By Shriraksha Mohan
Economic systems have constantly evolved, and have been influenced by human needs, socio-cultural norms, historical events, and technological innovations of their time. In the 21st century, tremendous innovations in digital technologies have had a great influence on how economies function. Digital technologies and smartphones have redefined the notion of market. Trade and commerce have moved online. Markets are no longer confined to brick-and-mortar malls or shopping centers. Humans interacting in these digital markets are aided, sometimes coerced, by computer algorithms to make their choices.
Economists observing this new form of technology-aided capitalism opine that this stage of capitalism could be ushering in an era of neo-feudalism dominated by techno-oligarchs, who have amassed disproportionate amounts of wealth and gained excessive control over digital resources. With this control, capitalists are able to dominate every aspect of our lives like feudal lords did in feudal societies. Some have called this “techno-feudalism”, others have called this “digital feudalism” or “information feudalism”, and others “digital fiefdom” (1).
Once upon a time, when capitalism replaced the socio-economic system of feudalism, it held the promise of liberating serfs or agricultural laborers from the control of feudal lords, who owned the agricultural land on which serfs worked and produced crops. Serfs added value to the economy and landlords usurped value. The capitalist system, assisted by the emergence of new technology, broadened commercial activities and markets in which commodities could be sold, gave those who produced commodities an opportunity to determine their economic future.
Agricultural laborers no longer had to be under the economic bondage of feudal lords. Until this point, landlords were accumulating wealth through the rents they charged for the land, without being productive themselves and passed the land on to their heirs. As a result, a few privileged families held political and economic power under feudalism. Capitalism dismantled this power of clan and inheritance, to some extent. In capitalism, tradition and feudal hierarchy did not dictate trade. Capital available for investment and markets dictated commercial exchange.
The commercial society that followed feudalism, identified as capitalism by scholars, was characterized by the presence of markets outside of the feudal estates. This facilitated trade and exchange of commodities between people. Markets were seen as a liberating force, primarily, because they enabled people to satisfy their needs without being subjected to the severe exploitation of feudal lords. Therefore, capitalism was perceived to be a bit more favorable to agricultural laborers than feudalism. Capitalism has mutated ever since, and has taken different forms and shapes, at different times.
Merchant capitalists had convinced kings and queens that expanding their reach into foreign markets was the best way to serve the economic interests of European nations. This led to colonization and brutal subjugation of non-European societies. Early industrial revolution era capitalism, which was characterized by advancement in manufacturing technologies and increased productivity, led to exploitation of the working class at the hands of greedy industrialists. It created crowded towns and cities, poverty due to low wages, pollution, child labor and poor living conditions for industrial laborers. Capitalism’s promise of free markets and its ability to uplift the economic conditions of the masses already seemed questionable.
Capitalism in the twentieth century was characterized by dominance of big corporations which owned disproportionate amounts of capital, and controlled the markets, labor and other means of production to maximize their profits. These corporations were considered monopolies. Now, in the twenty-first century, a new form of capitalism has come into existence. Some economists opine that capitalism in its current incarnation is more exploitative like feudalism of the past. Monopolies have grown stronger, and are controlling what we buy and sell like never before.
According to Yanis Varoufakis, the author of Technofeudalism: What Killed Capitalism?, the current mutation of capitalism in the twenty-first century is the result of advancement in digital technology. He says, “Enter Amazon and you have exited capitalism. Despite all the buying and the selling that goes on there, you have entered a realm that can’t be thought of as a market, not even a digital one.” (2) What makes this form of capitalism so different?
In feudalism, income of the feudal lords came from rents, and in capitalism income of the capitalists comes from profits. Profits are a result of creating goods or services, while rents come from ownership and privileged access to resources like land, buildings, fossil fuels, raw materials, etc., which by themselves are unproductive or sterile. Yanis Varoufakis uses this distinction to point out that big technology corporations, which had once made investments in cloud technologies, have morphed into cloud platforms that can continue to thrive on steep rents or subscription fees, even without producing anything of value. They have a parasitic existence.
The business model of cloud service providers enables them to collect fees to host apps, data, software and e-commerce websites, on which people interact or buy and sell products. These cloud service providers do not produce anything themselves. The investment they had made in “cloud capital”, such as servers, fiber optic cables, distributed computer networks, is paying off now in the form of rent they can charge to host the products created by other capitalists. They control the algorithms that determine what end-users see when they interact with websites and other pieces of technology hosted on their cloud platforms.
This does not come as a surprise to many of us who are accustomed to seeing how a website or an app knows what we want to buy even before we have made up our mind to buy and actively searched for the item. User data and preferences are another form of cloud capital. Varoufakis likens this situation to feudalism due to his opinion that the free market does not exist anymore, in any form. Algorithms on cloud platforms control all human interactions. No one is free to decide for themselves when they interact with digital technology. Also, there is a rise of an ultra-wealthy rentier class of cloud technology owners, whom Varoufakis calls “cloudalists”.
Are we living in a post-capitalist dystopia defined by technofeudalism? Or does technofeudalism augur the death of capitalism? While we may not know the answers to these questions, we do know that digital technologies form the bedrock of communication and commerce in today’s world. Democratic control of digital technologies could be a way forward. Public ownership of algorithms can ensure responsible utilization of user data and preferences to make the process more transparent. Digital communication (social media, messaging platforms, internet services) should be recognized as a key industry, which has a large-scale socio-economic impact. Key industries ought to be run on a “no profit no loss” basis” and not be subject to the vagaries of the market.
Local government bodies must play an active role in monitoring the information disseminated on cloud platforms and regulating them. “Cloudalists” should not be allowed to accumulate more and more wealth that further empowers them to exercise total control over shared resources, both digital and material. Stock markets are the biggest culprits in facilitating upward movement of wealth to capitalists. Big tech companies aim to increase profits for their shareholders, rather than create products with economic and social value for people. Designing policies for ethical and benevolent use of digital technologies and for market regulation will determine the trajectory of our economic future.
- Evgeny Morozov, Critique of Techno-Feudal Reason, NLR 133/134, January–April 2022 (newleftreview.org)