If you've read my articles before you know that I'm a very big fan of Sovereign Personality, a book I never tire of recommending. This interesting work of art was written in 1997, but has been extremely successful in analyzing trends in both society and technology while making extremely accurate predictions about where things will go.
One of the things the authors talked about was that for the first time in history countries would have to compete with each other to attract their citizens. They would do this much like companies launching a product, trying to offer the best deal and lower prices. In this case, the main factor comes down to taxes and regulations.
That makes El Salvador, a humble Latin American country that few people could find on a map if needed. This year they made an incredibly disruptive move by making bitcoin legal tender, attracting serious international attention and investors. The bitcoin crowd is not only super loyal to those who want to honestly further their cause of breaking up governments and the financial system, but they are also getting richer year by year. A combination that makes them an incredibly tempting audience with which to align your country, especially if you're not a particularly wealthy nation.
Anyway, the next step for this small and ambitious nation is to build a "Bitcoin City" near a volcano. The plan is to use geothermal energy to power bitcoin mining facilities and possibly the entire place. To fund this new venture, they are offering bonds with over 6% yield. Half of the money raised will be used to purchase and store BTC, giving the bonds some liquidity, while the other half will be used as an investment in the city itself.
As an investor in the city you would not pay taxes for living there, only VAT (value added tax). The new "pro-bitcoin" way that El Salvador has embraced plus such small taxes, and an entire city dedicated to bitcoin enthusiasts, is likely to get a lot of attention from this crowd around the world.
So here it is, just as the author of "The Sovereign Individual" predicted more than 20 years ago, countries are now beginning to compete for their citizens. The book also explains how this will benefit developing countries much more than developed ones. The latter have enjoyed a time of plenty and have become complacent; they charge among the highest taxes in history, offering very little in return. Already we see the quality of life declining in these places, and governments becoming more intrusive in the lives of their citizens.
We should expect to start seeing mass movements of people from jurisdiction to jurisdiction in search of the best possible deal. Some countries will continue to attack (such as El Salvador) and offer huge opportunities. While some will defend themselves, rather than entice newcomers, they will seek to punish and penalize those who want to leave. As individuals, it will become a moral obligation for us to vote with our feet, seeking to support those jurisdictions that have our best interests at heart.
If I'm right, Bitcoin City is just the first attempt of developing countries trying to make themselves more enticing to investors and settlers. This will likely be the start of a trend that will benefit people more than anything. When companies have to compete, their costs tend to go down, this will happen with all governments around the world.
There are many consequences that the new paradigm will bring, much of the social welfare enjoyed by developed countries will disappear. At the same time, more money than ever will be in the hands of the private sector rather than the public sector, which should mean an explosion of investment and high productivity.
The playing field has been completely changed by this move that El Salvador just made, of course it will take time for this trend to establish itself and for others to follow suit. But the transition has begun, that's the important point I'm trying to make. That is something else to bear in mind as we move forward. I hope this is useful to you, have a nice day!