Thursday, July 08, 2021

Is Capitalism Succumbing to Techno Feudalism?

yanisvaroufakis |  This is how capitalism ends: not with a revolutionary bang, but with an evolutionary whimper. Just as it displaced feudalism gradually, surreptitiously, until one day the bulk of human relations were market-based and feudalism was swept away, so capitalism today is being toppled by a new economic mode: techno-feudalism.

 capitalism has undergone extreme makeovers at least twice since the late nineteenth century. Its first major transformation, from its competitive guise to oligopoly, occurred with the second industrial revolution, when electromagnetism ushered in the large networked corporations and the megabanks necessary to finance them. Ford, Edison, and Krupp replaced Adam Smith’s baker, brewer, and butcher as history’s prime movers. The ensuing boisterous cycle of mega-debts and mega-returns eventually led to the crash of 1929, the New Deal, and, after World War II, the Bretton Woods system – which, with all its constraints on finance, provided a rare period of stability.

The end of Bretton Woods in 1971 unleashed capitalism’s second transformation. As America’s growing trade deficit became the world’s provider of aggregate demand – sucking in the net exports of Germany, Japan, and, later, China – the US powered capitalism’s most energetic globalization phase, with a steady flow of German, Japanese, and, later, Chinese profits back into Wall Street financing it all.

To play their role, however, Wall Street functionaries demanded emancipation from all of the New Deal and Bretton Woods constraints. With deregulation, oligopolistic capitalism morphed into financialized capitalism. Just as Ford, Edison, and Krupp had replaced Smith’s baker, brewer, and butcher, capitalism’s new protagonists were Goldman Sachs, JP Morgan, and Lehman Brothers.

While these radical transformations had momentous repercussions (the Great Depression, WWII, the Great Recession, and the post-2009 Long Stagnation), they did not alter capitalism’s main feature: a system driven by private profit and rents extracted through some market.

Yes, the transition from Smithian to oligopoly capitalism boosted profits inordinately and allowed conglomerates to use their massive market power (that is, their newfound freedom from competition) to extract large rents from consumers. Yes, Wall Street extracted rents from society by market-based forms of daylight robbery. Nevertheless, both oligopoly and financialized capitalism were driven by private profits boosted by rents extracted through some market – one cornered by, say, General Electric or Coca-Cola, or conjured up by Goldman Sachs.

Then, after 2008, everything changed. Ever since the G7’s central banks coalesced in April 2009 to use their money printing capacity to re-float global finance, a deep discontinuity emerged. Today, the global economy is powered by the constant generation of central bank money, not by private profit. Meanwhile, value extraction has increasingly shifted away from markets and onto digital platforms, like Facebook and Amazon, which no longer operate like oligopolistic firms, but rather like private fiefdoms or estates.