Archive for May, 2024

TechnoFeudalism Killed Capitalism

Thursday, May 16th, 2024

Techno Feudalism; What Killed Capitalism, Yanis Varoufakis, 2023


Self proclaimed libertarian Marxist.

The Rise of Big Finance and Big Business

To produce the rivers of credit necessary to fund the Edisons, the Westinghouses, and the Fords of early twentieth-century capitalism, small banks merged to form large ones and lent either to the industrialists directly or to speculators eager to buy shares in the new corporations…And it led to emergence of Big Finance, which grew up alongside Big Business in order to lend it monies borrowed effectively from the future: from profits not yet realized but which Business promised to delivery.

The Creation of the American technostructure in WWII (Eisenhower’s military industrial complex)

(after Pearl Harbor brought the US Into WWII) the US government began to emulate…the Soviet one.


Galbraith at work in 1940
It told factory owners how much to produce and to what specifications, from aircraft carriers to processed food. It even employed a price czar – the economist John Kenneth Galbraith – whose job, literally, was to decide the price of everything, to fend off inflation, and to ensure a smooth economic transition from wartime to peacetime is no exaggeration to say that American capitalism was run according to Soviet planning principles, with the exception that the networked factories remained under private ownership of Big Business.

Under President Roosevelt, the US government’s deal with Big Business was simple: they would produce what was necessary to win the war and, in exchange, the state would reward them with four incredible gifts. First, state guaranteed sales translated into state guaranteed profits. Second, freedom from competition, since prices were fixed by government. Third, huge government funded scientific research (e.g. the Manhattan Project, jet propulsion) that provide Big Business with wonderful new innovations and a pool of highly skilled scientific personnel to recruit from during and after the war. And forth, a patriotic aura to help rinse off the stench of corporate greed that clung to them after the crash of 1929 and make them over as heroic enterprises that helped America win the war.

Galbraith called this nexus (at the end of the war) the technostructure.

With the war behind them, one thing kept the good folks of the technostructure up at night: if the government would no longer guarantee sales and prices, where would they find the customers ready and willing to pay for all the chocolate bars, cars, and washing machines that they were planning to manufacture…(hence the rise of Madison Avenue and consumer behavior modification)

In the 1960s, a decade marked by an ideological and nuclear clash between America and the Soviet Union that almost blew up the world, Soviet planning principle were implemented with remarkable success in …the United States. Irony has seldom taken a more effective revenge over earnest ideology.

The American Golden Age of Bretton Woods 1944-1971

This dazzling design, America’s Global Plan to remake Europe and Japan in the image of its technostructure, led to capitalism’s Golden Age. From the wars end until 1971, America, Europe and Japan enjoyed low unemployment, low inflation, high growth and massively diminished inequality.

As long as America was the major surplus nation, Bretton Woods was safe as houses. And that’s why, by the late 1960s, the Bretton Woods system was dead in the water. The reasons? Three developments which caused America to lose its surplus and become a chronically deficit economy. The first was the escalating Vietnam War which forced the US government to spend billions in South East Asia on supplies and services for its military. The second was President Lyndon Johnson’s attempt to make amends for the ill effects of conscription on working-class America, its black communities in particular. His valiant but expensive Great Society program substantially reduced poverty but, at once, sucked lots of imported goods from Japan and Europe into the United States. Lastly, Japan’s and Germany’s factories surpassed America’s in terms of quality and efficiency, partly due to the support successive US governments had extended to Japan’s and Germany’s manufacturing sectors – the car industry being an obvious example.

Nixon Shock the death of Bretton Woods 1971

..on 15 August 1971 President Nixon announced the eviction of Europe and Japan from the dollar zone. Bretton Woods was dead. The door had been opened on a new and truly dismal phase in capitalism’s evolution.

Fed Dismal Chairmen Volcker, Greenspan, Bernanke

In 2002, thirty years after the Nixon Shock, humanity’s total income approximated $50 trillion. In the same year, financiers around the world had wagered $70 trillion on a variety of bets…. By 2007 humanity’s total income had risen from $50 to $75 trillion – a decent 33 percent increase over five years. But the sum of bets in the global money market had gone up from $70 to $750 trillion – a rise in excess of 1000 percent…Bretton Woods was designed to prevent such greed-fueled recklessness from bringing humanity to the brink of another Great Depression, indeed another world war, ever again.

Once they lost their fixed exchange with the dollar, the dollar value of European and Japanese money began fluctuating wildly…The dollar became the only safe harbor, courtesy of its exorbitant privilege, namely, that if any French, Japanese, or Indonesian company, indeed anyone wanted to import oil, copper, steel, or even just space on a freight ship, they had to pay in dollars…The Nixon Shock produced a magic trick for the ages; the country going deeper and deeper into the red was the country whose currency was becoming more and more hegemonic…But there was another reason why the dollar’s hegemony grew: the intentional impoverishment of America’s working class.,,It is also no coincidence that union busting became a thing in the 1970s.

Crash of 2008

With investment first knocked out by the crash of 2008 and finished off soon after by austerity, throwing new money at the financiers was never going to resurrect it. Put yourself in the position of a capitalist at a time when austerity is eliminating your customer’s income. Suppose I give you a billion dollars to play with for free, i.e. at a zero interest rate. Naturally you will take the free billion but as we’ve established you would be mad to invest it in new production lines. So what are you going to do with the free cash? You could buy real estate or art or better still, shares in your own company. That way, the shares in your company appreciate in value, and if you are the CEO running it, your stature and share-linked bonuses rise too. No new investment, in other words, but a lot more power in the hands of the powerful.

For while the American deficit returned with a vengeance a year after the crash of 2008 and the subsequent bankers bailouts, it never restored the beast’s capacity to recycle the world’s profits. True, the rest of the world continued to send most of its profits to Wall Street. But the recycling mechanism was broken: only a small fraction of the monies rushing to Wall Street returned in the form of tangible investments in factories, technologies, agriculture. Most of the world’s money rushed to Wall Street to stay in Wall Street. There, it sloshed around doing nothing useful. As it piled up, it bid up share prices, thus giving the Jills and the Jacks of of finance yet another opportunity to do stupid things at a mammoth scale.

When an activist states makes fabulously wealthier, the same banks whose quasi-criminal activities brought misery to the majority, while they are punished with self-defeating austerity, two new calamities beckon: poisoned politics and permanent stagnation. The poisoned politics we need not elaborate on – from Greece’s neo-Nazis to America’s Donald Trump we have all lived through the nightmare. But permanent stagnation? Why would more wealth for the ultra-rich stagnate capitalism? And how did it lead to the funding of cloud capital?

Cloud proles and cloud serfs

…capital has hitherto been reproduced within some labor market – within the factory, the office, the warehouse. Aided by machines, it was waged workers who produced the stuff that was sold to generate profits, which in turn financed their wages and the production of more machines– that’s how capital accumulated and reproduced. Cloud capital, in contrast, can reproduce itself in ways that involve no waged labor. How? By commanding almost the whole of humanity to chip in to its reproduction – for free…By doing so, we shall see that while workers have become ‘cloud proles’ we all have become ‘cloud serfs’…Cloud proles – my term for waged workers driven to their physical limits by cloud based algorithms—suffer at work in ways that would be instantly recognized by whole generations of earlier proletarians. (As in Chaplin’s 1936 movie Modern Times)
Workers employed by General Electric, Exxon-Mobil, General Motors or any other major conglomerate pay in salaries and wages approximately 80 percent of the company’s income. This proportion grows larger in smaller firms. Big Tech’s workers, in contrast, collect less than 1 percent of their firm’s revenues. The reason is that paid labor performs only a fraction of the work that Big Tech relies on. Most of the work is performed by billions of people for free…The fact that we do so voluntarily, happily even, does not detract from the fact that we are unpaid manufacturers – cloud serfs whose daily self-directed toil enriches a tiny band of multibillionaires residing mostly in California and Shanghai.

Amazon and Jeff Bezos the end of capitalism

Enter Amazon.com and you have exited capitalism. Despite all the buying and selling that goes on there, you have entered a realm which can’t be thought of as a market, not even a digital one…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 monopolized market – there at least, the buyer can talk to each other, form associations, perhaps organize a consumer boycott to force the monopolist to reduce a price or to improve a quality. Not so in Jeff’s realm, where everything and everyone is intermediated not by the disinterested invisible hand of the market but by an algorithm that works for Jeff’s bottom line and dances exclusively to his tune.
(Amazon is) a type of digital fief…A post-capitalist one, whose historical roots remain in feudal Europe but whose integrity is maintained today by a futuristic, dystopian type of cloud-based capital.

Tesla and Elon Musk Amazon copycat


Copycat ecommerce platforms, offering variations on the Amazon theme, are springing up everywhere, in the Global South as well as the Global North. More significantly,other industrial sectors are turning into cloud fiefs too. Take for example Tesla,,, Elon Musk’s successful electric car company. One reason financiers value it so much higher then Ford or Toyota is that its cars’ every circuit is wired into cloud capital. Besides giving Tesla the power to switch off its cars remotely, if not, for instance, the driver fails to service it as the company wishes, merely driving around Tesla owners are uploading in real time information (including what music they are listening to!) that enriches the company’s cloud capital.

A.I. Algorithms produce Cloud Proles and Cloud Serfs

It took mind-bending scientific breakthroughs, fantastical sounding neural networks and imagination-defying A.I. Programs to accomplish what? To turn workers tolling in warehouses, driving cabs and delivering food into cloud proles. To create a world where markets are increasingly replaced by cloud fiefs. To force businesses into the role of vassals. And to turn all of us into cloud serfs, blued to our smartphones and tablets, eagerly producing the cloud capital that keeps our new overlords on cloud nine.

Privatization of the Internet Commons

Capitalism surfaced when owners of capital goods (steam engines, machine tools, spinning jennies, telegraph poles, etc.) acquired the power to command people and nations– powers that far exceeded, for the first time, those of landowners. It was a Great Transformation made possible by the prior privatization of common lands. Same with cloud capital. To acquire its eve greater powers to command, it too required the prior privatization of another crucial commons: Internet One.
Previously, to exercise capital’s power to command and make other humans work faster and consume more, capitalists required two types of professionals; managers and marketeers. Especially under the auspices of the post-war technostructure, these two service professions achieved greater prominence even than bankers and insurance brokers…Then cloud capital arrived. At one fell swoop it automated both roles. The exercise of capital’s power to command workers and consumers alike was handed over to the algorithms. This was a far more revolutionary step than replacing autoworkers with industrial robots. After all, industrial robots simply do what automation has been doing since before the Luddites: making proletarians redundant, or more miserable or both. No, the truly historic disruption was to automate capital’s power to command people outside the factory, the shop or office – to turn all of us, cloud proles (blue collar working-class) and everyone else, into cloud serfs in the direct (unrenumerated) service of cloud capital, unmediated by any market.
Meanwhile, 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-a-vis their feudal overlords.

The Apple iPhone and the Apple Store


The stroke of genius that unlocked cloud rent for Steve Jobs was his radical idea to invite ‘third party developers’ to use free Apple software with which to produce applications for sale via the Apple Store. In one fell swoop Apple had created an array of unwaged laborers and vassal capitalists whose hard work yielded a host of capabilities available exclusively of iPhone owners in forms of thousands of desirable apps that Apple engineers could never have produce themselves in such variety or volume.

Google’s Android Operating System and Google Play


Only one other conglomerate managed to persuade a significant proportion of those developers to create apps for its own store: Google. Long before the iPhone arrived, Google’s search engine had become the centerpiece of a cloud empire which included Gmail and YouTube, and which would later include Google Drive, Google Maps and a host of other online services…Google followed a different strategy to Apple’s. Instead of manufacturing a handset in competition with the iPhone, it developed Android, an operating system that could be installed for free on the smartphones of any manufacturer, including Sony, Blackberry and Nokia, who chose to use it. The idea was that if enough of Apple’s competitors installed it (Android) on their phones, the pool of smartphones operating on the Android software would be large enough to lure third-party developers to produce apps not only only for the Apple Store but for a new store running on Android software. That’s how Google created Google Play, the only serious alternative to the Apple Store.

Creation of Vassal Capitalists and the Precariat

But large or small, powerful or otherwise, all vassal capitalists are by definition dependent to a greater or lesser extent on selling their wares via an ecommerce site, whether Amazon or Ebay or Alibaba, with a sizable portion of their net earnings being skimmed off by the cloudalists they depend on.
Meanwhile, as Amazon was snaring makers of physical products within its cloud fief, other cloudalists were focusing their attention on the precariat (people whose employment and income are insecure). Companies like Uber, Lyft, Grubhub, DoorDash and Instacart in the Global North, along with their imitators in Asia and Africa, wired into their cloud fiefs a vast array if drivers, delivery people, cleaners, restauraneurs – even dog walkers – collecting from these unwaged, piece-rate workers a fixed cut of their earnings too. A cloud rent.
The Great Transformation from feudalism to capitalism, was predicated on the usurpation of rent by profits as the driving force of our socio-economic system. That was why the word capitalism proved so much more useful and insightful than a term like market feudalism. It is this fundamental fact – that we have entered a socio-economic system powered not by profit but by rent – that demands we use a new term to describe it. To think of it as hyper capitalism or rentier capitalism would be to miss this essential defining principle. And to reflect the return of rent to its central role, I can think of no better name than technofeudalism.

Technofeudalism Underlies the Great Inflation

…the Great Inflation and cost-of-living crisis that have followed the recent pandemic cannot be properly understood outside the context of Technofeudalism…I recounted how for twelve long years after the crash of 2008, central banks printed trillions to replace the bankers’ losses. We saw how socialism for bankers and austerity for the rest of us dampened investment, blunted Western capitalism’s dynamic and pushed it into a state of gilded stagnation. The only serious investment of the central banks’ poisoned money during this time went into the accumulation of cloud capital. By 2020, cloud rents accruing to cloud capital accounted for much of the developed world’s aggregate new income.
…rents stunning comeback could only mean deeper and more toxic stagnation. Wages get spent by the many struggling to make ends meet. Profits get invested in capital goods to maintain the capitalists’ capacity to profit. But rent is stashed away in property (mansions, yachts, art, cryptocurrencies, etc.) and stubbornly refuses to enter circulation, stimulate investment into useful things, and revive flaccid capitalist societies. And so the vicious cycle begins: deeper stagnation.
The pandemic (2020) exacerbated the same trend. The only significant difference from the pre-pandemic period was that, this time, and for the first time since 2008, some of the fresh trillions printed by the central banks were spent by governments on the population, to keep their citizens alive while locked down. Nevertheless, most of the new monies ended up bolstering the share price of Big Tech corporations. This explains the report of the Swiss Bank UBS, published in October 2020, which found that billionaires had increased their wealth by more than a quarter (27.5 per cent) between April and July of that year, just as millions of people around the world lost their jobs or were struggling to get by on government schemes. What happens when supply suddenly dies? Especially during times when the locked-down masses get some income support from the central banks’ money tree. The price of groceries, exercise bikes, bread makers, natural gas, petrol, housing and host other goods goes through the roof and, following a dozen years of subdued prices, a Great Inflation sets in.
When, for whatever reason, prices surge across the board, a social power game is afoot in which everyone attempts to suss out their bargaining power. Business managers try to work out how far they can raise prices – if not to profit then, at least, to recoup their own rising costs. Rentiers, both traditional and cloudalists, test the water with rent hikes. Workers assess the extent to which they can push for a pay rise – at least to compensate for the higher bills they must meet. Governments play the game too: do they intervene by using the greater income and VAT tax receipts flowing from the rising prices to assist weaker citizens being crushed by inflation? Or do they subsidize Big Business as it is squeezed by high energy prices? Or do they do nothing much? Until these questions get answered inflation continues to roll.

Delayed Green Energy Adoption

The need to switch from fossil fuels to green energy could not be more urgent. The rise in energy costs that is an integral part of the Great Inflation would seem to have taken us away from that goal, offering a windfall to the fossil fuel industry. But this will not last long. Advances in green energy are pushing down fast the costs of green electricity generation. Even though the life cycle of fossil fuels has been extended, ruinously for the planet, cloud based green energy is growing – and, with it, so is the relative power of cloudalists.

China’s Dark Deal Post 1971 Global Capitalism

From the 1970s onward, global capitalism was founded on this fascinating recycling of, mainly, Asian manufacturing profits into American rents, which in turn sustained the American imports that provided Asian factories with sufficient demand.
Why call it a Dark Deal? Because in the small print of this pact between America’s and East Asia’s ruling classes was written misery for workers on both sides of the Pacific. American workers faced the exploitation and immiseration that resulted from under investment and its industrial heartland being hollowed out by manufacturing in Asia and the underdeveloped Global South. Meanwhile, in China’s fast-industrializing coastal cities, workers suffered the frenzied exploitation associated with over investment…
The came the crash of 2008. This had two main effects that, together, underpin today’s New Cold War: it strengthened China’s position in the global recycling mechanism, ant it turbocharged the build-up of cloud capital both in the United States and China.
…when the bottom fell out of Wall Street, China stabilized global capitalism by cranking up domestic investment to more than half of China’s national income. It worked in that Chinese investment took up much of the global slack caused by Western commitment to austerity. China’s international stature rose, and its accumulating dollar surpluses allowed Beijing, in addition to feeding Wall Street, to become a major investor in Africa, Asia, even in Europe through its famed Belt and Road Initiative.

Chinese cloudalist agglomeration

…to grasp the enormity and nature of China’s big five cloudalist conglomerates – Alibaba, Tencent, Baidu, Ping An and JD.com – consider the following thought experiment. Imagine if, in the West, we were to roll into one Google, Facebook, Twitter, Instagram and the version of Chinese owned Tik Tok still available to American users. Then include the applications that play the role that telephone companies used to: Skype, WhatsApp, Viber, Snapchat. Add to the mix ecommerce cloudalists like Amazon, Spotify, Netflix, Disney Plus, Airbnd, Uber and Orbitz. Lastly, throw in PalPal, Charles Schwab and every other Wall Street bank’s own app.
Unlike Silicon Valley’s Big Tech, China’s is directly bound into government agencies that make all-pervading use of this cloudalist agglomeration: to regulate urban life, to promote financial services to unbanked citizens, to link its people with state health care facilities, to conduct surveillance of them using facial recognition, to guide autonomous vehicles through the streets – and, outside its borders, to connect Africans and Asians participating in China’s Belt and Road Initiative to its super cloud fief.
With this great leap into financial services, China’s cloudalists acquire a 360-degree view of their users’ social and financial life. If cloud capital is a produced means of behavior modification, Chinese cloudalists have accumulated cloud capital beyond the wildest dreams of their Silicon Valley competitors, who, by comparison, enjoy far less power per capita to accumulate cloud rent.

American Dollar Reign

It (dollar’s reign) has allowed countries with large trade surpluses, like China and Germany, to convert their excess production – their net exports – into property and rents in the United States: real estate, US government bonds, and any companies that Washington allowed them to own. Without the dollar’s global role, Chinese, Japanese, Korean, or German capitalists would never have been able to extract such colossal surplus value from their workers and then stash it away somewhere safe. Michael Pettis: “While the US dollar may create an exorbitant privilege for certain American constituencies, this status creates an exorbitant burden for US the economy overall, especially for the vast majority of Americans who must pay for the corresponding trade deficits either with higher unemployment, more household debt, or greater fiscal deficits.”

Cloud Capital Affect on the Liberal Individual

It (cloud capital) has produced individuals who are not so much possessive as possessed, or rather persons incapable of being self-possessed. It has diminished our capacity to focus by co-opting our attention. We have not become weak-willed. No, our focus has been stolen. And because technofeudalism’s algorithms are known to reinforce patriarchy, stereotypes and pre-existing oppressions, those that are most vulnerable – girls, the mentally ill, the marginalized and yes, the poor – suffer the outcomes most…Bigotry is technofeudalism’s emotional compensation for the frustrations and anxieties we experience in relation to identity and focus…it is intrinsic to cloud capital, whose algorithms optimize for cloud rents, which flow more copiously from hatred and discontent.
And therein lies the greatest contradiction: to rescue that foundational liberal idea – the liberty of self-ownership—will therefore require a comprehensive reconfiguration of property rights, over the increasingly cloud-based instruments of production, distribution, collaboration, and communication. To resuscitate the liberal individual, we need to do something that liberals detest: plan a new revolution.
To stand a chance of overthrowing technofeudalism and putting the demos back into democracy, we need to gather together not just the traditional proletariat and the cloud proles but also the cloud serfs and, indeed, at least some of the vassal capitalists. Nothing less than such a grand coalition that includes them all can undermine technofeudalism sufficiently.

Cloud mobilization

The beauty of cloud mobilization is that it stands on its head the conventional calculus of collective action. Instead of maximal personal sacrifice for minimal collective gain, we now have the opposite: minimal personal sacrifice delivering large collective and personal gains. This reversal has the potential to pave the way toward a coalition of cloud serfs and cloud proles that is large enough to disrupt cloudalists control over billions of people.
Under technofeudalism, we no longer own our minds. Every proletarian is turning into a cloud prole during working hours and into a cloud serf the rest of the time. Every self employed striver mutates into a cloud vassal, while every self employed struggler becomes a cloud serf. While privatization and private equity asset-strip all physical wealth around us, cloud capital goes about the business of asset stripping our brains. To own our minds individually, we must own cloud capital collectively. It’s the only way we can turn our cloud-based artifacts from a produced means of behavior modification to a produced means of human collaboration and emancipation.
For a more thorough discussion of the required mobilization see Yanis Varoufakis’novel, Another Now, 2021.