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What Killed Capitalism

Reviewed by G Sampath

Published : Saturday, 20 April, 2024 at 12:00 AM  Count : 640

What Killed Capitalism

What Killed Capitalism

Economist and former Greece finance minister argues that capitalism has been supplanted by a new tech-enabled system whose animating logic is not profits but rent-seeking…

Capitalisms death has been foretold many times over. For some, it is the destiny of the proletariat to finish off capitalism. For others, like Raghuram Rajan, the capitalists themselves are shoving the knife in. And for the economist who, as Greeces finance minister, battled Europes financial establishment (and lost), capitalism has been killed off by cloud capitalists, or cloudalists, a mutant of the old capitalist class that has liberated itself from the twin imperatives of capitalism - market competition and profit.

In Technofeudalism: What Killed Capitalism, Varoufakis argues that capitalism has been supplanted by a new tech-enabled system whose animating logic is not competition, wage labour, and profit-seeking but market monopoly, unpaid labour, and rent-seeking - reminiscent of a state of affairs that preceded capitalism, which we know as feudalism.

Social network
The thesis that digital technology has transformed capitalism into a version of feudalism is not new. Way back in 2014, when the Internet of Things and Big Data occupied positions in the hype-index currently held by AI and the Metaverse, science fiction author Bruce Sterling wrote that "a materialised network society" marked by relentless data capture is ushering in an era of digital feudalism where people "are like the woolly livestock of a feudal demesne, grazing under the watchful eye of barons in their hilltop Cloud castles."

Since then, several writers have advanced similar theses. For Varoufakis, three phenomena - the privatisation of the Internet, the sustained quantitative easing in the decade after the 2008 financial crisis, and the rise of China as an economic powerhouse - were instrumental in the emergence of an ecosystem where profits took a backseat. Instead, they incentivised burning cash to build market dominance, or "cloud fiefs" - a fair description of what digital overlords such as Facebook, Amazon, and Uber have done.

Feudal traits
However, Varoufakis conceptual framework rests on equating platforms freely appropriating users data/content-creation with medieval barons freely appropriating the peasants produce, a problematic leap. Contemporary capitalism certainly displays feudal characteristics. But are they due to algorithms, or are they intrinsic to a particularly virulent strain of capitalism that has become globally dominant - the neoliberal strain?

Lets take Varoufakiss primary argument that cloudalists accumulate wealth from rent, not profit. As he notes, rent, unlike profit, is not vulnerable to market competition, because it "flows from privileged access to things in fixed supply, like fertile soil or land containing fossil fuels." Profit, on the other hand, flows to those who produce things that otherwise would not have existed, such as a car or phone, and since someone else can make a better car or a phone, profits are vulnerable to competition.

The arch cloudalist Amazon, for instance, has privileged access to consumers attention. So it charges manufacturers - Varoufakis calls them vassal capitalists - rent for selling their wares on its market place, and likewise Google gets a cut from every sale on its Playstore. Are the likes of Google and Amazon therefore comparable to medieval barons who made no investments in capital goods but lazed around all year only to seize the fruits of their serfs labour? Not really, because both these cloudalists have huge R&D budgets and they keep releasing new products. While the rent they charge may be insulated from market pressure, their other businesses - advertising in the case of Google and Facebook - do remain vulnerable to competition.

Intellectual property
Also, medieval serfs had to swear fealty to their overlords. They did not have the freedom to up and leave, like Varoufakis cloud serfs can, from say, Tik Tok to YouTube, or Uber to Ola. In fact, the supreme enabler of rent-seeking in the algorithmic age is not so much digital tech as the expanding empire of intellectual property - a gift of neoliberalism that is gobbling up the commons just as the Enclosures did at the birth of the market society.

A flawed understanding of capitalism in the age of AI risks flawed prescriptions for political action, and surely enough, Varoufakis ends up advocating an alliance between cloud serfs and vassal capitalists, assuming a convergence of interests, if not solidarity, between them because both pay rent to parasitic cloudalists. Seriously, capitalists and users/workers combining to overthrow cloud capitalists? Even a libertarian Marxist, as Varoufakis likes to call himself, would rather prefer old school class politics.

Varoufakis is at his best explaining the history and mechanics of capitalism and how a broken financial system is perverting it in ways that inevitably produce upward redistribution of wealth, greater concentration of power, and sharpening inequality. He is less convincing in his attempts to formulate a launch pad for effective counter-politics.

Courtesy: THE HINDU







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