A penetrating analysis of where we are and why.

Varoufakis has form with analysing current political affirs, of course: he wrote about his short time as Greek finance minister during the 2008 financial crisis in Adults in the Room: My Battle with Europe’s Deep Establishment. In this book he tackles a bigger subject: how has the economic system we are now experiencing diverged from the capitalism we’ve known for over a century? Varoufakis’ take is that the torrent of government money that followed the crisis, and increased during the pandemic, was used by the owners of internet-based cloud providers and major platforms – the “cloudalists” – to build-up their capital stock risk- and cost-free, and used this to grab (and then sell) the attention of everyone. Moreover it allowed them to charge rents to everyone else looking to sell on the internet, since network effects made their platforms unavoidable. This return to rentier economics is what Varoufakis terms technofeudalism, and claims this is a better term that the other terms such as late-stage capitalism or hypercapitalism that fail to capture the return to rents as the major source of corporate income – to the point that the cloudalists don’t need to be selling profitable commodities any more.

Varoufakis has a keen eye for anecdotes and corners of the economy in which to test his hypotheses, such as how General Motors turned into a hedge fund with a sideline in cars, or the irony of capitalism being defeated by … more efficient capitalism. But the major point is that technofeudalism isn’t capitalism, and emerged largely because of government largesse leading to unintended consequences followed by significant political capture to keep the new status quo in place and without meaningful regulation.

This is a book about economics, but there’s a computer science perspective that’s perhaps worth taking too. Cloud systems may be inefficient in economic terms, because they extract rents from all users and service providers. But technically they’re almost always more efficient than owning and running your own computers to provide services, as well as reducing costs and risks for start-ups and being a lot more flexible and (potentially) energy-efficient. That’s not to say that there’s no evidence of rentier behaviour: the cloud providers segment the market to charge premium rates for not-very-different services, which in turn changes technical decisions in ways that might not benefit service providers, and they’re notorious for making their charging structures as opaque as possible.

It’s the network effects in terms of access to users’ attention where the rents really become too significant to ignore and almost entirely negative in their effects. We’re also seeing the platforms seek regulation to stifle competition, notably in AI, which will re-inforce their ownership of the most important means of computation.

Another thing to consider is that the cloudalists’ rents make offerings progressively worsen. Cory Doctorow terms this process enshittification, where platform-based services inevitably try to suck-in all the surplus value and squeeze-out other stakeholders – turning them into what Varoufakis terms “cloud serfs” living on whatever pittance of value the platforms don’t deign to hoover-up.

So far so negative. But Varoufakis doesn’t content himself with merely describing the emergence of the current situation. As a former Communist his class-based analysis (which I have to say strikes a chord with me) leads him to try to define an alternative economy that recognises the realities of the techologies we live with. His prescription seems utopian and hard to realise, although not as hard (as he points out) as when trades unions were first formed, or when right-wing dictatorships were defeated – and he provides possible strategies and rallying cries for us to fight back against the return of feudalism in a more pernicious form than anyone ever expected.

5/5. Finished Saturday 9 December, 2023.

(Originally published on Goodreads.)