Technofeudalism: What Killed Capitalism

Technofeudalism: What Killed Capitalism by Yanis Varoufakis, Melville House  

“Enter amazon.com and you have exited capitalism.” 

That is a provocative take on the nature of the Big Tech behemoth, but Yanis Varoufakis is convinced that Amazon and its ilk represent a fundamentally different kind of economic organization than their industrial era predecessors. This is not because, as the FTC stated in its suit against the company, that it “uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.” As true as that may be, monopoly power has been a goal of capitalists immemorial. They are different because they are no longer driven by a profit motive, but by a much older and more ominous motivation: collecting rent. Unlike previous rent collectors, however, they are not collecting rent from people living and working on terrestrial land or property under their control, but from almost all activity that occurs online platforms, creating a new phenomenon: cloud capital.  

The depth and breadth of the influence Amazon and other cloud rent collectors—or "cloudalists" as Varoufakis calls them—wield over our lives is staggering. It is both public and private, shaping our personal behavior as well as geopolitics. If collecting rent, rather than the profit motive, is now the driving force of these companies, the world’s largest and most influential corporations, it is very important to recognize that—and its profound implications. Varoufakis makes a convincing case that “there comes a time when something has evolved so much that it is probably best to call it something else,” that it is probably best to cease calling what these companies engage in capitalism and instead, properly, label it technofeudalism. 

It is tempting to view these developments as yet another evolution of capitalism. Immersing yourself in a history like Jonathan Levy’s Ages of American Capitalism reveals the many ways in which capitalism has changed with—and created—new technological developments and political realities over the years. Capitalism has been nothing if not adaptable and resilient. And, as Varoufakis explains, it is not that capitalism has ceased to exist altogether:  

Of course, markets and profits remain ubiquitous—indeed, markets and profits were ubiquitous under feudalism too—they just aren’t running the show anymore. What has happened over the last two decades is that profit and markets have been evicted from the epicentre of our economic and social systems, pushed out to its margins, and replaced. With what? Markets, the medium of capitalism, have been replaced by digital trading platforms which look like, but are not, markets, and are better understood as fiefdoms. And profit, the engine of capitalism, has been replaced with its feudal predecessor: rent. 

Varoufakis wrote an earlier book in which he explained capitalism to his twelve-year-old daughter. It was his response to her asking him why there is so much inequality in the world. He addresses this book to his father in response to a question he posed, which we’ll get to in a moment. First, it is important to understand who his father was and what he endured as a leftist who was once imprisoned for his political views by Greek’s fascist government. "As a young man,” Yanis tells us, his father shared a hope many in his generation held, that one day “organized labour would vanquish capitalism on at a planetary scale.” He would go on to work as a chemical engineer in a steel plant, and would introduce his son Yanis to the wonders of metallurgy at a young age, showing him in the family fireplace how iron could be melted, quenched, and hardened into steel. Alongside this lesson he provided his son a history lesson about how technology offered both great promise and great peril when it  fundamentally changes the circumstances of humankind—as it did durng the Iron Age. The tables were turned when Yanis introduced his father to a technology that would define a new age, the internet. His father immediately pondered the implications, asking his son:  

‘Now that computers speak to each other, will this network make capitalism impossible to overthrow? Or might it finally reveal its Achilles heel?’ 

The ultimate answer is complicated. Through the prose of Varoufakis, it is an answer filled with philosophy and science, peopled with characters from greek mythology and modern television. It relies on his understanding of the dual nature of things—from the dichotomous relationship of labor's value under capitalism, something he learned from observing his mother's work at a young age, to Einstein's theory of relativity and the underlying realities of the universe. It is often very poetic and yet hard-earned, relying equally on his education as an economist and his experience as the former finance minister of Greece.   

The most succinct answer Varoufakis offers his late father is that the internet has “solidified, augmented and massively expanded capital’s triumph over labor, society and, catastrophically, nature. And yet, here is the contradiction: in doing so, cloud capital has simultaneously ushered in the technofeudal system that has killed capitalism in so many realms and is in the process of replacing it everywhere else.” 

To help explain our present predicament, he offers a brief and entertaining economic history, focused especially on the era since World War II when America came to lead the so-called “Western“ capitalist democracies. He enlists a cast of characters from Mad Men’s Don Draper to the beast from Theseus and the Minotaur as metaphors for different eras of American economic policy. He enlists Don Draper as the personification of postwar America’s technostructure, when America’s political and business leaders retrofitted America’s centrally planned wartime economy into a consumer products paradise in which ad executives manufactured something new within us: the constant desire for more that eventually expelled us from our postwar industrial economic Eden. If you think pop culture references can’t get to the deeper human realities underneath our economic lives, consider this passage: 

Talking to himself … Draper offers an answer in the form of the harshest self-criticism possible by a man who has dedicated his life to manufacturing desires: “We are flawed because we want so much more. We are ruined because we get these things and wish for what we had.” 

He also pulls back to show us how the largest geopolitical and economic realities of the world are shifting, especially the growing bifurcation of the world into two spheres of economic influence in the escalating competition between America and China after decades of American hegemony, and (more than tangentially related) explains why resisting the rise of technofeudalism is imperative to tackling the climate crisis.   

One key component to the rise of technofeudalism was the massive amount of money central banks have poured into the economy over the past 15 years to combat two different, and equally existential, crises to the world economy. During the pandemic, at least some of that money went to working people. But the money that central banks used to save the financial system following the Great Recession did not, nor was it used to create productive new ventures and new jobs as central bankers might have hoped. Bankers saw few returns on such investments in a down economy. Instead, it bubbled to the top and was used to buy up high-priced apartments, yachts, and other playthings and properties for the already obscenely wealthy to park their money in. It was ploughed into stock buybacks to artificially inflate companies’ stock prices and executive compensation. And it sloshed around Silicon Valley where it fueled the rise of cloud capital, turning traditional, profit-seeking companies and capitalists into vassals of the cloudalists. Most importantly, Varoufakis helps us understand that this shift to technofeudalism is not just an abstract economic event, a change only in how companies relate to one another or how money moves around the world. It affects how we live our everyday lives.

It has not yet had as profound an influence on the way we work as many predicted and most expected. That is not the major change it has had on our lives. 

No, the truly historic disruption was to automate capital’s power to command people outside the factory, the shop or the office—to turn all of us … into cloud serfs in the direct (unremunerated) service of cloud capital, unmediated by any market.   

Big Tech has succeeded in usurping power from the capitalists of the industrial economy and creating cloud fiefdoms in which we all now live and work. And because of that, capitalism is no longer the engine powering our economic growth, only the fuel that cloudalists use to drive their digital fiefdoms. 

So, to answer his father’s question, he finds that the internet did reveal capitalism’s Achilles heel, but so far the ones who have take advantage of that weakness have (re)created something that is even more exploitative and oppressive, and concentrated wealth and power in even fewer hands.  

That is not the start or the end of our story, though. Varoufakis has wisely written this book as a response to his father’s question—as he wrote a previous one to answer his daughter's. I appreciate that, in part I'm sure, due to my own sentimentality. But it also reflects the important of taking a view that spans generations, to honor the intellectual traditions we’ve inherited and the hopes of those who will inherit the world from us. Rather than succumb to the seeming inevitability of our current economic paradigm, it is good to dissect the human decisions that led us into the predicaments and realities we face. It is powerful to remember the hopes and dreams of those who wished to build the world in a different way using different ideas and tools, and to resurrect them if they are helpful to human flourishing. And it is right to rebury the ideas and tools of oppression—like rent and feudalism—that are not. 

The good news in the answer Varoufakis offers his father is that the Achilles’ heel remains exposed, and the arrows we have in our collective quiver to strike at it are in the very same technological capacity the cloudalists use to surveil and modify our behavior for their benefit. The internet was originally built deliberately free of the walls and surveillance that have degraded our experience, commodified our attention, and come to own our very identities online. And the internet is still being built on our activity, on ouy interaction with it. The internet exists only because we exist, and in freeing it from the shackles of rentiers we may just emancipate ourselves.