Commentary on Political Economy

Wednesday 14 July 2021


How capitalism is fading away into techno-feudalism

Printed money has replaced private profit as the driver of economies, and markets are giving way to platform-based fiefdoms. But that may not be the end of it.

Yanis Varoufakis

This is how capitalism ends: not with a revolutionary bang, but with an evolutionary whimper. Just as it displaced feudalism gradually, surreptitiously, until one day the bulk of human relations were market-based and feudalism was swept away, so capitalism today is being toppled by a new economic mode: techno-feudalism.

This is a large claim that comes on the heels of many premature forecasts of capitalism’s demise, especially from the left. But this time it may well be true.

Meet the new lord of the manor. Bloomberg

The clues have been visible for a while. Bond and share prices, which should be moving in sharply opposite directions, have been skyrocketing in unison, occasionally falling but always in lockstep. Similarly, the cost of capital (the return demanded to own a security) should be falling with volatility; instead, it has been rising as future returns become more uncertain.

Perhaps the clearest sign that something serious is afoot appeared on August 12 last year. On that day, we learnt that in the first seven months of 2020, the United Kingdom’s national income had tanked by more than 20 per cent, well above even the direst predictions. A few minutes later, the London Stock Exchange jumped by more than 2 per cent. Nothing comparable had ever occurred. Finance had become fully decoupled from the real economy.

What we are experiencing is not merely another metamorphosis of capitalism. It is something more profound and worrisome.

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