Are we living in a cloudalist dystopia?
Yanis Varoufakis's 'Technofeudalism: What Killed Capitalism'
My introduction to the concept of 'Technofeudalism' was two years ago when I watched this conversation between Yanis Varoufakis and Slavoj Žižek (excerpt):
This was a lightbulb moment for me, and I was immediately sold on the concept. I have been waiting for Varoufakis to write a book about it ever since, and now it is here at long last.
When Varoufakis's father first connected his computer to the internet, he asked the author: "Now that computers speak to each other, will this network make capitalism impossible to overthrow? Or might it finally reveal its Achilles heel?". This question frames 'Technofeudalism: What Killed Capitalism', and his late father becomes his imaginary interlocutor and critic at various points in the book.
Varoufakis begins by retreading familiar historical ground from his book 'The Global Minotaur: America, Europe and the Future of the World Economy’, adding in the significance of electromagnetism, and taking us through the New Deal, Bretton Woods, the ‘Nixon shock’, the end of the gold standard, financialisation and on to the 2008 crash. At this point, capitalism lost its power, and the transformation to technofeudalism began. Capital still exists, but it is now subservient to technofeudal overlords.
He discusses the rise of the decentralised internet, noting that with the rise of financialisation in the 1980s, capitalists spied a chance to profit, and Shoshana Zuboff's 'surveillance capitalism' developed, with a key innovation, the commodification of unpaid user data, content and attention, turning us into 'cloud serfs'. Algorithmic management tightened the hold over workers, creating 'cloud proles'.
Primitive AI devices such as Alexa create feedback loops, enabling unprecedented manipulation of consumer behaviour. Cloud platforms are no longer markets but 'cloud fiefs' where platform owners regulate all activity via algorithms. This rise of cloud computing, funded by central bank money printing after the 2008 financial crisis, enabled the emergence of a new capitalist class, 'cloudalists'. Leveraging proprietary cloud platforms, they have amassed tremendous power, overturning traditional free market principles. The cloudalists form a new class above traditional capitalists. Whilst the poor got poorer during austerity, and capitalists took the central bank money and refused to invest it, instead buying back shares in their own companies and investing in real estate, the cloudalists, not caring about profits, seized control of the platforms and technologies, extracting value through monopolies.
Varoufakis argues that the term 'technofeudalism' better captures all this than 'hyper-capitalism' or 'rentier capitalism.' Under classic capitalism, profits generated by entrepreneurial investment prevailed over rents extracted simply through ownership claims. We now have a new type of rent, 'cloud rent', which is the rent capitalists pay to cloudalists to advertise, market and sell their goods (Apple's app store was the progenitor of this).
These cloud rents resemble feudal land rents, argues Varoufakis, and rent-seeking behaviour now displaces profit-seeking entrepreneurialism. Rent concentrates wealth while evading productive investment, breeding even greater inequality. The pandemic-induced ‘Great Inflation’ strengthened technofeudalism by expanding the cloud's reach across even more economic activity (Amazon is an obvious example). The cloud fiefs are now so powerful that we have passed the point of no return.
Varoufakis has an interesting analysis of Musk's Twitter purchase here. I think most of us are now aware that the 'free speech' line was somewhat a 'bait and switch', the truth revealed by the choice of Linda Yaccarino as CEO. Varoufakis's take is that despite everything Musk has achieved, he is not yet a cloudalist because he lacks the means to extract cloud rents. His frequent statements that he wants to turn Twitter/X into an 'everything app', tying in a digital payments system, indicate his intent to join this class.
Switching his attention to China, Varoufakis states that their cloudalist platforms, which Western money printing fueled, are even more potent than Western platforms; Alibaba, for example, integrate communications, retail and finance (an 'everything app'). Users never have to leave the platform to carry out all online activity. The Chinese government hoovers up all this activity and turns it into a system of behavioural control. Before 2008, economic ties between the US and China centred on America's trade deficits sustaining Chinese export growth while Chinese profits flowed back into US assets. However, China's development of cloud finance reduces its dependence on US demand and the dollar system. Fears over China's tech advancements are now driving an escalating geopolitical clash between the two superpowers. We have seen the 'Chip Wars' outbreak, a direct result of this.
Varoufakis finishes his analysis here with a tone of triumphalism, a tone that comes across very strongly in the Audible version of the book:
"Liberals once feared people like you and me - leftists craving a socialist transformation. When the left was defeated, liberals were relieved but continued to rail against the power of the state: in their eyes, powerful states, even bourgeois liberal ones, are what pave the road to serfdom. Is it not delectably shocking how, in the end, a global superhighway to serfdom has been constructed not because Western states were too powerful but because they were too weak? Too weak, that is, to prevent the cloud capital they birthed from taking over, disestablishing capitalism and facilitating technofeudalism."
As with the rest of his books, I believe Varoufakis's diagnosis is accurate. He claims that he is not talking in the book about what is yet to happen but about what has already happened, and I am inclined to agree. As a liberal, I am even prepared to give him his conclusion that liberalism ultimately resulted in technofeudalism, just as it has engendered the luxury beliefs and cultural excesses that have become the new Puritan religion. Varoufakis is rather dismissive of identity politics in the book, which is refreshing, though he is wedded to climate alarmism.
However, his macroeconomic diagnosis does not capture the whole picture in my view, which the pandemic has brought into sharp focus. Varoufakis talks about the accelerated money printing by the central banks. These policies greatly favoured the cloudalists, forcing people to spend their days in the cloud fiefs and benefitting Bezos in particular. However, he doesn't talk about the merging of state and corporate interests, where we saw Klaus Schwab's stakeholder capitalism and Naomi Klein's disaster capitalism in action (even if she can't bring herself to admit it). He doesn't mention how we saw the UN/WHO/WEF, acting through their subservient governments, implementing policies in lockstep worldwide and ordering the banks to print the money. For the conspiracy-minded, there remains a suspicion that the pandemic was exaggerated because of a looming financial crisis.
Why is this? I rather suspect it is because of Varoufakis's avowed Marxism, even though he has a libertarian streak. He mentions his grief more than once in the book about the end of the socialist dream in 1991, and with it, one surmises, the demise of the large centrally planned economies. Marxism, at least in practice, generally has little issue with central authorities controlling and ordering the lives of the masses. I guess he might reply that he can make his case purely on macroeconomic considerations, though I think the situation is more complex.
When we look at the book's final chapter, we get another hint on why Varoufakis may not want to go down this road. Beginning with a summary of his discussions in his novel 'Another Now: Dispatches from Another Present', Varoufakis paints a picture of his utopia, based heavily on the devolvement of decision-making to direct democracies.
Varoufakis envisages companies where each worker gets a single vote, from the cleaner to the CEO, and votes on a division of money between running costs, R &D, a basic income and a portion where the most valuable workers are rewarded with extra pay, via a separate voting system akin to the Eurovision song contest. This eliminates the class divide between owners and workers, share markets and financialisation whilst still incentivising everybody to maximise the company's success.
Money, in general, is now mediated by CBDC, and individuals have a UBI, the company wage and interest. Private banks cannot create money as debt. Taxation is only payable on company revenues and commercial land rents. Land and cloud resources are collectivised, and residents bid to occupy properties. Citizen assemblies make decisions at a national level; governance is decentralised in favour of direct democracy.
In many ways, this is a very attractive theory. His belief that the incentivisation system of voting extra pay to those who contribute the most to companies will generate the same level of entrepreneurial flare and innovation seen in the Steve Jobs of this world is a little optimistic; indeed, this part of the reward system appears somewhat open to abuse too. It rather relies, as does the whole theory in many ways, on everybody wanting to play nicely together. The system within companies appears rooted in game theory, depending on everybody to be rational and realise that the greatest chance of maximising their self-interest is through cooperation and not competition.
My sense of unease with the utopia he paints is probably rooted in my own psychology and my philosophical beliefs, for I am a Kantian, both metaphysically and morally. Varoufakis's utopia appears claustrophobic to me: a Star Trek world of homogenised progressive social attitudes where everybody is nauseatingly pleasant, a utilitarian world, the tyranny of the majority. I think more of Demolition Man than Star Trek. To be fair, he does not spell all this out; this is partly my inference.
Varoufakis might respond that as a cloud serf, I have far less freedom now than I think I have and that his world would offer me a different set of freedoms. Whilst our choices may differ here, I think a stronger argument would be that I now have little choice; I can either choose between his utopia or a cloudalist dystopia. Early in the book, he notes:
"For many, life under constant surveillance is intolerable. They rebel at the thought that Big Tech knows us better than anyone should. I sympathise but, to be honest, I am less worried about what they know and far, far more worried about what they own. To do anything in what used to be our digital commons, we must now plead with Big Tech and Big Finance for the ability to use some of the data about us that they own outright."
This sums up our fundamental difference. I am one of those who finds life under constant surveillance intolerable. Varoufakis's utopia does not appear to offer me any relief from this. This is why (I speculate) he does not mention the UN/WHO/WEF totalitarianism during the pandemic, because the society he proposes is also, in many ways, technocratic and totalitarian.
Varoufakis is not a Luddite; he sees the changes AI is enabling as irreversible (and hopefully shapeable by humans). He endorses central bank digital currencies (and, by extension, digital ID), even proposing a scheme (presciently!) whereby we are bribed off fiat money. CBDCs and digital ID are the ultimate tools of repression and totalitarian control for me. Whilst he claims in the book to be opposed to the Chinese social credit system, he offers no account of crime and punishment in his utopia (remember, everybody is nice to each other) or how dissent towards the system is to be handled, but the digital gulag is the obvious 'solution' here.
Varoufakis would argue, I think, that all this is coming whether I like it or not and that the choice before me is that it is either in the power and control of the cloudalists or it lies with the demos. Presented with that choice, his utopia is obviously preferable, but I hope we can find a different way forward for our future; his utopia is worryingly dystopian for me.
It remains the case that the cloudalist's tech dystopia remains close to inevitable, for Varoufakis is short on suggestions of how we overthrow the system to reach his utopia. Limited strikes against Amazon and social media usage are unlikely to get us there, and he knows the future looks bleak. Marx predicted that the end state of capitalism was socialism; instead, history has cycled again and brought the return of feudalism.
‘Technofeudalism’ is a great book, beautifully written by an expert communicator of macroeconomic concepts and well-read by the author in the Audible version, though here you will miss a rather remarkable appendix. I thoroughly recommend it, whatever your political persuasion.