Reviewing Technofeudalism and Another Now (November 2024)

Yanis Varoufakis is an academic economist most famous internationally for his six-month controversial stint as the Greek Finance Minister in 2015 in the leftist Syriza government. His take on those six months is recorded in his memoir, Adults in the Room, and will not be discussed in this review as my review of the book has already been published in the December 2024 edition of Arts and Opinion. The two books reviewed here are of a more general nature concerning economics and politics or political economy, as some put it. The first to be reviewed, Technofeudalism: What Killed Capitalism (2023) assesses the state of capitalism in the 21^st century, while the second, Another Now (2021), describes an alternative society to capitalism and technofeudalism à la science fiction. Although an economics professor, his writing in these books is quite accessible without being elementary. Indeed for Varoufakis, “Economics is best seen as a contested terrain on which armies of politically motivated ideas (some favouring the ruling class, others the exploited classes) clash mercilessly to win over our hearts and minds.”

In each book, Varoufakis addresses a fundamental question. In Technofeudalism, the question is whether the Internet Age heralds a future where capitalism is further entrenched or a future where capitalism’s demise is presaged. This question was posed by his father who feared the former outcome. In Another Now, the question is what might a post-capitalist world look like. This latter question was raised by a Cockney Tory in an English pub who could not believe there was a better way than capitalism and for whom Varoufakis at the time had no better answer.

To the first question:

So, what is my hypothesis? It is that capitalism is now dead, in the sense that its dynamics no longer govern our economies. In that role it has been replaced by something fundamentally different, which I call technofeudalism. At the heart of my thesis is an irony that may sound confusing at first but which I hope to show makes perfect sense: the thing that has killed capitalism is … capital itself. Not capital as we have known it since the dawn of the industrial era, but a new form of capital, a mutation of it that has arisen in the last two decades, so much more powerful than its predecessor that like a stupid, overzealous virus it has killed off its host. What caused this to happen? Two main developments: the privatisation of the internet by America’s and China’s Big Tech. And the manner in which Western governments and central banks responded to the 2008 great financial crisis.

So, for Varoufakis, what has fundamentally changed?

What in the simplest possible terms distinguishes this world from the previous one, demanding that we discard the word capitalism and replace it with technofeudalism? . . . [I]t is very simply this: the triumph of rent over profit.

Key to technofeudalism is the emergence of economic rent as a replacement for economic profit particularly in the tech sector. According to Varoufakis, economic rent, which he refers to as simply ‘rent’—though not the same ‘rent’ as what we think of when we consider landlords and tenants in the housing market—is different from profit in that the latter is realized in a competitive market environment. Economic rent would more closely track with what is commonly regarded as the profit that a monopolist enjoys by virtue of controlling the supply of some commodity via mergers and acquisition, patents, trademarks, brands, etc. Based on this differentiation between economic rent and profit and the fact that the profit motive and competition are fundamental to capitalism, Varoufakis makes the case that firms are essentially rent-seekers having regressed from capitalism to a form of feudalism where producers do not face competitive markets and instead enjoy the rewards of owning productive resources risk-free. As this phenomenon is most noticeable in the tech industries according to Varoufakis, the form of feudalism, though retrograde (in the eyes of a true capitalist), is technologically advanced hence the term ‘technofeudalism.’ So, who are the technofeudal lords? They would include names familiar to antitrust and competition regulators worldwide: Amazon, Apple, Google and Facebook (Meta). But also included would be China’s Big Five: Alibaba, Tencent, Baidu, Ping An and JD.com.

In my view the natural tendency of the firm is to achieve dominance in a market so that competition is no longer required to maintain profits. The notion of a firm preferring a competitive environment is nonsense. This is standard microeconomic theory thanks to the contributions of economists such as Joan Robinson and Edward Chamberlin through their influential Depression-era works on imperfect competition—imperfect competition being the condition required to produce economic rent. I would argue that many of those who claim to espouse the virtues of competition in the capitalist system fail or refuse to acknowledge that competition, for them, is often just a means to an end, that end being the establishment of control of some market or market niche. This is amply demonstrated in the antitrust suits filed by the Department of Justice and the Federal Trade Commission in the U.S. and the European Commission in the EU. However, I concede that using the term ‘technofeudalism’ has a certain appeal and therefore may be useful in raising awareness to this latest ‘metamorphosis’ of capitalism.

Another term that Varoufakis uses frequently to describe the new firms in the emerging technofeudal society is ‘cloudalist.’ This is a reference to the cloud or the remote digital environment in which Big Tech, much like “an aristocracy of gods dwelling above the clouds that encircle Mount Olympus, jealously hold[s] on to their exorbitant power over us mortals.” Cloudalists charge rent for businesses to market and sell on the cloud, application developers to develop and deploy apps to the cloud and, of course, consumers to buy things. As consumers, we pay rent in the form of our attention which becomes aggregated in complex algorithms that reflect our preferences, interests and desires that are then packaged and sold on to others who get our attention to view their product and/or service offerings, from the news to entertainment and even to job banks.

So, what’s wrong with technofeudalism? Here’s a hint:

And so between 2010 and 2021, the paper wealth of these two men [Jeff Bezos and Elon Musk] – meaning the total price of their shares – rose from less than $10,000 million to around $200,000 [million] apiece.

In the 2024 presidential election (or auction) in the U.S., Bezos, current owner of the Washington Post (of Pentagon Papers fame), decided less than two weeks before the election not to endorse a candidate for the first time since 1988—the Democratic candidate always having received the Post’s endorsement since then. Robert Kagan, editor-at-large for the Post who resigned because of the decision, reported that officials from Bezos’ Blue Origins aerospace company which has a multi-billion dollar contract with NASA, met with Trump just a few hours after the Post announcement was made public. And Elon Musk is expected to be given an influential role in the new administration. This is the same multi-billionaire who restored Trump’s Twitter account (previously cancelled because of Trump’s incendiary posts leading up to and following the January 6^th insurrection), donated $119 million to the Trump campaign(1) (second only to the $125 million contributed by Timothy Mellon, heir to the Andrew Mellon fortune) and even sponsored a farcical $1 million-a-day voter sweepstakes. But then on the Democrats’ side, the Guardian reported that a former adviser to Joe Biden asked, “How do you spend $1bn and not win?” giving credence to the growing sense that the American presidential elections are in fact presidential auctions.

In the end, Varoufakis does answer his father’s question though not entirely as might have been predicted.

* * *

To the second question, is there a better alternative to capitalism (or technofeudalism)? Three friends—an engineer, an anthropologist and an economist—gain access to a parallel world. This is a science fiction prop and it is really of little importance as it is the message—the message that alternatives to capitalism exist—that matters profoundly and most of all. Another Now presents one of those alternatives.

From Eva’s perspective as an Ayn Rand-style free market enthusiast,

[T]he Other Now was brimming with features that any liberal would find hard to resist: an absence of income and sales taxes; the freedom of workers to move from company to company while taking their personal capital with them; the curtailment of large companies’ market power; universal freedom from poverty, but also from a welfare state demanding that benefit-recipients surrender their dignity at the door of some social security office; a payments system that was free, efficient and which did not empower the few to print money at the expense of the many; a permanent auction for commercial land that exploited market forces to the full in the interests of social housing; an international monetary system that stabilized trade and the flow of money across borders; a welcoming attitude to migrants based on empowering local communities and helping them absorb newcomers.

In contrast, for Iris, the radical and lonely iconoclast, there is no denying the improvements,

Iris did not dispute that the Other Now had shaken the superflux magnificently. But at what cost? At the cost of freeing markets from the shackles of the mega-firms’ and mega-banks’ monopoly. And why was this too high a price to pay? Because in her estimation, free markets, which may indeed require the end of capitalism to be fully realized, are not the solution. Markets, capitalist or otherwise, create the habitat in which patriarchy and oppressive power survive. . . . Just as a slight reduction of inequality in the name of social democracy only paved the way for a revival of inequality later on, so the Other Now had merely prolonged the reign of markets over societies.

Costa, the one who stumbles on the wormhole to this parallel world is however terrified at the prospect that the discovery could be picked up by malevolent powers who would use the technology against those who dared speak or write about the possibility of a better system to supersede capitalism. He is determined to destroy the evidence as does Emperor Yuan in Ray Bradbury’s short story, ‘The Flying Machine.’

Varoufakis’ answer to the question is not as clear-cut as the reader might have wished. Thus ends his dream . . . for now.

Endnotes

(1) The New York Times reported that “Elon Musk . . . spent over a quarter of a billion dollars in the final months of this year’s election to help Donald J. Trump win the presidency, federal filings revealed.” ‘Elon Musk Backed Trump With Over $250 Million, Fueling the Unusual ‘RBG PAC’, New York Times, December 5, 2024.