Yanis Varoufakis: Techno-Feudalism Is Taking Over

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Yves here. Yanis Varoufakis puts a name, techno-feudalism, on the widespread shifts in economic power relationships. Varoufakis speculates as to whether this is a move to a new system or a reversion to an older tooth and claw version of capitalism.

By Yanis Varoufakis. Originally published at Project Syndicate and his website

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.

This is a large claim that comes on the heels of many premature forecasts of capitalism’s demise, especially from the left. But this time it may well be true

The clues have been visible for a while. Bond and share prices, which should be moving in sharply opposite directions, have been skyrocketing in unison, occasionally falling but always in lockstep. Similarly, the cost of capital (the return demanded to own a security) should be falling with volatility; instead, it has been rising as future returns become more uncertain.

Perhaps the clearest sign that something serious is afoot appeared on August 12 last year. On that day, we learned that, in the first seven months of 2020, the United Kingdom’s national income had tanked by over 20%, well above even the direst predictions. A few minutes later, the London Stock Exchange jumped by more than 2%. Nothing comparable had ever occurred. Finance had become fully decoupled from the real economy.3

But do these unprecedented developments really mean that we no longer live under capitalism? After all, capitalism has undergone fundamental transformations before. Should we not simply prepare ourselves for its latest incarnation? No, I do not think so. What we are experiencing is not merely another metamorphosis of capitalism. It is something more profound and worrisome.

Yes, 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.

That central banks’ balance sheets, not profits, power the economic system explains what happened on August 12, 2020. Upon hearing the grim news, financiers thought: “Great! The Bank of England, panicking, will print even more pounds and channel them to us. Time to buy shares!” All over the West, central banks print money that financiers lend to corporations, which then use it to buy back their shares (whose prices have decoupled from profits). Meanwhile, digital platforms have replaced markets as the locus of private wealth extraction. For the first time in history, almost everyone produces for free the capital stock of large corporations. That is what it means to upload stuff on Facebook or move around while linked to Google Maps.

It is not, of course, that traditional capitalist sectors have disappeared. In the early nineteenth century, many feudal relations remained intact, but capitalist relations had begun to dominate. Today, capitalist relations remain intact, but techno-feudalist relations have begun to overtake them.

If I am right, every stimulus program is bound to be at once too large and too small. No interest rate will ever be consistent with full employment without precipitating sequential corporate bankruptcies. And class-based politics in which parties favoring capital compete against parties closer to labor is finished

But while capitalism may end with a whimper, the bang may soon follow. If those on the receiving end of techno-feudal exploitation and mind-numbing inequality find a collective voice, it is bound to be very loud.

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  1. synoia

    Inflation appears rampant too, and it appears to be in all sectors of goods sold.

    Is this a massive “devaluing” of fiat money, in what appears to be a test of the immediate effects of MMT?

    1. diptherio

      The massive supply shock is the cause of current inflation in real goods, not the US gov’t debt level.

      1. Michael McK

        And that massive supply is not being spent to produce goods or services (other than the service of increasing wealthy persons’ asset valuations).

          1. Michael McK

            Yet another lost opportunity for employment-rich green new deal programs. Instead of money to improve the housing stock for all, we financed Blackrock’s hoovering up of all the distressed properties.

          2. Steven Greenberg

            In this case we have too little goods because workers were in lockdown. Name me an economic system that could provide for everyone’s needs while a big part of its workforce couldn’t go to work.

    2. Gavin

      The inflation in money supply already happened: Derivatives. We don’t experience it in the “real” economy until they move from electronic to real, however.. and so once again it’s privatize profits, socialize the risk. And they’re not done creating derivatives, of course.
      Note that the fun is that nobody’s holding reserves against derivatives.. because free money always works out well for wall street, right? Right?

  2. Robert Hahl

    Perhaps what has changed is merely how we support the value of the U.S. dollar now – capital gains instead of interest payments. Corporations borrow money to buy their own stock, supplying perpetual upward motion, attracting more saving in dollars.

  3. Gulag

    “Capitalisms main feature, a system driven by private profit and rents extracted through some market.”

    Yet, it may be, as Jonathan Levy has argued in “Ages of American Capitalism,” that this ideological assumption, that capitalism and capitalists, have always been purely rationally motivated to maximize their profits at all costs and against all other considerations does not really hold up to careful historical scrutiny–that the profit motive alone simply cannot explain what happened to the U.S economy and U.S. capitalism.

    The profit motive appears to have always been entangled with larger and individual and collective projects–just ask, for example, Hamilton or Jefferson.

    What really separates the ages of American capitalism may be political initiatives, like the British Empire’s mercantilist project of the 1660s as it transformed the fledging American colonies or the electoral triumph of the anti-slavery Republican party in the 1860s and the succession of Southern slave states or the New Deal of the 1930s responding to the Great Depression or the Volker interest rate shock of 1979.

    State action always seems to also be intimately involved in the transformation of capitalism. In 2021 the overwhelming outflows of liquidity are a product of state power lodged inside the U.S. central bank.

    It seems quite likely that Politics will continue to assert significant authority over economics in the U.S. as it has since the 1660s.

    1. chuck roast

      I would argue that U.S. central bank has all the trappings of a “state” controlled bank. When it does QE or reverse repos or alters the reserve requirement it appears that the federal government is acting in the interests of greater good. These acts are a product of private power lodged inside the central bank and acting in the guise of state power.

      1. Gulag

        In response, I would argue that it is quite easy to get oneself strangled in the weeds on the exact nature of this institution.

        In my opinion, at its historical origins, the Federal Reserve System emerged in the context of political conflicts, especially from the farmer/populist revolt and the struggles of the People’s party and the Farmers alliance.

        The Federal Reserve Act of 1913 took into consideration important agrarian interests because of agrarian political power in Congress at that time.

        The Federal Reserve system itself seems to consist of a complex fusion/structure of centralized and decentralized powers, of public duties and private interests and of formal and informal executive processes– a kind of hybrid duality that resulted in an uneasy mix of executive processes and informal policy making.

        It seems to me it is both a network of private banks and a central instrument of government–a kind of alliance between public and private interests that was deliberately situated along side and apart from elected governance.

        1. chuck roast

          “…a kind of alliance between public and private interests that was deliberately situated along side and apart from elected governance.”

          Nice theory…the kind of thing that you can lecture on, parse and write about forever. I take the C. Wright Mill view of ruling class. They go to the same schools and churches. They belong to the same clubs and vacation together. They intermarry and attend on another’s soirees and funerals. They don’t have to get together in the back room and conspire to do particular strategies at the Federal Reserve and the Treasury Department. They think alike, act alike and may as well have the same DNA. They make certain that the great unwashed view the interests of the capitalist class, their class, as the unwashed view as well. Of course Powell and Yellen portray themselves as independent officials doing what’s best for all of us. An alliance? More like “our thing.”

          1. Christopher Horne

            Agreed. But it is also worth noting that a similar phenomenon attends to persons who are hired by the
            mainstream media, such as WAPO and NYT. These
            worthies claim to have unbiased, independent worldviews.
            But their society-specific worldviews have been so internalized by the time they are hired, they are simply
            not aware of their own biases.

      2. Steven Greenberg

        It has all the trappings of a state controlled bank surprisingly because it is a state controlled bank.

    2. eg

      The subject was originally called Political Economy, and as you point out remains so, despite the efforts of the usual suspects to abstract an economics unto itself in an act of self-serving sleight of hand.

  4. Redlife2017

    Jodi Dean has been discussing this since mid-last year. There was a very interesting article she wrote for the Los Angeles Review of Books: Neofeudalism: The End of Capitalism? She starts with a good discussion on the history of the thinking around neo-feudalism and goes from there. This is from a Communist point-of-view, so is like something to accompany Yanis’s discussion above.

    Here is an excerpt from the ending:

    Just as feudal relations persisted under capitalism so do capitalist relations of production and exploitation continue under neofeudalism. The difference is that non-capitalist dimensions of production — expropriation, domination, and force — have become stronger to such an extent that it no longer makes sense to posit free and equal actors meeting in the labor market even as a governing fiction. It means that rent and debt feature as or more heavily in accumulation than profit, and that work increasingly exceeds the wage relation. What happens when capitalism is global? It turns in on itself, generating, enclosing, and mining features of human life through digital networks and mass personalized media. This self-cannibalization produces new lords and serfs, vast fortunes and extreme inequality, and the parcellated sovereignties that secure this inequality while the many wander and languish in the hinterlands.

    1. Thistlebreath

      Another commentator also posted a long piece on the topic today: Michael Hudson. “Finance Capitalism vs. Industrial Capitalism.” https://michael-hudson.com/

      Mr. Hudson’s bona fides are impressive, he was a Wall St. insider for a long time before he moved over to economic consulting, writing and public speaking.

      My personal barometer here in the super suburbias of LA is that when we moved here ~ 30 years ago, we could companionably amble about on horses to nearby properties that had only low decorative plantings and fences. The horses liked to stand while riders and neighbors jawboned. Today, that’s gone. The vicinity has devolved into the “fortified estates” of late Roman-era landscaping with solid gates, high walls (and updates like cameras, “fraidy lights” etc.).

      Everyone’s sulled up.

  5. Chauncey Gardiner

    Given the influence technology has on our lives, there’s much food for thought here. But I don’t agree with Varoufakis’ view that techno-feudalism is a new social, economic and political order. Ownership, control, and access to technology is merely one of several key components, rather than the sole determinant, of production and provision of goods and services that lead to economic, political and social control.

    Sovereign states control the creation and distribution of money, markets, the use of violence to enforce laws and regulations, military force, and production of energy and key commodities necessary to both produce technology itself and meet basic human needs. The CEOs of Facebook, Amazon and Google do not.

    States, other large corporations, cooperatives, and even individual electricians control the production, distribution and access to electricity and other forms of energy and key commodities necessary to produce and drive technology.

    Ownership and control of land remains pivotal to food production. This is one of the reasons you see people like Bill Gates, who made a fortune in technology, acquiring large agricultural land holdings. Perhaps this signals a return to some form of feudalism for a segment of society.

    Seems to me that climate change will play a more significant role as a determinant of the future forms societies might take than technology. I also find myself more concerned about our increasing reliance on technology and its vulnerabilities to massive disruption than about its displacement of financial capitalism by techno-feudalism in the socioeconomic order.

    1. Jeremy Grimm

      I tend to agree with what I think I understand in your comment. To me techno-feudalism is meaningless as used in the Varoufakis post. The Feudal system involved mutual obligations, fealty. Techno-feudalism has no concepts of fealty or mutual obligations. Feudalism had an element of Church blessings upon it. Techno-feudalism knows no Church but the Market. I can see no reason at all to fashion a new category — Techno-feudalism — to describe what looks to me like Neoliberalism in the form of a very unpleasant “deduction” from principles.

    2. Jeremy Grimm

      To augment a comment temporarily lost to Skynet — I forgot to lampoon “Techno”. What about the current transfers of wealth and power could not be accomplished without any “techno” help? I believe most/all could, though “techno” does help grease the skids a little. Techno-Feudalism is an unnecessary label for garden variety Neoliberalism.

      1. Michaelmas

        We do have something new going on. But ‘Techno-feudalism’ isn’t actually a good descriptor for it, both because of the objections listed by the posters above and because actually-existing feudalism in the Middle Ages had aspects — like, for instance, lords notionally had real obligations towards their serfs in England, at least — that aren’t true of the set-up that’s emerged here in the 21st century

        MacKenzie Wark uses a term, ‘Vectoralism,’ which better describes the phenomenon in her book CAPITALISM IS DEAD. IS THIS SOMETHING WORSE?

        What’s vectoralism? See here —


        ‘Of course, there’s plenty of evidence for this still being capitalism or mostly capitalism’, writes McKenzie Wark in Capital is Dead. The question, rather, is ‘whether an additional mode of production is emerging and whether it is qualitatively different enough to call it something else’ …

        ‘Recent technological advances have made information extremely cheap and abundant, raising the problem of ‘how to maintain forms of class inequality, oppression, domination and exploitation, based on something that in principle is now ridiculously abundant’. To resolve this contradiction, a new mode of production has morphed out of capitalism, one based on the control of what she calls ‘vectors of information’, an abstraction that designates the ‘infrastructure on which information is routed, whether through time or space’.

        ‘If the ownership and control of the means of production confer upon the capitalist the power to organize labour, then ownership and control of the vector gives the vectoralist the power to organize the means of production themselves, through ‘patents, copyrights, brands, trademarks, proprietary logistical processes and the like.’

  6. Sound of the Suburbs

    How does a collapse in asset prices feed back into the financial system?
    Let’s look at 1929.

    Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.
    Bankers do need to ensure the money they lend out gets paid back to balance their books.
    Banking requires prudent lending.

    If someone can’t repay a loan, they need to repossess that asset, and sell it, to recoup the money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.
    As asset prices collapsed the banks became insolvent as their assets didn’t cover their liabilities.
    They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get the money they lend out back again to balance their books.
    The banks become insolvent and collapsed, along with the US economy.

    When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

    What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?
    Japanese real estate.
    They avoided a Great Depression by saving the banks.
    They killed growth for the next 30 years by leaving the debt in place.

    Japan could study the Great Depression to avoid this fate.

    What was the ponzi scheme of inflated asset prices that collapsed in 2008?
    “It’s nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world” All the Presidents Bankers, Nomi Prins.
    We avoided a Great Depression by saving the banks.
    We left Western economies struggling by leaving the debt in place, just like Japan.
    It’s not as bad as Japan as we didn’t let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

    We in turn seem to have learnt something from Japan as they did let asset prices crash.

    Now we are stuck and the only way to keep things from collapsing is to keep pumping in more and more liquidity.

    It’s a choice
    1) Let the assets bubbles burst and watch this feed back into the financial system.
    2) Keep the whole thing afloat, but make things worse in the long run as the bubbles just get bigger and bigger.

    We’ve gone for option two.

  7. Glossolalia

    Eh. It’s going on twenty years now that I’ve been hearing and reading about A, B, or C indicator has never done the same as X, Y, or Z indicator and now they are and this spells certain doom. Maybe it’s true this time? ¯\_(ツ)_/¯

    1. Mikel

      The slow eating away of alternatives means the day of complete capture gets closer.
      It’s like being the frog in the pot of water with the temperature being turned up slowly.

  8. Susan the other

    My immediate negative metaphor is Blade Runner. I do think there will always be nodes of power. Sane or insane. There will be puppeteers. Grifters. There will be a certain amount of rogue freedom because policing the internet will be problematic. But so will equality. But the drive for equality will be the energy going forward. Because, imo, society cannot function without that proper organization. Civilization cannot function without society. So it isn’t just an amusing monty python skit to stand up and scream “freedom and equality” – it’s an innate, hard-wired instinct. Even though we have come to a point in time where the two conflict. Time was when freedom meant freedom for everyone to enjoy equal rights. Now not so much because civilization has evolved; population expanded and conflict emerged. So what else is new? I think, to respond to our current situation, we need a refined slogan: Freedom in Equality. And to that end, I don’t know why all the new “techno-feudalists” can’t be good shopkeepers – because it will certainly be to their advantage. In this way: the old profits that have been extracted never to return can be replenished by the convenience of technology. That’s the whole idea of capitalism – except it used to be that instead of finding efficiencies we all just grabbed for money and used it very inefficiently. Those days are over. Thank god.

  9. Acacia


    And class-based politics in which parties favoring capital compete against parties closer to labor is finished.

    I didn’t quite follow this step in his reasoning. Anybody?

    1. Susan the other

      Not sure I can read YV’s mind, but this dovetails with what a lot of people are saying about the “end of capitalism” (thinking about some of the things Wolfgang Streeck says). And it makes sense. Imo, capitalism is at an end, or a point of change, because profits are too hard to come by and populations are too large. Not to mention that exploiting the environment simply for profit, as well as labor, is now not possible. Labor is a more basic part of an economy, there will always be labor in one form or another – but maybe not for money as we have known it. The argument that techno-feudalism is taking over is almost reactionary. In the 1920s and 30s when rural electrification came “online” not too many people liked it or used it. And here’s a thought: money is the great organizer – it can make things happen pretty quickly (whether “capital” or whatever) – but now we have rapid communication and organization literally without money at all. I kinda think that might be less “feudal”.

    2. hdo

      I read it as:

      Digitalization of cash and other things, as well as other new technologies, make it comparatively easy to distract the hoi polloi and in general cause them to do things that are against their own long-term interests.

      And now more than ever, you and I are becoming the hoi polloi. Or at least if we have always been, now we are becoming aware of it.

  10. pck

    Quoting from the article’s exposition:

    “The clues have been visible for a while. Bond and share prices, which should be moving in sharply opposite directions, have been skyrocketing in unison, occasionally falling but always in lockstep. Similarly, the cost of capital (the return demanded to own a security) should be falling with volatility; instead, it has been rising as future returns become more uncertain.”

    I’m sorry if this is a really dumb question, but if I wanted to check this for myself, how would I do it? I’m imagining I could use the S+P500 or some other index for stocks. Is there a similar index for bond prices? How would I look for the cost of capital or volatility? I’m a total beginner in a lot of this stuff and I am more than willing to read up on it, but I don’t even know what links or sources to trust.

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