a poorer nation and enjoy the lower cost of living. This will likely stimulate the economies of those countries but it could also lead to gentrification which is when an area, once filled by people of a certain income, becomes one filled by those of higher income. This doesn't have to result in displacement but it often happens due to rising cost of living. It could also result in the cultures of these poorer nations selling out in a way, becoming more western. This would naturally be quite upsetting to many people. Having to move because you can no longer make ends meet can be quite disruptive. And businesses catering to a foreign culture rather than your own can be rather unsettling to some. This could lead to the formation of terror groups set on reversing these trends. This makes me think of the KVA from COD Advanced Warfare which wanted to get rid of advanced technology.
Meanwhile, back home, rich countries will essentially experience the same thing that Detroit experienced. As online jobs move elsewhere, jobs which exist to cater to others and can easily be dome by locals in those other countries will go away. This mainly concerns retail jobs. Brick-and-mortar retailers will either have to find a way to expand to where the digital expats are or go out of business. Online retailers like Amazon will last longer since they don't need physical locations at the destination. Eventually though, retailers and manufacturing firms will be disrupted by 3D printing. Right now, the technology has its strengths and weaknesses, but as time goes on, it may very well be able to do away with traditional manufacturing. This would drastically reduce the economies of scale required to make products and do away with many jobs. It would also allow products to be more individualized, being particularly useful in healthcare. To be clear, you would still need raw materials but it would drastically reduce the cost of goods by cutting overhead, allowing more businesses centered around manufacturing to form, and reduce the number of steps between extraction and the end consumer.
This will be the second wave of globalization. The first wave began in the late 20th century when shipping became much cheaper. The result was that financial capital became mobile whereas physical capital remained fixed. This caused manufacturing jobs to move overseas because goods could now be manufactured abroad for lower labor costs. Workers were at a disadvantage because moving to another country was a pretty big deal. Most would probably not be on board with moving to another country only to get paid less. Meanwhile, it was easy for corporations to do so. However, all of this can be mitigated by capital controls and protectionism. The second wave of globalization will not just make the world more connected, it will also call nationalism, its main counterbalance, into question. There will probably be less shipping in the second wave as finished products can now be made via 3D printing but it will render labor and most capital mobile. Capital controls and protectionism only work with capital inside the country.
All of these changes will leave many in the first world without any real means for employment. American digital expats still have to pay taxes because the US taxes on the basis of citizenship. Most other countries tax on the basis of residency. Most articles I've read on this subject apply to Americans, so I'm not sure how it would work for Europeans or Canadians. And with all of this going on, they will be more compelled to tax people living abroad (they may actually have to pay more taxes). Living abroad means that sales tax and property tax cannot be collected, incentivizing state and even local governments to switch over to income tax. This is where crypto comes into play. But since the internet that we use in dominated by web browsers and search engines, both of which are centralized. The clear net refers to the part of the internet which can be accessed via search engines. Then you have the deep web which cannot. This is mostly emails, cloud storage, and any restricted access website other than the login page. Then you have the dark web. Despite the scary name, all it refers to is the part of the worldwide web which exists on overlay networks. It cannot be accessed by a regular web browser, let alone a search engine. To access it, you need a special browser like ToR. This allows for a great deal of anonymity, allowing criminal activity to occur. The clearnet can easily be regulated. All that has to be done is for Congress to regulate the search engines. If online businesses are evading taxes, then they can easily be tracked down on the clear net. On the dark net, that would be much more difficult.
With online businesses and workers using crypto and the dark web to engage in tax evasion, it will be very difficult for the government to collect tax revenue. The government already runs a deficit, but it will run an even greater deficit to keep itself running. But with financial capital leaving the US and the inability to keep it from leaving, demand for treasury bonds will fall as faith in the government's ability to pay wanes; this will hinder the ability of the government to borrow money, forcing the fed to print more money to keep running deficits. Demand for US dollars will drop as everyone is now using crypto to evade taxes. This will lead to high inflation rates and also a failing government. By this time, people will start to wonder what the real purpose of the nation-state really is. Nationalism is often a rallying cry to unify those within a country behind a certain cause. Digital expats will be less inclined to feel any sense of loyalty to any one country whereas those left behind and displaced locals will perhaps become even more nationalistic. This could perhaps result in a big war or in many wars between the waning old order and the waxing new one. Eventually, the US, alongside other rich nations, will fail. The decreasing economies of scale, combined with newly unemployed police officers and soldiers, will result in a power vacuum waiting to be filled. Warlords will then rush in to seize power, creating violence in the US not seen since the Civil War. Afghanistan fell victim to such a circumstance when the Communist regime got overthrown by the Mujahideen. Afterwards, the insurgency fractured as different factions vied for power. The fighting continued until the Taliban took over all but the northern part of the country. With the former US, things will be a bit different. In a sense, warlords are like businesses, except they produce violence for themselves. In the age of economies of scale, one would eventually emerge victorious and become the new state. But in this age, no side will really gain an advantage over the others. Eventually, the factions will realize a truce as they can minimize their own risk by simply taxing their own residents. Of course, their residents won't have lots of money to spare, meaning that the best way forward will be to make their domains suitable for digital expats, which obviously cannot happen if there is rampant fighting going on.
Now these factions which settled down are going to need a source of revenue. We need government for the same reason that sports events need referees. But a drive to lower cost will incentivize a race to the bottom. This will likely lead to a tax on land as a factor of production. At this point, labor and capital will both be mobile and well hidden in the event of taxation. Land never moves and resources cannot be moved without first. being extracted. As such, all land will effectively belong to the mini states and get rented out at market rate. Something alsow worth noting is that while economies of scale will dissipate for digital capital but not for physical capital. Even with 3D printing, there will be scale for utilities and infrastructure, not to mention existing space for residences and office space. As such, the value of land in cities will remain more valuable than the rural areas. Governance will, over time, favor city states over nation states. At some point, people from nations like India will start to compete with the digital workers from the global north, driving down wages.
There are some people right now who believe in getting rid of the state through a counter economy, which seems like will happen with crypto and tax evasion. These people follow an economic ideology called agorism. Unlike many other ideologies which are driven by people who believe in it, agorism simply requires participation in the counter economy and tax evasion.
I'm not posting any of this to push a political ideology but rather for food for thought on the near future. We tend to be mediocre at predicting new technology and terrible at predicting how new technology will influence our society. I don't mean to get political, it's just that when you try to predict social changes for the near future, you inevitably invoke political trends today.
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