Technofeudalism by Yanis Varoufakis

Technofeudalism is the culmination of many years of economic thinking by the Greek economist and ex-Finance Minister Yanis Varoufakis. Describing the transformation of capitalism into something completely different, Varoufakis has written a controversial book about the economic future we are entering. The book takes the form of a letter, written to his father, and answering the questions that his father posed to him about the state of the world, and the future of capitalism.

Varoufakis argues that liberal market economics and capitalism are no longer the defining paradigm of the current economy. Capitalist economies are defined by profit and a free market. Companies – producers – are in search of greater profits, and they do so within a market of exchange, where buyers and sellers can see the goods on offer, and trade money between them. However, what defines today’s largest companies (and those with the greatest power) is not profit, but rent, and not a free market, but an algorithmically-determined online platform. Amazon, Google, Apple… these companies all amass great fortunes through taking a cut of all the transactions made on their platforms. They do not offer marketplaces – buyers and sellers are not free to discuss and trade on their own terms – rather, they offer curated spaces determined by algorithms where they, the company, always have the upper hand. The market is now in the cloud, not in the material world, and all the shops, all the buildings, the streets, the lights, the signs… all belong to one person. Moreover, the company itself doesn’t really sell anything – it just lets other people sell things and takes money from them in the process. These spaces resemble the old order of feudalism, which was the dominant social system before capitalism took over in the 18^th century. Hence the name of this new system: technofeudalism.

In today’s society, citizens no longer own their own identity. They must use verification measures owned by other companies, and their data that is produced is hosted, manipulated, and owned by these cloud capitalists. When you do something on Google Maps, Google owns the data that shows how long it took for you to get from Point A to Point B. It can then use this data to propose route times to other users, therefore increasing the value of the application, through using your data, without paying you. They make money from work that you do, for free.

Varoufakis presents two main solutions to this problem, which would help return power and wealth to the majority of citizens, rather than continuing to let it flow to these cloud capitalists. The first of these is to establish a one-person, one share, one vote scheme of governance for companies. Instead of having shareholders with the majority of the wealth, companies will be directed and governed by all the employees, collectively. Employees can make propositions which are then voted on by other employees, and each vote has an equal weight. Wages, new hires, expansion plans, environmental targets… everything is subject to a vote.

The second solution is that the central bank issues each person with a digital wallet, and a digital ID. This would allow normal citizens to own their own identity in the cloud, and allow them to be paid for the services they offer to these companies, and for them to pay for other services offered to them. Instead of holding money in an account with a private bank, where this money is then riskily invested in the stock market, people’s savings would be protected by the central bank, which is not at risk of collapse in the same way that the private banks are. Everyone’s money would be safe.

In New Zealand, like in many other countries, economists do not stop talking about markets, profits, and growth. What Varoufakis’ thesis shows is that these theories, which failed to predict the global crisis of 2008, and whose policies have shown to be weak in the face of other crises since, might just be obsolete. They no longer explain the world around us in which we live. That creates a major problem, because we cannot accurately understand the crises which we are experiencing, and we fail to respond in adequate ways to confront the real seats of power, both economic and political, and domination.

New Zealand is a small, relatively insignificant country on the global scale. We have almost no economic, political or institutional power. We follow the United States for much of our responses, deferring to their power because we have nothing to use ourselves. Our economy is composed of major banks, many of which are Australian; we use online services where our data is sent to the United States; our two supermarket chains collude to keep prices high and rake in profits. All of our cloud capital is located with the United States – we work, for free, for Google, Facebook, Amazon, Apple… all in America. And none of the returns are seen in New Zealand.

The book recognises that there are ecological problems that result from the kind of economy that we have at the moment, but it fails to properly address these issues. Varoufakis is very much focused on solving the problem of control or domination by large companies over everyday citizens, and the way that money flows through the economy. He doesn’t talk about material resources very much – after all, that is the thesis, that most wealth is generated through actions on digital cloud platforms, and not with physical capital like tomatoes and cars. It is also not clear how we might arrive at implementing the solutions he proposes, or what might happen once they are implemented. However, having the ideas is the first step towards finding a plan to put them in place.

The book is quite easy to read, and full of examples and stories from Varoufakis’ youth. I would recommend it if you are looking for something which will extend your economic horizons, and help you to understand how the economy is changing, and being shaped by cloud capital. Varoufakis is clear that his position is just a thesis, a hypothesis, which we will see, in time, the extent to which he is correct.