Technofeudalism: What Killed Capitalism
By Yanis Varoufakis
Vintage 2024
In his latest book, Yanis Varoufakis, economist and former Greek finance minister in the leftist SYRIZA government, argues that with the advent of the internet and related technologies, we have now entered an era beyond capitalism — technofeudalism.
Computer and internet-based technology has had a huge impact on our lives, our work and our society for decades, even more so in the past 10 years.
It has also had a huge impact on the economy. The market capitalisation of the so-called “magnificent seven” tech giants — Apple, Microsoft, Amazon, Alphabet, Meta, NVIDIA and Tesla — has risen 14-fold since 2012 and accounts for most of the recent growth in the United States stock market.
This has led many to theorise about the significance of this trend, and the concept of technofeudalism has recently gained some traction.
In justifying his claim for a new era of technofeudalism, Varoufakis recognises that in spite of the popular language of “the cloud” being used for internet technologies, they do not exist in some ethereal world. They still consist of physically constructed data centres and millions of kilometres of optical fibre cabling.
He also argues that the condition of tech workers in this is “not in essence any different from those of the millworkers of old” citing Karl Marx’s work in the first volume of Capital as offering a reliable analysis.
He coins the term “cloud proles” for these workers.
Despite recognising such continuities with capitalism, from here Varoufakis moves on to justify his case for technofeudalism — which I would suggest is built on hyperbole and plain error.
Prima facie, it is hard to justify a new era based on the role of tech companies when, in spite of their growth and importance, they still only make up a corner of the economy.
While a significant part of our lives may involve interaction with technology, the bulk of what we do still depends on traditional goods and services.
‘Cloud serfs’?
Much of our time is spent “in the cloud”, but we spend a large (possibly increasing) chunk of the money we earn from working on housing, food and transport. Technology is certainly involved, but we are a long way from existing in a cloud world.
In 2023, tech companies accounted for 8.9% of the US economy and about 5.8% globally. This is significant, but not a strong basis on which to propose that our entire economic system has fundamentally entered a new era.
Varoufakis makes his case, in part, by pointing out that the tech companies’ physical infrastructure would be worthless without “content” — “the stories posted on Facebook, the videos uploaded to TikTok and YouTube”, etc.
And “[m]ost of this work is provided by billions of people for free.” We are like feudal serfs forced to hand over some of the product of our labour for free, argues Varoufakis, describing us as “cloud serfs”.
But is this “content” creation really work? In other words, is it the source of economic value that creates profits? Is this a fundamentally new economic relation?
After all, people have long provided content for free in capitalism. Telephone companies could never have turned huge profits without people providing free content for telephone calls. Before that, postal companies could never have survived and profited without people providing content for letters. But were they providing labour by doing so?
Although the content in platforms like Facebook allows us to communicate in different forms and to a broader audience, the economic relationship involved seems to have existed long since.
Platforms like Facebook do not derive their revenue from content. Their revenue comes from advertising. To promote their products and try to sell more and gain more profits, companies use advertising. To get this advertising, they will share some of their revenue with Facebook in the hope of gaining greater profits from more sales.
But for advertising to work, it needs something to hook consumers in with. Internet content provides that hook to get eyeballs on the advertising — the source of the platform’s income.
Again, this is really just a new form of something not fundamentally new. Television has long since derived its income by providing a vehicle for advertising in exchange for a share in advertisers’ revenue. Television companies’ content and TV shows are provided for free to be the hook for advertising — which is their real game.
Extending back further in history, newspapers have likewise provided news stories as a hook to facilitate what has been a large proportion, if not their main source, of income — advertising.
Facebook, like television and newspapers, is an advertising platform.
Advertising has expanded a lot since the early days of capitalism. The huge increases in productivity that have taken place mean that less and less of the economy needs to be dedicated to the necessities of life, so more and more is available to non-productive sectors like advertising.
This trend is a long-standing feature of capitalism. Its golden era of expansion followed World War II and was theorised at the time as an expansion of the “sales effort” by Paul Baran and Paul Sweezy in their 1966 work, Monopoly Capital.
‘Cloud fiefs’?
Varoufakis also argues that markets have been replaced by “cloud fiefs”. Here, Amazon is a prime example. The sheer scale and breadth of Amazon and similar platforms means that “conventional capitalist manufacturers increasingly have no option but to sell their goods at the discretion of the cloudalists, paying them a fee for the privilege, developing a relationship with them no different to that of vassals vis-à-vis their feudal overlords”.
But again, Amazon and the like are still only a minor proportion of all goods and services sold, and how new is this really? Capitalists have always had to part with a proportion of their revenue to ship their goods. Marx spent a large part of Capital volume two on this very topic, mostly written back in the 1850s and ’60s.
Amazon is somewhat of a monopolist in its field, but on monopolisation see Marx or Baran and Sweezy or plenty of other historical sources.
Varoufakis’ further argument for technofeudalism is that these tech giants no longer seek profits like traditional capitalists. Instead, they have largely become seekers of rent.
Here, rent is meant in the broader sense of earning money not just through control of land or buildings, but also of things such as mineral deposits, loanable funds, patents, stocks etc — in general earning money by dint of mere ownership of something, rather than actually producing anything of value.
He makes particular emphasis on the role of quantitative easing following the 2008 financial crisis and the 2020 pandemic. During these crises, central banks effectively just printed money to stave off economic collapse. Much of this money ended up in the pockets of the big tech giants.
Varoufakis sees a case of “feudal rent defeating capitalist profit; of wealth extraction by those who already have it triumphing over the creation of new wealth by entrepreneurs”.
Yet, rent is not unique to feudalism. Rent is a long-standing feature of capitalism.
Again, we can refer back to Capital, volume three this time. In it, Marx pointed out that not all capitalists produce value. However, those that do often depend on other capitalists to provide finance or land and buildings. To obtain these, productive capitalists are forced to share a proportion of the value (above that paid to workers) they produce with the capitalists who provide loans or land/buildings. Their profits take the form of interest or rent.
But ultimately these rent-seekers must still depend on productive capitalists creating value to be able to get their cut of value from somewhere.
Also included in Varoufakis’ book is an analysis of some key turning points in the history of capitalism and the US tech war against China. This is interesting, but the addition of technofeudalism terminology doesn’t contribute anything enlightening.