Yanis Varoufakis, the distinguished economist and former Greek finance minister, coined the term techno-feudalism. An incorrigible Marxian and a contrarian, Varoufakis had challenged the stringent austerity proposals by the troika—the European Commission, European Central Bank and IMF—for Greece’s debt default.
His book, Techno-Feudalism: What Killed Capitalism, published in 2017, stirred up controversy not only among high priests of capitalism but also among Marxist ideologues. For Marxists, proclaiming the death of capitalism is anathema, which leaves them with no mortal enemy in bourgeois to wage an unending war of liberation. It also means the absolute futility in organising trade and workers’ unions. The strong undercurrents of social evolution from capitalism to the transformative form of techno-feudalism have gathered momentum, according to Yanis.
Social organisation in the ancient world, from the Pharaonic and Greco-Roman Empires to the great civilisations of China, India and Mesopotamia, was predominantly monarchial or some form of oligarchy and plutocracy. Wealth and power were inextricably linked; often, losing power was tantamount to losing wealth. The first wave of industrialisation in the sixteenth century transferred power from the land-owing nobility and gentry to the capitalist class.
In the eighteenth century, the commodification of land, labour and invested capital paved the way for the capitalist modes of social systems. The owners of machinery capital, steamships, steam engines, electricity and telephone, who assumed risks and controlled the labour force, quickly became the new lords of the present, much more powerful and ruthless than feudal masters of the past.
Karl Marx and Fredrick Engels, in their book, The Communist Manifesto, eulogised the virtues of capitalism in the first three pages. The Manifesto could also be regarded as a brochure for globalisation, where the bourgeois effectively dismantles the Chinese walls of superstitions with the advent of technology and employment of the means of production. Rapid urbanisation following the Industrial Revolution, where the supply of labour outstripped demand, led to the mushrooming of the “Dark Satanic Mills” of exploitation.
Workers lived in squalid conditions with appalling wages and gross human rights violations. In response, the first libertarian movements, the first trade unionists, sought to truly emancipate the proletariat from the clutches of oppression of the bourgeoisie. The internal contradictions of capitalism and the friction between capital and labour engendered communism worldwide, which sought to free the working class from the tyranny of the state.
Though Marx was never a ‘statist,’ communist regimes didn’t eschew the domineering state control and operated as bourgeoisie regimes in disguise. The oppression, the Soviet Gulags, the Stalinist Purges, the Agrarian Utopia of Pol Pot and the Long March of Mao carried within themselves the seeds of destruction through the excesses of their “interpretations of convenience” of Marxism and Communism.
Capitalism required democratic structures and independent secular institutions, and their relationship was more symbiotic. It warranted an educated and healthy workforce, preservation of’ workers’ rights, universal adult suffrage, competition and efficiency to drive free markets and thwart monopolies. Double-entry book-keeping and joint stock corporations conjured up the two pillars of capitalism, namely markets and profits. Milton Friedman and Friedrich Hayek, two of the foremost champions of free market economics, advocated shareholder capitalism as the ultimate purpose and end of businesses and corporations!
Adam Smith, in his book, The Wealth Of Nations, written in 1776, together with ‘The Theory Of Moral Sentiments,’ entrenched capitalism as the predominant social system, extolling its virtues. But, capitalism in its truest form existed only in theory and in the imagination of Adam Smith, citing the baker, the butcher and the brewer analogies.
Capitalism, in practice, has always relegated itself to cronyism and lobbying, which was oligarchic and corrupt. The baker, butcher and brewer were replaced by Ford, GE, Edison and Krupp. With growing influence, wealth and power, JP Morgan, Goldman Sachs, and Lehman Brothers became the poster boys and prime movers of modern capitalism. The epicentre of power and market dominance shifted from product-based companies to finance companies that later engaged in or helped financialisation to digital platforms, such as tech companies.
Just as capitalism was brewing under the ethos of feudalism, so was a new phenomenon taking shape in the consolidated democracies of the Americas and Europe. It goes under the moniker techno-feudalism, exacerbated by the 2008 Great Recession and the adoption of extraordinary monetary policies in the form of quantitative easing. Its undercurrents are strong and have feudal undertones. The west coast of the US in Silicon Valley and the east coast of China, which gave rise to China’s Big Tech, were the geographical torchbearers of this revolution that later spilt over into geopolitical frictions.
Zero bound interest rates post-2008, privatisation of the internet, combined with the availability of cheap capital, provided a conducive environment for the rise of tech behemoths that are essentially cloud-based and algorithm-driven. If markets and profits are the defining paradigms of capitalism, cloud rents and central bank money constitute the economic foundations of Technofuedalism. Profits are market-dependent, but rents are relatively market-agnostic. Puritanical capitalists would argue that it is ‘rentier capitalism’ in operation. However, an astute analysis of cloud-based technology companies like Apple, Amazon, Meta, Tencent, Alibaba, and Alphabet shows that their business models have a striking semblance to the feudal economy of the old.
These software technology companies thrive on network effects; the more subscribers and users are added, the higher their engagement, stickiness to the platform and high switching costs. When Facebook users or X (formerly Twitter) spend inordinate hours on these platforms, they add to these companies’ capital stock by serving paid advertisements or selling subscriptions.
Elon Musk doesn’t pay the users, but users pay for the valuation of his company with their time and user-generated content. Their business model is based on attention capture through engagement algorithms that bombard the user with novelty content every time on the user’s feeds. Yanis Varoufakis refers to these users as ‘cloud serfs’ akin to vassals in the feudalistic system. The lords here are the owners of cloud capital, which he coined as ‘cloudalists.’
Unprecedented in the history of humanity, the vassals or subscribers/users in the 21st century are producing capital, which, in medieval fiefdoms, those vassals produced agricultural commodities by toiling in pastoral lands. The capital stock of ploughs, other tools and instruments were made by artisans hired by the lords. Therefore, the lords and capitalists indirectly produced capital, not the serfs and workers.
A digital trading platform like Amazon or Alibaba charges approximately 30-40 per cent fees or rent per transaction on their platform. And these software infrastructure companies don’t produce goods and services, similar to traditional brick-and-mortar capitalists. The proliferation of smartphones and quantum advancements in telecommunications and broadband technology have enabled these tech leviathans to harness the massive power of network effects. This has translated into hundreds of millions of users whose engagements are, in reality, cash for Jeff Bezos, Jack Ma and Mark Zuckerberg. They are feudal lords who extract fees (rent) per transaction from vassal capitalists who sell their offerings on Amazon or Alibaba, targeting B2B, B2C or C2C market segments within their e-commerce ecosystems. Though Apple has a pipeline business for iPhones, only the high-end value-added activities like design, marketing, and finance are done in-house. The iPhone is also a platform where apps can be listed on its App Store, and it charges a fee of 30 per cent for apps and in-app purchases.
The success of this business model, with the revolutionary power of computing, predicted by Moore’s Law, spawned new companies in this space. Airbnb, Lyft, Uber, GrubHub, Instacart and Zomato are software infrastructure companies that don’t own real estate, taxis or restaurants but capitalise on the power of network effects and digital scaling to extract rents, both from the demand and supply side of the platform for each e-commerce transactions on it.
An antique shop in Mumbai, an Uber driver in Los Angeles, and factories in Dongguan increasingly rely on digital platforms to find customers. By removing a URL, these tech giants have unfettered power to remove any individual or commercial entity from the face of the earth. Community standards and sanitised tech-error are new instruments of control and subservience.
Just as in the nineteenth century, capitalists depended on feudalism for food supply, today, techno-feudalists depend on capitalists to perpetuate a rentier economy. The profits from goods and services produced by capitalists are siphoned off in the form of rents. Yanis calculated the drainage to be in the range of 35-40 per cent of the GDP from the circular flow of income, with the consequences of decreased investments, lower incomes, and depressed demand and spending in the economy.
The multiplier effects from high investments spurring higher income and demand are lost in a tidal wave of rent-seeking machinery of techno-feudalism. ‘Cloud Proles’ are another category of people, synonymous with the cloud proletariat, who work in Amazon fulfilment centres and are constantly monitored by CCTV cameras and algorithms, thus curbing their privacy and autonomy.
Perhaps the most harmful effect of this new feudalism is that the entire cloud capital, comprising software programs, data centres, availability zones, servers, and optic fibres, is designed to act as a behavioural modification machine. They aid in democratic recession by spreading disinformation and discontent through the disappearance of quality jobs and reduced economic investments. This failure of the market economy is perceived as a failure of democratic polity, which causes disillusionment among the masses.
A crafty demagogue with authoritarian instincts captures the opportune moment to disguise as the messiah of the people, ascend to power and later clinically dismantle democracy and establish authoritarian rule. From Vladimir Putin to Erdogan to Giorgia Meloni
and Viktor Orban, such stereotypes abound in the contemporary world. The Great Depression brought the Nazis to power in Germany. The rise of populism has direct correlations to economic inequality and the erosion of hope among the masses.
The world is fast accelerating towards a ‘technological singularity’ that is cloud-based and algorithm-driven. The unsuspecting masses are the ‘cloud serfs,’ the addicts toiling with their time and attention—manipulated by sophisticated and intelligent software programs— to create massive wealth for the neo-techno-feudal lords, who don’t produce anything, unlike classical capitalists. Time is money under capitalism driven by profits, markets and competition. But the new techno-feudalists have successfully diverted that time onto their alluring platforms, creating a generation of doom-scrolling, vulnerable and virtual communities.
The real identities of citizens are now defined by and retrogressed into digital identities on these networks. A ‘Few Good Men’ dictate what we see, like, discuss and debate. Emphasis is on sowing discord rather than accord because discontent and hatred breed higher engagement. The algorithms know us better than our friends and families and even better than we know ourselves.
Amazon’s Alexa, the artificial intelligence-based virtual assistant that lives in the cloud, listens to and trains us to know ourselves better. As a result, it trains itself to know us better.
Little did this generation know that they are caught up in a vicious triad of engagement-behavioural modification-addiction sequences, over which they have lesser and lesser control. Conventional markets are analogous to Hegelian Dialectics of thesis, antithesis and synthesis that, in real life, found expression in understanding one’s true self by being able to deliberate freely for price negotiations and consensually agreeing on terms.
Now, such synthesis is not the result of rational, autonomous thinking but is replaced by algorithms owned by a few powerful individuals. Free choice is subdued. This subjugation has historical precedence, that of feudal lords of the past. The only difference is that if those serfs and vassals in the medieval era were coerced and intimidated into submission, in the 21st century, surrender is voluntary.
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