Technofeudalism: What Killed Capitalism

by Yanis Varoufakis

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.