The Age of Cloud Capital

Capitalism is finished. What's replaced it is even worse.

Madame Tussauds’ wax figure of Don Draper, February 24, 2021. (Photo by Noam Galai/Getty Images.)

By Yanis Varoufakis 

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 In that role it has been replaced by something fundamentally different, which I call technofeudalism.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 contend makes perfect sense: the thing that has killed capitalism is… capital itself. Not capital as we have known it since the dawn of the industrial era, but a new form of capital, a mutation of it that has arisen in the last two decades, so much more powerful than its predecessor that like a stupid, overzealous virus it has killed off its host. What caused this to happen? Two main developments: the privatization of the internet by America’s and China’s Big Tech. And the manner in which Western governments and central banks responded to the 2008 great financial crisis.

If we do pay attention, it is not hard to see that capital’s mutation into what I call cloud capital has demolished capitalism’s two pillars: markets and profits. Of course, markets and profits remain ubiquitous—indeed, markets and profits were ubiquitous under feudalism too—they just aren’t running the show anymore. What has happened over the last two decades is that profit and markets have been evicted from the epicenter of our economic and social system, pushed out to its margins, and replaced. With what? Markets, the medium of capitalism, have been replaced by digital trading platforms which look like, but are not, markets, and are better understood as fiefdoms.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. Specifically, it is a form of rent that must be paid for access to those platforms and to the cloud more broadly. I call it cloud rent. As a result, real power today resides not with the owners of traditional capital, such as machinery, buildings, railway and phone networks, industrial robots. They continue to extract profits from workers, from waged labor, but they are not in charge as they once were. They have become vassals in relation to a new class of feudal overlord, the owners of cloud capital. As for the rest of us, we have returned to our former status as serfs, contributing to the wealth and power of the new ruling class with our unpaid labor—in addition to the waged labor we perform, when we get the chance.

This great transformation, triggered by capital’s recent mutation, comes three centuries after capital’s original triumph in transforming feudalism into capitalism. Capitalism prevailed when profit overwhelmed rent, a historic triumph coinciding with the transformation of productive work and property rights into commodities to be sold via labor and share markets respectively. It was not just an economic victory. Whereas rent reeked of vulgar exploitation, profit claimed moral superiority as a just reward to brave entrepreneurs risking everything to navigate the treacherous currents of stormy markets. Nevertheless, despite profit’s triumph, rent survived capitalism’s golden age in the same way that remnants of the DNA of our ancient ancestors, including long-extinct serpents and microbes, survive in human DNA. Capitalist mega-firms, like Ford, Edison, General Electric, General Motors, ThyssenKrupp, Volkswagen, Toyota, Sony and all the others, generated the profits that outweighed rent and propelled capitalism to its dominance. However, like remora fish living parasitically in the shadow of great sharks, some rentiers not only survived but, in fact, flourished by feeding on the generous scraps left in profit’s wake. Oil companies, for example, have raked in gargantuan ground rents from the right to drill on particular plots of land or ocean beds—not to mention the unearned privilege to damage the planet at no cost to themselves.

To exercise capital’s power to command and make other humans work faster and consume more, capitalists required two types of professionals: managers and marketeers. Especially under the auspices of the post-war technostructure, these two service professions achieved greater prominence even than bankers and insurance brokers. Gleaming new business schools were set up to initiate MBA students in the dark arts of quick-marching a workforce towards explosive labor productivity. Advertising and marketing departments nurtured a generation of Don Drapers.

Then, cloud capital arrived. At one fell swoop it automated both roles. The exercise of capital’s power to command workers and consumers alike was handed over to the algorithms. This was a far more revolutionary step than replacing autoworkers with industrial robots. After all, industrial robots simply do what automation has been doing since before the Luddites: making proletarians redundant, or more miserable, or both. No, the truly historic disruption was to automate capital’s power to command people outside the factory, the shop or the office—to turn all of us, cloud proles and everyone else, into cloud serfs in the direct (unremunerated) service of cloud capital, unmediated by any market.

From factory owners in America’s Midwest to poets struggling to sell their latest anthology, from London Uber drivers to Indonesian street hawkers, all are now dependent on some cloud fief for access to customers. It is progress, of sorts. Gone is the time when, to collect their rent, feudal lords employed thugs to break their vassals’ knees or spill their blood. The cloudalists don’t need to deploy bailiffs to confiscate or to evict. Instead, every vassal capitalist knows that with the removal of a link from their cloud vassal’s site they could lose access to the bulk of their customers. And with the removal of a link or two from Google’s search engine or from a couple of ecommerce and social media sites, they could disappear from the online world altogether. A sanitized tech-terror is the bedrock of technofeudalism. Looked at in totality, it becomes apparent that the world economy is lubricated less and less with profit and increasingly with cloud rent. And so the delightful antinomy of our era comes into focus: capitalist activity is growing within the same process of energetic capital accumulation that degrades capitalist profit and gradually replaces capitalist markets with cloud fiefs. In short, capitalism is withering as a result of burgeoning capitalist activity. It is through capitalist activity that technofeudalism was born and is now sweeping to power.

Does all this matter to the way we live and experience our lives? It certainly does. Recognizing that our world has become technofeudal helps us dissolve puzzles great and small: from the elusive green energy revolution and Elon Musk’s decision to buy Twitter to the New Cold War between the USA and China and how the war in Ukraine is threatening the dollar’s reign; from the death of the liberal individual and the impossibility of social democracy to the false promise of crypto and the burning question of how we may recover our autonomy, perhaps our freedom too. Today, to own our minds individually, we must own cloud capital collectively. It’s the only way we can turn our cloud-based artifacts from automated means of behavior modification, that poison our social reality, to automated means of human collaboration and emancipation.

Yanis Varoufakis is an economist and former Greek Minister of Finance. He is the author of several best-selling books, including Technofeudalism: What Killed Capitalism. He was for many years a professor of economics in Britain, Australia, and the USA before he entered politics. He is co-founder of the international grassroots movement DiEM25 and a Professor of Economics at the University of Athens. 

From Technofeudalism: What Killed Capitalism. Used with permission of the publisher, Melville House Publishing. Copyright © 2023 by Yanis Varoufakis.

---

Follow Persuasion on X, LinkedIn, and YouTube to keep up with our latest articles, podcasts, and events, as well as updates from excellent writers across our network.

And, to receive pieces like this in your inbox and support our work, subscribe below: