Socialists have been hotly anticipating the end of capitalism since at least 1848, when Marx and Engels published The Communist Manifesto – but the Manifesto also reminds us that capitalism is only too happy to reinvent itself during its crises, coming back in new forms, over and over again.
Now, in Technofeudalism: What Killed Capitalism, Yanis Varoufakis – the “libertarian Marxist” former finance minister of Greece – makes an excellent case that capitalism died a decade ago, turning into a new form of feudalism: technofeudalism.
To understand where Varoufakis is coming from, you need to go beyond the colloquial meanings of “capitalism” and “feudalism.” Capitalism isn’t just “a system where we buy and sell things.” It’s a system where capital rules the roost: the richest, most powerful people are those who coerce workers into using their capital (factories, tools, vehicles, etc) to create income in the form of profits.
By contrast, a feudal society is one organized around people who own things, charging others to use them to produce goods and services. In a feudal society, the most important form of income isn’t profit, it’s rent. To quote Varoufakis: “rent flows from privileged access to things in fixed supply” (land, fossil fuels, etc). Profit comes from “entrepreneurial people who have invested in things that wouldn’t have otherwise existed.”
This distinction is subtle, but important: “Profit is vulnerable to market competition, rent is not.” If you have a coffee shop, then every other coffee shop that opens on your block is a competitive threat that could erode your margins. But if you own the building the coffee shop owner rents, then every other coffee shop that opens on the block raises the property values and the amount of rent you can charge.
The capitalist revolution – extolled and condemned in the Manifesto – was led by people who valorized profits as the heroic returns for making something new in this world, and who condemned rents as a parasitic drain on the true producers whose entrepreneurial spirits would enrich us all. The “free markets” extolled by Adam Smith weren’t free from regulation – they were free from rents.
But rents, Varoufakis writes, “survived only parasitically on, and in the shadows of, profit.” That is, rentiers (people whose wealth comes from rents) were a small rump of the economy, slightly suspect and on the periphery of any consideration of how to organize our society. But all that changed in 2008, when the world’s central banks addressed the Great Financial Crisis by bailing out not just the banks, but the bankers, funneling trillions to the people whose reckless behavior brought the world to the brink of economic ruin.
Suddenly, these wealthy people, and their banks, experienced enormous wealth-gains without profits. Their businesses lost billions in profits (the cost of offering the business’s products and services vastly exceeded the money people spent on those products and services). But the business still had billions more at the end of the year than they’d had at the start: billions in public money, funneled to them by central banks.
This kicked off the “everything rally” in which every kind of asset – real estate, art, stocks, bonds, even monkey JPEGs – ballooned in value. That’s exactly what you’d expect from an economy where rents dominate over profits. Feudal rentiers don’t need to invest to keep making money – remember, their wealth comes from owning things that other people invest in to make money.
Rents are not vulnerable to competition, so rentiers don’t need to plow their rents into new technology to keep the money coming in. The capitalist that leases the oil field needs to invest in new pumps and refining to stay competitive with other oil companies. But the rentier of the oil field doesn’t have to do anything: either the capitalist tenant will invest in more capital and make the field more valuable, or they will lose out to another capitalist who’ll replace them. Either way, the rentier gets more rent.
“Profit is vulnerable to market competition, rent is not.”
So when capitalists get richer, they spend some of that money on new capital, but when rentiers get richer, they spend money on more assets they can rent to capitalists. The “everything rally” made all kinds of capital more valuable, and companies that were transitioning to a feudal footing turned around and handed that money to their investors in stock buybacks and dividends, rather than spending the money on R&D, or new plants, or new technology.
The tech companies, though, were the exception. They invested in “cloud capital” – the servers, lines, and services that everyone else would have to pay rent on in order to practice capitalism.
Think of Amazon: Varoufakis likens shopping on Amazon to visiting a bustling city center filled with shops run by independent capitalists. However, all of those capitalists are subservient to a feudal lord: Jeff Bezos, who takes 51 cents out of every dollar they bring in, and furthermore gets to decide which products they can sell and how those products must be displayed.
The postcapitalist, technofeudal world isn’t a world without capitalism, then. It’s a world where capitalists are subservient to feudalists (“cloudalists” in Varoufakis’s thesis), as are the rest of us the cloud peons, from the social media users and performers who fill the technofuedalists’ siloes with “content” to the regular users whose media diet is dictated by the cloudalists’ recommendation systems.
A defining feature of cloudalism is the ability of the rentier lord to destroy any capitalist vassal’s business with the click of a mouse. If Google kicks your business out of the search index, or if Facebook blocks your publication, or if Twitter shadowbans mentions of your product, or if Apple pulls your app from the store, you’re toast.
Capitalists “still have the power to command labor from the majority who are reliant on wages,” but they are still mere vassals to the cloudalists. Even the most energetic capitalist can’t escape paying rent, thanks in large part to “IP,” which I claim is best understood as “laws that let a company reach beyond its walls to dictate the conduct of competitors, critics and customers.”
Varoufakis points to ways that the cloudalists can cement their gains: for example, “green” energy doesn’t rely on land-leases (like fossil fuels), but it does rely on networked grids and data-protocols that can be loaded up with IP, either or both of which can be turned into chokepoints for feudal rent-extraction.
Capitalists “still have the power to command labor from the majority who are reliant on wages,” but they are still mere vassals to the cloudalists.