Review of Technofeudalism, cloudalists & cloud serfs

The WaPo published a review of the book Technofeudalism: What killed Capitalism by Greek economist Yanis Yaroufakis. Yaroufakis argues that for a big portion of modern economies, the tech sector, profits have been significantly replaced by rents. Profit has to be earned. Rents are extracted by virtue of owning a property like Apple or Google app stores. The WaPo review comments (whole article not behind paywall):

Today, some prominent thinkers are telling a different story: Capitalism is dead. It’s a contention that’s explicit in the subtitle of Yanis Varoufakis’s bold new book, “Technofeudalism: What Killed Capitalism.” He joins a chorus of observers arguing that the scales have tipped in the direction of a new form of feudalism that strips capitalism of its best features. The former finance minister of Greece (and the negotiator of its debt crisis with the European Union) argues that capitalism has not been overthrown but has instead become something else. .... Blending intellectual memoir, history, and economic and technological history, Varoufakis creates an intimate atmosphere that is a genuine pleasure to read. But its message is grim.

The drumbeat of eulogies for capitalism — such as the media theorist Mckenzie Wark’s “Capital Is Dead: Is This Something Worse?,” an important interlocutor for Varoufakis — all point to the emergence of Big Tech as a breaking point in the story that goes back to the Industrial Revolution. The big tech companies — Amazon, Apple, Meta, Alphabet and Microsoft — along with Baidu, Tencent and Alibaba are not participants in markets so much as they are markets themselves. (Amazon founder Jeff Bezos owns The Washington Post.) These platforms only sell goods or host ads as a secondary feature. Their primary function, according to a growing chorus that includes Varoufakis, is to extract rent.

Rent is not profit. The distinction is subtle but crucial: .... Apple has been known to take a cut as large as a third from those selling apps in the App Store, effectively charging rent for being in one of two spaces — the other is Google Play — that all but dominate the mobile market. .... Apple has contributed nothing to the effort of actually producing the program I sell, yet they will receive a significant portion of every dollar that my consumers pay. As thinkers of the Industrial Revolution like Adam Smith and David Ricardo might put it, Apple’s revenue on the platform is merely passive, which is what makes it rent, unlike profit, which has to be actively earned. The problem is that, if the balance shifts away from genuine profit, no growth can occur. Rent is finite: The value that labor puts into commodities is added to the economy and becomes profit. If the economy starts to run on rent, it will stall.

But stagnation, for Varoufakis, would be the least of our problems. He describes the replacement of traditional capital by what he calls “cloud capital,” which no longer focuses on growth, value and profit, but instead on rent extraction and control. The “cloudalists” are the new capitalist bosses, and their influence extends far beyond the workplace to nearly every facet of your app-powered daily life. According to Varoufakis’s narrative, when we are the product — as we are when our clicks and searches generate profit for massive corporations, when our data is bought and sold — we’ve gone over from the relative freedoms of capitalism to technofeudalism, in which those who control the platforms have direct control over the rest of us, reducing us to the station of “cloud serfs.”

In other words, the rise of Big Tech is not just, some have called it, the “Fourth Industrial Revolution.” It is the end of the agreement that dissolved feudalism, from which grew both capitalism and democracy. Capitalism, as Marx pointed out, freed workers by dissolving the bonds of feudalism. The vassal who labored for a lord was bound to that lord and his land. By contrast, capitalist workers were free to exchange work for money, and “free” to starve if they did not. Contrast this to the positive freedoms of democracy: Varoufakis suggests that our digital world effectively destroys these, and wipes away the beating heart of capitalism with them. Cloud capital [] creates a mirage that looks like capitalism. But what seems like profit, and what seems like work, in the cloud, is really rent, and a new, high-tech form of serfdom.

This problem is worse than ever, and to the extent that it is a crucial part of capitalism, we still very much live under the umbrella of that label. The main virtue of Varoufakis’s book is that it poses the problem of global digitally mediated value. This by itself is illuminating, whether we adopt the term of art “technofeudalism” or not.