Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

Then Vladimir Putin invaded Ukraine and in response America did something that changed the whole equation. In retaliation to Putin’s aggression, the Federal Reserve froze hundreds of billions of dollars that belonged to Russia’s central bank but kept within the dollar-payment circuit that the US controls fully. It was the first time in capitalist history that a major central bank’s money had been, effectively, confiscated by another central bank.[10]

If you are Russia, or Germany for that matter, there is nothing much you can do if Washington decides to grab your stash and evict you from all international payment systems. How about selling your exports in your own currency, emulating Putin who demanded to be paid for Russia’s oil and gas in roubles?

What if you are China? Again, even though your economy’s size and depth mean that many foreign capitalists will crave some of your assets enough to accept yuan, you still have a problem: if you are a Chinese capitalist cut off from the dollar, you will not be able to benefit from America’s trade deficit; to use it as a vacuum cleaner that sucks into the American markets your aluminium, cement, electric vehicles

However, recall that this is a problem for Chinese capitalists but not so much for Chinese cloudalists (like TikTok) who had already built cloud finance up into an alternative global payment system. With it in hand, what is a serious problem for Chinese capitalists – i.e. the possible end of the dollar’s reign – poses no threat to Chinese cloudalists.

Blockchain is, no doubt, a fascinating tool. When I first encountered it, I wrote that it was a brilliant answer to a question we have not discovered yet. But if the question is how to fix capitalism or dethrone technofeudalism, this is not it.

what is the alternative to technofeudalism? And if social democracy is impossible and crypto a false promise, how will we build it?

One reason that we, the left, are wallowing in perpetual defeat is our failure to answer the killer question once put to me in a pub by a self-described ‘cockney Tory’ who had heard that a socialist was in the house: ‘If you don’t like what we have, what would you replace it with? How would it work? I am all ears. Convince me!’

Today, we know from both the Soviet and the Western European experience with social democracy that this was wishful thinking: a bottom-up socialist blueprint has simply not transpired, anywhere. But what was my excuse?

The task was clear and daunting: I had to explain how production, distribution, innovation, land use, housing, money, prices and a host of other stuff would work in a society that has socialised land and capital, including its algorithmic, AI-powered, cloud-based variety. I would have to explain how international trade and money flows would work. What democracy would mean and how it would function.

My answer to the guy in the pub, to the Irish finance minister, to anyone who wants to know what the alternative to technofeudalism is that I am proposing, can be found in the pages of the book that resulted: Another Now: Dispatches from an alternative present.[17]

Imagine a corporation in which every employee has a single share that they receive when hired, the way a student collects a library card upon enrolling at university.

Pay is determined by a democratic process that divides the company’s post-tax revenues into four slices: one to cover the firm’s fixed costs (such as equipment, licences, utility bills, rent and interest payments), another set aside for R&D, a slice from which basic pay to staff is made and, lastly, a slice for bonuses. Again, the distribution between these four slices is decided collectively, on a one-person-one-vote basis.

The impact of legislating such a corporate governance system would be the equivalent of a large comet crashing into technofeudalism’s bedrock. On the most superficial level, it would liberate employees from the tyranny of self-serving managers, but on a structural level it would do so much more. First, it would eliminate the distinction between wages and profits; thus we have collective ownership and we have eliminated the fundamental class divide between those who own and collect profits or rents and those who lease their time for a wage.

In contrast, the democratised companies I propose here, and in Another Now, are more consistent with well-functioning, competitive markets in which prices – free from the scourge of rent and concentrated market power – are formed. Put differently, doing away with capitalist firms, through terminating labour and share markets, paves the ground for truly competitive product markets and a process of price formation that powers up the great engine of entrepreneurship and innovation which conventional thinking, wrongly, associates with capitalism.[18]

What would all this mean for the cloudalists? The various Bezoses, Zuckerbergs and Musks would wake up to find they owned a single share in ‘their’ company granting them a single vote.

equally empowered, employee-shareholders. Control over the firm’s cloud capital, including the almighty algorithms at their centre, would be democratised, at least within the bounds of the company.

One such protection would be a Social Accountability Act stipulating that every corporation be graded according to an index of social worthiness, to be compiled by panels of randomly selected citizens, the equivalent of juries, chosen from a diverse pool of stakeholders: the company’s customers, members of the communities it affects, and so on. If a company’s rating falls consistently below

second, even more pertinent, social protection is afforded by the termination of ‘free’ services. We have learned the hard way what happens when services are funded by selling users’ attention to third parties. It turns the users into cloud serfs, whose labour enhances and reproduces cloud capital, further tightening its grip on our minds and behaviour.

App developers needing our data have to pay to get it from consenting users, who are protected by a Bill of Digital Rights that guarantees us all the right to choose which of our data to sell and to whom. The combination of the micropayment platform and the Bill of Digital Rights terminates, in practice, the current attention-grabbing market model. At the same time, anyone using an app pays the developer for access to it. The sums involved are small for the individual but for an app with a large pool of users they add up.

Imagine that the central bank provided everyone with a free digital wallet, effectively a free bank account. To attract people to use it, a stipend (or basic dividend) is credited monthly to each account making universal basic income a reality.

What about taxation? Recall that there are three types of income. First, the basic dividends credited to citizens’ digital wallets by the central bank. Second, earnings from working in the democratised companies, comprising basic salary plus bonuses. Third, interest paid to savers by the central bank or by private intermediaries.

When it comes to international trade and payments, a new international financial system guarantees continual wealth transfers to the Global South, while also restraining trade and financial imbalances of the type that inflate bubbles and cause financial crashes. The idea is that all trade and all money movements between different monetary jurisdictions – such as the UK, Germany, China and the United States – are denominated in a new digital international accounting unit, which I called the Kosmos. If the Kosmos value of a country’s imports exceed its exports, the country is charged an imbalance levy, in proportion to its trade deficit. Equally, if a country’s exports exceed its imports, it is also charged the same levy in proportion to its trade surplus. This terminates the mercantilist motive for one country persistently to extract value from another country by selling to it goods of greater value than those it imports from it, and, subsequently, lending them the money to continue buying from it – a form of vendor finance that places the weaker country in permanent debt bondage.