Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

CRISES Two main forces cause capitalism to enter into crises. 5.1 Falling rate of profit Falling profits depress the capacity of firms to invest in new capital, consequently limiting future surplus value. At some point, the weakest firms go bankrupt. The workers fired as a result reduce their consumption which, subsequently, depresses further the profit of firms that just managed to hang on – some of which also go bankrupt thus precipitating a doom-loop, a domino effect of bankruptcies causing, and being amplified by, related financial and real estate sector slumps.[11] 5.2 Debt crises During the good times, the financiers’ rents rise geometrically – if not exponentially. Caught up in a gold-fever-like mentality, they lend burgeoning sums to capitalists – which they borrow from the future. At some point the present cannot produce enough value to repay the future, the bubble bursts, and the psychological pendulum swings the opposite way, causing financiers to go on a credit strike. The result is a domino effect of collapsing corporate, FIRE (finance, insurance and real estate) and, often, public debt.[12]