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Technofeudalism, by Yanis Varoufakis
Preface and chapters 1–4 AiPT study guide, March 16, 2025
The thesis of the book (preface, pp. 7–8) “is that capitalism is now dead, in the sense that its dynamics no longer govern our economies. In that role it has been replaced by something fundamentally different, which I call technofeudalism. At the heart of my thesis is an irony that may sound confusing at first but which I hope to show makes perfect sense: the thing that has killed capitalism is … capital itself.”
Varoufakis’ timeline of political economy
- 18th century: [W]hy not evict en masse the serfs from land that produced worthless turnips and replace them with sheep whose backs produced precious wool for the international markets? The peasants’ eviction, which we now remember as the ‘enclosures’ … gave the majority of people something they had lost at the time that agriculture was invented: choice. Landlords could choose to lease land for a price reflecting the amount of wool it could produce. The evicted serfs could choose to offer their labour for a wage. Of course, in reality, being free to choose was no different from being free to lose. (chapter 1, p. 30)
- By the middle of the nineteenth century, the thinking of Marx and other foundational left-wing thinkers was all about freeing us. (chapter 1, p. 31)
- To produce the rivers of credit necessary to fund the Edisons, the Westinghouses and the Fords of early-twentieth-century capitalism, small banks merged to form large ones and lent either to the industrialists directly or to speculators eager to buy shares in the new corporations. That’s how electromagnetism transformed capitalism: while its grids would go on to power mega-firms and its megawatts translated into mega-profits, it also created the first mega-debts in the form of vast overdraft facilities for the Edisons, the Westinghouses and the Fords. And it led to the emergence of Big Finance, which grew up alongside Big Business in order to lend it monies borrowed effectively from the future: from profits not yet realised but which Big Business promised to deliver. (chapter 2, p. 40)
- [S]ometime in the twentieth century, the left traded freedom for other things. In the East (from Russia to China, Cambodia and Vietnam), the quest for emancipation was swapped for a totalitarian egalitarianism. In the West, liberty was left to its enemies, abandoned in exchange for an ill-defined notion of fairness. The moment people believed they had to choose between freedom and fairness, between an iniquitous democracy and miserable state-imposed egalitarianism, it was game over for the left. (chapter 1, p. 31)
- 1941–2: For immediately after the Japanese bombing of Pearl Harbor brought the US into the Second World War, the US government began to emulate … the Soviet one. It told factory owners how much to produce and to what specifications, from aircraft carriers to processed food. … It is no exaggeration to say that American capitalism was run according to Soviet planning principles, with the important exception that the networked factories remained under the private ownership of Big Business. (chapter 2, p. 42) … Whereas capitalism had come to life by turning feudalism’s societies-with-markets into decentralised market societies, the rise of the technostructure transformed American capitalism from a decentralised market society into a centralised economy-with-markets. It was precisely what the Soviet planners had always hoped to achieve, but failed. (chapter 2, p. 46)
- Bretton Woods was the audacious global financial system devised by the New Dealers in 1944 whose purpose was noble: to thwart the Great Depression’s return after the war had ended. … So Washington understood that its first task would be to remonetise Europe–literally, to provide them with money to spend in order to get their economies running again. … The financial project of the Bretton Woods system was bold: to ‘dollarise’ the currencies of Europe and Japan by linking European currencies and the yen to the dollar with fixed exchange rates–hence the thirty drachmas to one dollar whose demise disturbed you in 1975. … Naturally, there had to be limits to how many dollars one could get for one’s ‘funny money’–Greek drachmas, Italian lire, etc. These limits were known as capital controls: restrictions in the movement of money from one currency to another. They made the life of bankers wonderfully boring by denying them the opportunity to speculate on shifts in the relative value of currencies… For the dollar to be the apple of everyone’s eye, at the fixed exchange rates the Bretton Woods system guaranteed, America had to be a surplus-amassing country–meaning, it had to sell more goods and services to the rest of the world than it imported. (chapter 2, p. 48–50)
- [C]apitalism’s Golden Age. From the war’s end until 1971, America, Europe and Japan enjoyed low unemployment, low inflation, high growth and massively diminished inequality. (chapter 2, p. 50)
- The 1960s: “The mass commercialisation of nostalgia Draper alludes to marked a turning point for capitalism. While the big issues of the 1960s were the Vietnam War, civil rights and the institutions that might civilise capitalism (Medicare, food stamps, the welfare state), Draper was putting his finger on a fundamental mutation in its DNA. Efficiently manufacturing things that people craved was no longer enough. Capitalism now involved the skilful manufacture of desire.” (chapter 2, p. 36)
- By the late 1960s, the Bretton Woods system was dead in the water. … Three developments which caused America to lose its trade surplus and become a chronically deficit economy. The first was the escalating Vietnam War which forced the US government to spend billions in South East Asia on supplies and services for its military. The second was President Lyndon Johnson’s attempt to make amends for the ill effects of conscription on working-class America, its black communities in particular. His valiant but expensive Great Society programme substantially reduced poverty but, at once, sucked lots of imported goods from Japan and Europe into the United States. Lastly, Japan’s and Germany’s factories surpassed America’s both in terms of quality and efficiency, partly due to the support successive US governments had extended to Japan’s and Germany’s manufacturing sectors–the car industry being an obvious example. (chapter 2, p. 51)
- The breakdown of the drachma–dollar exchange rate that had so impressed you was a consequence of the downfall four years earlier, in August 1971, of the so-called Bretton Woods system. (chapter 2, p.48)
- In the end, it was neither the hippy left nor the libertarian right that disintegrated the Global Plan. It was the work of functionaries who had served the technostructure well. We know this from the horse’s mouth, the former New Dealer who was at the centre of the 1971 Nixon Shock and who, between 1979 and 1987, chaired America’s central bank, the Fed. In a 1978 speech at Warwick University, Paul Volcker explained succinctly and cynically what they were up to: ‘[ A] controlled disintegration in the world economy is a legitimate objective for the 1980s.’ (chapter 2, p. 61)
- 1970s: The new American Minotaur’s appetite kept the gleaming German factories busy. It gobbled up everything produced in Japan and, later, in China. This kept Europe and Asia peaceful and prosperous (for now). In return, the foreign and often the American) owners of these distant factories sent their profits, their cash, back to Wall Street to be invested – an additional form of tribute, which enriched America’s ruling class, despite its deficit. (chapter 2, p. 56)
- 1970s–1980s: the creation of the internet commons, later to be enclosed by cloud capitalists (no quote, sorry!)
- On Boxing Day in 1991, … history was marking not just the demise of the Soviet Union but also the end of the social democratic dream: of a mixed economy, in which government provided public goods while the private sector produced plentiful goodies to satisfy our whims–all in all, a civilised form of capitalism where inequality and exploitation were kept in check in the context of a politically mediated truce between the owners of capital and those who had nothing to sell but their labour. (chapter 1, p. 32)
- By 2007, humanity’s total income had risen from
50 to75 trillion–a decent 33 per cent increase over five years. But the sum of bets in the global money market had gone up from70 to750 trillion–a rise in excess of 1000 per cent. That’s when I lost you. Or, more accurately, it is when we agreed that the numbers had gone mad, an arithmetic reflection of capitalism’s hubris. - 2008(ish): “the internet shattered capitalism’s evolutionary fitness.” (chapter 2, p. 67) … “The New Enclosures”: A strikingly similar sequence gave birth to cloud capital: first, the epic ransacking of the internet commons, made possible by politicians, and then a sequence of spectacular technological inventions–from Sergey Brin’s search engine to the dazzling array of today’s AI applications. … each required a comprehensive plunder of a commons, a complicit political class, and only then a marvellous technological breakthrough. (chapter 3, pp. 80–81)
- So at their London summit in April 2009, the G7’ s central bankers–along with their presidents and prime ministers–agreed to do whatever it took to refloat the banks. That was sensible. What was preposterous was that, in addition to saving the failed banks, they bailed out the quasi-criminal bankers responsible for their failure, along with their lethal practices. And far worse, in addition to practising socialism for the bankers, they subjected workers and the middle class to vicious austerity. … Seeing that the vast majority were likely to be stuck in poverty and precarity for the foreseeable future, Big Business went on history’s deepest and longest investment strike, while spending large sums on things like real estate deals that gentrified neighbourhoods and deepened divides. (chapter 4, pp. 111–113)
- It was the pandemic, with the flood of state money it unleashed, that ushered in the Age of Cloud Capital. … Share markets do rise in response to bad news, but only when the news, however awful, turns out at least somewhat better than anticipated. … That’s what made 12 August 2020 so bizarre: news far worse than anticipated had caused the share market to rise. Nothing like it had happened before. … The news, it turns out, was so bad that traders in the City of London had the following realisation: ‘When things are this dismal, the Bank of England panics. And what have panicky central banks been doing since the crash of 2008? They print money and give it to us. And what do we do with all the freshly minted dough from the central bank? We buy shares, sending their price up. And if prices are destined to go up, only a fool would miss out on the action. A wall of printed money is surely on its way to us. Time to buy!’ And buy they did, causing the City of London to defy the gravitational laws of capitalism. … So why invest in such stuff? Instead, they would do something riskless, profitable and stress-free: they used it to buy back their own company’s shares–boosting their company’s share price and, along with it, their own bonuses. (chapter 4, pp. 106–107)
- In the ensuing cacophony, terrestrial capitalists–traditional car companies, oil corporations, steel producers and the like–were happy to sit on their growing paper wealth, transforming it into real estate or other traditional assets. By contrast, cloudalists like Jeff Bezos and Elon Musk acted quickly to turn their paper wealth, before it vanished, into a far greater value extractor: cloud capital. … Using their appreciating shares as collateral, the cloudalists mopped up many of the billions sloshing around within the financial system. With them, they paid for server farms, fibre optic cables, artificial intelligence laboratories, gargantuan warehouses, software developers, top-notch engineers, promising start-ups and all the rest. (chapter 4, pp. 121–122)
Varoufakis vs. Marxism
Varoufakis argues that “capitalism is on the way out (and not merely undergoing one of its many impressive metamorphoses)” (preface, p. 8)
“[C]apital’s mutation into what I call cloud capital has demolished capital’s two pillars: markets and profits. … Markets, the medium of capitalism, have been replaced by digital trading platforms which look like, but are not, markets, and are better understood as fiefdoms. And profit, the engine of capitalism, has been replaced with its feudal predecessor: rent.” (preface, p. 8)
“Have I forgotten that nothing strengthens capitalism more than the illusion it is evolving out of existence and into something new–a mixed economy, a welfare state, a global village?” (chapter 2, p. 35)
“Conjured from thin air? To be clear, yes. 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 keystrokes on a keyboard are necessary. … Bretton Woods was designed to prevent such greed-fuelled recklessness from bringing humanity to the brink of another Great Depression, indeed another world war, ever again. But once it was gone, the bankers were free to run amok–again.” (chapter 2, p. 53)
Before we even get to cloud capital/technofeudalism, Varoufakis identifies western neoliberalism and the socialism of the Soviets and CCP as breaks, not evolutions!, from earlier ideas: “Neither new nor liberal, neoliberalism was an uninteresting hodgepodge of older political philosophies. As a piece of theory, it had as much to do with really-existing capitalism as Marxism had to do with really-existing communism: nothing!” (chapter 2, p. 63)
A key feature of this new mode of … not capitalism is that the labour that reproduces it is not voluntary or remunerated: “Every time we go online to enjoy the services of these algorithms, we have no option but to cut a Faustian deal with their owners. To use the personalised services their algorithms provide, we must submit to a business model based on the harvesting of our data, the tracking of our activity, the invisible curating of our content. Once we have submitted to this, the algorithm goes into the business of selling things to us while selling our attention to others. At that point something more profound kicks in which gives the algorithm’s owners immense power–to predict our behaviours, to guide our preferences, to influence our decisions, to change our minds, to thereby reduce us to their unpaid servants, whose job is to provide our information, our attention, our identity and above all the patterns of behaviour that train their algorithms.” (chapter 3, p. 92)
“Cloud capital, in contrast, can reproduce itself in ways that involve no waged labour. How? By commanding almost the whole of humanity to chip in to its reproduction–for free! … Consider what cloud capital consists of: smart software, server farms, cell towers, thousands of miles of optic fibre. And yet all of this would be worthless without ‘content’. The most valuable part of the stock of cloud capital is not its physical components but rather the stories posted on Facebook, the videos uploaded to TikTok and YouTube, the photos on Instagram, the jokes and insults on Twitter, the reviews on Amazon or, simply, our movement through space, allowing our phones to alert Google Maps to the latest spot of traffic. In providing these stories, videos, photos, jokes and movements, it is we who produce and reproduce–outside any market–the stock of cloud capital. … Workers employed by General Electric, ExxonMobil, General Motors or any other major conglomerate collect in salaries and wages approximately 80 per cent of the company’s income. This proportion grows larger in smaller firms. Big Tech’s workers, in contrast, collect less than 1 per cent of their firms’ revenues. The reason is that paid labour performs only a fraction of the work that Big Tech relies on. Most of the work is performed by billions of people for free.” (chapter 3, pp. 94–97)
The disappearance of real market competition and the concentration of wealth and power: “This is no market town. It is not even some form of hyper-capitalist digital market. Even the ugliest of markets are meeting places where people can interact and exchange information reasonably freely. In fact, it’s even worse than a totally monopolised market–there, at least, the buyers can talk to each other, form associations, perhaps organise a consumer boycott to force the monopolist to reduce a price or to improve a quality. … Under feudalism, the overlord would grant so-called fiefs to subordinates called vassals. These fiefs gave the vassals the formal right to exploit economically a part of the overlord’s realm–to plant crops on it, for example, or graze cattle–in exchange for a portion of the produce. The overlord would then unleash his sheriff to police the fief’s execution and collect what he was owed. Jeff’s relationship with the vendors on amazon.com is not too dissimilar. He grants them cloud-based digital fiefs, for a fee, and then leaves his algo-sheriff to police and collect.” (chapter 3, pp. 100–101)
“To use the language of early economists like Adam Smith, it is a classic case of feudal rent defeating capitalist profit; of wealth extraction by those who already have it triumphing over the creation of new wealth by entrepreneurs. … In reality, since Smith wrote his famous lines in the 1770s, rent has survived and even prospered under capitalism. Cartels, consumer gouging, the technostructure’s successful manufacturing of desires for things we do not need, financialised asset-stripping–all of these practices have generated increasing rents within capitalism. Nevertheless, Smith’s optimism was supported by the bigger picture: rent survived only parasitically on, and in the shadows of, profit.” (chapter 4, p. 124)
“BlackRock, Vanguard and State Street. These three firms, the Big Three as they are known in financial circles, effectively own American capitalism. No, I am not exaggerating. … This could not have happened before 2008 because until then the ultra-rich simply did not have access to enough cash with which the Big Three could buy a significant chunk of the New York Stock Exchange. After 2008, however, central bank-sponsored socialism for the ultra-rich created more than enough money.” (chapter 4, pp. 124–126)