<nettime> Yanis Varoufakis: What is techno-feudalism?

[Felix Stalder <felix@openflows.com>]

At the end of a long interview on crypto, conducted by Evgeny Mozorov, 
Yanis Varoufakis outline, quite succinctly, his argument for rise of 
"techno-feudalism". It centers around the seeming paradox: "Capital is 
getting stronger but capitalism is dying."

https://the-crypto-syllabus.com/yanis-varoufakis-on-techno-feudalism/


__Q:
ecently, you’ve taken up the theme of ‘techno-feudalism’, pointing out 
that capitalism is no longer what it once was. If I understand your 
thesis correctly, what makes the current system ‘feudal’ is that A) 
markets are no longer key to the making of profits (e.g. the QE 
experience suggests as much), while B) tech platforms have amassed 
immense political power, which is unprecedented in capitalism. Is it a 
correct summary of your argument?  Are there other important dimensions 
to ‘techno-feudalism’ that this summary doesn’t capture?

__A:
The question is this: Is capitalism undergoing one more of its many 
metamorphoses, thus warranting nothing more than a new epithet, e.g. 
rentier capitalism, platform capitalism, hyper-capitalism or 
xxxxx-capitalism? Or are we witnessing a qualitative transformation of 
capitalism into a brand new exploitative mode of production? I think the 
latter. Moreover, this is not just a theoretical issue. If I am right, 
grasping the radicality of this transformation is crucial to opposing 
this new systemic exploitation.

Puzzlement is, of course, an understandable reaction to my claim – which 
needs a great deal of explanation and substantiation. Unable to offer it 
here in full (Nb. I am dedicating my next book to the subject), here is 
a flavour:

Capitalism is everywhere we look. Capital is accumulating rapidly and 
beating labour over the head everywhere and in cruel new ways. So, how 
come I argue that this is no longer capitalism – but, rather, something 
worse and distinct? Let me begin by reminding our readers that back in 
the 1780s, feudalism was everywhere and feudal lords were stronger than 
ever. However, surreptitiously, capitalism was already infecting 
feudalism’s roots and a new ruling class (the bourgeoisie) was in the 
process of taking over.

My claim is that, similarly today, capitalism – like feudalism in the 
1780s – is being usurped by a far more exploitative and very distinct 
new extractive/exploitative system (which I call techno-feudalism), one 
that is arriving complete with a new ruling class.

Critics of my thesis will point out, correctly, that capitalism has 
undergone many transformations – from its early competitive phase, to 
monopoly-oligopoly capitalism (1910–onwards), its Bretton-Woods period 
(during which finance was kept on a leash with capital controls, etc.), 
financialised capitalism (from 1980–onwards) and, more recently, rentier 
capitalism. All these capitalisms were distinct and interestingly 
different from one another. BUT, they were each a version of capitalism.

What makes a system capitalist? The answer is: It is a system driven by 
private profits (Nb. not rents) extracted within markets. (To compare 
and contrast, feudalism was driven by rents extracted outside of 
markets.) Has that changed? I believe so. What has replaced profit on 
the one hand and markets on the other? My answer: Central bank money has 
replaced private profit (as the system’s main fuel and lubricant) and 
digital fiefdoms/platforms have become the realm in which value and 
capital are extracted from the majority by a tiny oligarchy.

Let me explain this in greater detail:

Hypothesis 1: Central bank money replaced private profits as the 
system’s driver

Profitability no longer drives the system-as-a-whole, even though it 
remains the be-all and end-all for individual entrepreneurs. Consider 
what happened in London on August 12, 2020. It was the day markets 
learned that the British economy shrank disastrously – and by far more 
than analysts had expected (more than 20% of national income had been 
lost in the first seven months of 2020). Upon hearing the grim news, 
financiers thought: ‘Great! The Bank of England, panicking, will print 
even more pounds and channel them to us to buy shares. Time to buy shares!’

This is just one of countless manifestations of a new global reality: In 
the United States and all over the West, central banks print money that 
financiers lend to corporations, which then use it to buy back their 
shares – whose prices are thus decoupled from profits. The new barons, 
as a result, expand their fiefs, courtesy of state money, even if they 
never earn a dime of profit! Moreover, they dictate terms on the 
supposed Sovereign – the central banks that keep them ‘liquid’. While 
the Fed, for example, prides itself over its power and independence, it 
is today utterly powerless to stop that which it started in 2008: 
printing money on behalf of bankers and corporates. Even if the Fed 
suspects that, in keeping the corporate barons liquid, it is 
precipitating inflation, it knows that ending the money printing will 
bring the house down. The terror of causing a bad debt and bankruptcy 
avalanche makes the Fed a hostage to its own decision to print and 
ensures that it will continue printing to keep the barons liquid. This 
has never happened before. Powerful central banks, which today keep the 
system going singlehandedly, have never wielded so little power. Only 
under feudalism did the Sovereign feel similarly subservient to its 
barons, while remaining responsible for keeping the whole edifice together.

Hypothesis 2: Digital platforms are replacing markets

Amazon.com, Facebook, etc. are not markets. As you enter them, you leave 
capitalism behind. Within these platforms, one algorithm (belonging to 
one person or to very few persons) decides what is on sale, who sees 
which commodity is available, and how much rent the owner of the 
platform will keep from the profits of vassal-capitalists allowed to 
trade within the platform. In short, more and more economic activity is 
shifting from markets to digital fiefs. And that’s not all.

During the 20th century, and up to this day, workers in large capitalist 
oligopolistic firms (like General Electric, Exxon-Mobil, or General 
Motors) received approximately 80% of the company’s income. Big Tech’s 
workers do not even collect 1% of their employer’s revenues. This is 
because paid labour performs only a fraction of the work that Big Tech 
benefits from. Who performs the bulk of the work? Most of the rest of 
us! For the first time in history, almost everyone produces for free 
(often enthusiastically), adding to Big Tech’s capital stock (that is 
what it means to upload stuff on Facebook or move around while linked to 
Google Maps). And, moreover, this capital takes a new, far more powerful 
form (see below, where I talk about command capital).

At the same time, firms operating in normal capitalist markets – outside 
Big Tech and Big Finance – see their profitability collapse anyway, 
their dependence on central bank money grow exponentially, and their 
ownership be gobbled up by private equity and SPACs. Ergo, as feudal 
social relations of production were on the wane (and replaced by 
capitalist social relations) in the 1780s, today it is capitalist social 
relations of production that are being replaced by what I call 
technofeudal social relations.

Summing up:

Capital is getting stronger but capitalism is dying. A new system is 
taking over in which a new ruling class owns and runs both the state 
money that lubricates it (instead of profits) and the new non-market 
realms in which the very, very few make the many work on their behalf. 
Capitalist profits (in the sense of the entrepreneurial profits as 
understood by Adam Smith and Marx) are disappearing, while new forms of 
rent are accumulating in the accounts of the new techno-lords in control 
of both the state and the digital fiefs, in which unwaged or precarious 
work is performed by the masses – who begin to resemble techno-peasants.


__Q:
A common refrain in arguments about the rise of techno-feudalism is that 
tech platforms are just passive rentiers who are deriving immense 
profits from user data for which they pay very little. To put this in 
the most extreme way possible, these are lazy, mostly immaterial 
rentiers, who, having amassed a lot of IP, are now resting on their 
laurels. This reading also informs many of the enthusiastic accounts of 
Web3, which promise to share data wealth with the users who generated 
it. Yet, if one looks at the balance sheets and earnings statements of 
these firms, a different picture emerges: they actually invest more – 
rather than less – in material and tangible assets than non-tech firms 
(and more than they themselves did a decade ago), all while incurring 
immense R&D and capital expenditures (e.g. Amazon’s for 2020 was over 
$40 billion; Alphabet’s was almost $30 billion). This seems to fit 
rather well with the view of these firms as capitalist enterprises that, 
while controlling some markets, still compete in others (Google, 
Facebook, and Amazon in advertising; Google, Microsoft, Amazon, and 
Alibaba in cloud computing and AI services). Aren’t we running the risk 
of minimizing the really-existing capitalist dynamics of this tech 
economy when we emphasize those related to feudalism?

__A:
I agree with you in this sense: Jeff Bezos, Elon Musk, et al. invest 
massively and are nothing like the lazy aristocrats of the original 
feudal era. But that does not mean that their investment is part of a 
standard capitalist dynamic. Techno-feudalism is not merely feudalism 
with gadgets. It is simultaneously much more advanced than capitalism 
and reminiscent of feudalism.

Let me be more precise. The massive investment of Big Tech that you 
mention is crucial. Not just because of its size but, primarily, because 
of what it produces: a new form of capital that I call command capital. 
What is command capital?

Standard capital comprises produced means of production. Command 
capital, in contrast, comprises produced means of organising the means 
of industrial production. Its owners can extract huge new value without 
owning the means of industrial production; merely by owning the 
privatised informational networks that embody command capital.

Command capital, to be more precise, lives on privately owned 
networks/platforms and has the potential to command those who do not own 
it to do two things: Train the machines/algorithms on which it lives to 
(A) direct our consumption patterns; and (B) directly manufacture even 
more command capital on behalf of its owners (e.g. posting stuff on 
Facebook, a form of labour de-commodification).

In more abstract terms: Standard capital allows capitalists to amass 
surplus exchange value. Command capital, in contrast, allows 
techno-lords (i.e. Jeff Bezos, Elon Musk, et al.) to amass surplus 
command value. Command value? Yes: Any digital commodity has command 
value to the extent that its buyer can use it to convert expressive 
everyday human activity into the capacity to train an algorithm to do 
two things: (A) make us buy stuff, and (B) make us produce command 
capital for free and for their benefit.

In the language of Marx’s political economy, the magnitude of command 
value contained in any digital commodity is determined by the sum of: 
the surplus value of the commodities it makes us buy (see A above) + the 
labour time socially/technically necessary for us to produce a unit of 
command capital (under B above), to be appropriated instantly by the 
techno-lords.

In summary, what Bezos, Musk, et al. are accomplishing through their 
massive investments cannot be understood in terms of either feudalism or 
capitalism.

- Feudalism was based on the direct extraction of experiential/use value 
from peasants.

- Capitalism was based on the extraction of surplus labour from waged 
labour.

- Technofeudalism is a new system in which the techno-lords are 
extracting a new power to make the rest of us do things on their behalf. 
This new power comes from investing in a new form of capital (command 
capital) that allows them to amass a new type of value (command value) 
which, in turn, grants them the opportunity to extract surplus value 
from (i) vassal-capitalists, (ii) the precariat, and (iii) everyone 
using their platforms to produce on their behalf, unconsciously, even 
more command capital.



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