All of those things would still be possible under a hypothetical “Bitcoin standard”. The difference is that they wouldn’t be funded by limitless money-printing and runaway debt.
The goal of Bitcoin is essentially to create a digital version of the classical gold standard (the monetary system used by Europe, the US, and other countries, before 1914). Under that system,
lending still happened;
governments still had the power to raises taxes for public projects; and
while governments would issue standardised notes that represented fixed amounts of gold, they weren’t able to inflate the gold supply itself.
Incidentally, that era is regarded as one of the most peaceful and innovative in human history—it’s referred to as the “Belle Epoque” in Europe, and as the “Gilded Age” in the US.
All that having been said: theorising is fun, but the success or failure of a currency ultimately depends on whether the individuals using it find that it serves their needs. Right now, there are many people around the world whose local currencies are clearly not serving their needs—but because money is currently a government monopoly, these people don’t have an alternative. The point of Bitcoin, then, is simply to give people a choice.
1)
A sound monetary system is a crucial element of a healthy democracy.
It is not enough to address these problems simply with better governance. An institution is vulnerable to the extent that it relies on a small group to govern responsibly; the aim of political reform is instead to construct a system that cannot be hijacked by the incompetent or authoritarian actors that it will inevitably encounter. The most foolproof way of doing that is to make it impossible (e.g. by technological means) for any single entity to wield such power in the first place.
That’s precisely the approach that Bitcoin takes: instead of relying on political leaders to self-regulate, or counting on imperfect carrot-and-stick institutions to police good governance, Bitcoin ends the government monopoly on money altogether. Instead of hoping that people vote more rationally, Bitcoin appeals to people’s economic self-interest, offering a way out of their failing monetary systems.
As a result, Bitcoin is perhaps the only effective measure that could help to democratise societies that are hostile to reform. Members of Effective Altruism have offered many suggestions for strengthening democracy in nations where there is already some kind of avenue for popular change. But when it comes to authoritarian states where the ruling regimes show no interest in ceding power, we seem to have had no answers until now. Bitcoin is unusual in that it initiates institutional change from the ground up; governments can no more stop its proliferation than they can switch off the Internet. It is no accident that the nations most hostile to Bitcoin tend to be the most authoritarian ones.
2)
I don’t see how fairer taxation is made more challenging by Bitcoin. Decentralised money is not an aberration that humanity has never seen before – we’ve been there for most of human history (commodity money, such as gold, is fundamentally decentralised). Bitcoin is essentially trying to create a digital version of the classical gold standard that prevailed until 1914. Lending, taxation, and public works still happened in that era – if anything, it was a relatively peaceful and prosperous time. There is no reason to believe the same would not be possible when using Bitcoin. Government-enforced paper money, on the other hand, is an aberration, and one that has consistently resulted in rapid devaluation (as we are seeing right now).
3)
I’ve added this to the appendix: