In his latest book, Technofeudalism, the maverick academic-turned unlikely Minister of Finance-turned enfant terrible of European politics Yanis Varoufakis argues that capitalism has ended. It has not, however, been destroyed by the workers of the world – it has been killed by capital itself. The idea, in a nutshell, is the following. As a response to the combined effect of the privatisation of the internet on the one hand, and the nearly no-strings-attached way with which states have injected eye-wateringly large sums of money into banks and large businesses after the 2008 financial crisis on the other, rent has supplanted profit as the main driver of the global economy. As Varoufakis put it, “Insane sums of money that were supposed to re-float our economies in the wake of the financial crisis and the pandemic have ended up supercharging big tech’s hold over every aspect of the economy.” Against the backdrop of a privatised digital world, post-2008 and then post-2020 public investments into the economy have not stimulated growth, because they have not triggered increased investments. Instead, they have enabled “cloudalists” to become digital rentiers, capable of exercising passive control over workers; over users who de facto work for them for free (by sharing and generating precious data); and crucially, over old-school capitalists.
The reference to feudalism is quite literal: capitalists, according to Varoufakis, are still doing very well, but they are no longer running the show. They have turned into (very well-off) vassals, who have to pay their dues to techno-feudal lords (Amazon; Google; Apple; Meta) – say, in order to selling and/or advertise on such platforms. The reason why this is the case is that rent-based capital has, just like under pre-industrial feudalism, supplanted profit-based capital as the driver of the economy. The fundamental system is no longer one where the capitalist extracts value from workers to generate as much profit as possible and be competitive in the market; re-invests in new machineries, technologies, etc., in order to make profit extraction ever more efficient; and thereby generates growth and innovation. It has rather become one where big tech bosses act like feudal lords – rentiers who own digital, rather than natural, “land” and can extract value (albeit in slightly different ways) from everyone who want or need to use their platforms. Like medieval lords, their power and wealth comes from sheer rent – for which, in a certain sense, they do not need to “do” anything.
Varoufakis is no naïve (not on all fronts, at least) so he qualifies this claim in several ways. Most importantly, people like Elon Musk and Zuckerberg still project a businessman-like image of hyper-activism, innovativeness, insatiability, and creativity. They appear to be constantly after “the next big thing.” This is not just for show: of course they compete, and of course competition requires coming up with new ideas. But many feudal lords were not lazy, either: competing for power and dominance is hard work – yet, it is still different from the competition based on profit and market dynamics which constitutes the backbone of capitalism.
The most interesting idea in the book is how the metaphor of feudalism (although he doesn’t see it as a metaphor at all, of course) enables us to see the connection between two particularly prominent phenomena of the last couple of decades. On the one hand, the incredible rise in inequality and the idea that we are ever more under the power of an ever richer, ever more dominant few. On the other, the common perception that we are more and more isolated from one another – that “the algorithm” and echo chambers send down distorted and distorting rabbit holes. Varoufakis suggests that the rent-based digital power of big tech is the connection: these new overlords are both the new rent-based aristocracy – thus explaining the rise in inequality – and the atomisation and customisation of our experiences on their platform is the result of their own special brand of the “Divide et Impera” strategy:
“Imagine the following scene (…). You are beamed into a town full of people going about their business, trading in gadgets, clothes, shoes, books, songs, games and movies. At first, everything looks normal. Then you begin to notice something odd. It turns out that all the shops, indeed every building, belong to a chap called Jeff. He may not own the factories that produce the stuff sold in his shops, but he owns an algorithm that takes a cut for each sale and he gets to decide what can be sold and what cannot.
(…) Except that isn’t all. Jeff (…) also owns the dirt you walk on, the bench you sit on, even the air you breathe. In fact, in this weird town everything you see (and don’t see) is regulated by Jeff’s algorithm: you and I may be walking next to each other, our eyes trained in the same direction, but the view provided to us by the algorithm is entirely bespoke, carefully curated according to Jeff’s priorities. Everyone navigating their way around Amazon – except Jeff – is wandering in algorithmically constructed isolation.
This is no market town. It is not even some form of hypercapitalist digital market. Even the ugliest of markets are meeting places where people can interact and exchange information reasonably freely. In fact, it’s even worse than a totally monopolised market – there, at least, the buyers can talk to each other. Not so in Jeff’s realm, where everything and everyone is subject not to the disinterested invisible hand of the market but to an algorithm that works for Jeff’s bottom line and dances exclusively to his tune.” (The longer version of this description can be read here)
Some of Varoufakis’s critics on the left find that this reading idealises the market, and encourages a nostalgic view of market competition as something good, dynamic, egalitarian even. Unlike classical liberals, however, those on the traditional left have always seen markets as the very basis of capitalist class domination. I understand this concern – but I must say I don’t really care much about whether Varoufakis is right or whether, for better or worse, we are still living under capitalism (see also another similar line here).
I find the insight that we no longer live in a common market – which of course relies on a set of intuitions that have been around for a while and have been hinted at by many, but which has never been spelled out quite as clearly – uniquely valuable regardless: it’s this specific opacity that we have we fight against, because we operate in a social world where we can no longer even rely on having the same benchmarks, the same reality in front of us. Depending on how we use the digital platforms of the cloud-based overlords, we end up having a different perceptions of…well, potentially everything. Against this background, the individualistic exhortation to “pierce our bubble” and try to get out of our echo chambers is just as futile as the idea that climate change will be solved by me learning to recycle a little bit better. The problem is systemic: this is the special way in which cloudalists consolidate their dominance.
This might be the end of capitalism; it’s transformation into something even more sinister; or simply a new brand of global market economy. Maybe Varoufakis’s technofeudalism is yet another seriously mistaken prediction of capitalism’s death. Yet the idea that fighting it requires grappling with how to escape collectively from “carefully curated isolation” remains a crucial insight. If only we knew how.