@ pam

I’d like to see a world where a small artisan in Sarawak sells handcrafted goods directly to a boutique in Paris by bypassing currency exchange fluctuations, banking restrictions, and government-imposed tariffs. Or where a coffee farmer in Ethiopia sells beans straight to a roaster in Tokyo by sidestepping middlemen, exchange fees, and bureaucratic red tape. In theory, free trade should enable this exchange smoothly, allowing businesses of all sizes to compete on a level playing field. But in reality, global trade is far from free. Policies, interventions, and economic theories are often designed to favor the powerful. One particular theory that troubled me was Paul Krugman’s New Trade Theory (NTT), which argues that large businesses with economies of scale, supported by government-backed advantages, dominate international trade. This manifestation of the global marketplace favoring the giants, leaving smaller players like that Ethiopian coffee farmer out and struggling to compete, had led to trade hegemonies and trade wars. After going through centuries of trade theories from Adam Smith’s Wealth of Nations to Keynesian interventionism and Friedman’s libertarianism I found myself questioning: Is Krugman right? After all, in today’s world, global trade is controlled by a few key players. The U.S., China, Germany, Japan, and the U.K. alone contribute to 40% of global trade in goods and services. The 134 countries of the Global South are often forgotten. Can Bitcoin offer a countermeasure to help globalize small businesses from anywhere in the world? ### Big players rule the game. Let’s go a little deeper on Krugman’s New Trade Theory. He believes that trade is increasingly dominated by large firms because they benefit from economies of scale and brand power. While older trade theories assumed that countries traded based on resource advantages, NTT tries to explain why similar economies like the U.S. and Europe, engage in high levels of trade with each other, missing out on the obvious nuances of global alliances on geopolitical control and power. Another aspect of Krugman’s theory is that large companies have a better chance of capturing market lead if they can benefit from unfair advantages through additional boosters in an imperfect market. In simple terms, power, status, and wealth are all you need to win. So if you are a big company and you have status, government perks, and economic advantages, you can be the market leader. It’s like the Olympics of global trade, except some players get to use performance-enhancing drugs (subsidies, trade barriers, and financial influence) while others run clean. The race isn’t fair, but the rules say it’s fine. So what is the blind spot here? Well, other than the obvious disregard for merits and fair play, this model also assumes that only large corporations drive global trade, leaving small businesses to struggle against giants - despite the fact that small businesses often contribute significantly (sometimes up to 80%) to a country's revenue. ### Small business in a big economy NTT was developed in the 1970s and 1980s when economies of scale and industrial advantages were the primary drivers of global trade. Kugman's argument assumes that large corporations, due to their financial and logistical dominance, will continue to dictate trade flows. But is this still true today? Small businesses are establishing themselves in a globalized world, even without economies of scale, as opposed to Krugman's belief. The rise of e-commerce, digital platforms, and decentralized technologies has significantly altered the trade landscape, though many barriers remain. In the past, small businesses struggled because they lacked access to global markets, but platforms like Alibaba, Amazon, and Shopify have reduced the barriers to entry, allowing even micro-businesses to participate in international trade. When Jack Ma started Alibaba, businesses didn’t automatically sign up. His team traveled to small villages and industrial hubs to onboard businesses that had never considered global trade let alone understand digital interfaces, communicate in English, or use the internet. This grassroots effort revolutionized commerce, digitizing and globalizing it at an unprecedented scale. Krugman’s model assumes that large firms control trade, but in reality, many countries thrive on small business-driven exports. I’ve been to these areas in China and seen firsthand how they operate. These small manufacturers in China may not have the scale of a multinational, but they’re deeply integrated into global supply chains. And despite limited resources, they’re able to compete globally. Other countries like Germany and Japan are great examples where ‘hidden champions' who are typically highly specialized small businesses, play a crucial role in global supply chains. US is not there yet, but it has the opportunity to explore untapped potential of globalizing small businesses and compete in the global market to drive sustainable economic growth. In fact with this model, ideally anyone is welcome. But there are many barriers that still exist in limiting the globalization of small businesses : * High transaction costs. * Complexity of currency exchange and exchange fees * Complex regulations and banking restrictions * Difficulty finding trustworthy international partners Imagine a small business trying to import materials from multiple global suppliers. Not only is it hard to find them, as many countries still rely on government agencies, trade directories, and outdated methods for searching and connecting with suppliers, but when it comes to solidifying deals, the complications don’t stop. One supplier might require an international wire transfer, another may only accept Western Union, and a third insists on using a local bank with high fees and delays. Small businesses simply don’t have the same access to banking services and streamlined financial systems that large corporations do. The variations often depend on the specific banking practices and infrastructure of both parties. To make matters even more complicated, small businesses don't have dedicated teams like large corporations. They run on minimal resources, managing everything themselves. One small error or delay can stall shipments, disrupt cash flow, and risk losing customers. Yet, global trade expects them to compete at the same level as industry giants, without the same financial infrastructure or support. More often than not, small businesses are left to fend for themselves, struggling to overcome these challenges alone. And that’s where Bitcoin changes everything. ### Can Bitcoin Create a True Free Market? Unlike traditional banking systems, which are tied to government policies and centralized institutions, Bitcoin operates on a decentralized, borderless network. This enables direct transactions between buyers and sellers without intermediaries or excessive fees. While Krugman’s theory explains why big corporations once held an advantage, it overlooks how decentralization removes trade bottlenecks, giving small businesses a real chance to compete globally. In a Bitcoin-based global economy: * No more currency conversion fees - Businesses trade freely across borders. * No more reliance on banks - Transactions occur on a trustless system, reducing fraud and expensive intermediaries. * No more cross-border delays - Payments are instantaneous, bypassing restrictive banking regulations. For small businesses, this means fewer barriers to global trade. A textile producer in India could sell directly to a retailer in Canada without needing to figure out the bureaucratic maze of currency exchanges and trade laws. A graphic designer in Brazil could collaborate with a company in Australia and receive payment instantly without relying on high-fee banking systems. A shea butter producer in Kenya could sell organic products directly to small skincare manufacturers in the U.S., bypassing middlemen and avoiding international shipping delays. Bitcoin removes middlemen, slashes costs, and levels the playing field, not by government intervention, but by eliminating artificial barriers altogether. ### The Challenges and the Future Bitcoin isn’t a perfect solution, and we know that. Scalability, price volatility, and regulatory pushback remain major hurdles. Currently, stablecoins are attempting to integrate into the Bitcoin Layer 2 network, which could potentially distract from Bitcoin's intended role as a global decentralized medium of exchange. Some are pushing for trade to happen through currency-pegged, centralized coins, which risks undermining Bitcoin's strong push toward free trade and decentralization. Governments and banks resist decentralization because it threatens their control over money flows. However, the concept of Bitcoin as a medium of exchange is already taking root. Leaders and developers are dedicating their legacies to building this system for a truly global community. El Salvador’s Bitcoin experiment has shown both the potential and the obstacles of a Bitcoin-driven economy with many lessons to learn from. Block Inc’s innovations have expanded into strengthening Bitcoin’s role as a decentralized medium globally, particularly through decentralized mining benefits and commercialized cold wallets. Nostr has been very successful in seeing growth in these domains as well. It is slow but it's taking the right steps towards simplifying Bitcoin commerce adoption through zaps. However the million-dollar question remains. If Bitcoin removes trade barriers, will small businesses adopt it? History suggests yes but with the right approach. Just as Jack Ma went door to door convincing small businesses to embrace e-commerce, a similar effort is needed for Bitcoin adoption. With Bitcoin, global trade can become digitized, commercialized, and pain-free, but only if small businesses understand how to use it. More importantly, it disrupts trade hegemony and creates a more equitable world that everyone can be part of. A challenge I foresee beyond technology, is education. Initiatives that focus on simple onboarding, low-cost adoption, and real-world use cases can drive Bitcoin-powered trade forward. There are many non-tech Bitcoin enthusiasts who want to contribute to the Bitcoin ecosystem and would love to take on educator roles. Once the infrastructure and understanding around Bitcoin become more conceptualized, these folks could play a strong role in spreading awareness and adoption. If Bitcoin is introduced strategically, not as a speculative asset but as an international trade enabler through its medium of exchange, it could reshape global commerce just as e-commerce once did. The only difference is that this time, trade is truly borderless, trustless, and not controlled by financial intermediaries. Krugman’s New Trade Theory remains useful in explaining how economies of scale shape trade. But it fails to account for decentralized digital economies, where small businesses can bypass the old rules of power and privilege. If Bitcoin achieves mainstream adoption, we may finally see a world where trade is truly free, where merit, not governments or middlemen, determines success.