In this age of self-referential bubbles, of performative mutual demonisation and of siloed ideological camps that make debate impossible, it was a breath of fresh air to spot two reviews of my TECHNOFEUDALISM by conservative publications: The Washington Free Beacon and The European Conservative. Disagreeing agreeably must surely be a major improvement to unreasoned, mutually hateful finger-pointing. Below, I copy the full text of the two reviews:
1. The European Conservative
Varoufakis’s argument for the global economy being post-capitalist is that it no longer principally relies on the pursuit of profits under conditions of market competition but on rent extraction, the way that feudalism did. He sees this as resulting from a recent de facto privatization of the Internet, like a new enclosure of the commons (despite 18th–century enclosures actually inaugurating capitalism).
Large platforms like Amazon, on which the capitalist has to sell his products to be competitive, or social media, where he has to advertise, would be new fiefdoms, and the capitalist paying rent to use them to make money would be a vassal.
And yet, the serfs in this system are precisely not serfs. The latter, after all, were given cradle-to-grave employment in a system without social mobility. What we have today is rather the opposite: what has been described as a precariat (a precariously employed workforce).
True, rent has overtaken profit in a certain sense. Positioning themselves in such a way as to dominate the market and be able to extract rents, even at the cost of short- and medium-term profit, has been the M.O. of many large companies, but far from being anything novel, this is one of the classical criticisms made against capitalist/corporatist oligarchs.
In any case, whether we describe it as techno-feudalist or, more accurately, Cloudist (as in the Cloud), the way this M.O. has played out in recent decades does represent something new, and Varoufakis pinpoints the emergence of this something new to August 12th, 2020, when it was announced that “[As a result of the COVID-19 pandemic] the UK’s national income had fallen by a whopping 20.4%,” but “instead of plummeting in response to the data, the UK stock exchange jumped up by 2.3%.”
This is key.
Varoufakis’s assessment is that such a thing was “utterly at odds” with any variety of capitalism and that, with this 2.3% jump, “the world of money has finally decoupled from the capitalist world.” The City of London had done nothing short of defying “the gravitational laws of capitalism,” and this trend was about to repeat throughout the world.
True, sometimes “share markets do rise in response to bad news … but only when the news is better than anticipated,” In this case, however, the news was quite a bit worse than expected (markets had been predicting a 15% drop in the UK’s national income at most).
What happened was that traders in the City of London had the following realization:
When things are this dismal, the Bank of England panics. And what have panicky central banks been doing since the crash of 2008? They print money and give it to us. And what do we do with all the newly minted money? We buy shares, sending their price up. If prices are destined to go up, only a fool would miss out. … A wall of printed money is on its way to us. Time to buy.
Arguably then, as with the rise of modern industrial capitalism itself, Britain was a kind of ground zero. As Blake wrote, things begin “in Albion’s ancient Druid rocky shore.” But the decoupling of money and capital was about to go global.
Authorities … responded by [doing what they had been doing since 2008] … printing money to give to the financiers [banks] in hopes that it would buttress investment in business, generating stable jobs. … It didn’t. Fearing that run-of-the-mill businesses would not be able to repay them, the financiers lent only to big business. And big business either refused to invest or invested solely in Cloud capital. Conglomerates founded on traditional terrestrial capital, like General Electric and Volkswagen, refused to invest the interest-free central bank money because when they surveyed the ongoing carnage of the pandemic they saw the same thing the banks had seen … masses of little people condemned to low wages, B.S. jobs, and diminished prospects. A sea of people unable to afford new high-value products. So why invest in such stuff? Instead, they would do something riskless, profitable, and stress-free. They used it to buy back their own companies’ shares, boosting their companies’ share price and their own bonuses. Meanwhile, Big Tech was having an even more fabulous pandemic.
While the U.S. economy was shedding jobs, Amazon appeared, in the words of Varoufakis, as a “hybrid of the Red Cross, by delivering parcels to confined citizens, and [by hiring people] Roosevelt’s New Deal.” But the jobs it created were a precarious kind of labour, suited to its ends, and the investment it made was in building Cloud capital.
Thus dawned our present age of Cloudism, about whose staying power Varoufakis makes the following observations:
- Whatever economic shocks might come, Cloud capital will likely endure, as will its ability to extract rents. Infrastructure often far outlives the bubble that takes out the actors who built it. Fibre optic cable and server farms, for example, survived the dot-com bubble bursting in 2001.
- And, in any case, money is still flowing from central banks. If central banks withdraw money, writes Varoufakis, a “vortex of volatility is ready to hit the 24 trillion dollar market for U.S. public debt, [which is] the very bedrock of international banking and finance.” In other words, central bank money will continue to “play the systemic role once played by capitalist profits.”
- Finally, “Cloud capital is now so well entrenched that it is bolstered and augmented not just by central bank money and its own capacity to amass Cloud rent, but by every new development,” from green energy to demands for cheap online degree programs.
We may describe Cloudism, then, as a system in which central banks print money that ends up in the coffers of Big Tech and associated conglomerates, leading to reduced pressure for these entities to pursue profits in a competitive market and so allowing them to focus instead on pursuing the entrenchment of the system that so benefits them.
This they do by trying to capture people’s attention (through adaptive algorithms) and predict their behaviour (through big data). The end point of this central bank/Big Tech nexus of control-seeking is something like China’s WeChat, an ‘everything app’ providing citizens/consumers with everything they need and corralling them into conformity through some kind of social credit score.
The solution? Varoufakis has said that it is easier to imagine nationalising Big Tech than it is to imagine taxing them effectively. Indeed, the idea that certain platforms provide services that really ought to be public utilities has been floating around, including on the political Right, for some years.
This is crucial for any political platform seeking to address current conditions. In addition, we have to consider how to promote and package open source technology, in which context we have the excellent case-study of Stability AI, which is meant (as its founder and CEO, Emad Mostaque, has said) to be like a pizza base, ready to be stacked with local, culturally appropriate or sectional, business-specific ‘toppings.’
With this (and after dismissing his excessively fraught and not all helpful titular “feudalism”), we may take Varoufakis’ analysis of Cloudism onboard.
It should be developed through an analysis of how the attention-capturing, behaviour-predicting project of Cloud-capital-owning corporations ends up manifesting as a cultural and ideological project that is precisely aligned with the aims of the central banks (the states) that fund them.
But this warrants a separate essay.
2. The Washington Free Beacon
With Technofeudalism: What Killed Capitalism, Yanis Varoufakis joins this strange canon, arguing that capitalism has disappeared right under our noses. Varoufakis, who rose to global prominence as Greek finance minister during the country’s debt crisis, is a self-proclaimed “libertarian Marxist,” and Technofeudalism is as intriguing and puzzling as his label, though it does not ultimately persuade.
Varoufakis contends that new technologies have over the last decade put an end to capitalism. But, contrary to what conventional Marxists promised, it has managed to be replaced by something even worse. Under capitalism, the owners of capital are supposed to compete with each other, pursuing profits in the market. But markets—the forums in which buyers and sellers directly engage with each other—have been overtaken by digital platforms that control every feature of these previously free transactions; think of Amazon or Apple’s App Store. And this establishment of digital “fiefs” has in turn eliminated profits—the surplus revenue that drives one to beat the competition. Through their intermediation in these digital transactions, fiefs can take a cut from every sale without producing anything themselves. This cut constitutes a “cloud rent,” rents being any money gained through a privileged position that competition would have eliminated.
Together, these two transformations—from markets to digital platforms, and from profits to rents—have moved us beyond capitalism into technofeudalism, with the capitalists replaced by “cloudalists.” These rulers of the cloud constitute a new feudal class, overseeing the many vassal businesses which in turn shape the decisions of everyday serfs—you and me.
It would be easy to dismiss Varoufakis’s high-flying theorizing as a case of an errant economist high on his own supply. But this sort of macroeconomic musing on capitalism’s succession is worth taking seriously, for it pushes the reader to ask whether we’re observing business as usual or something else—and what business as usual even means. In particular, by tying capitalism’s development to the evolution of the internet and the computer, Technofeudalism raises a serious question: How is it that the internet, which so many thought would be a radical tool for decentralization, has come to be dominated by a few corporate behemoths? And why do so many users feel a sense, not of autonomy, but of invasion, in which someone else controls our data and digital identity? Steve Jobs thought that the computer would be a “bicycle for our minds,” empowering free individuals to explore the world. But the internet so often feels instead like a tank rolling over our minds, or perhaps a rollercoaster we can’t get off of.
Varoufakis argues that this dream of a decentralized internet was, however briefly, a reality. The early internet was a “digital commons,” marked by open-source protocols that anyone could copy and modify for free. But an elaborate string of events, including President Richard Nixon’s taking the dollar off gold, central banks’ response to the 2008 financial crisis, and the pandemic, enabled financiers to pump money into Big Tech, which in turn poured its investments into digital infrastructure and the expansion of their cloud serfdoms. The result has been “the conversion of billions of us into willing cloud serfs volunteering to labor for nothing to reproduce cloud capital for the benefit of its owners.”
There is a fascinating story to be told about how software’s seemingly inevitable growth was instead the very contingent result of a complex of political and economic factors, but Varoufakis details the rise of the cloudalists too quickly for it to convince. A more compelling presentation of this history would have given more attention to these details and less to Varoufakis’s opinions on Mad Men and Homer.
Still, Varoufakis’s core point, that capitalism will change as technology does, is surely right, and essential—Adam Smith, for example, famously used the new pin factories of the Industrial Revolution to understand the division of labor. That being said, it’s far from clear that the dramatic identification of a new stage of history is called for. The rent-seeking that Varoufakis puts at the heart of this feudal system has been a bugbear of capitalism’s champions since Smith himself. Businesses have always sought special privileges for themselves that blocked out competitors and boosted their leverage against customers—why wouldn’t they? Apple’s ability to charge a 30 percent commission rate to developers who want their products on the App Store is a genuine obstacle to a more vibrant internet, but feudalism it ain’t. If we need a term for this phenomenon, fellow leftists Rebecca Giblin and Cory Doctorow were closer to the mark when they dubbed it “chokepoint capitalism.”
Varoufakis’s more libertarian praise for competition over cronyism also comes into conflict with his leftist commitments in his criticism of the internet’s privatization. He laments that “our digital identity belongs neither to us nor to the state. Strewn across countless privately owned digital realms, it has many owners, none of whom is us.” Many of us are indeed mystified about what is really “ours” online—consider those incomprehensible terms and conditions agreements and now concerns about artificial intelligence’s replication of our words and images. But if the goal is individual ownership of our digital identities, then the obstacle isn’t privatization, but the lack of it. A more certain sense of ownership and privacy over our data is a worthy goal, but a return to the early “digital commons” would only compound confusion, at users’ expense, about who really owns what online.
Reviving the dream of the freer, purer internet of yesteryear should also prompt a deeper question: Could that “Internet One” ever have turned out otherwise? After all, the internet was itself the product of Cold War military innovation, an irony that Varoufakis calls “history’s greatest ever antinomy”: “a US government-built and -owned, non-commercial computer network that lay outside capitalist markets and imperatives but whose purpose was the defense of the capitalist realm.” And for all his flower-child talk about liberating the individual, it was Steve Jobs himself who thought up the App Store, a “walled garden” locking developers into a centralized system. Perhaps, then, a decentralized digital commons was always going to be an unstable point between more centralized equilibria. In that case, the solution can’t be a libertarian fantasy of using the web to escape the state.
But the second part of Varoufakis’s libertarian Marxism won’t do, either. His proposal for a “cloud rebellion to overthrow technofeudalism” is the weakest part of the book, as he shifts from mind-opening theorizing to dull manifesto-waving. Here, Varoufakis might have learned from his predecessors: What makes Burnham and Schumpeter so engaging is, paradoxically, the very disinterested coldness of their observations. Varoufakis provides some stimulating provocations, but a clearer assessment of capitalism’s metamorphoses will require a greater sobriety than he can provide.
