Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

Prehistory gave its place to history, Father said, when bronze displaced stone tools and weapons. Once bronze became widespread after 4000 bc, powerful civilisations emerged in Mesopotamia, Egypt, China, India, Crete, Mycenae and elsewhere. But, still, history was counted in the millennia. To be counted in the centuries, we had to discover the magic of iron. Once the Iron Age got going, around the ninth century bc, three different and remarkable eras emerged in quick succession, within no more than seven centuries in total: the geometric period, the classical era and the Hellenistic civilisation.

From the glacial speeds of the Bronze Age, humanity had been propelled to the breathless developments of the Iron Age. But for a long time, iron and steel remained too difficult to produce, too expensive. Even after the Industrial Revolution, the first steamships were mostly wooden, with steel providing only the essential components (boiler, chimney, joints). Enter another one of my father’s great heroes, Henry Bessemer, who invented a technique for producing large quantities of steel cheaply by blowing air through molten pig iron to burn off the impurities. It was then, according to Dad, that history accelerated to speeds with which we are familiar today. Coupled with the taming of electromagnetism, which we owe to another Victorian, James Maxwell, Bessemer’s technique gave us the Second Industrial Revolution – the period of rapid technological innovation from 1870 onwards, as distinct from the arrival of the factories earlier that century in the First Industrial Revolution – its wonders and horrors wrapped tightly together.

Looking back to those few winter nights of 1966, it is now clear to me that I was being inducted in ‘historical materialism’ – the method of understanding history as a constant feedback loop between, on the one hand, the way humans transform matter and, on the other, the manne...

manner in which human thinking and social relations are transformed in return.

Hesiod was composing poetry at around the same time as Homer. His Works and Days had a salutary cooling influence on Dad’s enthusiasm for iron and, more generally, technology: I wish I did not have to live among the people of the Fifth Age [the Iron Age], but either had died earlier or been born later. For now truly is a generation of iron who never rest from labour and sorrow by day or from perishing by night…But, notwithstanding the good mingled with their evils…[this generation] will know no favour for those who keep their oath or for the just or for the good…strength shall be right…the wicked will hurt the worthy…bitter sorrows will be left for us mortals, and there will be no help against evil.

During the feudal era, which became properly entrenched across Europe in the twelfth century, economic life involved no economic choices. If you were born into the landed gentry, it would never cross your mind to sell your ancestors’ land. And if you were born a serf, you were compelled to toil the land, on the landowner’s behalf, free of any illusion that, one day, you might own land yourself. In short, neither land nor labour power was a commodity. They had no market price. The vast majority of the time, ownership of them changed only through wars of conquest, royal decree or as a result of some catastrophe. Then, in the eighteenth century, something remarkable happened. Because of advances in shipping and navigation, international trade in things like wool, linen, silk and spices made them lucrative, thus giving British landlords an idea: why not evict en masse the serfs from land that produced worthless turnips and replace them with sheep whose backs produced precious wool for the international markets? The peasants’ eviction, which we now remember as the ‘enclosures’ – for it involved fencing them off from the land their ancestors had toiled for centuries – gave the majority of people something they had lost at the time that agriculture was invented: choice. Landlords could choose to lease land for a price reflecting the amount of wool it could produce. The evicted serfs could choose to offer their labour for a wage. Of course, in reality, being free to choose was no ...

different from being free to lose. Former serfs who refused squalid work for a pitiful wage starved to death. Proud aristocrats who refused to go along with the commodification of their land went bankrupt. As feudalism receded, economic choice arrived but was as free as the one offered by a mafioso who, smilingly, tells you: ‘I shall make you an offer you cannot refuse.’

To produce the rivers of credit necessary to fund the Edisons, the Westinghouses and the Fords of early-twentieth-century capitalism, small banks merged to form large ones and lent either to the industrialists directly or to speculators eager to buy shares in the new corporations. That’s how electromagnetism transformed capitalism: while its grids would go on to power mega-firms and its megawatts translated into mega-profits, it also created the first mega-debts in the form of vast overdraft facilities for the Edisons, the Westinghouses and the Fords. And it led to the emergence of Big Finance, which grew up alongside Big Business in order to lend it monies borrowed effectively from the future: from profits not yet realised but which Big Business promised to deliver. These wagers on future profits funded not only the construction of Big Business’s grids and production lines but an almighty froth of speculation as well.

Beneath the surface, however, the heat of war had transformed American capitalism at a molecular level, just as the heat of our fireplace had transformed iron into steel. By the war’s end, American capitalism was unrecognisable. Business and government had become profoundly entwined. Indeed, the revolving doors between government departments and corporations saw to it that the same crowd of mathematicians, scientists, analysts and professional managers populated them both. The heroic entrepreneur at the helm of the corporation and the democratically elected politician at the head of the government had both been usurped by this new private-public decision-making network, whose values and priorities – indeed its survival – boiled down to one thing: the survival and growth of the conglomerates now that the war, with its infinite demand for stuff and technologies, was over. Galbraith called this nexus the technostructure. Profitability remained essential for the army of technicians and influence-wielding employees making up the technostructure. Nevertheless, profit was no longer their top priority. As with all bureaucracies, their primary goal was to keep their underlings employed and busy. This meant they had not merely to avoid the shrinking of their conglomerates at the war’s end, but to grow them.

Bretton Woods[2] was the audacious global financial system devised by the New Dealers in 1944, whose purpose was noble: to thwart the Great Depression’s return after the war had ended. Its strategy, however, was perhaps less so: it aimed to append post-war Europe and Japan to America’s gleaming new War Economy.

In the East, the New Dealers rewrote the Japanese constitution and oversaw its transformation into a technostructure-with-Japanese-characteristics. In Europe, they guided the foundation of the European Union as a cartel of heavy industry centred upon German manufacturing, adapting their technostructure blueprint to European circumstances. To make this happen, they had to rewrite the German constitution and, with promises of handing administrative and political oversight over to Paris, thwart the French ambition to de-industrialise Germany. This dazzling design, America’s Global Plan to remake Europe and Japan in the imagine of its technostructure, led to capitalism’s Golden Age. From the war’s end until 1971, America, Europe and Japan enjoyed low unemployment, low inflation, high growth and massively diminished inequality.

As long as America was the major surplus nation, Bretton Woods was safe as houses. And that’s why, by the late 1960s, the Bretton Woods system was dead in the water. The reason? Three developments which caused America to lose its trade surplus and become a chronically deficit economy. The first was the escalating Vietnam War which forced the US government to spend billions in South East Asia on supplies and services for its military. The second was President Lyndon Johnson’s attempt to make amends for the ill effects of conscription on working-class America, its black communities in particular. His valiant but expensive Great Society programme substantially reduced poverty but, at once, sucked lots of imported goods from Japan and Europe into the United States. Lastly, Japan’s and Germany’s factories surpassed America’s both in terms of quality and efficiency, partly due to the support successive US governments had extended to Japan’s and Germany’s manufacturing sectors – the car industry being an obvious example. Never too slow to accept reality, Washington killed off its finest creation: on 15 August 1971 President Nixon announced the ejection of Europe and Japan from the dollar zone. Bretton Woods was dead.

How had these mad numbers come about? What drove them? One way to answer this question is technical: it involves a description of financial instruments such as options (or derivatives) – the weapons of potential mass financial destruction, as Warren Buffett called them – which were the occasion, if not the cause, of the immense financial bubble that burst in the calamity of 2008.[4] These instruments, known as options, had been available under Bretton Woods, but it was only once Bretton Woods had died that bankers, liberated from their New Deal chains, were allowed to bet on the stock exchange, first with other people’s money and, later, with money – effectively conjured from thin air – lent in astronomical sums by the banks to…themselves. Conjured from thin air? To be clear, yes. Most people think that banks take Jill’s savings and lend them to Jack. That’s not what banks do. When a bank lends Jack money, it does not go into its vault to check it has enough cash to back the loan. If it believes Jack will return the loan, plus the agreed interest, all the bank needs to do is add to Jack’s account the number of dollars it lends him. Nothing more than a typewriter or, today, a few keystrokes on a keyboard are necessary. Now, if the Jacks of the world use their loans judiciously to make enough money to repay the loans plus the interest, all is well. But it is in the nature of banks to accommodate too many Jacks eager to borrow increasing amounts to keep paying each other more...

This was the strategy that lay behind the Nixon Shock of 15 August 1971. And it worked wonders, at least for those who triggered it. You see, the writing had been on the wall for Bretton Woods since the mid to late 1960s. As America’s trade surplus began turning into a deficit, financiers began anticipating its demise. They knew that, sooner or later, the dollar–gold exchange rate, artificially set in 1944 at a fixed $35 per ounce, would depreciate. At that point, their stash of dollars would buy less gold. Naturally, they began eagerly exchanging their dollars for American gold before that happened. Had this continued, the United States would have run out of gold. The Nixon Shock stopped the rot. The dollar depreciated fast vis-à-vis gold, as anticipated, but curiously that was the moment the dollar regained its mojo. How? Shortly after the dollar was decoupled from gold, Europe’s currencies were decoupled from the dollar. Once they lost their fixed exchange with the dollar, the dollar value of European and Japanese money began fluctuating wildly, like driftwood in a tempestuous ocean. The dollar became the only safe harbour, courtesy of its exorbitant privilege: namely, that if any French, Japanese or Indonesian company, indeed anyone, wanted to import oil, copper, steel or even just space on a freight ship, they had to pay in dollars.

For Wall Street to exercise fully its magnetic powers over foreign capital, profit margins in the United States had to catch up with profit rates in Germany and Japan. A quick and dirty way to do this was to suppress American wages: cheaper labour makes for lower costs makes for larger margins. It is no coincidence that, to this day, American working-class earnings languish, on average, below their 1974 level. It is also no coincidence that union busting became a thing in the 1970s, culminating in Ronald Reagan’s dismissal of every single unionised air traffic controller – a move emulated by Margaret Thatcher in Britain who pulverised whole industries in order to eliminate the trades unions that inhabited them. And faced with a Minotaur sucking most of the world’s capital into America, the European ruling classes reckoned they had no alternative but to do the same. Reagan had set the pace, Thatcher had shown the way. But it was in Germany, and later across continental Europe, that the new class war – you might call it universal austerity – was waged most effectively. A new era had begun. The post-war détente between capital and labour was now in its death throes. The final straw came in 1991, with the demise of the Soviet Union. Thereafter Russia and more importantly China voluntarily inducted themselves into globalised capitalism. Two billion low-waged workers entered the Minotaur’s realm. Western wages stagnated further. Profits swelled. The torrent of capital rushing to...

Young rebels who rejected the technostructure’s audacity to plan everything, their desires included, were not alone in feeling discontented. The 1950s and 60s had been a nightmare for true believers in capitalism as a natural system of spontaneous order. Wherever they turned their eyes, they saw centralised planning – not the splendid operation of freewheeling market forces that no planner, however well meaning, should be able to second-guess. Even if innocent of the way the technostructure was manufacturing desires and fixing prices, they could not help but notice the long hand of the state directing investment funds, preventing bankers from moving money, and fixing the dollar value of every other currency – including our drachma. To their free-marketeer eyes, the Global Plan was too close to Soviet planning for comfort. The West was, in short, psychologically prepared for a rupture like the Nixon Shock. Anti-capitalist youths and free-market zealots were both looking for a chance to bring down what they saw as a dying system.

We know this from the horse’s mouth, the former New Dealer who was at the centre of the 1971 Nixon Shock and who, between 1979 and 1987, chaired America’s central bank, the Fed. In a 1978 speech at Warwick University, Paul Volcker explained succinctly and cynically what they were up to: ‘[A] controlled disintegration in the world economy is a legitimate objective for the 1980s.’

Where once stood the most stable global capitalist system ever, folks like Volcker were enthusiastically erecting the most unstable international system possible, founded on ceaselessly ballooning deficits, debts and gambles. Their controlled disintegration of Bretton Woods would soon complete the new global system. Most people refer to it as Globalisation or Financialisation.

Computers allowed financiers to complicate their gambles immensely. Instead of a simple option-to-sell boring old shares to Jill, Jack could now buy much snazzier options called derivatives. For example, he could buy a derivative that was in essence an option-to-buy a bundle containing shares in a variety of different companies plus bits of debts owed by homeowners in Kentucky, German corporations, even the Japanese government. As if that were not complex enough, Jack could also buy a derivative amounting to the option-to-buy a bundle of many such…derivatives that some super-computer would create. By the time these derivatives containing other derivatives had come out of the computer, not even the genius financial ‘engineer’ who created them could understand what was in them. Complexity thus became a great excuse not to delve into the derivatives that one bought. It liberated the Jills and the Jacks from the need to explain to themselves why they were buying them. Once computers had guaranteed that no one could possibly understand what these derivatives were made of, everyone wanted to buy them because…everyone was buying them. And as long as everybody was buying, anyone who could borrow huge amounts of money could become a billionaire (and avoid being branded a coward or a party-pooper or a loser by one’s colleagues) simply by purchasing them. For years, that’s exactly what was happening. Until, in 2008, it wasn’t.

Before we delve into capitalism’s final metamorphosis, into what I call technofeudalism, it is perhaps apt to dedicate a few final words to the Global Minotaur – the metaphorical beast standing in for the US-centred global recycling system which, between the late 1970s and 2008, delivered all the props of our present drama: Big Finance, Big Tech, neoliberalism, industrial-scale inequality, not to mention democracies so atrophied that films like Don’t Look Up are necessary to explain humanity’s paralysis in the face of climate catastrophe. So, here comes the briefest of eulogies: the Cretan Minotaur was slain by an Athenian prince, Theseus. Its death ended prehistory and ushered in the classical era of tragedy, history, philosophy. Our era’s Minotaur died less heroically: a victim of cowardly Wall Street bankers whose hubris was rewarded with massive state bailouts that did nothing to resuscitate the Minotaur. For while the American deficit returned with a vengeance a year after the crash of 2008 and the subsequent bankers’ bailouts, it never restored the beast’s capacity to recycle the world’s profits. True, the rest of the world continued to send most of its profits to Wall Street. But the recycling mechanism was broken: only a small fraction of the monies rushing to Wall Street returned in the form of tangible investments into factories, technologies, agriculture. Most of the world’s money rushed to Wall Street to stay in Wall Street. There, it sloshed around doing nothi...

Our Minotaur will, in the end, be remembered as a sad, boisterous beast whose thirty-year reign created, and then destroyed, the illusion that capitalism can be stable, greed a virtue and finance productive. By dying, it forced capitalism into its last and fatal metamorphosis, birthing a system where power is in the hands of even fewer individuals, who own a brave new type of capital.

Exclusive ownership of irrigated fertile land is a classic source of power. More than 3,000 years ago, as you once explained, the Dorians swooped down from the north upon the Greek peninsula. Because they had iron weapons that the Mycenaeans lacked, they took over the good land. Once they had it, they acquired power over those who had lost it. And until fairly recently, it was that precise combination – of land and sophisticated weaponry – that decided who did what to whom; who had power, and who had to obey. This was feudalism. Then something strange happened: power decoupled from land and vested itself, to a previously unparalleled degree, in owners of something called capital instead.

By restricting access to land, the enclosures helped capital to transcend its original productivity-enhancing role and to grow exponentially in commanding power. Before long, the worldwide commodification of previously common lands had enabled capital to achieve supremacy in all corners of the globe. With the magnification of capital’s commanding power over labour, capital’s owners amassed great wealth. As their wealth accumulated, their social power proliferated. They graduated from being employers to agenda setters wherever big decisions were being made. Soon, capitalists could boss everyone around, including the landed gentry – even the royals. Indeed, the only way the aristocracy managed to hang on in some countries was by joining the capitalist class or, at least, deferring to it.

As we chat on the phone, or move and do things about the house, Alexa listens, observes and learns our preferences and habits. As it gets to know us, it develops an uncanny capacity to surprise us with good recommendations and intriguing ideas. Before we realise it, the system hiding behind Alexa has acquired substantial powers to curate our reality in order to guide our choices – effectively to command us. How is this different to what Draper did? Hugely, is the answer. Don had a talent to invent ways to instil manufactured desires in us. But it was a one-way street. Through the medium of television, or large billboards in cities and along highways, Don would implant longings into our subconscious. That was that. However, with cloud-based Alexa-like devices in Don’s place, we find ourselves in a permanently active two-way street between our soul and the cloud-based system hiding behind Alexa’s soothing voice. In the words of the philosophers, Alexa ensnares us in the most dialectical of infinite regresses.

I speculated about what would have happened had James Watt invented the steam engine in ancient Egypt: The most he could have expected is that the ruler of Egypt would have been impressed and placed one or more of his engines in his palace, demonstrating to visitors and underlings how ingenious his Empire was. My point was that the reason the steam engine changed the world, rather than ending up a showpiece in some ruler’s landscaped garden, was the epic raid on the common lands that had preceded its invention: the enclosures. The singularity we now call the Great Transformation – the name given by the great theorist Karl Polyani to the birth of the market society over the course of the nineteenth and early twentieth centuries – involved precisely this sequence: first the plunder of the common lands, made possible by brute state violence, and only then Watt’s splendid technological breakthrough.

A strikingly similar sequence gave birth to cloud capital: first, the epic ransacking of the internet commons, made possible by politicians, and then a sequence of spectacular technological inventions – from Sergey Brin’s search engine to the dazzling array of today’s AI applications. In short, in the last two and a half centuries, humanity has had to reckon with two singularities, neither of which required machines to attain sentience. Rather, each required a comprehensive plunder of a commons, a complicit political class, and only then a marvellous technological breakthrough. That’s how the original Age of Capital transpired. And that’s how the Age of Cloud Capital is now dawning.

The early internet was a capitalism-free zone. If anything, it seemed like an homage to Soviet Gosplan – the State Planning Committee whose job was to replace the market mechanism: a centrally designed, state-owned, non-commercial network. At the same time, it featured elements of early liberalism, even tributes to what I call ‘anarcho-syndicalism’: a network without hierarchy, it relied on horizontal decision-making and mutual gift exchange, not market exchanges. What is unimaginable today made perfect sense at the time. America was transitioning from its War Economy to the realities of the Cold War. Even the most ardent free-marketeers understood that planning for a nuclear confrontation with the Soviet Union was too important to be left to market forces. As the nuclear arms race gathered pace, the Pentagon chose centrally to finance the design and construction of a network of decentralised computers. Its single purpose? To work out how to make different silos housing nuclear weapons communicate with each other, and all of them with Washington, without a central hub that a Soviet nuclear bomb could take out in one go. That’s how history’s greatest ever antinomy came about: a US government-built and -owned, non-commercial computer network that lay outside capitalist markets and imperatives but whose purpose was the defence of the capitalist realm.

How different would the internet be without these New Enclosures? Imagine what you could do if you owned your digital identity and could prove who you are without relying on the combination of a bank card and a corporation like Uber or Lyft that processes that card and all your subsequent travel data. In the same way GPS pinpoints where you presently are, you would have the opportunity to broadcast over the internet: ‘My name is George, I am on the corner of Aristotle and Plato Streets, and I am heading for the airport. Anyone wishing to bid for my ride?’ Within seconds you would receive a multitude of offers from people or outfits licensed to carry passengers, including sage advice from the municipal transit authority like ‘Why not take the metro, located three minutes’ walk from where you are, and much faster than any car can meander its way through traffic?’ Alas, you can’t do this.

It is in our human nature to be vulnerable to anyone, or anything, that seems to understand us better than we do ourselves. In fact, we may be even more vulnerable to algorithms we know to be mindless than we are to real persons, because we are more easily lulled into a false sense of security. We pretend Alexa is a person because we are not used to conversing with machines – the experience would otherwise be embarrassing or uncanny. But the fact that we know Alexa is not a person is how we come to terms with its intense knowledge of us, which would otherwise be off puttingly creepy or scary. At that precise moment, when we relate to it as if it were a person while we know it is not, we are at our most vulnerable – ready to fall into the trap of thinking of Alexa as our own Pandora-like mechanical serf. 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.

Here is a glimpse of what makes cloud capital so fundamentally new, different and scary: capital has hitherto been reproduced within some labour market – within the factory, the office, the warehouse. Aided by machines, it was waged workers who produced the stuff that was sold to generate profits, which in turn financed their wages and the production of more machines – that’s how capital accumulated and reproduced. 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!

As they struggle to keep up with computer devices that track and dictate the pace of their every move, Amazon warehouse workers would recognise themselves instantly in Charlie Chaplin’s Modern Times (1936) – one of your favourite movies. Forced to inspect and scan 1,800 Amazon packages an hour is an uncannily similar fate to that of Chaplin’s character on the industrial factory line, who is trying to keep pace with a suddenly accelerating conveyor belt, and who is ultimately driven mad and falls into the vast machine whose cog he could never truly become.

When Juan Espinoza, a picker at a Staten Island Amazon warehouse, opined that ‘Mr Bezos couldn’t do a full shift at that place as an undercover boss,’ anyone familiar with Fritz Lang’s even earlier film Metropolis (1927) would have been reminded of the scene in which Freder, the autocrat’s son, inadvertently descends into his father’s Machine Halls, where workers are engaged in a desperate struggle to keep the massive hands of huge clock-like machines aligned. Shocked at what he finds, Freder holds his head in horror at the sight of machines marching the workers at an inhuman tempo, mechanising them ruthlessly.

Take Amazon’s Mechanical Turk, which the company describes as a ‘crowdsourcing marketplace that makes it easier for individuals and businesses to outsource their processes and jobs to a distributed workforce who can perform these tasks virtually’. But let us call it what it is: a cloud-based sweatshop where workers are paid piece rates to work virtually. Nothing is happening there that Karl Marx had not fully analysed in the twenty-first chapter of the first volume of his Capital, where he stated: ‘Piece-wages become…the most fruitful source of reductions in wages and of frauds committed by the capitalists.’ Precarious piecework, Marx added, is ‘the most appropriate to the capitalist mode of production’. Hear, hear!

Algorithms have already replaced bosses in the transport, deliveries and warehousing sectors. And workers forced to work for these algorithms find themselves in a modernist nightmare: some non-corporeal entity that not only lacks but is actually incapable of human empathy allocates them work at a rate of its choosing before monitoring their response times. Released from any of the qualms even inhumane humans harbour, the algo-bosses are at liberty to reduce the workers’ paid hours, to increase their tempo to insanity-inducing levels, or to turn them out onto the street for ‘inefficiency’. At that point, the workers sacked by the algorithm are thrown into a Kafkaesque spiral, unable to speak to a human capable of explaining why they were fired.

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.

‘If it ain’t a capitalist market, what in the sweet Lord’s name are we stepping into when we enter amazon.com?’ a student at the University of Texas asked me a few years ago. ‘A type of digital fief,’ I replied instinctively. ‘A post-capitalist one, whose historical roots remain in feudal Europe but whose integrity is maintained today by a futuristic, dystopian type of cloud-based capital.’ Since then, I have come to believe that it was a reasonably accurate answer to a hard question.

Amazon was just the start. Alibaba applied the same techniques to create a similar cloud fief in China. Copycat ecommerce platforms, offering variations on the Amazon theme, are springing up everywhere, in the Global South as well as the Global North. More significantly, other industrial sectors are turning into cloud fiefs too. Take for example Tesla, Elon Musk’s successful electric car company. One reason financiers value it so much higher than Ford or Toyota is that its cars’ every circuit is wired into cloud capital. Besides giving Tesla the power to switch off one of its cars remotely, if for instance the driver fails to service it as the company wishes, merely by driving around Tesla owners are uploading in real time information (including what music they are listening to!) that enriches the company’s cloud capital. They may not think of themselves as cloud serfs but, alas, that’s precisely what the proud owners of new, wonderfully aerodynamically gleaming Teslas are. It took mind-bending scientific breakthroughs, fantastical-sounding neural networks and imagination-defying AI programs to accomplish what? To turn workers toiling in warehouses, driving cabs and delivering food into cloud proles. To create a world where markets are increasingly replaced by cloud fiefs. To force businesses into the role of vassals. And to turn all of us into cloud serfs, glued to our smartphones and tablets, eagerly producing the cloud capital that keeps our new overlords on cloud nine.

Previously, to exercise capital’s power to command and make other humans work faster and consume more, capitalists required two types of professionals: managers and marketeers. Especially under the auspices of the post-war technostructure, these two service professions achieved greater prominence even than bankers and insurance brokers. Gleaming new business schools were set up to initiate MBA students in the dark arts of quick-marching a workforce towards explosive labour productivity. Advertising and marketing departments nurtured a generation of Don Drapers. Then, cloud capital arrived. At one fell swoop it automated both roles. The exercise of capital’s power to command workers and consumers alike was handed over to the algos. This was a far more revolutionary step than replacing autoworkers with industrial robots. After all, industrial robots simply do what automation has been doing since before the Luddites: making proletarians redundant, or more miserable, or both. No, the truly historic disruption was to automate capital’s power to command people outside the factory, the shop or the office – to turn all of us, cloud proles and everyone else, into cloud serfs in the direct (unremunerated) service of cloud capital, unmediated by any market.

Big Tech was having an even more fabulous pandemic. While the US economy shed 30 million jobs in a single month, Amazon bucked the trend, appearing to a swathe of Americans as a hybrid of the Red Cross, delivering essential parcels to confined citizens, and Roosevelt’s New Deal, hiring 100,000 extra staff and paying them a couple of extra dollars an hour to boot. True, Big Tech did invest the central bank cash, and it did create new jobs – but the jobs it created were those of cloud proles and the investment was in building up its cloud capital. 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. And if we want a milestone with which to mark its formal arrival, that summer’s morning will do nicely. But as I have hinted already, the story of the rise of cloud capital on the back of state money actually begins earlier than this, for it was in the wake of the crash of 2008 that state money began to be printed en masse by the world’s central banks and started to have its strange and counter-intuitive effect on profit.

The technological breakthroughs of the Second Industrial Revolution – the electricity grids, the telegraph, later the telephone, highways packed with automobiles, television networks – these expansive networks of phenomenal machinery may have spawned Big Business, Big Finance, the Great Depression, the War Economy, Bretton Woods, the post-war technostructure, the European Union and built the modern world that your generation and mine took for granted, but they gave rise to neither a new type of capital nor a new class who could challenge the capitalists for dominance. But the technologies that spawned cloud capital have proved more revolutionary than any of their predecessors. Through them, 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.[3] As a result, its owners – the cloudalists – have acquired the ability to do that which the Edisons, the Westinghouses and the Fords never could: to turn themselves into a revolutionary class actively displacing the capitalists from the top of society’s pecking order.

The pressing question is: how did the cloudalists finance all this? The early industrialists funded their factories, steamships and canals with the blood and sweat of African slave labour and loot from American and South Asian lands and peoples. Later, the Edisons, the Westinghouses and the Fords used monies conjured from thin air by private bankers who morphed into Big Finance in the process. The cloudalists did something subtler and more impressive: they helped themselves to the rivers of cash that were being printed by the central banks of developed capitalist states.

After 2008, and especially during the pandemic, a strange thing happened. 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.[5] This was a reflection of the fact that austerity was nullifying business investment and so business people’s demand for money was pitiful. But surely, if the central banks keep reducing interest rates, there would eventually come a point where money was sufficiently cheap that borrowing and investment would pick up again? Not so. In the case of potatoes, microchips or cars, falling prices generally cure an oversupply problem (i.e. where supply outweighs demand) in exactly this way: bargain-hunters swoop in while producers cut output, and thus the price ‘correction’ eliminates the excess supply. But when it comes to money, something different happens. When its price – the interest rate – drops fast, capitalists panic. Instead of rejoicing that they can now borrow more cheaply, they think: ‘Sure, it is a good thing that I can borrow for next to nothing. But for the central bank to allow interest rates to drop so much, things must be looking grim! I won’t invest even if they hand me the money.’ That’s the reason investment refused to recover, even after central bankers cut money’s official price to almost zero.

The crash of 1929 and the Great Depression took the shine off profit-driven markets. But throughout each of capitalism’s subsequent metamorphoses – during the New Deal, the War Economy, the era of Bretton Woods and particularly with the rise of the technostructure and the Minotaur – profit remained its driving force. Coupled with debt, profit was the power that turned the cogs and wheels of every form of capitalism the planet had seen. 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.

As conglomerates and governments became reliant on a diet of interest-free loans, with companies in developing countries borrowing more than their governments, in excess of $2 trillion by the end of the 2010s, the central bankers faced an ugly dilemma: either switch off the money taps, which would mean blowing up financialised capitalism, having printed all that money to save it; or continue to pump money into the system, hoping for a miracle to intervene but, in reality, facilitating the replacement of profit as capitalism’s motivating power and lubricant. Unsurprisingly, they chose the latter. The central banks’ anguish was the cloudalists’ delight. It was in this period that intrepid and talented entrepreneurs like Jeff Bezos and Elon Musk were able to build up their super-expensive, ultra-powerful cloud capital without needing to do any of the three things that capitalists traditionally had to do to expand: borrow money from some bank, sell large portions of their business to others, or generate large profits to pay for new capital stock. Why suffer any of this when central bank money was flowing freely? And so between 2010 and 2021, the paper wealth of these two men – meaning the total price of their shares – rose from less than $10,000 million to around $200,000 billion apiece.

In 2021 Goldman Sachs, one of Wall Street’s least likeable banks, stunned the financial world by publishing a ‘Non-Profitable Technology Index’, which perfectly demonstrates capitalism’s emancipation from profits: between 2017 and the beginning of the pandemic, loss-making cloudalist companies saw their share value rise by 200 per cent. By the middle of the pandemic, their value had exploded to 500 per cent their 2017 level. During 2020, Amazon’s best year since its inception, when its pandemic-fuelled sales went through the roof, Bezos’s company booked sales worth €44 billion at its global headquarters in Ireland but paid exactly zero corporate tax because it posted not a cent of profits. Similarly with Tesla: even though its profit margins hovered just above zero, Tesla’s share price soared from around $90 at the beginning of 2020 to over $700 at year’s end. Using their appreciating shares as collateral, the cloudalists mopped up many of the billions sloshing around within the financial system. With them, they paid for server farms, fibre optic cables, artificial intelligence laboratories, gargantuan warehouses, software developers, top-notch engineers, promising start-ups and all the rest. In an environment where profit had become optional, the cloudalists seized upon the central bank money to build a new empire.

Socialism for the financiers gave rise to another cluster of financial uber-lords to rival the cloudalists – three US companies with powers exceeding those of private equity and all terrestrial capitalists put together: BlackRock, Vanguard and State Street. These three firms, the Big Three as they are known in financial circles, effectively own American capitalism. No, I am not exaggerating. Most people have not heard of them but they have heard of the companies the Big Three own, which include America’s major airlines (American, Delta, United Continental), much of Wall Street (JPMorgan Chase, Wells Fargo, Bank of America, Citigroup) and car makers such as Ford and General Motors. Together, the Big Three are the largest single shareholder in almost 90 per cent of firms listed in the New York Stock Exchange, including Apple, Microsoft, ExxonMobil, General Electric and Coca-Cola. As for the dollar value of the Big Three’s shares, it has too many zeros to mean much. At the time of writing, BlackRock manages nearly $10 trillion in investments, Vanguard $8 trillion and State Street $4 trillion. To make sense of these numbers: they are almost exactly the same as the US national income; or the sum of the national incomes of China and Japan; or the sum of the total income of the eurozone, the UK, Australia, Canada and Switzerland.

As I write, war in Ukraine has turbocharged the mild inflation that came in the wake of the pandemic, thus causing central banks to cease minting new monies. If I am right that it was central bank cash that funded the cloudalists, will cloudalist power recede as the rivers of central bank monies run dry? Could the good old capitalist conglomerates, relying on terrestrial capital, make a comeback? The second question, which I can imagine you putting to me forcefully, is more about language. Is life under the cloudalists’ reign fundamentally different from living under capitalism? Are the cloudalists really so different from the capitalists that we need a newfangled term – technofeudalism – for the system we live in today? Why not just call it hyper-capitalism or platform capitalism? These are the questions I address in the next chapter.

Suppose we were living in the 1770s, as the first steam engines began driving the water pumps that kept the mines dry and turning the wheels of William Blake’s ‘dark satanic mills’. As their chimneys spewed thick smoke along the River Clyde, in Birmingham and around Manchester, we would not be wrong to speak of an emergent ‘industrial feudalism’ or ‘market feudalism’. Technically, we would be correct. In the 1770s, and for at least another century, wherever one looked one saw feudalism. Feudal lords dominated rural areas, owned the freehold titles of most city blocks, commanded armies and navies, and presided over parliamentary committees and government bodies. Even in the 1840s, as Marx and Engels were writing their manifesto in response to the worldwide effects of the capitalist class, most production was still taking place under the auspices of the old feudalist class, the landed gentry. Land ownership remained the main source of political authority and rent continued to be more powerful than profit, especially in the aftermath of the Napoleonic Wars when landlords regained the upper hand over capitalists by banning grain imports with their Corn Laws.

Capitalism is dying indirectly of its own hand, a deserving victim of its greatest creation: not the proletariat, but the cloudalists. And little by little, capitalism’s two great pillars – profit and markets – are being replaced. Alas, instead of a post-capitalist system that finally heals human divisions and ends exploitation of people and planet, the one that is taking shape deepens and universalises exploitation in ways that were hitherto unimaginable, except perhaps by science-fiction writers. Thinking back, Dad, why did we ever allow ourselves to be lured into the soothing delusion that the death of something bad would necessarily deliver something better? Rosa Luxemburg’s devastating question ‘Socialism or barbarism?’[3] was not rhetorical. Its answer could easily be barbarism – or extinction.

Arithmetically, there is no difference: both rent and profit amount to money left over once costs are paid for. The difference is subtler, qualitative, almost abstract: profit is vulnerable to market competition, rent is not. The reason is their different origins. Rent flows from privileged access to things in fixed supply, like fertile soil or land containing fossil fuels; you cannot produce more of these resources, however much money you might invest in them. Profit, in contrast, flows into the pockets of entrepreneurial people who have invested in things that would not have otherwise existed – things like Edison’s light bulb or Jobs’s iPhone. It is this fact – that these commodities were invented and created and so can be invented and created again but better by someone else – that renders profit vulnerable to competition. When Sony invented the Walkman, the first mobile and personal hi-fi, it raked in substantial profits. Then competition from imitators whittled Sony’s profits away until, eventually, Apple rode in with its iPod to dominate the market. In contrast, market competition is the rentier’s friend. If Jack owns a building in a neighbourhood that is being gentrified as a result of what others do, Jack’s rents will increase even if he does nothing – he, literally, gets wealthier in his sleep. The more enterprising Jack’s neighbours are, and the more they invest in the area, the larger his rents.

The stroke of genius that unlocked cloud rent for Steve Jobs was his radical idea to invite ‘third-party developers’ to use free Apple software with which to produce applications for sale via the Apple Store. In one fell swoop Apple had created an army of unwaged labourers and vassal capitalists whose hard work yielded a host of capabilities available exclusively to iPhone owners in the form of thousands of desirable apps that Apple engineers could never have produced themselves in such variety or volume. Suddenly, an iPhone was much more than a desirable phone. It was a ticket to a vast vista of pleasures and abilities that no other smartphone company could provide. Even if an Apple competitor, say Nokia, Sony or Blackberry, had managed to respond quickly by manufacturing a smarter, faster, cheaper and more beautiful phone, it would not matter: only an iPhone opened the gates to the Apple Store. Why didn’t Nokia, Sony or Blackberry build their own store? Because it was too late: with so many people signed up to Apple, the thousands of third-party developers were not going to spend their time and effort developing apps for other platforms. To be competitive, Apple’s unwaged third-party developers, mainly partnerships or small capitalist firms, had no choice but to operate via the Apple Store. The price? A 30 per cent ground rent, paid to Apple on all their revenues. Thus a vassal capitalist class grew from the fertile soil of the first cloud fief: the Apple Store.

Long before the iPhone arrived, Google’s search engine had become the centrepiece of a cloud empire which included Gmail and YouTube, and which would later include Google Drive, Google Maps and a host of other online services. Keen to exploit its already dominant cloud capital, Google followed a different strategy to Apple’s. Instead of manufacturing a handset in competition with the iPhone, it developed Android – an operating system that could be installed for free on the smartphone of any manufacturer, including Sony, Blackberry and Nokia, who chose to use it. The idea was that if enough of Apple’s competitors installed it on their phones, the pool of smartphones operating on the Android software would be large enough to lure third-party developers to produce apps not only for the Apple Store but also for a new store running on Android software. That’s how Google created Google Play, the only serious alternative to the Apple Store.