https://newleftreview.org/sidecar/posts/quantity-to-quality?pc=1643

20 November 2024 Economics

You are one of several theorists, along with Cédric Durand, Jodi Dean, Mariana Mazzucato and others, who have speculated that the hegemony of Big Tech – using algorithms to build data empires that function as a seemingly limitless source of value – may be pushing beyond capitalism’s frontiers. In your 2023 book Technofeudalism you claim that, just as the early modern period saw land supplanted by productive capital as the dominant factor in production, the early twenty-first century has seen productive capital replaced by ‘cloud capital’, signalling a shift to a new accumulation regime. Why, in your view, is cloud capital qualitatively distinct from other forms of capital? What was its historical evolution?

First, allow me a short preface. Technofeudalism is not a post-Marxist analysis of a post-capitalist system. It is a fully Marxist analysis of the workings of contemporary capital, which tries to explain why it has undergone a fundamental mutation. Of course, over the previous centuries the character of fixed capital has evolved from fishing rods and simple tools to complex industrial machinery, but all these shared a basic feature: they were produced as means of production. Now, we have capital goods that were not created in order to produce, but in order to manipulate behaviour. This occurs through a dialectical process in which Big Tech incites billions of people to perform unpaid labour, often without their even knowing it, to replenish its cloud capital’s stock. That is an essentially different type of social relation.

How did it come about? As always, through steady, gradual, quantitative changes in technology, which at a certain point yielded a larger qualitative change. The preconditions were twofold. One was the privatization of the internet, the original ‘internet commons’. There came a moment when, in order to transact online, you had to get either your bank or a platform like Google or Facebook to verify who you are. That was a hugely significant form of enclosure, marketizing the cybersphere and creating newly privatized digital identities. Another factor was the 2008 financial crisis. To deal with its fallout, capitalist states printed $35 trillion between 2009 and 2023, giving rise to a dynamic of monetary expansion in which central banks, rather than the private sector, became a driving force. States also imposed universal austerity across the West, which depressed not only consumption but also productive investment. Investors responded by buying up real estate assets and pouring money into Big Tech. So, naturally, the latter became the only sector that was able to turn that torrent of central-bank cash into capital goods. Their stock became so substantial, and gave its owners so much power to influence behaviour and extract rents, that it ruptured the traditional functioning of the capitalist system. And this happened entirely accidentally: a classic case of unintended consequences, without the intention of even the tech companies themselves.

Of course, whether or not we are entering a post-capitalist era depends on our conception of capitalism. It has been argued that Robert Brenner’s definition, which views capitalism as a system in which the coercion of labour, and therefore also capital accumulation, is mediated principally by economic forces, leads to defining the current situation as ‘technofeudalism’ or ‘political capitalism’, as Brenner would put it, given the prominence of ‘extra-economic’ coercion – whether it’s blunt political power protecting monopolies and channelling profits upwards or forms of algorithmic control – within the current model of accumulation. But others, for example Morozov, would reject this as too narrow, since capitalism has always involved a complex interplay between economic and extra-economic realms. How would you respond to this?

I’m not a Brennerite. My understanding of capitalism comes straight from Marx, who sees it as predicated upon two major transformations: the transfer of power from the owners of land to the owners of machines following the enclosures, and the switch from wealth accumulation in the form of rent to the accumulation of profit. The first unleashes a seemingly endless process of commodification, a perpetual expansion of the market into all areas of life. The second enshrines surplus value – the sum that the capitalist can extract from labour after rent, interest and so on have been paid off – as the primary aim of investment. My conviction that we have moved beyond capitalism developed out of a very simple observation: if you look at Amazon.com, you notice that it is not a market. It is a digital or cloud fiefdom. It shares certain characteristics with the fiefdoms of old: there are fortifications around it, there is one ‘Lord’ who owns it, and so on. But unlike these premodern structures involving land and simple fences, cloud fiefs are built on cloud capital and operated by a sophisticated system of economic planning – an algorithm that would have been the wet dream of Gosplan, the Soviet planning ministry.

Remember that cybernetics were developed in the Soviet Union. They used the term ‘algorithm’ to refer to a cybernetic mechanism that would replace markets with a different method of matching needs with means. If Gosplan had had the technological sophistication of, say, the Amazon algorithm, then the USSR may well have been a long-term success story. Today, though, algorithms are not used for planning on behalf of society at large; they are used to maximize the cloud rents of their owners. The reproduction of cloud capital, and the cloud fiefs it erects, destroys not just market competition but entire markets as well. Then the residual surplus value produced in the conventional capitalist sector (factories and the like) is appropriated as cloud rent by the owners of cloud capital. Thus, profit is marginalized and wealth accumulation relies increasingly on cloud rent extraction.

You write that while capitalism commodified labour, technofeudalism is decommodifying it. That is to say, Big Tech relies on exploitation that occurs outside the labour market, substituting data harvesting for waged work. But wouldn’t social reproduction theorists say that capitalism has always done something similar, in extracting value from unmonetized forms of labour?

It’s true that unremunerated care work has long been essential to capitalism. But when I say that cloud capital decommodifies formerly waged labour, I’m talking about something fundamentally different. Here, unpaid unwaged labour is directly producing capital in an unprecedented way. The carer who doesn’t get paid because of patriarchy is smoothing out the distribution of surplus value in the capitalist economy, but she’s not producing capital directly. Under capitalism, capital is produced by waged labour alone. If a textile industrialist wanted a steam engine, he would have to go to James Watt and ask for one, and Watt would have to pay the workers who produced it a sufficient amount to provide their labour. With a company like Meta, much of its capital stock is being produced not by its employees but by its users in society at large – by unpaid people who, like modern-day ‘cloud serfs’, come into contact with its algorithms and work for free to imbue them with a greater capacity to attract other cloud serfs. That’s why I argue that cloud capital marks the mutation of capital into a new strain which, for the first time in history, is no longer a produced means of production. It is, rather, a produced means of behaviour modification: one that is manufactured largely, if not fully, by unpaid labour.

The technofeudalism hypothesis tends to see rents and profits as structurally opposed, with the former supplanting the latter – replacing capitalist dynamism and innovation with stagnation and oligarchization. But Marx shows how rent-seeking needn’t always neutralize productivity gains; in fact, in the early capitalist period, it did something like the opposite, impelling capitalists to develop the productive forces. Is it possible that, in a similar way, cloud rents could restore capitalist profitability rather than smothering it? What if the relationship between the two is less antagonistic than you suppose?

Marx recognized that rent-seeking can drive development, but he also agreed with Ricardo that if as a proportion of total income it surpasses a certain threshold, then it becomes a drag on capitalist growth. Today, cloud rents are so exorbitant that they are clearly having this effect. Indeed, I would venture that, if you took listed companies thriving on cloud rent out of the the stock market, its values would collapse. At a more microeconomic level, consider that Amazon appropriates up to 40% of the price of a product sold on its platform. That leaves next to no surplus for the seller to reinvest. And when you have so much rent being siphoned out of the economy, out of the circular flow of income, then the capitalist sector is starved and increasingly subordinate to the cloud rent sector. It is not that the capitalist sector has ceased to exist; crucially, it is still responsible for all the surplus value that is produced in the economy, as per the labour theory of value. But it is relatively small compared to this parasitic outgrowth, which has become so colossal that, as I said, quantity has become quality, and the entire system has transformed.

Most of the major intellectual monopolists – who own the digital infrastructure on which the world economy depends – are based in the US. This could be taken as a sign that, despite talk of an emerging multipolar order, the American empire is in good health. But you write that China has achieved something that Silicon Valley hasn’t, in effecting a successful merger of cloud capital and other fractions of big finance. What are the implications for the New Cold War between the two powers?

In my view, what we have now is a bipolar order. This is not what China wants. The astonishing thing about the Chinese Communist Party is that it really doesn’t want to rule the world, nor even to be a second hegemonic pole countering the first one. What they want is to rule China – plus the places they feel they’ve lost, like Hong Kong, Taiwan – and to trade freely with other countries. They would genuinely like a multipolar world, in which they would share power with their trading partners, but the problem is that they have only one way of achieving that, which is to use their tech sector, in concert with big finance, to create something like the Bretton Woods system within the BRICs. This would involve fixed exchange rates, essentially a common currency backed by the yuan. It would be a major project, equivalent to the New Dealers planning the world order in 1944 at the Bretton Woods Conference. The rest of BRICs are not ready for it, as we can see from the huge tensions between India and China. Much of the global south is not ready for this kind of multipolarity either. And the Chinese leadership itself is very reluctant. But if they don’t start pushing in that direction, then they will be stuck with a bipolar US–Chinese world, with all the risks that this entails.

But doesn’t the Chinese model, of a market system where the state plays an active role in directing and allocating investment, potentially undermine the assumption that Big Tech is now the hegemonic force in planning the economy? It seems possible, at least in theory, that as Western countries grapple with the effects of economic stagnation and climate crisis, they will increasingly look for neo-statist solutions. What would this mean for cloud-rentierism?

I strongly believe that in Western countries we underestimate the role of the state, and in China we overestimate it. My recent trip to China opened my eyes to the fact that a lot of the bold thinking about projecting Chinese values and influence comes from the private sector, whereas the state itself is far more hesitant. (The private sector is also where you find most Marxists, though there aren’t that many of them.) In the United States, meanwhile, people like Eric Schmidt and Peter Thiel are totally intertwined with the state: the Pentagon, the pharmaceutical industrial complex. Julian Assange published a little book called When Google Met Wikileaks when he was still in the Ecuadorian Embassy which I’d highly recommend to everyone. It’s a dialogue between him and Schmidt, and the striking thing about it is that, when Schmidt speaks, it’s impossible to tell whether he’s an agent of Google or an agent of the US state. So I think the idea that the state has been separate from the market in the West, and that maybe now it’s time for it to play more of a role, is itself a libertarian fiction. It’s always been impossible to disentangle them. And if you look closely at the forms of convergence between the two in both the East and the West, you tend to see a remarkable degree of similarity.

When Elon Musk bought Twitter, you wrote that this was an attempt to ascend to the golden circle of cloud rentiers. Is it the same with his entry to politics? Does it imply, as some critics have speculated, that it’s becoming necessary for the American ruling class to purchase access to the levers of political power in order to guarantee their returns?

I don’t think that’s strictly necessary for them. Jeff Bezos doesn’t do it. He uses other channels of influence like the Washington Post. Even though the Google leadership have a lot to lose from any attempt by the FTC to regulate them, you don’t see them making much of an effort to get into politics. Musk is different for two reasons. Firstly, because he’s a flamboyant megalomaniac whose decisions aren’t necessarily based on any particular material interest. And secondly, because he has a relatively weak hold on cloud capital. His businesses – Tesla, Neuralink, The Boring Company – were all old-fashioned capitalist firms. Even SpaceX was, ironically, built on terrestrial capital. His aim was to convert them into cloud enterprises. That’s why he bought Twitter: not as a traditional investment from which he hoped to turn a profit, but as an interface with you, with me, with all of us; the kind of interface that others had and he didn’t. He got hold of it in a rather brutish way and the company lost half its market value immediately. But that’s typical of Musk: there are moments when the market capitalization of his businesses goes through the roof and moments where they look like they could lose everything.

His involvement with the Trump administration – which I’m sure is not going to end well, by the way – is partly a matter of wanting certain favours. The prospect of loosening regulations on self-driving cars has, in a single day, given Tesla an additional market capitalization that’s equivalent to the total capitalization of General Motors, Volkswagen, Stellantis and Mercedes-Benz. So that’s a nice little return for him. But it’s certainly not the only reason why he’s doing it. He’s also driven by ideology: unlike Bezos or Gates, he actually believes that he’s a force for good. Now that’s a unique level of delusion.