For as long as there has been "capitalism," there have been observers predicting its demise—most famously Karl Marx himself, who helped popularize the term. Nearly a century later, James Burnham foresaw a "managerial revolution," in which control over production would be taken over by a new class of administrators and technocrats, while Joseph Schumpeter prophesied that capitalism would be undone by its very success as intellectuals and industrialists turn against it. While Marxist writer Fredric Jameson observed that it is easier to imagine the end of the world than the end of capitalism, plenty of thinkers would counter that witnessing the end of capitalism requires not imagination but simple observation of, as Burnham put it, "what is happening in the world."
With Technofeudalism: What Killed Capitalism, Yanis Varoufakis joins this strange canon, arguing that capitalism has disappeared right under our noses. Varoufakis, who rose to global prominence as Greek finance minister during the country’s debt crisis, is a self-proclaimed "libertarian Marxist," and Technofeudalism is as intriguing and puzzling as his label, though it does not ultimately persuade.
Varoufakis contends that new technologies have over the last decade put an end to capitalism. But, contrary to what conventional Marxists promised, it has managed to be replaced by something even worse. Under capitalism, the owners of capital are supposed to compete with each other, pursuing profits in the market. But markets—the forums in which buyers and sellers directly engage with each other—have been overtaken by digital platforms that control every feature of these previously free transactions; think of Amazon or Apple’s App Store. And this establishment of digital "fiefs" has in turn eliminated profits—the surplus revenue that drives one to beat the competition. Through their intermediation in these digital transactions, fiefs can take a cut from every sale without producing anything themselves. This cut constitutes a "cloud rent," rents being any money gained through a privileged position that competition would have eliminated.
Together, these two transformations—from markets to digital platforms, and from profits to rents—have moved us beyond capitalism into technofeudalism, with the capitalists replaced by "cloudalists." These rulers of the cloud constitute a new feudal class, overseeing the many vassal businesses which in turn shape the decisions of everyday serfs—you and me.
It would be easy to dismiss Varoufakis’s high-flying theorizing as a case of an errant economist high on his own supply. But this sort of macroeconomic musing on capitalism’s succession is worth taking seriously, for it pushes the reader to ask whether we’re observing business as usual or something else—and what business as usual even means. In particular, by tying capitalism’s development to the evolution of the internet and the computer, Technofeudalism raises a serious question: How is it that the internet, which so many thought would be a radical tool for decentralization, has come to be dominated by a few corporate behemoths? And why do so many users feel a sense, not of autonomy, but of invasion, in which someone else controls our data and digital identity? Steve Jobs thought that the computer would be a "bicycle for our minds," empowering free individuals to explore the world. But the internet so often feels instead like a tank rolling over our minds, or perhaps a rollercoaster we can’t get off of.
Varoufakis argues that this dream of a decentralized internet was, however briefly, a reality. The early internet was a "digital commons," marked by open-source protocols that anyone could copy and modify for free. But an elaborate string of events, including President Richard Nixon’s taking the dollar off gold, central banks’ response to the 2008 financial crisis, and the pandemic, enabled financiers to pump money into Big Tech, which in turn poured its investments into digital infrastructure and the expansion of their cloud serfdoms. The result has been "the conversion of billions of us into willing cloud serfs volunteering to labor for nothing to reproduce cloud capital for the benefit of its owners."
There is a fascinating story to be told about how software’s seemingly inevitable growth was instead the very contingent result of a complex of political and economic factors, but Varoufakis details the rise of the cloudalists too quickly for it to convince. A more compelling presentation of this history would have given more attention to these details and less to Varoufakis’s opinions on Mad Men and Homer.
Still, Varoufakis’s core point, that capitalism will change as technology does, is surely right, and essential—Adam Smith, for example, famously used the new pin factories of the Industrial Revolution to understand the division of labor. That being said, it’s far from clear that the dramatic identification of a new stage of history is called for. The rent-seeking that Varoufakis puts at the heart of this feudal system has been a bugbear of capitalism’s champions since Smith himself. Businesses have always sought special privileges for themselves that blocked out competitors and boosted their leverage against customers—why wouldn’t they? Apple’s ability to charge a 30 percent commission rate to developers who want their products on the App Store is a genuine obstacle to a more vibrant internet, but feudalism it ain’t. If we need a term for this phenomenon, fellow leftists Rebecca Giblin and Cory Doctorow were closer to the mark when they dubbed it "chokepoint capitalism."
Varoufakis’s more libertarian praise for competition over cronyism also comes into conflict with his leftist commitments in his criticism of the internet’s privatization. He laments that "our digital identity belongs neither to us nor to the state. Strewn across countless privately owned digital realms, it has many owners, none of whom is us." Many of us are indeed mystified about what is really "ours" online—consider those incomprehensible terms and conditions agreements and now concerns about artificial intelligence’s replication of our words and images. But if the goal is individual ownership of our digital identities, then the obstacle isn’t privatization, but the lack of it. A more certain sense of ownership and privacy over our data is a worthy goal, but a return to the early "digital commons" would only compound confusion, at users’ expense, about who really owns what online.
Reviving the dream of the freer, purer internet of yesteryear should also prompt a deeper question: Could that "Internet One" ever have turned out otherwise? After all, the internet was itself the product of Cold War military innovation, an irony that Varoufakis calls "history’s greatest ever antinomy": "a US government-built and -owned, non-commercial computer network that lay outside capitalist markets and imperatives but whose purpose was the defense of the capitalist realm." And for all his flower-child talk about liberating the individual, it was Steve Jobs himself who thought up the App Store, a "walled garden" locking developers into a centralized system. Perhaps, then, a decentralized digital commons was always going to be an unstable point between more centralized equilibria. In that case, the solution can’t be a libertarian fantasy of using the web to escape the state.
But the second part of Varoufakis’s libertarian Marxism won’t do, either. His proposal for a "cloud rebellion to overthrow technofeudalism" is the weakest part of the book, as he shifts from mind-opening theorizing to dull manifesto-waving. Here, Varoufakis might have learned from his predecessors: What makes Burnham and Schumpeter so engaging is, paradoxically, the very disinterested coldness of their observations. Varoufakis provides some stimulating provocations, but a clearer assessment of capitalism’s metamorphoses will require a greater sobriety than he can provide.
Technofeudalism: What Killed Capitalism
by Yanis Varoufakis
Melville House, 304 pp., $19.99
Robert Bellafiore is research manager at the Foundation for American Innovation.