Can distributed ledger technology and public review of transactions help improve the performance of government policy and resource allocations?
I read a fantastic BloombergView article today morning which shows governments across the world manage an estimated $75 trillion worth of commercial assets -- roughly 50 percent more than the $54 trillion in global public debt -- and these assets are typically quite poorly managed. In some cases, governments have actively tried to hide their value, often so that government officials can personally benefit from handing out favors. The study suggests a 2 percent-point increase can fetch additional $1.5 trillion - equivalent to global spending on research and development. If we consider the developing or poor countries the scenario is far grave. Lot of countries are managed by criminal politicians who use most of foreign aid or tax revenues to fund their own personal assets (using cash for money laundering to Tax heavens, Terrorist financing, luxury apartments etc.) when most of their citizens live a poor, hopeless life. There are misallocation of public resources even in advanced countries - citizens are not always aware of all the transactions, lobbying efforts by rich companies exploit tax loopholes or gain undue competitive advantage in terms of government subsidies etc. The centralized ledger system followed by central bodies today is built on trust of the government - many think this helps powerful bankers manipulate the global financial system and add undue systemic risks. The payment transactions of today does not have built-in traceability- there is no way to trace how the cash changed hands and moved from NYC to Washington and back!
The latest breakthrough in blockchain or distributed ledger technologies has power to disrupt this nexus. The historical trace capability of distributed ledger and public analysis of the transactions can potentially reduce money laundering. This can increase the trust of common people in the financial system and improve global commerce. If use of cash is banned over time and use of distributed ledger technologies get enough traction we many see a much efficient and corruption free world in future. We can dream of a world where government performances can be validated by the effectiveness of the public money they manage (we have seen the use of Sovereign Fund or TARP ETF) and crowdsourcing best ideas for use of public money becomes the norm. It will take time but we probably will see it in our lifetime.