Welcome to Serfdom

Photo by Aliaksei Lepik on Unsplash

In any given society, as I described in an earlier article, two elements dictate its direction. There are, of course, the formal institutions that have been established to determine the specific structure of its administration and the manner in which laws, regulations and policies are decided upon and enacted. There are also, as Montesquieu outlines, informal principles that hold equal, if not greater, sway over the movements of society. These principles can be thought of as the attitude of the people toward their state at a given time, and it is through them that we will likely gain a much more accurate understanding of that society’s real nature.

In the aforementioned earlier article, I explained that, while our current formal institutions might be considered to be a kind of democracy-at-scale, our prevailing principles are not democratic at all. According to the definitions of Montesquieu, the principle of a democracy (where the citizenry holds complete and equal political power) is virtue. Not virtue as in general good conduct, but as in a common sense of civic duty and responsibility through which the masses can keep democracy from corrupting into an aristocracy, or worse. In an aristocracy, there is a ruling class that holds the primary political power and acts in its own self-interest to maintain it.

It is not a complete tyranny, however, and so in the interests of maintaining it, they must exercise restraint, or moderation, in their conduct such that their self-centred behaviour doesn’t inspire mass revolt. Of course, we don’t have a strict and hereditary aristocratic class in the world of today, but there is no doubt that power lies primarily in the hands of lobbyists, businesses and politicians who, while varying on an individual level, continue to push the same broad agenda of elite self-interest across generations. In this sense, it is the principle of moderation on their part, and complacency on ours, that predominates in our contemporary society.

But that is not where it ends. When enough unchecked control is concentrated in the hands of these aristocrats, a principal shift towards oligarchy becomes a viable next step. Unlike in an aristocracy, where the elites hold power but must remain considerate of popular consent in their conduct, an oligarchy places the ruling elite under no such obligation. It is a form of governance that, in my opinion, falls largely into the category of what Montesquieu labels despotism. In such systems, the principles are not virtue or moderation or complacency (1), but fear. In the end, this fear manifests in a Soviet-style totalitarianism where acting out of line has one sent straight to the gulag, but it is not necessarily so. It can also simply imply a sense of such enormous dependence on such few entities that one cannot reasonably provide for themselves in any other way than conforming to those powers-that-be. Such an enslaving principle as this is, of course, only emergent out of the most continuous and unfortunate corruption of a society’s spirit. It is also, of course, the direction which our society appears to be taking.

Introducing Technofeudalism

Only a couple of weeks ago, I finished reading the economist Yanis Varoufakis’ remarkable work, Technofeudalism: What Killed Capitalism. To a large degree, it is what inspired this article, and I will use him as the predominant source of ideas as to our present movements toward oligarchy. Following the Allied victory at the end of World War II, says Varoufakis, the world was torn apart. Literally. Only one nation, the US, remained standing tall. Having come out as the undisputed victors of the War and having remained the only country sufficiently intact, the burden to rebuild the modern world fell on their shoulders. They would usher in a new age of worldwide peace, prosperity and capitalism, powered by their hyper-productive industrial war machine that now found itself without a war. And that is exactly what they did. It was off the back of their exports that Japan, Germany and all the rest of the war-torn world became re-modernised.

So much so, it seemed, that the two countries whose redevelopment was most heavily orchestrated by the US — Germany and Japan — would soon become even more competitive manufacturers than the US. In fact, with US consumption reaching new heights, it would soon be Japan and Germany that would feed it, and not the other way around. As a complete structural shift from the early post-war years, US trade deficits had become normalised, and they were pushed elsewhere to assert their economic dominance. In particular, it was the dollar that stood out as the US’s primary economic leverage point. After World War II, the US dollar had become the reserve currency of the Free World (something which persisted even after the collapse of the Bretton Woods system in 1971). (2) As such, all major exporters (Japan, Germany and, later, China) were left with enormous sums of surplus dollars. The question was what to do with it, and the answer was to invest it in US assets. By the 1970s, following on from the Golden Age of US capitalism, the US had become a stable and rich investment option, which was only to be enhanced by the forthcoming years of financial deregulation.

Such investment, in the forms of treasury bonds and derivatives and so on, would continue on for many decades, ultimately transforming Wall Street into an unchallengeable powerhouse. Most notably, it was within this system that what Varoufakis describes as the Big Three began to dominate. These three, specifically, are Big Business, Big Tech and Big Finance. So great had their dominance become that, following on from the carnage spurred on by the 2008 financial crash (which may largely be ascribed to the unregulated greed of Big Finance), their survival — nay, their dominance — would become one of the primary focuses of the United States administration.

In the case of Big Finance, this was done through fully socialising their losses and bailing out relevant organisations, while in the cases of Big Business and Big Tech, the objective was simply to improve the ease with which these companies could flourish. By lowering the interest rates to near zero and engaging in significant measures of quantitative easing to sustain such lowered interest rates, borrowing was made more viable and businesses were granted the opportunity to substantially expand their dominance via debt. On the whole, it was against this backdrop that the development of what Varoufakis calls technofeudalism was enabled over the following decade.

Technofeudalism, broadly put, is a system characterised not by markets, but by virtual fiefdoms. Of course, markets may exist within these fiefdoms, but they are no longer requisite. To make this clearer, I will offer a few examples.

First of all, consider eBay. Ebay’s value doesn’t reside in anything they sell, but rather in the convenient and international online marketplace that they control. In this sense, to maintain their dominance, all they must do is extract fees from their users, not so different from the mediaeval fiefdoms of old. This, in particular, is done in two ways. First, there is the basic financial tax: every sale made on their platform must include an obligatory fee dedicated to the eBay overlords. Second, there is the data fee. In order to use the platform, each user must agree to cede their usage data to the eBay algorithm, which will employ such data for the curation of a personalised feed most likely to stimulate the interests of their users, and earn eBay a corresponding fee.

Moreover, this algorithm, along with its accumulated data, will also be frequently leased out to third-party advertisers, who will similarly employ it for the purpose of selective advertising, and who will pay a cut of their sales to eBay. This is the broad strategy of the Big Tech fiefdoms, and its practice can be found in myriad other corporations, including Alphabet, Meta and Amazon.

In Big Business and Big Finance, the structure is quite like that of Big Tech, although the fees and algorithmic uses are slightly different. In the case of Big Business, we will consider Uber, and in the case of Big Finance, PayPal. Uber, similar to eBay, has two points of particular distinction. First, there is its near monopoly on drivers, and second there is its ever valuable algorithm. In the case of its near monopoly on drivers, well, it speaks for itself: the users come where the drivers are and the drivers stay where the users are. The algorithm simply serves to consolidate this by matching the right drivers to the right people at the right time, and in so doing maximise user experience and efficiency. With this system in place, they retain their dominance, and do so while extracting fees from their users for their privilege (like eBay, these fees are composed of both money and data, thus keeping both the company and the algorithm afloat).

Paypal, concerning its near monopoly on payments and the essential nature of its services, is in another likewise position of feudal dominance. As an all-in-one finance management fiefdom, users rely on this single platform for sending and receiving transactions, for storing their money and even, with their Afterpay system, for their credit loans. Of course, as with the other two examples, the transaction is the same: in return for granting you access to their fiefdom, you will be charged a fee and made dependent upon the feudal lords for your essential services.

So there you go: from World War II to the 2008 financial crash to the modern-day virtual fiefdoms of the Big Three, that is the story of technofeudalism. And, all the way throughout, it has been accepted largely without pushback (or, at least, without sustained and meaningful pushback) simply because its incremental and apparently justified nature has kept it within the bounds of moderation. It has crept closer and closer towards us, until now, increasingly, moderation is becoming much more an option than a necessity. The power over our livelihoods lies neither in ourselves nor in our governments, but rather in the hands of our technofeudal overlords. Our technofeudal overlords, who, more and more so, are gaining the potential to rely on fear over complacency. With this in mind,

we must now consider what a world governed by technofeudalism will look like.

On the whole, the most impactful distinction between technofeudalism and conventional capitalism is their respective source of income. In capitalism, the sole aim of the capitalist has always been simply to maximise their profits. In technofeudalism, this changes significantly. Why? Because, as Varoufakis outlines, there is no longer any need for profits. Corporations such as eBay, Uber and PayPal, as aforementioned, do not actually sell anything. Their income is exclusively derived from charging rent to their users for access to their fiefdom. This rent, unlike profit, does not require any new production to acquire, and is instead a passive byproduct of maintaining an in-demand fiefdom. The wider economic effects of this are tremendous.

In a free market, sellers are forced to distinguish themselves by selling their goods and services cheaper or of a higher standard than their competitors. Naturally, when such behaviour is practiced en masse, prices will decrease, and quality will increase not only in particular companies, but in the economy at large. Innovation will become systemic. Of course, this cannot be expected anymore in a system where markets and profits are replaced by fiefdoms and rents. While it is true that markets can still operate within fiefdoms (such as with vendors on eBay or Amazon), they are no longer essentially tied to their economies. Innovation is no longer a systemic inevitability. For the first time since pre-capitalism, stagnation will be normalised over progress.

It is difficult to overstate the historic significance of this. When innovation is no longer necessary and the established order of stagnation is, well, stagnant and predictable, the focus of the technofeudal fiefdoms shifts dramatically. It becomes their primary focus to simply consolidate and expand their control. How is that done? Simple: you make people increasingly reliant on access to your fiefdom, and you lobby the government to make sure they operate in your favour. In our present system, where democracy (or democratic aristocracy) has largely disintegrated into a proto-oligarchy, this latter method is no great challenge. If state capture was ever a concern, it pales in comparison to what is to come. Democracy perseveres only as a façade, an arena for oligarchic hypocrisy.

Footnotes:

(1) Complacency, unlike virtue or moderation, is not a principle explicitly described by Montesquieu, but I think it is worth including due to the fact that while in a democracy virtue refers to the spirit of everyone, in an aristocracy moderation refers exclusively to the spirit of the elites. In this sense, I think complacency can be considered as the reaction of the commoners towards the moderation of the elites. While not strictly relevant, I also think it worth briefly noting that in Montesquieu’s governmental typology of despotism, the prevailing principle, fear, is likewise only felt by the commoners, and the elites have their own principle of what could be described as something like unchecked exploitation.

(2) The post-war Bretton Woods system involved the placement of the US Dollar as the reserve currency of the world, which would be backed by gold at a fixed exchange rate for foreign central banks. As countries that had been wrecked by the wars had begun to recover, and as the US had become increasingly overtaken by balance-of-payment deficits, large quantities of US dollars began to accumulate abroad. At this point, growing doubt emerged concerning the dollar’s gold backing and many countries (most notably France) desired to exchange their monies into gold. President Nixon’s response to this was to officially eliminate the dollar-gold exchange, thus leaving the US dollar as the world’s primary reserve currency.