a longer version of this blog post is available on the MIT Media Lab’s Digital Currency Initiative platform
With Google Trends data showing that searches for the word “blockchain” have exponentially increased, we may be entering the peak of the hype cycle for blockchain and distributed ledger technology.
But here’s the thing: the blockchain is a major breakthrough. That’s because its decentralized approach to verifying changes in important information addresses the centuries-old problem of trust, a social resource that is all too often in short supply, especially amid the current era’s rampant concerns over the security of valuable data. It turns out that fixing that can be a boon for financial inclusion and other basic services delivery, helping to achieve the global objectives laid out in the Sustainable Development Goals (SDGs).
Sorting out hype from reality may depend on how well we identify where institutions that have until now played a role in mediating trust between people are falling short, especially in the key area of money. Deploying the blockchain in those settings to generate secure, decentralized trust could achieve great strides in inclusion and innovation.
What do we mean by decentralized trust? The concept is unfamiliar in part because its converse -- centralized trust – is something that we often take for granted, at least while it’s working. But if we look at the history of transactions since the early barter systems to modern-day digital money exchanges, we can see how different trust protocols for keeping track of our exchanges of value have evolved and how, in each case, centralizing trust within particular institutions has periodically caused problems.
As strategies for dealing with this challenge evolved and as the complexity and frequency of transactions grew, different trust bearers emerged. We went from relying on the memory and discretion of tribal leaders, to central governments issuing currencies in the form of precious metals, to commercial banks acting as trusted intermediaries and issuing their own bank notes, to central banks managing a hybrid system in which sovereign fiat banknotes circulate alongside a debt/credit form of money managed by regulated banks and internal ledgers.
“The peculiar essence of our financial system is an unprecedented trust between man and man; and when that trust is much weakened by hidden causes, a small accident may greatly hurt it, and a great accident for a moment may almost destroy it.”
- Walter Bagehot, a British journalist, economist, political analyst and essayist, who wrote extensively about government, economics, and literature. In 1860, he became editor-in-chief of The Economist, which had been founded by his father-in-law, James Wilson. In the 17 years he was editor, he expanded the publication's reporting on politics and increased its influence among policymakers, transforming the journal into one of the world’s foremost business and political publications.
Individuals who believe in conspiracy theories are often disregarded as 'paranoid' and 'irrational', but social science research indicates that they engage in psychological processes that we all do. The difference lies their unusual distrust of authority.
Conspiracy theories abound! Rumors are whispered, discrepancies in a story are seized upon, and the official version of events is discredited. Then, an alternate explanation is proposed and evidence is gathered to support it.
While there is no formal, generally-accepted understanding of a ‘conspiracy theory’, they are usually considered to be an explanation for an event that is not the most plausible account and which postulates unusually sinister and competent conspirators carrying out the conspiracy. Conspiracy theories are usually based on weak evidence, are self-insulating from fact, and sensationalize the actors or the implications of the event.
Contrary to what we might think, many of the people who follow conspiracies aren’t crazy. They are actually skeptics, they just happen to be selective with their doubt. According to research, individuals that believe in conspiracy theories tend to favor a worldview in which people are prone to misbehave (or behave downright evil) and in which elites exercise omnipotence.
I like entertaining my western friends with stories of growing up in the post-communist Kazakhstan limbo, when everything ended, but nothing had yet started. Stories of how my friends and I would collect old newspapers to trade for books and Moscow magazine subscriptions. And later on, selling empty milk bottles back for some cash to buy candy and chewing gum in the newly opened Chinese shops. The audience goes “oohh” and “ahh”, and oh do I feel like I’ve seen a lot and know what life is like!
I have to admit – attending the Fragility Conflict and Violence (FCV) Forum 2015 that took place at the World Bank HQ last week was an experience that changed my perspective on hardships of life in developing countries. There are developing countries and then there are fragile and conflict-affected countries.
I joined Facebook in 2007. For years, I would boast that I got all my news from Facebook and the Daily Show, an American satirical television program, which delivers fake news reports. I should be embarrassed to admit this, but perhaps it was inevitable. I certainly didn't feel connected to news sources, or government press services, so Facebook and fake news somehow felt more authentic and trustworthy than the traditional means of accessing information.
Because we have a global audience, I must start by explaining that, according to the Oxford American Dictionary, a smart aleck is “a person displaying ostentatious or smug cleverness’. It also reports that one usage of the word ‘smart’ means: “(of transactions) unscrupulous to the point of dishonesty”. If you watch crime movies the way I do, there is a tendency to admire ‘smart play’, that is, ruthlessly clever and effective maneuvers. The best crime bosses are masters of ‘smart play’. In order words, they are smart alecks.
What is fascinating is how often (particularly in the massed punditry of elite global media) a capacity for smart play by political leaders is glorified. Leaders are routinely judged and compared with regard to whether or not they appear to shape the game, determine events, or impose their will on others and so on. If they do not seem to do that, they are dismissed as effete. If they seem to do that, they are admired and glorified. What is particularly striking is how often the writers who say these things leave out ethical standards. I believe, for instance, that true evil is a willingness to act without ethical considerations. Yet, notice how often leaders are admired for ostentatiously clever play even if the methods are odious.
But I am interested in a much narrower question. And it is this: if we leave out ethical considerations, is a reputation for ‘smart play’ good for a leader? Does it make her more effective? To throw this into bold relief, I am going to tell two kinds of stories- one domestic, and the other global.
I went to Bosnia and Herzegovina (BiH) last week to help Oxfam Italia develop advocacy and campaign skills among local civil society organizations. They have their work cut out.
Firstly, there is a crisis of trust between the public and CSOs, which are poorly regulated, often seen as little more than ‘briefcase NGOs’, only interested in winning funding, and under constant attack from politicians. Many CSOs seem pretty disillusioned, faced with a shrinking donor pot and public hostility.
I think there’s a strong case for the CSOs to take the lead in putting their house in order, practicing what they preach on transparency and accountability, and working with government to sort out the legitimate organizations from ones that have registered (there are some 10,000 in the country) but do nothing, (or worse).
Meanwhile, Oxfam is working with some of the more dynamic ones to develop the advocacy and campaign skills of what is still a maturing civil society network (after decades of state socialism, followed by a devastating war, and then an influx of donor cash that had mixed results). Two days of conversation and debate with some great organizations working on everything from disability rights to enterprise development to youth leadership identified some big issues and dilemmas:
Like cholesterol, “social capital” comes in bad and good types.
Elusive to define, social capital consists of those bonds created by belonging to a group that instills trust, solidarity, and cooperation among members. We know that good social capital has an enormous development potential, positively influencing economic growth, democracy, cognitive development, and adoption of farming practices, among others.
In a recent study on crime in Colombia1, a colleague from American University, Erik Alda, and I show that high rates of crime help destroy social capital (victims trust less). But social capital can also reduce crime when it effectively increases the involvement of all of us in the prevention and management of crime and violent behavior and when it reduces the temptation of each individual to let others solve the problem of crime.
Stronger interpersonal trust, however, also allows an easier exchange of information and know-how among criminals, reducing their costs of committing a crime. Because bonding and trust within these groups demands the exclusion of others, a perverse social capital may lead to the kind of extreme violence and hatred seen in the Mafia, the Ku Klux Klan, maras, or genocides.
This was a question asked by numerous participants during a consultation meeting held in Washington on February 29 on the Bank’s proposed Global Partnership for Enhanced Social Accountability (GPESA). They noted that this lack of trust comes from a longstanding view that the Bank tends to favor governments in detriment of the broader society in many developing countries. Others noted that the lack of trust comes from the perception that the Bank is not accessible and does not effectively engage civil society in some countries. This contrasts with the view, expressed by several participants, that the Bank has made important strides in opening up and reaching out to civil society at headquarters over the past decade and that this positive momentum should guide GPESA implementation.
- The World Region
- Global Partnership for Enhanced Social Accountability
- GPESA Consultation
- civil society organizations
- civil society
- Citizen Participation
- Citizen Voice
- Civil Society Engagement
- Multi-Stakeholder Dialogue
- Public Consultations
- social accountability
- Citizen Networks