TECHNOFEUDALISM

The following is an essay written in 2024, so may not be absolutely current.

In his book What Killed Capitalism, Yanis Varoufakis argues that tech companies have ‘demolished capitalism’s two pillars: markets and profits’ (Varoufakis, 2023) by augmenting capital into what he terms as ‘cloud capital’ (Varoufakis, 2023). Cloud capitalists’ primary revenue stream is from online services, and constitutes a trans-local, even transnational, way of doing a centralised form of business - to the detriment of small, localised markets. Furthermore, Varoufakis implicates governmental and banking policy as exacerbating this profound financial crisis – forming, in conjunction with cloud capital, what could be defined as “technofeudalism”.

Before one can cite technofeudalist examples, it is important to define the distinction between feudalist and capitalist economic models. A simple yet pervasive definition of feudalism is elusive. Feudalist economies were based on ‘a system by which a sovereign divided portions of his land among his vassals in exchange for certain services’ (Bass, 2019). Land was owned by a central authority, but, for a fee, communally worked on by the proletariat. Traditional feudalism is only possible under a stratified, monarchical system in which hierarchy is strictly enforced. Capitalism replaced this with the foundational notion of private ownership. This gave rise to local and independent business, the cultivation of private capital and, to some extent, flexibility in social mobility.

However, as we’ve seen corporate profits grow, inflation rise decade-on-decade, average incomes sink, and national debts reach the trillions, are we seeing the end of the capitalist economic model? Despite US unemployment being the ‘lowest it’s been for two decades’ (DeSilver, 2018), many Americans can barely afford the cost of living. So, is Varoufakis right, and if so, what are the signs that we are living in an age of technofeudalism? How exactly has technological advancement caused a tectonic shift in the way our economies work?

To answer these questions, it is pertinent to understand how advances in digital technology have changed markets. The first and primary example of an emerging technofeudalism can be seen in the meteoric monopoly of Uber. Since Uber’s start in 2009, local taxi companies have been almost entirely wiped out. Using contemporary articles from around Uber’s rise, I was able to reconstruct the kind of impact that Uber had on local taxi businesses. While exact figures for the taxi industry aren’t available, there have been high-profile bankruptcies in this sector. In 2016, Yellow Cab, San Franciso’s premier taxi service, filed Chapter 11 as many other taxi companies were also ‘sent to the brink by Uber and Lyft’ (Harnett, 2018). Uber has cornered the market so successfully that black or yellow-cab drivers are almost entirely extinct. In Harnett’s article on Yellow Cab’s demise, a light is cast on the human cost of this market shift. The financial destitution left in Uber’s wake pushed Doug Schifter, a New York black-cab driver, to protest on the steps of city hall before he ‘shot himself’ (Harnett, 2018) and died. Uber’s ability to steamroll local competition is due to its integration with digital technology, its infrastructure, and its ease of use.

Ironically, Uber is an example of capitalist innovation – it revolutionised the taxi industry and catered to the convenience of customers, but it is becoming clear that this came at the cost of there being a taxi industry in the first instance. Under working capitalism, local taxi services would privately own a fleet of cabs, compete with other taxi companies in their region for fares, and recycle the money they made back into their area through wages and taxation.

This business model is, simply put, untenable in our modern era.

So, how would this constitute an example of us entering an age of technofeudalism? Under technofeudalism, there is a central authority/sovereign (Uber) who allows private individuals (vassals/drivers) to communally work in one space, but not as employees – as freelance contractors, using their own vehicles. The difference from traditional feudalism here is that Uber has no intrinsic right to the land it operates on, as opposed to the medieval Lords who were bestowed land by a monarch. Instead, Uber’s right to use the land comes in the form of the Uber app – a free, digital download that transcends city limits, county lines and state borders. Uber has taken the taxi business model and made it trans-local yet centralised, thus monopolising the private transport industry and decimating the taxicab market. A customer can order an Uber whether they’re in Manchester, England or Milwaukee, Wisconsin – with neither of these places having their own, local taxi companies in operation to effectively compete in any real sense. Most of the money goes to Uber directly, with the drivers earning a fraction of the ride price - plus a possible tip.

In the initial stages of this market change, contemporary articles were citing the emergence of a ‘gig economy’ (Harvard Business Review, 2018). Over ‘150 million people in North America and Western Europe’ (Harvard Business Review, 2018) were independent contractors in 2018. Part of the reason why Uber was able to dominate the market is that they price-gouged smaller taxi businesses – because Uber technically does not employ any drivers. This means no unions, little insurance and no benefits that must be paid for out-of-pocket. In addition to this, Uber diversified and was able to swallow the food delivery market through the introduction of Uber Eats. Small, local restaurants now share their revenue from food delivery with Uber, because it does not make sense in this kind of system to employ your own delivery drivers. This makes ordering food easier and therefore helps these businesses, but it also eliminates competition from this sizeable market as well. The bulk of the money is only flowing one way. Convenience, in light of technological revolution, has broken the way capitalist markets ought to operate.

Tech monopolisation of industry deprives local economies of autonomous business and healthy free-market competition. For capitalism to supposedly work, it must be able to self-regulate through a free market – which is the antithesis of a monopoly. Furthermore, despite Uber raking in revenue, this money is not being redistributed back through national or local economies. After looking at the economic impact that Uber has had, I turned my research toward how Uber operates itself as a techno-feudal, transnational corporation. In 2013, Uber’s corporate restructuring meant that ‘nearly all its ride-share income outside the U.S. would be effectively shielded from U.S. taxes’ (O’Keefe, 2015). Despite being an American company, Uber hardly pays tax in the U.S. – or in any other country, for that matter, due to its transnational status as a corporation. Uber can establish itself in any tax haven across the world and have its revenue remain essentially undeclared. This is truly resonant of the ‘cloud capital’ (Varoufakis, 2023) concept. Unlike a feudal Lord, Uber answers to no one – there is no King with Divine Right to Rule overseeing it. Uber is its own monarch. The subversion of tax, and state-level regulation, is a defining facet of technofeudalism's dangers.

Another example of a technofeudalist company is Amazon, which has also effectively made itself above tax. The UK division of the Amazon corporation paid ‘no corporation tax for the second year in a row’ (Reed, 2023) in Britain, after receiving a government tax credit on a ‘£1.2 billion investment in infrastructure’ (Reed, 2023) - which included ‘robotic equipment at its [own] warehouses’ (Reed, 2023). To make it clear, a government allowing an international corporation - that made $30 billion in profit in one year - to not pay tax, because it invested in its own infrastructure, is simply not normal behaviour in an ostensibly “capitalist” system. This is another sign that we have crossed from a capitalist model into what Varoufakis describes as technofeudal. Currently, the gulf between tech profits and state deficits is cataclysmic. Extrapolating further, what happens when technofeudalist businesses meet the full arrival of autonomous (A.I) labour?

At this juncture, it is important to return to Uber. As of late 2023, Uber partnered with the self-driving taxi start-up Waymo – which operates without any human drivers. Since the partnership, customers in select areas can choose to ride a Waymo through the Uber app. Yet again, with new technological innovation – this time in the form of the driverless vehicle – a corporation has found yet another way to conserve the means of production and ownership, this time by eliminating human labour. In five to ten years’ time, it is highly likely that most, if not all, Uber rides will be with driverless cars. This presents us with a model that goes even beyond Varoufakis’ conception of technofeudalism. (**Since this essay was written, Waymo has begun its expansion into Europe. It is official Uber strategy to pursue Waymo as a full alternative to human-driven rides.)

Although highly speculative, what may end up happening is that individuals who privately own driverless vehicles can utilise them as an “autonomous Uber”, and have it drive around giving rides to people so that it may earn passive income for the owner. Or private ownership of cars becomes an alien concept – and everyone is transported in driverless Ubers, for a small fee. Whatever the case, one thing is for certain: mass unemployment in large areas of the global economy. Since the Harvard Business Review’s article in 2018, the number of independent contractors has grown – with it being for many their only or main source of income. What happens if the gig economy collapses due to automated labour? Countries with high unemployment have higher tax burdens, but the tech corporations that continue to operate in them will continue to gain un-taxed capital as long as they are allowed to continue subverting tax. This means that governments will have even less money to invest in infrastructure as poverty runs rampant. There is a scenario in which populations of the world are completely dependent on tech companies for infrastructure and meagre employment, in an even bigger class divide than the one between the Lords and their vassals (which, in fact, is already the case). With how the current world economy looks now, this is something that society could be on-course toward – and would signify the total extinction of free-market capitalism. If we aren't already there.

Post-capitalist economics will look very different from what we are accustomed to. It is also hard to ascertain whether the emerging technofeudalist model is the killer or the by-product of capitalism. Marx believed that feudal peasant-merchants evolved into early capitalists. In a historic irony, have late capitalists evolved into early technofeudalists? My research brought me to the current effects of AI in the labour market. Already, human labour is being phased out of contemporary industries. Klarna’s CEO has stated that ‘AI can do the job of 700 workers’ (Cerullo, 2024), and Best Buy has already laid off its customer service staff to partner with ‘Google’s Gemini models’ (Kan, 2024), in an aim to build an autonomous customer support agent. Interestingly, Google is yet another example of technofeudalism. By owning YouTube, Google controls the ability to earn revenue from video content – as well as what content is recommended by the platform’s algorithm. There is no alternative video-sharing site to YouTube, at least for long-form work. As for the layoffs in customer service - this is an encroaching trend, which will move into all crevices of the job market. As Uber invests in Waymo, and Amazon into robotics, there will be a dearth of employment opportunities and the gig economy will cease to exist.

White-collar work is by no means immune, either. The stock market is already operated by A.I, with stockbrokers not having meaningful control as financial decisions have become mostly automated. As the world enters a post-capitalist epoch, there must be a joint effort across governments, legislators, and economists to seriously re-evaluate the way we organise and govern ourselves, corporations, and markets. This is a pivotal moment in human history, as it is the first time in human history that technological innovation itself has broken the economy’s ability to function effectively.  All the while, the tech companies behind this industrial revolution are, quite frankly, above the law and the governments of the world.