The Marxist Case for the Technofeudal Hypothesis
Yanis Varoufakis has called Big Tech’s overweening power to shape the modern economy “technofeudalism.” Writing for Jacobin, he argues that this isn’t a moral critique but one based in the dynamic of capital accumulation today.
Some critics of Yanis Varoufakis’s idea of overbearing “technofeudal” control argue that it idealizes past forms of capitalism. He argues that this criticism is misplaced. (Nicolas Economou / NurPhoto via Getty Images)
When my book Technofeudalism was published in 2023, I had not imagined that the likes of Steve Bannon would embrace it. I had, however, fully anticipated a barrage of criticism from Marxist thinkers, especially in response to the book’s provocative subtitle (What Killed Capitalism). It is now incumbent on me to present the Marxist case for the technofeudal hypothesis, which, though written for a broader audience, was Marxist in its conception.
Karl Marx’s own method sought to bypass moralistic censure of capitalism’s penchant for injustice, monopoly, and sleaze. Instead he studied capitalism in its purest form: as an anarchic market system driven by an alien force — capital — seeking its own proliferation, a task necessitating the commodification of everything and a vicious class struggle over surplus value. Any analysis that claims to continue Marx’s work must do likewise.
Today, I contend, a mutation of capital has gained inordinate traction. I call it cloud capital: a network of remarkable machines that produce no commodities but generate enormous rent-extracting powers by interfacing directly with us, outside anything that can usefully be called a market. Studying this novel form of capital should be every Marxist’s responsibility.
Before focusing on cloud capital, it is important to clear away three common misunderstandings. First, no, we are not returning to feudalism. History is not going backward. Driven by unbridled capital accumulation, we are hurtling forward into a brand-new socioeconomic mode. According to the technofeudal hypothesis, capital is more dominant than ever. Wealth grows exponentially from gigantic investments in dynamic machines, not static assets. Alphabet, Microsoft, Meta, and Apple are as ruthlessly capitalist as Edison and Ford ever were. Thus, the term “technofeudal” denotes no literal regression, but rather draws an analogy with extractive power practiced outside markets.
Second, rents are not new to capitalism. Capitalism never existed in the pure form of mainstream economics. Like our bodies need residual serpent DNA, capitalism needed remnants of feudalism to function. David Ricardo warned that ground rent would grow dangerously, as it did. Paul Baran and Paul Sweezy showed how monopoly surplus was a form of rent. Since the 1970s, financialization grafted mountainous financial rents onto existing forms. So the mere proliferation of rents offers no evidence that capitalism is evolving into something else. For such a claim to be plausible, there must be evidence of a qualitative change in capital itself.
Third, data is not the new land. The belief that our stolen data has become the new feudal estate is a form of “data fetishism” that Marxists must reject. “Surveillance capitalism” constitutes no qualitative change of the capitalist system, since legislation granting us property rights over our data would eliminate any rents extracted via its surreptitious harvesting. The real novelty lies elsewhere: in how cloud capital uses data to modify our behavior directly and “transport” us outside anything resembling a capitalist market.
In short, the technofeudal hypothesis revolves around the notion of cloud capital. To grasp its nature, we need to start with Marx’s definition of commodities as goods or services produced for exchange in a market, of capital goods as produced means of commodity production (PMCP), and of markets as decentralized spheres of circulation where labor values turn into money and surplus values into profits, rents, and interest.
Changing Our Behavior
Are Google’s machines conventional PMCP-type capital goods or cloud capital? The answer is: it depends! When Google charges you for a film on YouTube, it sells a commodity — in which case its machines function as standard PMCP. However, when Google’s machines offer you a free search result or directions on a map, they function as cloud capital: cloud-based machines that produce no commodities but enter into a relationship with you to modify your behavior. This is something no machines could achieve until recently.
But how does cloud capital modify our behavior? By engaging us in one-on-one, two-way, real-time dialogue. Consider Amazon’s Alexa. It trains you to train it to know your preferences so as to do things for you, offer you good advice, and thus gain your trust. Then, one day, when your coffee maker dies, it suggests you buy a particular model. You click “buy.” What just happened? Cloud capital has sold you a commodity that it played no role in producing, and its owner, Jeff Bezos, pocketed up to 40 percent of the price as cloud rent, a form of absolute rent.
Evidently, these machines are not conventional capital goods (PMCP). They have crossed the Rubicon into what I call “produced means of behavioral modification (PMBM)” — or cloud capital. Fascinatingly, cloud capital is, in Marx’s technical sense, unproductive (as it produces no commodities) but hugely powerful, its novel social power extending over consumers, over waged laborers, and over conventional capitalist producers. In the process, cloud capital replaces markets with something I call cloud fiefs, like Amazon.com.
Why is Amazon.com nothing like a market? Recall Gosplan, the Soviet planning ministry. It too offered a top-down algorithmic system matching buyers and sellers. That was not a market — it was its opposite. Amazon is similar: a centrally planned allocation system. No one interacts with anyone unless the algorithm matches them. Given that, unlike Gosplan, Amazon is privately owned, it is best defined as a cloud fief, not a capitalist marketplace.
Consider Instacart. It practices “perfect price optimization” — every customer gets a unique, noncomparable price. Price competition thus becomes impossible. Retailers and platforms can collude in ways the naked eye never discerns. The system is designed to be an invisible solvent of a market mechanism’s basic traits.
Consider Uber. Yes, it looks like a monopoly reseller of drivers’ labor. But Uber also tracks drivers’ debt obligations. It offers higher rates and loans to update their cars to reluctant drivers, then lowers pay rates once they are hooked. ShiftMed does the same with nurses — offering lower rates just before their rent is due. This is algorithmic extra-market despotism, not a capitalist labor market in which, as Marx hypothesized, wages reflect the labor values of the wage goods they buy.
And here is another insight that Marxists must grasp: for the first time, free labor helps a variant of capital enhance its powers to modify everyone’s behavior in the interests of its owners. Unlike conventional capital, which only waged labor manufactures, massive free labor helps cloud capital accumulate. With every video we post, every rating we give, every mile we drive, every purchase we make — we augment cloud capital and raise our own costs of quitting. We can leave a platform, yes. But the cost of leaving increases with every click. Formal freedom masks real unfreedom. That is the classic Marxian diagnosis, applied to the age of cloud capital.
“But are the platforms not fiercely competing with one another?” many ask. “Are their clashes not evidence of ruthless market competition?” No, it is not. Market competition is based on price and quality and unfolds in decentralized markets. Economic rivalry, in contrast, of the sort we see today in the clashes between TikTok and Instagram, Uber and Lyft, etc., is zero-sum, territorial, pitching one fully centralized cloud fief against another. Unlike the market contest between, say, Toyota and General Motors, platforms race to lock us in their centralized trading schemes, not to offer us lower prices or higher quality.
What about successful YouTubers and influencers? They work hard, and some of them earn well. Are they not entrepreneurs? From a Marxist perspective, they are not. Their labor produces no new exchange value and no productive capital (cloud capital itself is unproductive). It generates only use-value and helps lure unpaid users, but it does not create surplus value. Influencers are, in that sense, not capitalists but, instead, a well-remunerated, privileged layer of cloud serfs, their high pay obscuring the general condition: most of us laboring unpaid to augment cloud capital’s power over us.
Now let me turn to macroeconomics. Marx showed that capitalism’s accumulation drive produces business cycles and a long-term falling rate of profit. In the longer paper, I extended his analysis to include cloud capital. Following Richard Goodwin’s adaptation of a prey–predator model, the analysis demonstrates the dynamic relationship between the economy’s productive department, where all value is created utilizing conventional capital and waged labor, and the technofeudal department, where cloud rents are extracted. Four phases emerge.
At first, the technofeudal department grows at the expense of the productive department. Then, once cloud rent extraction exceeds a threshold, productive capital accumulates again and both departments grow. A third phase kicks in when, as the profit rate exceeds another threshold, cloud capital overaccumulates and its capacity to extract rent wanes. Lastly, in the fourth phase, both the profit rate and the cloud rent extraction rate decline.
In the long run, as cloud capital accumulates and unpaid labor replaces more and more waged labor in the technofeudal department, the thresholds themselves decline and the system tends toward a collapse of both profit rates and cloud rent extraction rates. Thus the technofeudal hypothesis generalizes Marx’s falling rate of profit to a world with cloud capital, reaffirming the Marxist case for socialism as the only alternative to system failure and societal collapse.
Crisis Response
Since my Technofeudalism was published, artificial intelligence has become all the rage. Cloud capital did not need AI to emerge — reinforcement learning algorithms built the first cloud fiefs. But AI massively escalates cloud capital’s power. AI-powered bots will soon know us perfectly, speak to us like humans, and cultivate emotional dependence. Switching platforms will become akin to a heart-wrenching divorce. This creates what I call “artificial social relations of consumption (ASRC),” which dialectically interact with the machines themselves.
How did capital respond, in the past, to its intensifying contradictions? Marx’s successors identified three responses: finance capital, imperialism, and legitimizing ideologies. We see the same today:
Cloud finance: the merger of cloud capital with traditional finance has ignited a New Cold War between the United States and China. Through stablecoins and Trump’s “Genius Act” cloud finance is privatizing the dollar, giving Big Tech powers once reserved for central banks.
Imperialism and war: AI targeting systems that brought mega-death to Gaza are the same cloud capital that Palantir and Oracle sell to Britain’s National Health Service. Technofeudalism is modern war’s handmaiden.
Techlordism: a new ideology replacing neoliberalism. As neoliberalism deified the market, techlordism deifies cloud capital, offering a veneer of philosophical legitimacy to the replacement of human labor with rent-extracting machines, integrating Big Tech into state institutions and handing central banks over to cloud finance.
And here is the central dialectical contradiction: the more successfully the cloudalist class concentrates all powers — industrial, financial, political, cultural, and state power — the faster it drives down both profit rates and cloud rent extraction rates. Private success breeds system failure.
Not Absolving Capitalism
Some critics fear that by arguing that something worse than capitalism has arrived, I absolved capitalism or served bourgeois propagandists who want to return to a mythical pure capitalism. This fear is misplaced. My hypothesis is grounded firmly in the Marxist tradition. Capitalism was always monstrously irrational. Technofeudalism is a mutation internal to capitalism: it arose because the socialist transformation was averted brutally. Recognizing this does not excuse capitalism; it sharpens the need for socialism.
Perhaps the greatest contribution of the technofeudal hypothesis is its illustration of how private capital has become inconsistent not only with social well-being but even with private ownership — except for a tiny band of techlords. AI-enabled cloud capital is collectivizing our labor, our intellect, our identity, even our audiovisual likeness. The bourgeois state is incapable of regulating Big Tech. The case for socializing both productive and cloud capital — all of society’s capital stock — emerges stronger than ever.
Regarding our theory of change, some Marxists are critical of my call for a united front of traditional proletarians, cloud proles (waged gig workers), cloud serfs (unpaid users), and even vassal capitalists (small businesses being crushed by cloud fiefs). This is contentious, naturally. And yet Marxists have always debated alliances — with peasants, or with the petty bourgeoisie. This debate must continue within our tradition, not outside it.
What’s in a Word?
Let me end with the semantic question. Is this still capitalism, or should we call it technofeudalism? I understand the hesitation. A Marxist economist once told me, with a bitter smile, that he refused to let go of the thought that people like us came to this world to overthrow capitalism. “If capital did that without us,” he asked, “what’s our purpose?” I sympathize. I too grew up hoping the Left would have the honor of felling capitalism. But then there is Rosa Luxemburg’s devastating question: “Socialism or barbarism?” Her point was that socialism was not inevitable — that barbarism was a very real possibility. In her day, barbarism took the form of fascism. Today’s fascism rides on the coattails of technofeudalism and techlordist ideology.
So what’s in a word? In the 1770s, Adam Smith celebrated “commercial society” even though Britain’s feudal department was still larger than its capitalist department. In the 1840s, Marx and Friedrich Engels could have called the new era “industrial feudalism.” But calling it capitalism helped people living in the nineteenth century grasp the transformation underway.
The safe option today is to assume the cloudalist transformation is internal to capitalism. The controversial option, which I argue for, is to adopt a new term like technofeudalism to jolt our collective imagination. Both are defensible within the Marxist tradition. Neither is a reason for nastiness between Marxists.
Dialectics teaches us that reality is built on contradiction. At the time of the original Great Transformation, society was both feudal and capitalist. Today, it is both capitalist and technofeudal. The whole point of Marxist dialectics is to recognize this puzzling coexistence, and to see in it the possibility of overcoming the contradiction through socialist transformation.
First, we must see the contradiction. Once we do, the emancipatory potential knows no bounds.