The digital revolution may be returning us to hi-tech serfdom

On the longest of our long weekends, it’s good to have something different to think about. Try this. Could it be that the information revolution – big tech, big data, the internet and social media – is changing how the economy works in ways we’ve yet to understand and won’t like?

The world abounds with economists repeating their conventional wisdom about how the economy works and will keep on working. But one economist politician thinks that digitisation is changing the economy in ways that could lead us back to a new kind of feudalism.

He is Yanis Varoufakis, who lectured at Sydney University for some years before returning to Greece and briefly becoming its finance minister. He visited Australia earlier this month as a guest of the Australia Institute.

In the Middle Ages, feudalism was a system of reciprocal military and economic obligations running from the king to his land-owning lords, whose vassals managed their land worked by serfs.

In Varoufakis’s dystopian vision, the digital revolution, led by a few big technology companies – Meta (Facebook), Alphabet (Google), Apple, Amazon and Microsoft – is turning capitalism into “technofeudalism”. Hence the title of his book, Technofeudalism: What Killed Capitalism.

In the internet’s initial phase, it was characterised by open protocols and decentralised networking, focused on information sharing and communication.

Now, however, it has evolved towards more commercialised, centralised services, including social media, e-commerce and cloud computing. His metaphor for the changed parts of the economy is the “cloud”.

The capitalists – owners of physical capital - are being replaced by “cloudalists”: individuals or businesses that control the major digital platforms (such as the Facebook, Google and Twitter sites) and related infrastructure, which allows them to extract “cloud rent” from the consumers and businesses using their platforms.

“Fief” is the feudal word for land. But “cloud fiefs” are Varoufakis’s term for the digital domains and platforms controlled by the cloudalists. These can be specific services, apps or platforms where the cloudalists have significant control, allowing them to extract “cloud rent”.

This process is similar to the way feudal lords controlled land and extracted ordinary rent from those using it.

Economists use the word “rent” – economic rent – to mean prices people are required to pay in excess of the price a business (or a skilled worker) would require to keep them providing the good or service.

Why are sellers able to charge these higher prices? Because you can’t get that same thing anywhere else. Why do fans pay a fortune for tickets to a Taylor Swift concert? Because they don’t want to settle for some other singer.

So cloud rent is payments made by “cloud serfs” to cloudalists for the use of digital platforms and services. This rent is a form of income for cloudalists, derived from their control over these digital assets, rather than from the production or sale of conventional goods and services.

Thus, whereas capitalists seek to make a profit by selling goods and services, cloudalists seek extract rents from cloud serfs – the users and businesses that depend on the digital platforms and apps the cloudalists control.

Cloud serfs are akin to the serfs in feudal times, bound to the platforms and subject to their terms, often contributing their personal data or content while having limited autonomy and receiving fewer benefits.

Get that? The rent many serfs pay isn’t money, it’s their personal data about their purchasing habits and preferences, and their geographical movements, which can be of great value to businesses trying to sell them things.

Of course, cloud serfs aren’t to be confused with “cloud proles”. Huh? In Varoufakis’s vision, these are the people who work directly for the cloudalists such as Amazon. They’re often highly supervised, with little autonomy, and can even be managed by algorithms.

The modern equivalent of the lord of the manor’s “vassal” managers are the businesses that operate on the cloudalists’ digital platforms. They are subject to the cloudalists’ terms and conditions. While they may own their businesses, they must pay a portion of their earnings as rent to the platform owners and must adhere to their rules.

Getting past all these new names for things, a key point Varoufakis makes is the way the digital revolution has moved us from one-way advertising to two-way algorithms.

Although advertising could instil in us the desire to buy stuff we hadn’t formerly known we wanted, this is just a one-way street. With cloud-based, Alexa-like devices, the cloudalists can not only induce us to buy things, they can also modify our behaviour.

Knowing so much about our weaknesses, they can make us addicted to doing things that benefit them more than us – even just capturing our attention for protracted periods.

Varoufakis says algorithms have already replaced bosses in the transport, delivery and warehousing industries. Workers find themselves in a modernist nightmare: some entity that is incapable of human empathy allocates them work at a rate of its choosing before monitoring their response times.

This is no longer a market in any meaningful sense. Everything and everyone is intermediated (brought together) not by the disinterested invisible hand of the market, but by an algorithm that works for the cloudalist’s bottom line and dances exclusively to their tune.

Finally, Varoufakis argues that, thanks to all money created out of thin air by the rich world’s central banks during their resort to “quantitative easing” in the global financial crisis and then the pandemic, big tech was able to greatly expand its cloud capital without needing to borrow at great expense, sell large parts of its businesses to others, or generate large profits to pay for new capital stock.

Between 2010 and 2021, he says, the paper wealth of two men – Jeff Bezos and Elon Musk – that is, the market price of their shares – rose from less than $US10 billion to about $US200 billion each.

Even without the fancy jargon, this stuff is hard to get your head around. In 10 years’ time, we’ll know if it was fanciful or prophetic.

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Compared to you and me, the feudal serfs had it easy

Back at work yet, or still enjoying your summer break? Either way, you probably wish you had more annual leave. I could tell you to count your blessings, that today’s full-time workers get much longer holidays than workers have ever had.

But maybe that isn't true. It’s certainly true that we get longer holidays and work fewer hours than workers did in the 19th century but, according to the sociologist Juliet Schor, the 19th century – not long after the end of the Industrial Revolution – was an aberration in the history of human labour.

Indeed, if we’re to believe Dr Lynn Parramore, senior research analyst at the Institute for New Economic Thinking, we’re working a lot harder than medieval peasants did. “Ploughing and harvesting were backbreaking toil,” she says, “but the peasant enjoyed anywhere from eight weeks to half the year off.”

The church, mindful of how to keep a population from rebelling, enforced frequent holy-days. Weddings, wakes and births might mean a week off, quaffing ale to celebrate, and when wandering jugglers or sporting events came to town, the peasant expected time off for entertainment, she says.

There was no work on Sundays, and when ploughing and harvesting seasons were over, peasants got time to rest, too. In fact, according to Schor, during periods of particularly high wages, such as 14th century England, peasants might put in no more than 150 days a year.

I’m not sure every scholar would agree with this assessment, and the 14th century was the tail end of England’s feudal system, which began after the French Norman Conquest of England in 1066.

So if you’re not sure you’d have been happier as a serf – good thinking.

Feudalism was the system of political and economic organisation that preceded England’s Agricultural Revolution and Industrial Revolution, before we got to a capitalist or market economy approximating what we have today.

According to the father of modern economics, Adam Smith, feudalism was a social and economic system defined by inherited social ranks, each of which possessed social and economic privileges and obligations. Wealth derived from agriculture, which was arranged not according to market forces but on the basis of customary labour service owed by serfs to landowning nobles.

The king owned all the country’s land, but leased much of it to nobles, often called barons. The barons ran the decentralised, feudal system. These “lords of the manor” were in complete control of their manor, meting out justice, minting their own money and setting their own taxes.

The barons divided some of their land between their knights. The knights, in turn, distributed some of their land to the serfs, also known as villeins or peasants.

That covers people’s privileges, now their obligations. In return for their land, the barons paid rent to the king and provided him with knights to fight his battles when required. In return for their land, the knights provided their baron with personal protection and military service to the king.

In return for their land, the serfs paid their master with maybe a third of the food they grew, as well as being compelled to work on his own land. They couldn’t leave the manor and needed their lord’s permission to marry. They were often charged a fee for use of any of the improvements on the manor – roads, bridges, mills and bakehouses. And sometimes they had to fight in the baron’s battles.

Serfs lived with their animals in one-room homes they built themselves with wattle-and-daub (woven twigs daubed with mud). Their clothes were self-made, mainly of wool and very scratchy. They grew rye, wheat and other grains, grazed sheep on the common, had a kitchen garden and a few apple and pear trees.

Most of what they ate they grew themselves: little meat, but lots of rye bread and a stew of peas, beans and onions, called pottage. Berries, nuts and honey were gathered from the woods.

The feudal system fell into decline for many reasons. One was that the military became full-time professionals. Another was the Black Death (bubonic plague) of 1348, which killed many of the serfs. Landowners desperate for workers to harvest their crops had to do the unthinkable: pay actual wages to anyone who’d work their land – and the wages were high. Thus did the lords lose their hold over the serfs.

But Professor Richard Grabowski, of Southern Illinois University, has advanced a more economic theory. Manorial agriculture wasn’t very efficient, even though productivity could have been improved by such measures as removing stones from fields, adding mineral fertilisers and making greater use of fodder crops.

But the system of forced labour precluded use of these techniques because they required more care and skill than the serfs had any incentive to apply when working in the lord’s fields rather than their own.

Creating this incentive would have required shifting to paid labour, but this would cost the lord the ability to order his serfs to help fight a rival lord trying to grab his land. The first lord to free his serfs would lose his land to the others.

So the lack of national enforcement of property rights was another barrier to greater productivity. As the feudal system gradually broke down, the basis for power shifted from how many serfs you controlled to how good you were at using your land to generate more income.

England’s long Agricultural Revolution involved moving to market relationships between land owners and labourers, and almost all rural production being sold in markets, as well as huge improvements in agricultural productivity, making the nation much more prosperous.

People may have worked more hours on more days in the year, but they were much better paid to do it.

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