What would it take for capitalism to die? In your youth you had a definitive answer: capitalism will die, like Dr Frankenstein, indirectly of its own hand, a deserving victim of its greatest creation: the proletariat. Capitalism, you were convinced, was creating two great camps destined to clash: capitalists, who did not physically work with the revolutionary technologies they owned; and the proletarians who spent their days and nights working in, on, under or with these technological wonders, from merchant ships and railways to tractors, conveyor belts and industrial robots. The revolutionary technologies were no threat to capitalism. But revolutionary workers who knew how to work these incredible machines were.
The more capital dominated the global economic and political sphere the closer the two camps got to facing off one another in a critical battle. At its conclusion, and for the first time on a planetary scale, good would vanquish evil. The bitter bifurcation of humanity, between owners and non-owners, would thus be healed. Values would no longer be reducible to prices. And humankind would, at last, be reconciled with itself, turning technology from its master to its servant.
In practical terms, your vision meant the birth of a proper, technologically advanced, socialist democracy. Collectively-owned capital and land would be pressed into producing the things society needs. Managers would be answerable to the employees who elected them, to their customers, and to society as a whole. Profit would wither as a driving force because the distinction between profit and wages would no longer make sense: every employee would be an equal shareholder, their pay coming out of their enterprise’s net revenues.
The simultaneous death of the market for shares and of the labour market would turn banking into a staid, utility-like sector. Markets and concentrated wealth would, consequently, lose their brutish power over communities, allowing us collectively to decide how to provide health, education and protection of the environment.
Things could not have panned out more differently. Even in Western countries, like Germany and for a time Britain, where national labour unions grew strong, waged labour failed to organise effectively and eventually acquiesced to the idea of capitalism as a “natural” system. Solidarity between the workers of the North and the South remains an entirely unfulfilled dream.
Capital has simply gone from strength to strength. And in places where revolutions sworn to your vision succeeded, life ended up sooner or later resembling a cross between George Orwell’s Animal Farm and Nineteen Eighty-Four.
I shall never forget you confessing to me while recounting horror stories of the years you spent in prison camps for Greek left-wingers, the feeling which overwhelmed you most: that, had our side won power, you would probably be in the same prison only with different guards. It resonated with the heartbreak of authentic left-wingers worldwide: good people, dedicated to your vision, who ended up in gulags guarded by former comrades or, even worse, in positions of the sort of power that their own ideology detested.
Nevertheless, your prognosis is holding up extremely well, though not in ways that you would welcome. Capitalism is dying indirectly of its own hand, a deserving victim of its greatest creation: not the proletariat, but the cloudalists. And little by little, capitalism’s two great pillars – profit and markets – are being replaced. Alas, instead of a postcapitalist system that finally heals human divisions and ends exploitation of people and the planet, the one that is taking shape deepens and universalises exploitation in ways that were hitherto unimaginable, except perhaps by science-fiction writers. Thinking back, Dad, why did we ever allow ourselves to be lured into the soothing delusion that the death of something bad would necessarily deliver something better?
Rosa Luxemburg’s devastating question “Socialism or barbarism?” was not rhetorical. Its answer could easily be barbarism – or extinction. What we need, then, is a new story that explains not what we wish would happen but what is actually happening, and that is the story of how rent – the defining economic trait of feudalism – staged its remarkable comeback. Under feudalism, rent was easy enough to grasp. Courtesy of some accident of birth, or royal decree, the feudal lord obtained the deeds to a plot of land which empowered him to extract part of the harvest produced by the peasants who had been born and raised on that land.
Under capitalism, grasping the meaning of rent, and distinguishing it from profit, is much harder – a difficulty I witnessed first-hand when as a university teacher I would struggle to help my students spot the difference between the two. Arithmetically, there is no difference: both rent and profit amount to money left over once costs are paid for. The difference is subtler, qualitative, and almost abstract: profit is vulnerable to market competition, rent is not.
The reason is their different origins. Rent flows from privileged access to things in fixed supply, like fertile soil or land containing fossil fuels; you cannot produce more of these resources, however much money you might invest in them. Profit, in contrast, flows into the pockets of entrepreneurial people who have invested in things that would not have otherwise existed – things like Edison’s light bulb or Jobs’s iPhone. It is this fact – that these commodities were invented and created and so can be invented and created again but better by someone else – that renders profit vulnerable to competition.
When Sony invented the Walkman, the first mobile and personal hi-fi, it raked in substantial profits. Then competition from imitators whittled Sony’s profits away until, eventually, Apple rode in with its iPod to dominate the market.
In contrast, market competition is the rentier’s friend. If Jack owns a building in a neighbourhood that is being gentrified as a result of what others do, Jack’s rents will increase even if he does nothing – he, literally, gets wealthier in his sleep. The more enterprising Jack’s neighbours are, and the more they invest in the area, the larger his rents.
Capitalism prevailed when profit overwhelmed rent, a historic triumph coinciding with the transformation of productive work and property rights into commodities to be sold via labour and share markets respectively.
It was not just an economic victory. Whereas rent reeked of vulgar exploitation, profit claimed moral superiority as a just reward to brave entrepreneurs risking everything to navigate the treacherous currents of stormy markets. Nevertheless, despite profit’s triumph, rent survived capitalism’s golden age in the same way that remnants of the DNA of our ancient ancestors, including long-extinct serpents and microbes, survive in human DNA. Capitalist mega-firms, like Ford, Edison, General Electric, General Motors, ThyssenKrupp, Volkswagen, Toyota, Sony and all the others, generated profits that outweighed rent and propelled capitalism to its dominance. However, like remora fish living parasitically in the shadow of great sharks, some rentiers not only survived but, in fact, flourished by feeding on the generous scraps left in profit’s wake.
Oil companies, for example, have raked in gargantuan ground rents from the right to drill on particular plots of land or ocean beds – not to mention the unearned privilege to damage the planet at no cost to themselves. Naturally, oil companies have attempted to legitimise their loot by presenting it as capitalist profit, exaggerating the extent to which their returns are a reward to investments in smart, low-cost drilling technology without which, it is true, the extracted oil might not be competitive with oil extracted by competing oil producers. The same is true of real estate development where ground rent overshadows any profit from innovative architecture. Or with privatised electricity or water utilities whose returns are mostly due to rents the political class has allocated to them. What all these mega-rentiers have in common is a strong motive to legitimise their rents by disguising them as profits – something akin to profitwashing their rents.
Excerpted with permission from Technofeudalism: What Killed Capitalism, Yanis Varoufakis, The Bodley Head.