Socialists might seem a bit obsessed with how words are used, not because we consider ourselves to be the special constables of whatever language we speak, but because we are interacting with our fellow members of the working class, engaging with ideas about what words represent and defending and advancing our political tradition, in order to gain working class freedom.
So it is of some interest that we have had a globally known political individual, celebrated by many, stating in bold capital letters on the back cover of his book that ‘CAPITALISM IS DEAD WELCOME TO TECHNOFEUDALISM’.
It is this assertion, made popular by Yanis Varoufakis with his book Technofeudalism – What Killed Capitalism (2023) and its consequences that will be examined here.
Two years before the publication of Varoufakis’s book, a French academic published a book titled Technofeudalism: A Critique of the Digital Economy which argues along similar lines to Varoufakis’ book but with a more philosophical perspective. Durand puts the root of the digital economy’s structure in what he calls ‘The Californian Ideology’ – radical individualism, libertarianism, and neoliberalism emerging from Silicon Valley – but does not go as far as stating that technofeudalism has replaced capitalism. Varoufakis mentions Durand’s work in the acknowledgements of his book.
The book by Durand locates the first use of the word ‘technofeudalism’ to a science fiction role playing game manual – the GURPS (Generic Universal Role-Playing System) Cyberpunk Adventures where it is mentioned once:
‘As the world becomes tougher, the corporations adapt by becoming tougher themselves, out of necessity. This “we protect our own” attitude is sometimes called techno-feudalism. Like feudalism, it is a reaction to a chaotic environment, a promise of service and loyalty from the workers in exchange for a promise of support and protection from the corporation’.
GURPS Cyberpunk Adventures book has an interesting story in itself: the editor’s home and publisher’s office were simultaneously raided by the US Secret Service who were under the impression that the book was a computer hacking manual and confiscated the disks containing the book. The publishers got them back in the end although the hard drives no longer worked and the book had to be re-written from memory. Several of the people involved in that episode went on to become founder members of the Electronic Frontier Foundation.
Technofeudalism
In the body of Varoufakis’s book, the author makes the case for technofeudalism in the form of a conversation with his father, who had recently died. There are lots of interesting examples, anecdotes, bits of history, and the recalling of conversations about current events as they happened in the context of his father nearing the end of his life. The book has an appendix named The Political Economy of Technofeudalism, where Varoufakis lays out his case in a much more direct way.
In the main part of the book there are lots of sweeping statements made without qualification, and somewhat gross generalisations. The author makes similar statements in some of his interviews. He has said capitalism ‘is defined by profits and markets’ and left it at that, but in this appendix he shows a greater understanding:
‘Under feudalism, the power of the ruling class grew out of owning land that the majority could not own, but were bonded to. Under capitalism, power stemmed from owning capital that the majority did not own, but had to work to make a living. Under technofeudalism, a new ruling class draws power from owning cloud capital whose tentacles entangle everyone’.
‘Cloud’ here means data centres. That data may be data (information) or it may be code which enables networked software like Zoom to work. Like most resources in capitalism, the cloud is mostly owned by a few capitalists and is thus used to ration access to software and data via subscription services, such as Netflix.
Capitalism
Varoufakis states there are eight keys to understanding capitalism: commodity production; distribution of revenue into wages, interests, rents and profits; circulating money capital; capital accumulation, frequent crises; social classes (capitalist, middle class, waged labourers); extractive power (inequality and state enforcement); and a ‘techno-structure’; marketing and behavioural modification infrastructure.
Varoufakis also has a spin on the Labour Theory of Value to support his view. He states that value in capitalism has an experiential form – which seems to be synonymous with what Marx called use-value – examples given include – both commodities such as drinking water – and non-commodities like sunsets, or feeling appreciated. Exchange or commodity value, he states, is a quantity at which goods and services trade for one another. Labour is treated as a separate category but in similar terms as experiential labour and commodity labour. He states the ‘exchange value of commodity labour equals the sum of experiential labour that other workers have put into commodities that a worker’s wage can buy’.
According to Varoufakis two main forces cause capitalism to enter crises – the falling rate of profit and debt crisis (financiers going on credit strike). Rent he considers to be any price paid by a buyer above the price which most closely reflects the exchange value of the commodity. This includes ground rent, financial rent (interest), monopoly rent and brand rent (higher prices associated with in-demand brands, eg Apple computers or Nike training shoes). Varoufakis considers capitalism to be driven by profit and private debt.
Private debt he says is created by financiers from thin air – which qualifies him as a bit of a ‘currency crank’ – his note on this simply says bankers create loans from thin air by an audacious transfer of future values to the present. In the main text he states:
‘Most people think that banks take Jill’s savings and lend them to Jack. That’s not what banks do. When a bank lends Jack money, it does not go into its vault to check it has enough cash to back the loan. If it believes Jack will return the loan, plus the agreed interest, all the bank needs to do is add to Jack’s account the number of dollars it lends him. Nothing more than a typewriter or, today, a few strokes on a keyboard are necessary’.
We would disagree here and state that crises are caused by the chaotic nature of capitalist production that doesn’t know when to stop producing. Debt crises are a symptom of over-production in the real economy. The falling rate of profit is a real tendency but is generally negated by the development of new markets and labour market flexibilities. The Thin Air Theory of Debt is debunked (as detailed in the Socialist Party Pamphlet The Magic Money Myth). There is no reason to extend the concept of rent to the price pain of money loans (interest) or monopoly prices.
Cloud serfs, cloud proles and cloud fiefdoms
Varoufakis goes on to define technofeudalism. He starts with cloud capital, defined as the agglomeration of network machinery, software, AI-driven algorithms and communications hardware criss-crossing the whole planet and performing a wide variety of tasks. These include inciting billions of non-waged people (‘cloud serfs’) to work for free at replenishing cloud capital’s own stock (eg by uploading photos and videos to Instagram or TikTok, or submitting film, restaurant and book reviews, allowing their every click to be tracked across their social media use). Two further ideas central to his case are introduced here: the industrialisation of marketing to buy goods on platforms (‘cloud fiefdoms’), plus and the enhanced automation of actual physical production of goods by what he calls ‘cloud proles’.
Here the word capitalist is replaced by “cloudalist”. He states that because there are major cloud-based services (such as Twitter/X, or Uber) that have not made significant profits but managed to grow via issuing shares. He also states that Big Tech were the main effective recipients of extra currency produced by central banks in the post-2008 growth period and particularly during the pandemic. Via the money and share markets, and the inflation of the value of fictitious assets low interest loans were obtained to spend on cloud infrastructure. So profit via the direct exploitation of labour, became irrelevant for the cloudalists, instead their focus was on market dominance – the establishment of “cloud fiefdoms”. Varoufakis argues that profit is no longer the goal of the cloudalist, instead they seek “cloud rent” paid by “cloud vassals” (the “terrestrial capitalists” who now sell their goods and services via the cloudalist platforms).
Using social media services is of course not working for Big Tech for free: that is not an obligatory activity for survival based on social class like wage-labour is for most people. In fact, those who are doing the value-creating work are those collecting data – which is a whole industry: it’s the bread and butter of Google and Facebook and their thousands of workers. And almost every other firm selling on the internet is using in-house or third party SEO (search engine optimisation) software and expertise to boost sales by exploiting data about potential clients. It’s as if shopkeepers don’t rearrange their window displays to attract their customers, just because they can now do it remotely tailored for individual customers. Profit is still the driver, and movement of surplus capital from one section to another has always happened, including via the state’s capital which is sourced by skimming off capitalist production by means of taxation.
Many of the trends identified in Varoufakis’ thesis are in fact the continuation of long running trends in capitalism. Capitalists in different sectors are in constant competition for access to shares of the surplus value created by work. As the review in this journal stated: ‘What Varoufakis is analysing is not the downfall of capitalism, but its purest application’.
Critical and uncritical reception
Publicity material for the book garnered positive comments from a variety of sources: ‘The dark scary exciting song of our age’ (Irvine Welsh), ‘An urgent demand to seize the means of computation’ (Cory Doctorow), ‘Remarkable’ said the Financial Times who made it ‘Best Book of the Year’, ‘This is the world grappling with an entirely new economic system and therefore political power’ (Observer).
Several Trotskyist papers criticised the book on similar lines as this journal. Meanwhile a lengthy review in Jacobin Magazine said it was wrong about serfdom and that the economy still relies on a class of wage labourers.
However, for every review that seriously engaged with the idea and agreed that capitalism was not dead and that technofeudalism was not a new form of society, there are a multitude of newspaper reviews and blogs that just repeat the ideas in the book – trading on the excitement of something apparently new, it seems. Whilst not widespread, we have seen the term ‘technofeudalism’ spring up across social media: in posts by commentators suggesting that it is now the new social system and needs to be escaped from, in adverts for security software that will prevent cloud serfdom, for crypto-currencies, and for introductions to join slightly shady looking discussion groups on Telegram which promise to spill the beans on how to break out of the system.
Viewed generously Varoufakis’s contribution in Technofeudalism – What Killed Capitalism has put discussion of ideas about capitalism, the system we have now, into the ‘Recent Publications’ section of bookshops and libraries, both physical and in the cloud. But socialists have not been convinced that capitalism is dead. What it will take to kill capitalism is a politically organised working class that understands capitalism and wants socialism.
PDH
Blogger's Note:
There is a review of Yanis Varoufakis' book by Pik Smeet in the January 2024 issue of the Socialist Standard.
