Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

Two main developments: the privatisation of the internet by America’s and China’s Big Tech. And the manner in which Western governments and central banks responded to the 2008 great financial crisis.

capital’s mutation into what I call cloud capital has demolished capitalism’s two pillars: markets and profits.

Markets, the medium of capitalism, have been replaced by digital trading platforms which look like, but are not, markets, and are better understood as fiefdoms.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. Specifically, it is a form of rent that must be paid for access to those platforms and to the cloud more broadly. I call it cloud rent.

new class of feudal overlord, the owners of cloud capital.

secret power of employers: to extract any surplus, either from highly skilled or from uninspired, repetitive, robotic work, they must pay for their workers’ time (commodity labour) but cannot actually buy their sweat or flair (experiential labour).

They were using illusions which, while helpful in the microcosm of a single market (e.g. the market for potatoes, where a fall in the price can usually be relied upon to boost sales), were catastrophic when applied to the economy at large – the macroeconomy, where a fall in the price of money (the interest rate) may never boost money’s flows in the form of investment and employment.

Yes, money is a thing, a commodity like any other. But it is also something much bigger than that. It is, above all else, a reflection of our relation to one another and to our technologies; i.e. the means and the ways in which we transform matter.

inability to see how one could genuinely cherish freedom and tolerate capitalism

become, sadly, conventional fallacy: that capitalism is about freedom, efficiency and democracy, while socialism turns on justice, equality and statism. In fact, from the very start, the left was all about emancipation.

For over a century, the left was concerned primarily with deliverance from self-inflicted unfreedom – which is why it was so fundamentally aligned with the anti-slavery movement, the suffragettes, groups sheltering persecuted Jews in the 1930s and 40s, black liberation organisations in the 1950s and 60s, the first gay and lesbian protesters in the streets of San Francisco, Sydney and London in the 1970s. So, how did we get to the situation, today, where ‘libertarian Marxist’ sounds like a joke? The answer is that, sometime in the twentieth century, the left traded freedom for other things.

The moment people believed they had to choose between freedom and fairness, between an iniquitous democracy and miserable state-imposed egalitarianism, it was game over for the left.

end of the social democratic dream: of a mixed economy, in which government provided public goods while the private sector produced plentiful goodies to satisfy our whims

defeat made inevitable once our side had lost the conviction that capitalism was iniquitous because it was inefficient, that it was

unjust because it was illiberal, that it was chaotic because it was irrational. Falling back to basics, I asked Mum and Dad what freedom meant to them. Mother replied: the ability to choose your partners and your projects. Father’s reply was similar: time to read, to experiment and to write.

Fredric Jameson famously put it, people find it easier to imagine the end of the world than the end of capitalism.

relished the unalloyed joys of archaeometry, he would speculate on how capitalism might, one day, end – and what would replace it. His wish was that it would not die with a bang, because bangs had a tendency to cull good people in awful numbers; that instead socialist islands might spring up spontaneously in our vast capitalist archipelago and that they would expand gradually, eventually forming whole continents on which technologically advanced commons would prevail.

Efficiently manufacturing things that people craved was no longer enough. Capitalism now involved the skilful manufacture of desire.

Capitalism is synonymous with the triumph of exchange value because it is the only value that can be crystallised into more capital.

find the money or willingness to treat him like an academic? To pay him good money to think deeply at a pace of his choosing?

the New Deal also changed global capitalism profoundly. The New Deal’s public works projects, its social welfare programmes and, above all, its public finance instruments, together with stringent controls over what bankers could get away with, constituted a full-on dress rehearsal for the War Economy.

First, state guaranteed sales translating into state guaranteed profits. Second, freedom from competition, since prices were fixed by government. Third, huge government-funded scientific research (e.g. the Manhattan Project, jet propulsion) that provided Big Business with wonderful new innovations and a pool of highly skilled scientific personnel to recruit from during and after the war. And fourth, a patriotic aura to help rinse off the stench of corporate greed that clung to them after the crash of 1929 and make them over as heroic enterprises that helped America win the war. The War Economy experiment was an unqualified success. Production quadrupled in less than five years. Inflation was kept on a leash, unlike what had happened during the previous world war. Unemployment disappeared, and was kept at bay even after the soldiers, sailors and airmen returned from the front.

was commodified. Once again, it was electromagnetism that achieved this revolutionary feat – not by killing an elephant but by allowing for the invention of the radio and, even more importantly, the television set.

America’s industrial capacity had grown so much during the war that, to keep its factories busy and its workers in jobs, they had to produce a lot more stuff than Americans alone could absorb.

Their only constraints are the alertness of their clients and the occasional snoopings of a financial regulator. That’s why complexity is the financiers’ friend – for

And so it was that, decoupled from the mundane world of physical capital, legitimised by the ideology of neoliberalism, fuelled by a new virtue called ‘greed’, shrouded in the complexity of their computers, financiers reinvented themselves – not without some justification – as masters of the universe.

fence would be necessary to keep the masses out of such an important resource. In the eighteenth century, it was land that the many were denied access to. In the twenty-first century, it is access to our own identity. Think

It did not have to be this way. When the US Pentagon chose to make GPS available to everyone, to turn it over to the digital commons, they granted each of us the right to know our location in real time. For free. No questions asked. It was a political decision to do so.

This miracle took three leaps to complete. The first was from simple algorithms to ones that could adapt their objectives in light of the outcome of their activity – in other words, to reprogramme themselves (machine-learning was the technical term). The second leap replaced the standard computer hardware with exotic ‘neural networks’. The third and decisive leap infused neural networks with algorithms capable of ‘reinforcement-learning’.

Alas, Alexa is no serf. It is, rather, a piece of cloud-based command capital which is turning you into a serf, with your aid and by means of your own unpaid labour, in order to further enrich its owners.

To use the personalised services their algorithms provide, we must submit to a business model based on the harvesting of our data, the tracking of our activity, the invisible curating of our content. Once we have submitted to this, the algorithm goes into the business of selling things to us while selling our attention to others.

Cloud capital, in contrast, can reproduce itself in ways that involve no waged labour. How? By commanding almost the whole of humanity to chip in to its reproduction – for free!

Cloud proles – my term for waged workers driven to their physical limits by cloud-based algorithms – suffer at work in ways that would be instantly recognised by whole generations of earlier proletarians.

cloud-based sweatshop where workers are paid piece rates to work virtually.

His algorithmic double Alexa may be no romantic but cloud capital monetises our emotions more effectively than Don ever could. It tailor-makes experiences that exploit our biases to drive consumption, and then it uses our responses to hone those experiences yet further.

In providing these stories, videos, photos, jokes and movements, it is we who produce and reproduce – outside any market – the stock of cloud capital. This is unparalleled. Workers employed by General Electric, Exxon-Mobil, General Motors or any other major conglomerate collect in salaries and wages approximately 80 per cent of the company’s income. This proportion grows larger in smaller firms. Big Tech’s workers, in contrast, collect less than 1 per cent of their firms’ revenues. The reason is that paid labour performs only a fraction of the work that Big Tech relies on. Most of the work is performed by billions of people for free.

Cloud capital’s singular achievement, a feat far superior to either of these, is the way it has revolutionised its own reproduction. The true revolution cloud capital has inflicted on humanity is the conversion of billions of us into willing cloud serfs volunteering to labour for nothing to reproduce cloud capital for the benefit of its owners.

If this is not scary enough, recall that it is the same algorithm which, via Alexa, has trained us to train it to manufacture our desires. The mind rebels at the enormity of the hubris. The same algorithm that we help train in real time to know us inside out, both modifies our preferences and administers the selection and delivery of commodities that will satisfy these preferences.

So why invest in such stuff? Instead, they would do something riskless, profitable and stress-free: they used it to buy back their own company’s shares – boosting their company’s share price and, along with it, their own bonuses.

Even cloudalist companies that had a bad pandemic, like Uber and Airbnb whose customers were unable to use their services, took the central bank money and invested in more cloud capital as if there were no pandemic.

It was the pandemic, with the flood of state money it unleashed, that ushered in the Age of Cloud Capital.

become more sceptical of narratives that place too much emphasis on technology and not enough on how powerful groups seize and manipulate it to achieve and maintain dominion over others.

cloud capital has developed capacities that previous types of capital goods never had. It has become at once an attention-holder, a desire-manufacturer, a driver of proletarian labour (of cloud proles), an elicitor of massive free labour (from cloud serfs) and, to boot, the creator of totally privatised digital transaction spaces (cloud fiefs like amazon.com) in which neither buyers nor sellers enjoy any of the options they would in normal markets.

fifteen years since capitalism’s near-death experience, central bankers have been printing monies and channelling them to the financiers, entirely of their own accord. In their minds, they have been saving capitalism. In reality, they have been upending it by helping to finance the emergence of cloud capital. But that’s how history arrives: on the coat-tails of unintended consequences.

What was preposterous was that, in addition to saving the failed banks, they bailed out the quasi-criminal bankers responsible for their failure, along with their lethal practices. And far worse, in addition to practising socialism for the bankers, they subjected workers and the middle class to vicious austerity.[4] Cutting public expenditure in the midst of a Great Recession is always a terrible idea.

When an activist state makes fabulously wealthier the same bankers whose quasi-criminal activities brought misery to the majority, while they are punished with self-defeating austerity, two new calamities beckon: poisoned politics and permanent stagnation.

Money held its exchange value – that whole period, from late 2008 to early 2022, was one of very low (sometimes negative) inflation – but at the same time its price (i.e. the interest rate) tanked, even turning negative on many occasions.

When central banks began to treat money like a car manufacturer treats spent sulphuric acid, or a nuclear power station its radioactive wastewater, that’s when we knew there was something rotten in the kingdom of financialised capitalism.

‘People on the right of politics believe that hard work aimed at private profit is the surest route to a wealthy and good society. People on the left don’t.’

driven by the profit motive, that society would equip itself to manufacture sufficient quantities of life’s essentials and at the lowest prices possible. According to Smith, it is because of the capitalists’ cut-throat profit-hunger, not in spite of it, that capitalism begat wealth and progress.

Until, following the events of 2008, the Global North’s central banks fell into the trap of pumping unending quantities of poisoned monies into the financial markets. Then, for the first time since capitalism had stirred two and a half centuries earlier, profit ceased to be the fuel that fired the global economy’s engine, driving investment and innovation. That role, of fuelling the economy, was taken over by central bank money.