Kathmandu— Economist Yanis Varoufakis has published an essay in Jacobin magazine arguing that the rise of cloud-based technology companies like Google and Amazon represents a new form of capital accumulation, which he calls 'technofeudalism.' This mutation of capital, according to Varoufakis, is distinct from traditional capitalism due to its ability to extract rent through direct behavioral modification rather than market transactions.

Defining Cloud Capital

Varoufakis defines cloud capital as a network of machines that generate enormous rent-extracting powers by interfacing directly with users, outside the traditional market framework. He emphasizes that this form of capital is not a regression to feudalism but rather an evolution driven by unbridled capital accumulation. 'Cloud capital' refers to companies like Google and Amazon, which use data to modify consumer behavior in ways that generate significant profits without producing tangible commodities.

Challenging Common Misunderstandings

Varoufakis addresses three common misconceptions about technofeudalism. First, he clarifies that the system is not a return to feudalism but rather an evolution of capitalism. Second, while rents are not new to capitalism, the proliferation of rent-extracting powers through cloud capital represents a qualitative change in how wealth is accumulated. Third, data itself does not constitute a new form of land or asset; instead, it is the use of data to modify behavior that creates a novel economic power structure.

Behavioral Modification and Cloud Capital

Cloud capital modifies consumer behavior through one-on-one interactions facilitated by technology. For example, Amazon's Alexa learns user preferences and suggests products accordingly, turning users into unpaid laborers who enhance the company's profitability without direct compensation. This form of cloud capital is unproductive in Marx’s sense as it produces no commodities but is highly effective in extracting value from consumers.

Macro-Economic Implications

Varoufakis extends Marxist economic theory to include the impact of cloud capital on business cycles and profit rates. He outlines four phases of technofeudal development, where initially cloud rent extraction grows at the expense of productive capital accumulation. However, as cloud capital accumulates further, it leads to a decline in both profit rates and rent extraction rates, potentially driving towards system failure.

Responses to Technofeudalism

In response to technofeudalism, Varoufakis identifies three historical strategies of capital: finance capital, imperialism, and legitimizing ideologies. He argues that cloud finance is privatizing monetary systems, AI is being used for both warfare and civilian control, and a new ideology called 'techlordism' is emerging to justify the replacement of human labor with rent-extracting machines.

Varoufakis concludes by emphasizing that recognizing technofeudalism does not absolve capitalism but rather sharpens the need for socialist transformation. He argues that socializing both productive and cloud capital is essential to prevent system failure.

(With inputs from Jacobin)

Originally published on abcnews.com.np.