Technofeudalism: What killed capitalism? Yanis Varoufakis.

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Socialists have been looking forward to the end of capitalism since at least 1848, when Marx and Engels published The Communist Manifesto. But the Manifesto also reminds us that capitalism is all too happy to reinvent itself in times of crisis, appearing in new forms again and again.

Techno-feudalism: a new form of feudalism

Now Yanis Varoufakis, former Greek finance minister and "libertarian Marxist", in his book "Technofeudalism: What Killed Capitalism" convincingly argues that capitalism died a decade ago, turning into a new form of feudalism - technofeudalism.

To understand where Varoufakis's thinking comes from, we need to move beyond the ordinary meaning of the words "capitalism" and "feudalism." Capitalism is not just "a system in which we buy and sell things." It is a system in which capital rules the world: the richest and most powerful people are those who force workers to use their capital (factories, tools, cars, etc.). etc.) to create income in the form of profit.

In contrast, feudal society is organized around people who own things and charge for using them to produce goods and services. In feudal society, the most important form of income is rent. As Varoufakis said, "rents come from privileged access to things that have a limited supply" (land, fossil fuels, etc.). д.). Profit, on the other hand, comes from "entrepreneurial people who have invested in something that would not have happened otherwise. "

This is a subtle but important distinction: "Profits are vulnerable to market competition, rents are not." If you own a coffee shop, every other coffee shop that opens on your block is a competitive threat that can undermine your bottom line. But if you own a building that is leased by a coffee shop owner, every other coffee shop that opens on the block increases the value of the property and the amount of rent you can charge.

The end of capitalism and the rise of rent.

The revolution of capitalism described and damned in the Manifesto was led by people who exalted profit as the heroic income for creating something new in this world and denounced rent as the parasitic depletion of the real producers whose entrepreneurial spirit would enrich us all. "The 'free markets' that Adam Smith glorified were not free of regulation - they were free of rents.

But, Varoufakis said, "rents survived only parasitically on profits." That is, rentiers (people whose income comes from rents) were a small fraction of the economy, a bit suspect and on the periphery of considering how to organize our society. But that all changed in 2008, when the world's central banks weathered the Great Financial Crisis by rescuing not just banks but bankers, funneling trillions of dollars to people whose reckless behavior had brought the world to the brink of economic collapse.

Suddenly, these rich people and their banks had huge increases in wealth without profit. Their businesses lost billions in profits (the value of the goods and services offered by the business far exceeded the amount people spent on those goods and services). But businesses had billions more at the end of the year than they did at the beginning of the year: billions in public money directed to them by central banks.

This was the start of an "everything rally" in which all kinds of assets - real estate, art, stocks, bonds, even digital files with pictures of monkeys - soared in value. Exactly what one would expect from an economy where rents dominate profits.

Rent is not vulnerable to competition, so rentiers don't need to invest their rent in new technologies to maintain income. A capitalist leasing an oil field must invest in new pumps and refining to be competitive with other oil companies. But the rentier of an oil field doesn't have to do anything: either the tenant capitalist will invest more capital and make the field more valuable, or he will be replaced by another capitalist. In any case, the rentier will get more rent.

Techno-feudalism and the power of the rentiers

So when capitalists get richer, they spend some of that money on new capital, but when rentiers get richer, they spend the money on more assets that they can rent out to capitalists. "The 'Everything Rally' made all types of capital more valuable, and companies transitioning to a feudal basis turned around and gave that money to their investors in the form of stock buybacks and dividends, rather than spending the money on research and development, new plants, or new technologies.

The technology companies, however, were the exception. They have invested in "cloud capital" - the servers, communication lines and services that everyone else has to rent to engage in capitalism.

Think of Amazon: Varoufakis compares shopping on Amazon to visiting a busy city center full of stores owned by independent capitalists. However, all these capitalists are subordinate to a feudal lord, Jeff Bezos, who takes 51 cents from every dollar they bring in and has the right to decide what goods they can sell and how those goods should be presented.

Therefore, feudalism does not mean the absence of capitalism, but rather that capitalists are subordinate to feudalists (in Varoufakis' thesis, to "obfechalists"), and to all of us ordinary users of cloud services, from social media users and performers who fill the techno-feudalists' silos with "content" to ordinary users whose information diet is determined by the recommendation systems of the obfechalists.

The challenge to techno-feudalism and cloud revolt

One of the characteristic features of cloudchalism is the ability of a feudal lord to destroy the business of any capitalist vassal at the click of a mouse. If Google excludes your business from the search index, or if Facebook blocks your publication, or if Twitter hides mentions of your product, or if Apple removes your app from the store, then you've lost.

Capitalists "still have the ability to command the labor of the majority who rely on wages," but they are still mere vassals of the obachalists. Even the most energetic capitalist will not be able to avoid paying rents, largely because of "intellectual property," which I define as "laws that allow a company to reach outside its walls and determine the behavior of competitors, critics, and customers. "

Varoufakis points out the ways in which ennoblers can secure their positions: for example, green energy does not depend on land leases (like fossil fuels), but depends on network networks and data protocols that can be clogged with IP, and/or equipment that can be turned into bottlenecks for extracting feudal rents.

In addition, Varoufakis argues that the Oblachalists will not be able to muster the degree of coordination and patience needed to address the climate emergency. Not only will they extract rents from all sources of renewable energy, but they will make them separate from each other in such a way that they become incapable of doing what we need them to do.

Energy is only one of the consequences of technofeudalism that Varoufakis explores in this book: there are also long and fascinating sections on geopolitics, monetary policy, and the new Cold War. Techno-feudalism and the struggle for dominant feudalism is a very useful lens for understanding the technological war between the US and China.

Although Varoufakis lays out a technical and even esoteric argument, he tries very hard to make it accessible. The book is structured as a long open letter to his father, a chemical engineer and left-wing activist who was a political prisoner during the fascist takeover of Greece. The letter format works well, especially if you've read Talking to My Daughter About Economics, Varoufakis' initial economic introduction in the form of a letter to his young daughter.

At the very end of the book, Varoufakis calls for a "cloud revolt to overthrow techno-feudalism." This section is very short and does not contain a lot of detail. This is not a criticism of the book: there are many very good books that consist mostly or entirely of analysis of system problems without detailed programs to solve them.

But as far as I'm concerned, I think there is a way to plan and execute a "cloud uprising"-a way of using laws, technology, reverse-engineering