ON CRISIS AND DISOBEDIENCE
May 12, 20211
Yanis Varoufakis is the leader of MeRA25, the political party belonging to DiEM25—Europe’s first transnational Pan-European movement. Previously, he served as finance minister of Greece during the first six months of 2015 and, twice, as a member of Greece’s parliament. Varoufakis taught economics at the universities of East Anglia, Cambridge, Sydney, Glasgow, Texas, and Athens, where he holds a chair in Political Economy and Economic Theory. He is also honorary professor of Political Economy at the University of Sydney; honoris causa professor of Law, Economics, and Finance at the University College of Turin; visiting professor of Political Economy at King’s College, London; and doctor of the University Honoris Causa at University of Sussex. He is the author of a number of best-selling books, including: Another Now: Dispatches from an Alternative Present (2020); Adults in the Room: My Struggle against Europe’s Deep Establishment (2017); Talking to My Daughter about the Economy: A Brief History of Capitalism (2017); And the Weak Suffer What They Must? Europe, Austerity and the Threat to Global Stability (2016); and The Global Minotaur: America, Europe and the Future of the Global Economy (2015, 2011). His most recent book, Technofeudalism: What Killed Capitalism, was published in 2023.
ILAN PAPPÉ: Given the wide scope of your writing and activity, we will be able only to scratch the surface—but we will do our best to cover as much as we can for our community that cares about Palestine, Black history, gender rights, workers’ rights, ecology, and decolonization, among many other issues.
While I wanted to have a structured discussion with you, beginning with academia and moving to politics, we cannot ignore what is happening in Palestine right now. To avoid jail, a criminal Israeli prime minister pursues a provocative action against the holiest place for Islam in Palestine and the third-holiest place for Muslims all over the world—trying to ignite a conflict that will allow him to retain power.2 To do so, he has aligned himself with the right wing in Israel, which dominates Israeli politics today and whose agenda is to fully Judaize Jerusalem and the West Bank through means of another catastrophe, or Nakba.
Brave Palestinian youth were able to thwart some of this plan, defending the homes of the people of Sheikh Jarrah and the sacred Al-Aqsa Mosque. It was clear to everyone that Hamas in Gaza would not remain idle against such a provocation and aggression, nor would large segments of the Palestinian people, who for decades have been living under harsh colonization, brutal occupation, and subject to incremental ethnic cleansing.
We might be in the throes of a third uprising—a third intifada— which includes large segments of the “forgotten Palestinians.” These are Palestinians who live inside Israel in unrecognized villages, which are refused basic infrastructure from the state. Or in over-crowded towns prohibited to expand under the apartheid laws of the Israeli regime—a system that causes high levels of unemployment through its policies of segregation. The Palestinian Authority is helpless, the Arab regimes seek normalization rather than commitment, and the West, as always, is silent—and we have not heard much from the Muslim world.
In your opinion, what can we do right now? Should we strengthen our support for the Boycott, Divestment, Sanctions movement? Should we ask for sanctions by governments? What is the next step in our solidarity with the oppressed people of Palestine, given the reality unfolding in the last forty-eight to seventy-two hours?
YANIS VAROUFAKIS: You asked me what we should do, listing a number of things. The answer is: All of the above! We need to engage in the struggle to inform people and call upon governments— even shame them—into taking a position. In the process, we must dissolve the illusion that this is a conflict between two equivalents, which the rest of the world has the right to look upon dispassionately and equidistantly.
I remember something you wrote, maybe twelve years ago, in conjunction with Robert Fisk’s prescient comment that unless the Palestinians gain their independence, we will never gain ours. And you wrote, “It seems that even the most horrendous crimes, such as the genocide in Gaza, are treated as disparate events; unconnected to anything that happened in the past, and not associated with any ideology or system.”
If you watch the BBC or Sky News today this is how the Palestinian tragedy is presented. There is some factual reporting that so many rockets were fired from Gaza and so many bombs landed in Gaza, and this building was demolished and so many people died. But to quote your poignant words again: “It is as if the whole thing is unconnected to anything that happened in the past and not associated with any system or ideology.” This is racism in action. The moment you report on the figures of a one-sided massacre taken out of the context of ongoing and well-planned ethnic cleansing, of pushing a native people off their land, you end up fully complicit in the unspoken genocide. The moment you’re allowed to get away without mentioning the underlying white settler project is when you become complicit with the ethnic cleansing being perpetrated.
You can see this most vividly in Germany today, a country populated by people desperately trying to escape a dismal legacy through the tactics of political correctness. Today there is zero information in Germany regarding what’s going on in Palestine, how it started, who are doing the killing, or why. Few people know that this latest cycle of violence began when dozens of families were threatened with expulsion from their homes and the destruction of their buildings in East Jerusalem.
Clearly, as you say, we need to do so much on so many fronts. But, for now, let me wear my Greek political hat to convey to you my frustration, even my desperation—indeed, my deep sense of shame and foreboding. You will recall that in 2015 I became a government minister here in Greece—probably the most progressive government in Europe that was the culmination of the massive demonstrations in 2011, the equivalent of Occupy Wall Street in the US or the Indignados in Spain. A broad coalition of progressives gave rise to a movement, which took a small party of the former Eurocommunist left from 4 percent to 40 percent, and thus we stormed the citadels of power. We became the government.
Our manifesto waxed lyrical about our solidarity with the people of Palestine. It targeted racism of every form, including, of course, antisemitism. For six months, we put up a tremendous struggle against the global financial oligarchy. The Greek people rose to the occasion and courageously boosted their support for us from 40 percent to 60 percent. But on the night of July 5th, 2015, when that support manifested itself magnificently in the NO referendum, my then-comrade and prime minister surrendered to the powers-that-be as formally represented by the International Monetary Fund, the European Central Bank, and the European Commission—the infamous Troika.
Now, why am I telling you all this? Because one surrender brings another. The prime minister ostensibly surrendered because he claimed (against my advice and strongly held belief) that we could not successfully resist the financiers’ financial demands (i.e., mind-numbing austerity, surrending all remaining public assets to them, abandoning homeowners to the vultures, etc.). Even if one agreed with him that the government had to surrender on the financial front (which, naturally, I did not), the question becomes: But why also surrender on every other front, including the rights of Palestinians? And there’s the rub: less than twenty-four hours after my resignation and our government’s surrender to the Troika, the Greek foreign minister arrived in … Tel Aviv to inaugurate a long, reprehensible love-in between Netanyahu and a Greek “leftist” government that had hitherto pledged solidarity to the Palestinians, as per the sentiments of the vast majority of Greeks.
To my astonishment and horror, my until-a-few-hours-earlier comrades were forging a sordid alliance with Netanyahu’s government. Together, they planned to dominate the eastern Mediterranean through a series of aggressive moves, to drill the bottom of the Mediterranean Sea and to construct gas pipelines linking Israel (including Gaza) with Cyprus and Greece—in close association and collaboration with ExxonMobil, the French multinational Total, and, later, Donald Trump’s administration.
Speaking personally, the enormous heartache caused by my comrades’ abandonment of our people was surpassed only by what I felt about their cynical and callous abandonment of the Palestinian people, as well as of Israeli progressives languishing under Netanyahu’s iron rule. You see, deep down, I wanted to give my comrades the benefit of the doubt, even while disagreeing and falling out with them on financial matters and economic policy. However, the sight of my comrade Alexis Tsipras, the aforementioned prime minister, hobnobbing with Netanyahu, and the manner in which our so-called party of the radical left immediately forgot its solidarity to the Palestinian people, that was the litmus test which my comrades failed, helping me accept that these people were no longer my comrades. They were not just people I disagreed with on matters where rational debate is possible. No, they had mutated into misanthropes.
Four years later, once these former comrades had served the international oligarchy’s purpose and had thrown Greece into Israel’s geostrategic orbit, they were dispensed with by that same oligarchy. So, in 2019, a rabidly right-wing government (headed by Kyriakos Mitsotakis, who straddles the Trumpist ultraright and the radical center) was elected. During that parliament (2019–2013), the party I helped found in 2018, MeRA25, was represented by nine MPs. One of the first legislative moves I made as parliamentary leader was to table a bill that would have Greece formally recognize the state of Palestine (for symbolic purposes and as a first step toward a UN-led effort to end Israel’s apartheid). During that speech, I looked at my former Syriza comrades in the eye and asked: “Will you support this bill recognizing the state of Palestine? If not,” I continued, when I noticed they were avoiding eye contact, “how do you propose that we restore Greece’s support for the Palestinian people?” All I got was a loud silence. And so it was that, in 2023, both Syriza and MeRA25 lost seats in a twin general election that can be described as the left’s Waterloo—which makes perfect sense, since our people needed to punish a left that, after having inspired them in 2015, dumped them back into their debtors’ prison and, for good measure, abandoned all its principles, as evidenced by the ugly sight of the Tsipras-Netanyahu love-in.
As we know, this kind of silence that I faced that day in Greece’s parliament from my former Syriza comrades is the greatest vindication of the crime being perpetrated. It is a guilty silence. That attempt to take an equidistant position is the loudest vote of confidence in Mr. Netanyahu in particular and the Israeli apartheid system in general. Our struggle in Greece today is to reignite the movement against racism, including antisemitism, while at the same time bringing news of the apartheid policies practiced in Israel to the court of public opinion. I am pleased that Human Rights Watch delivered their report on Israel’s apartheid. I feel personally indebted to B’Tselem and to other comrades in Israel for raising the question of apartheid. This is what we’re trying to do in Germany, with our MERA25 party there, a country where you are almost immediately silenced as an antisemite if you dare challenge the right of Israel to commit any crime against humanity it fancies, if you dare speak out against Israel’s apartheid. It is quite preposterous: if you oppose ethnic cleansing, apartheid, mass murder, genocide you are immediately branded an antisemite and a “terrorist enabler.” So you are precisely right: we need to fight on many different fronts, at all levels, simultaneously, ceaselessly, night and day.
I’m sorry for taking so long to answer, but this really hurts. Greece used to be quite solidly supportive of, and in solidarity with, the Palestinian people. This is no longer so. We’ve been defeated by the oligarchy and lured into a false sense of protection from Turkish expansionism by the promise of an invincible (utterly fictional, of course) Greek-Israeli defense pact. As if Israel would lift even a finger to assist Greece if Turkey invaded one of our Aegean islands!
ILAN PAPPÉ: I’m glad you’re saying it, because, as you know, if you ask the Israeli foreign minister or foreign ministry diplomats which European countries are the best allies of Israel at this moment, unfortunately Greece would be one of them. But when I come to talk in Athens, I notice that civil society is still very much pro-Palestinian. And in that respect, we still have hope that politics from above in Greece will return to what they used to be. Because Palestinians need every possible ally, in the Mediterranean and in southern Europe—places near to Palestine and the struggle of the Palestinians.
Before deciding to begin tonight with the crisis in Palestine, I actually hoped to start with academia, which is the place many of us come from. I know that at the height of your political career, you would sneak back to academia whenever you could and in many ways examine the relevance of your former home, which was the discipline and department of economics.
It seems that while you were happy to be in a comfort zone, at the same time, revisiting your local sanctuary filled you with frustration. Economics, the discipline, seemed to be decoupled from the economic and political realities of our world. It seems that economic departments in the UK, US, and many other places underrate the importance of the history of economics. That they are fascinated with purist models examined in laboratories where space, time, and debt are disturbing variants that would not be considered, in order to preserve the pretended predicative power of economic theory.
The experts teaching economics have dismally failed again and again to provide any valid prediction, mainly by disregarding ethical and ideological considerations that are painted as disruptive to scientific research. This is evident particularly on the eve of spasms in the capitalist system. The way economics is taught and researched still has not changed today. As a historian who is aware that I can easily argue and counterargue with myself using the very same facts—realizing that the different versions, or narratives, would stem primarily from external factors such as my moral positionality—I can fully empathize with the humble recognition that economics, like the discipline of history, is not a science. While both disciplines have crucial elements of empirical study (facts, methods, and models), the end product, be it prediction or historical analysis, is the outcome of “nonscientific” elements as much as it is of the empirical evidence gathered from the laboratory or the archives.
This position is not easy to adopt. It invites politics, ideology, ethics, and morality to enter our world of scholarly work through the front door. It challenges the claim that they are successfully blocked at the gates of the university by academic apparatuses. Such an invitation is still regarded as a heresy in many academic circles, either because people believe it is still possible to be objective, or because such a stance could dry funding for our research—from governments unwilling to support research that contradicts their policies, or corporations reluctant to fund research that undermines their interests.
Am I presenting a position that you identify with? If so, do you see any hope for the discourse of plurality rather than the discourse of “proof ” as being able to guide future research and teaching in economics? Do you see any change in the way economics is being taught, researched? And what kind of change would you like to see on the part of academia in dealing with economy, political economy, and other issues familiar to you as a politician, a theorist, as an activist?
YANIS VAROUFAKIS: I wholeheartedly endorse your view of economics. And I will take it further. Do I see any prospects of academic economics becoming more relevant, more sophisticated in their approach to capitalism, more cultured, indeed, civilized? No, I don’t.
In whichever university I have taught, I have always chosen to teach the first semester of the first year of introductory economics— my attempt to deprogram the students before they proceed to the “harder” stuff. In my classes, I try to teach the parallel evolution of capitalism and of our ideas about capitalism—to demonstrate how capitalism and our undersanding (or theory) of capitalism coevolved. Why did Adam Smith write The Wealth of Nations in 1776? Why wasn’t it written a hundred years earlier? So I focus on the historical necessity of shedding light on events that seemed indecipherable.
Take, for instance, the decoupling of political power from economic power that only occurred as capitalism was rising up. For the first time ever, some people acquired enormous economic power, but they didn’t have any political power—the merchants, the first industrialists. Then I move on to explain why economists like David Ricardo suddenly turned against landowners, even though he was one himself! I show why the concept of economic rent had to be invented. Why did Karl Marx become Karl Marx? Why was he writing about the fluctuations of the economic cycle in the first volume of Capital? And most importantly, why did economics, from the middle of the nineteenth century, become transformed from a holistic, organic study of the capitalist system to a piecemeal, mathematized, static model resembling primitive classical mechanics? Why was there no room in economics deparments after that transformation for minds like Jeremy Bentham, John Stuart Mill, or Karl Marx—people with a strong ethical compass, approaching the economic system organically, as an evolving entity?
Today’s economic textbooks pretend to engage with the large questions: “What is it that gives rise to wealth creation?” “How is income distributed?” “What is the mechanism by which competition leads to innovation, innovation leads to capital accumulation, capital accumulation leads to investment, investment leads to technical progress, technical progress leads to social ruptures, and so on?” Alas, the textbooks from which youngsters learn economics today only pay lip service to these questions. In reality, these big questions have not been tackled in any substantive way since the first classical economists did so—people who did not even call themselves economists. And here is the irony: Once economics became professionalized, and the first chairs in economics were inaugurated after economics’ great transformation to a third-rate version of classical mechanics (neoclassical economics, as it is now called), form has replaced substance and the large questions are routinely sidelined. What has taken their place? The answer is a huge amount of intellectual effort to treat capitalism as if it is a phenomenon like the motion of the planets in a Newtonian sense, whereby a system of equations needs to be solved so that you can work out how the whole thing works, operates, functions.
And suddenly this professionalization process created the modern academic economist, embedded in the great universities in Europe. Except that this type spoke a language that Adam Smith, John Stuart Mill, David Ricardo, Karl Marx, and the rest would not recognize. Indeed, they would have no time for it even if they did recognize it. Why did this happen? What’s behind this transformation? What sociology of knowledge, of the profession, explains its physics envy?
My answer is that economics, as it evolved over the last one hundred and seventy years, is a most peculiar failure—an inverse Darwinian process. According to Darwin, evolution involves two parallel mechanisms: a process of adaptation that favors the capacity to remain in tune with one’s environment and a second process that throws out mutations which test the evolutionary process’ stability. Together, the two mechanisms ensure that the more successful adaptations (and the ones that are not destabilized by random mutations) are the ones that prevail. In economics, the opposite holds: the less relevant the model is to really existing capitalism, the greater the academic power it imparts to the economist who comes up with that model. Now how did such an absurd dynamic emerge?
The greatest utility for academic economics comes from appearing to be the queen of the social sciences, with economists luxuriating in the image of the nearest there is to a social physicist. To gain an upper hand vis-à-vis anthropology, sociology, and other disciplines, economists found it remarkably profitable to present themselves as the “scientists of society.” To this purpose, they need to pretend that it is possible to distinguish between positive economics (how economies work) and normative economics (how they ought to work). In this vein, they present themselves as dispassionate scientists who will explain to you, like an engineer explains a turbocharger’s function, how capitalism works, leaving to philosophers, sociologists, and various cranks the task of discussing how the economy should work. Their implication is that scientific economists should not be influenced by their politics or philosophy, in the same way that you could have a Nazi physicist, as in the 1930s and ’40s, and a communist physicist or a liberal physicist who hate each other’s political philosophies but, when it comes to the laws of nature, agree because atoms and quanta function in ways that are strictly independent of our ideas about society and humanity. Thus, academic economists gained a lot of discursive power by pretending that they could distinguish and separate the science of economics (the description of how capitalism works) from our ideas of how society ought to be structured.
The problem is, as you know, that the application of natural science methods in social science produces bad natural science and terrible economics. Let’s see why. If you’re going to be a scientist of society, you might try to emulate the methods of physics. What were the methods of physics that succeeded in imparting so much discursive power to, say, Isaac Newton? The method begins with axioms, statements that one takes for granted before knowing whether they are right or wrong. Take, for example, the principle of energy conservation, Newton’s intuition that energy does not dissipate into nothing, that it is not born out of nothing, but rather, it is constant and simply changes form from kinetic to thermal and so on. Newtown had no evidence initially that this was so—it was an axiom. Then he worked out the mathematical relationship between velocity, acceleration, mass, etc., that is consisent with his axiom. This mathematical relationship could then be checked empirically in some laboratory. If it was found to be not inconsistent with the empirical data, Newton could claim, “I have proof that nature works in a manner that is consistent with my axiom—at least so far!” That’s the beauty of physics and the reason it excited progressive people who wanted freedom from superstition and an objective method for ascertaining truth.
The economists who became the first professors of economics, the first recognized “scientists of society,” emulated that process. That meant they needed to come up with their own axioms. If you’re going to have a universal axiom about how humans function (equivalent to Newton’s energy conservation principle), one that applies equally in Britain, in Palestine, in the distant parts of the galaxy, you need to come up with a very general proposition. For instance, “Humans do whatever maximizes their utility function.” But this is a tautology, like saying that I do what I like and I like what I do. Still, it allowed academic economists to write down mathematical equations describing human behavior, consumer choice, and producer choice. Thus they produced their own systems of equations. But that’s where the comparison with physics ends, for two reasons: First, we do not have proper laboratories to test macroeconomic propositions (eg, had the central bank not printed money, there would have been no inflation). Second, even the labs we do have can never test the theory of human behavior when some economists, when confronted by data showing Jill and Jack violate the economists’ theory of how Jill and Jack ought to behave, turn around and blame the negative result on Jill’s and Jack’s irrationality rather than accept that their theory was bunk.
When I was studying all this back in the 1970s and 1980s, what fascinated me was that the very same unrealistic axioms that are necessary to “close” their models (in order to get tenure and embark on brilliant academic careers) were the very same assumptions that financiers used to “close” their financial models. The same models would reappear later behind the construction of the derivatives by Lehman Brothers and Goldman Sachs that blew up in 2008. The more antiscientific you were in order to solve your mathematical models, and the more you distanced yourself from actually existing capitalism, the more successful you became as an economist. Which, of course, made sense, given that the more functional your models were to the fictional capital generated by finananciers, the more money you brought to your economics department (as grants from the financiers), and the greater your likelihood of success in the profession, even being awarded a Nobel Prize in economics.
That is what I call a most peculiar failure. It is as if there is a whole system of incentives to produce bad economics. As if there exists a system designed to procure misleading models. Of course, no one designed such a system; it evolved spontaneously. The economics profession is best thought of as a priesthood that reproduces itself through particular practices that its members perform earnestly, in a manner that, supraintentionally (a little like Adam Smith’s invisible hand), leads to the permanent and irreversible disengagement between economic theory and really existing capitalism.
If I am right that this disconnect between economic reality and economic theory is baked into economics, is it any wonder that when Western finance crashed and burned in 2008, Queen Elizabeth [II] asked the members of the Royal Economic Society, “Why didn’t you see it coming?” and they had no idea? It took them days to come up with a groveling letter of apology saying, “Our models couldn’t tell us.” Of course they couldn’t tell you because they were designed not to tell you. Your models were designed not to have anything useful or relevant to say about actually existing capitalism, and this is why you were so powerful in the academe and beyond. There is, in other words, a fundamental and profound difference between saying that economics failed and my hypothesis that economics is designed to acquire discursive power in our academy and in society at large in proportion to its incapacity to understand capitalism.
How can we escape this trap? What should we be providing our students instead of a diet of mathematically interesting models that obfuscate the economy we live in? The solution is certainly not to ignore these models, since they are the language spoken in the corridors of power (treasury, central banks, boardrooms, etc.). No, the answer is to teach these models in the same way we teach the history of religion. The same way you explain, for instance, what happened to precipitate the schism between the Catholic Church and the Orthodox Church, and therefore to bring on the Crusades that ravaged Palestine. Yes, by all means, speak to students about the clashes on and around the doctrine of Filioque (whether the Holy Spirit is moved about by the will of God or of God and Christ simultaneously), but do so in the context of the deep, underlying commercial wars between the Western and Eastern remnants of the Roman Empire (centered upon Rome and Constantinople respectively) underpinning the theological clashes on who moves, who doesn’t, the Holy Spirit.
ILAN PAPPÉ: Maybe this is a moment to move to a related issue: the situation that emerged in both the economic and political world under the COVID-19 pandemic.
In a dystopian mood, some of us fear that what you call rightly “technofeudalism” is collaborating with, or may be replaced or augmented by, biofeudalism. Pharmaceutical giants are developing research with taxpayers’ money, producing and selling solutions in the name of public health and under the panic of a pandemic. Corporations’ share prices rise in the stock exchange markets while the number of unemployed, working, and middle-class people is unprecedented all over the world. The same is true about companies that produce surveillance products.
Do you have an antidote that might help us to see the pandemic reality as a moment of hope rather than despair? An optimism that would potentially justify the question mark on the title of your book And the Weak Suffer What They Must? Do you see a ray of hope coming from the pandemic in terms of the global economy, in the near and more distant future?
YANIS VAROUFAKIS: I always see hope wherever I look. Whether it was the 2008 crisis or the pandemic or even ghastly wars, hope is everywhere. When you look into the eyes of the young who are resisting climate change or trade unionists rising up in New Jersey and Bangladesh against working conditions in Amazon’s warehouses or into the the eyes of traumatized children in Palestine, hope is always there.
Speaking of biofeudalism, it too is part of technofeudalism. I’m not simply talking about digital technologies but the capacity of high tech, whether it’s bio high tech or digital high tech, to aid and abet the creation of a new kind of feudalism. Is there an antidote to globalized technofeudalism? Of course. And it takes the form of internationalist, democratic movements.
Some of us have come together in what we call the Progressive International—it all started in November 2018 in Vermont, when Bernie Sanders and I called for people to join in a Progressive International. Now it has been taken over by movements from around the world: from Africa, Asia, Latin America, the United States, and here in Europe. For me, the Progressive International is a great source of hope because, let’s face it: The bankers and the fascists have internationalized. Modi, Salvini, Le Pen, Trump, Bolsonaro, and Netanyahu fully understand the power of solidarity. Similarly, if you go to Davos you will find bankers and oligarchs sitting around the table from different countries: from England, Switzerland, Thailand, Nigeria. There is no hint of racism or discrimination among them. They’re like brothers and sisters. Isn’t it time that we internationalists do the same?
Now, since you asked about technofeudalism, let me offer a brief explanation of the term, as I understand and mean it. At the beginning of the twentieth century, the rosy view of capitalism as a competitive, village-like marketplace in which the baker, the brewer, and the butcher (three iconic figures who feature in Adam Smith’s account of free markets) had already been sidelined by large corporations like the networked firms of Thomas Edison and Henry Ford. We had already moved to what Rosa Luxemburg, Lenin, and others referred to as “monopoly capitalism.” But in 2008 there was a structural shift away from that. Some friends, colleagues, and comrades of mine are somehow puzzled by my insistence that 2008 was for capitalism what 1991 was to the Soviet Union and its satellites. But after 2008, I submit to you, we are no longer in a standard monopoly capitalist environment.
Ford, General Electric, and Walmart are good examples of monopolies that, after the Second World War, regrouped (under the Bretton Woods system) to become what John Kenneth Galbraith referred to as the Technostructure. The Technostructure was a form of central planning involving a cartel of industrialists—the highest form of monopoly capitalism, if you will. A new managerial class had emerged within the US war economy, and they ran, at once, the US entrepreneurial state and the private conglomerates. Weaponizing smart marketing and clever advertising, they generated the products, the innovations, and the desires of consumers for these commodities. However, the Technostructure’s foundation was still capitalist in the sense that the basic force driving the world economy was surplus value realized from the labor process—from the disparity between the value of labor going into commodities and services by workers, and the value of their labor time wages.
The standard process of capital accumulation—of capitalist production yielding surplus value, part of which ended up as profits for capitalists, which then drove the system—was maintained even during the phase of monopoly capitalism that people like Paul Sweezy and my friends from Monthly Review in New York were beautifully mapping out. However, it is my contention that in 2008 the underlying dynamic of the Technostructure’s capital accumulation buckled under under the weight of the financial sector’s hubris. Central banks came in and started pumping rivers of cash into finance. Their aim was temporarily to refloat the financial sector, but in practicing what I call “socialism for the financiers” and huge austerity for everyone else across the Western world, they squeezed aggregate demand, curtailed investment in physical capital, and thus zombified corporations and banks while devastating both the West’s proletariat and middle classes. So, effectively, we ended up with a financial sphere that was doing very well, financially, but also with conglomerates whose financial health was not related to their profitability.
The pandemic was not responsible for capitalism’s stagnation, but it turbocharged it nevertheless. Indeed, the pandemic accelerated and deepened a process that had begun already under Obama and his administration’s audacious refloating of the financial sector in 2009. From 2009 till the pandemic’s end, the process was straightforward to understand: Central banks were printing oodles of cash to hand over to the private banks. The private banks were never going to lend the cash to austerity-hit “little people” (eg, small businesses, working-and middle-class families) because universal austerity meant that the “little” people could not be relied upon to repay it. So the bankers picked up the phone and called their mates at large conglomerates like Apple in the US, Volkswagen in Germany, Alstom in France, and said, “Look, I have a load of cash that the central bank has given me at negative interest rates—so I can give it to you for free, at a zero interest rate, and still make a profit. Do you want it?”
These corporations did not plan to invest any money. They could also see that the “little” people could not afford high value–added products. So they would not invest money even if it fell upon them like manna from heaven. Recall the large piles of savings that these conglomerates were sitting on—for the first time in the history of capitalism, corporations had savings! Corporations are not meant to have savings. Households are supposed to save, while corporations borrow to invest. So when you see that Apple had $200 billion as savings, and similar with European corporations, you should immediately think: “My god, something’s going wrong here.”
Naturally, the corporations offered free money from their bankers did not turn down the free central bank money. They took it and headed straight for the stock exchange to buy their own shares. They all did it. Apple took the central bank money, via the private banks, and purchased Apple shares. Volkswagen purchased Volkswagen shares. The share markets skyrocketed, obviously. There was, in the language of Wall Street, an “everything rally.” Even when the pandemic shut everyone down and profits disappeared, the financial markets were going gangbusters. You can see why: on the strength of the central bank monies!
If you have any doubt, consider what happened in London on August 12, 2020. At 9:05 a.m., the unprecedented news came out that the markets had not predicted: the UK’s national income (GDP) had fallen by more than 20 percent for the first time in the history of British capitalism. That was way above the national income drop the markets had expected. Fifteen minutes later, the London Stock Exchange went up! What had happened? Simple: the financiers thought, “Oh, the news is so bad that it must be excellent!”
How could it be good news when national income fell to unexpected lows? The London Stock Exchange went up because financiers were surprised by how … bad things were. This phenomenon only makes sense if we come to terms with the fact that we no longer live in what we used to understand as capitalism, if we accept that we live in a world where the financiers thought along the following lines: “Things are really awful. But this is great news for us because it means that the Bank of England will panic and start printing even more money to give us. Time to rejoice! Since people like us—fincaniers—will suspect that people like us will take all this fresh central bank money to the stock market to buy whatever we can get out hands on, share prices will rise. Time to buy!”
This decoupling of financial wealth creation from capitalism and capitalist profits is one (and not even the most poignant) inkling that this is no longer capitalism. Then there is the new form of capital (which, in my recent book Technofeudalism: What Killed Capitalism I refer to as “cloud capital”), which, using algorithms running on networked machines, modifies our behavior and offers its owners a spectacular capacity to bypass markets and to siphon off surplus value as a new form of rent (“cloud rent,” I call it). Add to that biotechnologies that combine so powerfully with the decline of public health services to deliver whole populations to the rent-seeking behavior of biofeudal firms. Firms like Pfizer and Moderna now have immense power over society because they are producing the stuff that saves lives in societies where the national health service is delivered to them giftwrapped.
To give you one last reason why I am, controversially, arguing that this is no longer capitalism but a variety of technofeudalism, think of the moment you enter Amazon. I wish to argue that at that moment, the moment you are in Amazon, you have exited capitalism. It is as if you’ve stepped out onto the commercial road of your town, the High Street, as the English would say, or Main Street in America, you looked around and you found yourself in a dystopian science fiction movie: You realize that every building, every shop, every house is owned by one person. That whatever is sold there is controlled by that one person, who has played no role in its production. The (digital) air you breathe in that digital platform, the digital tarmac on which you walk, the digital bench on which you sit to rest—they all belong to that one person. A person who, courtesy of owning this digital universe and the algorithm that controls everything within it, is far more than a mere monopolist—he determines which products you see and which you can’t, whom you can talk to and who is out of your reach, what you can buy and at what price you can buy it. It is the same person who charges the producer of whatever you buy up to 40 percent of the final price. And, as if that were not enough, this is the person who lures you into investing your free labor into updating his digital (or cloud) capital with your reviews, likes, posts, videos, and data. This is not capitalism, I submit to you and to our readers, dear Ilan. Welcome to technofeudalism!
I hope that you can now see why I claim that, since 2008, we have been living in world that is rapidly becoming technofeudal. Moreover, this technofeudal world is exceptionally fragile and more unstable than even capitalism was. In this world, the greatest threat to the many, to the demos, is that we shall mistake this totalitarian system as a liberal, powerful, solid, natural system—which it is not. The power of the Jeff Bezoses of the world, of the Zuckerbergs, of the owners of Pfizer is the false belief in the minds of the many that we are the powerless ones. Our duty, therefore, is to let people across the world in on a crucial, liberating secret: That everything could be otherwise, as David Graeber used to say. That we, the “little” people, have the power.