Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

Social democrats were able to make a difference during a time when power was vested in old-fashioned industrial capital. They acted as referees between organised labour and the captains of manufacturing industry, metaphorically (and occasionally literally) sitting them around a table, forcing them to compromise. The result was, on the one hand, improved wages and conditions for the workers and, on the other hand, the diversion of a chunk of industry’s profits to pensions, hospitals, schools, unemployment insurance and the arts. But as power shifted from industry to finance after the death of Bretton Woods in 1971, European social democrats and American Democrats alike were lured into a Faustian bargain with the bankers of Wall Street, the City of London, Frankfurt and Paris. The bargain was crude and simple: social democrats in government freed bankers from the shackles of regulation: ‘Go crazy! Regulate yourselves,’ they told them. In return, financiers agreed to hand over the crumbs from their substantial table, in the form of a small portion of their gargantuan gains from rabid financialisation, to fund the welfare state.