TechnoFeudalism anyone?
A new economic model? Yanis Varoufakis thinks we are entering a new age of Techno-Feudalism, are we? And is this the cause of the great reset?
Capitalism is dead apparently, or it has evolved into something else, something worse. If you ask Yanis Varoufakis he would say that this new species of economic model is Techno-Feudalism. I disagree with Varoufakis on a lot of things but here I think he has a point. So what is Techno-Feudalism? Consider a thriving high street, not the modern high street of bookies and charity shops but a 1950’s high street. Somewhere you could buy everything that you would need in your daily life, food, clothing and household goods. Now imagine that every single shop is owned by one person, not the business itself but the building. That one person collects rent from every business owner in town. That’s Amazon. Just as the barons collected from the peasants in feudal times Amazon takes a huge percentage of the revenue from every one of its selling ‘partners’. Varoufakis argues that this marks the end of the market, in the traditional sense at least. As soon as you enter Amazon.com you are leaving the free market, this is because unlike the high street Amazon decides what you see. Businesses who pay Amazon more get promoted in the listings, and Amazon takes a cut of everything that you buy there.
It’s not just the retail sector that is leaving the free market behind, services too are seeing a move to the TechnoFeudal model. Google “plumber” and a host of wannabe service sector barons will come up, My Builder, Checkatrade, Trusted Trader etc. These pretenders are all vying for the throne that Amazon occupies in the retail sector. They operate a similar model to Amazon, charging businesses for leads rather than taking a percentage of the sale. Businesses get exposure to customers that they couldn’t get otherwise. And thats the problem for a small family business, there’s no way you can compete on SEO (Search Engine Optimisation) against a huge corporate entity. So either you cough up your tithe to the baron or you languish on page 2 of Google. You could advertise elsewhere but here too are problems, Facebook can target your customers in a way that you could never hope to do, they know more about their users lives than the users themselves. So it can pay to advertise with them, and thousands of businesses around the world do just that. Another baron skimming profits off the top. Another global company who can move those profits wherever they like. Varoufakis argues that once the customer no longer has a free choice of goods or services to buy then the market ceases to exist. It’s technically true of course. And whilst many a good free market capitalist would recoil in horror at the thought that some communist government might tell the people what to buy and where from, they seem much happier to be so instructed by Jeff Bezos.
It’s the same with fast food, Uber Eats, Deliveroo etc, they are all at it. Small restaurants and take aways are struggling as these fast food barons take a cut out of their sale. If you order McDonalds through one of these delivery partners you can bet that they aren’t paying anything like what your local independent take away is being charged. Deliveroo charge up to 30%, with many restaurants having to swallow this cost themselves. It’s almost like a protection racket, you either sign up with the baron or you see sales dwindle and face the consequences.
‘This is just the market at work, driving efficiency’ you might say. Perhaps it is. Perhaps not. Markets drive efficiency, and that can only be a good thing. Efficiency was what drove Industrialisation, well described by Adam Smith who visited a pin making factory. One worker cut the wire, another pointed it and yet another put the head on it, by specialising labour in this way many more pins could be made in a day than by artisans who carried out the whole process by themselves. Production lines changed manufacturing completely from the artisan model enabling output to reach new levels that drove the Industrial Revolution. It would be a mistake to think that this current rise of the barons is just another example of the market at work, driving efficiency and productivity. Is your plumber any more efficient because he bought your enquiry from one of the barons? Was your lamb biryani made more efficiently because you ordered it from Uber Eats? Probably not. Perhaps the customer experience was better, but that does little for the economy or national productivity. And could the job have been done cheaper by someone who hadn’t paid the baron? You’ll never know because the baron never gave you the option.
Another advantage that the barons have is influence. They can influence government policy in a way that a small independent business can only dream of. Lockdown policies were disastrous for many small firms, but the barons all survived, some like Amazon positively prospered. I have long been a critic of crony capitalism and whilst it might be tempting to think that it is a new phenomenon I am not sure if crony capitalism is all that new. When William Wilberforce began his campaign against slavery it was the pressure applied by the cotton mill owners on parliament that made his task a tough one. The moral argument won out back then, though it often seems to be on the losing side now. Today one could perhaps argue that the apparent rise of cronyism is enabled as much by a lack of unifying morality as it is by an increase in cronyism. One thing seems sure, the interests of the people appear to be divorced from policy in a way that they have not been since feudal times.
And there lies another problem with the barons, how are they to be taxed? In feudal times the king would come calling looking for his pound of silver, but now the barons can move money around the globe with ease. Perhaps central governments will find a way to tax the barons, but at the local level it will be harder. Think back to the high street, all those businesses paying business rates, now when you buy from a centralised warehouse all the rates are collected in one place. The death of the high street is hurting your local government, and they will in turn pass the pain on to you with higher taxes.
Napoleon once described Britain as a nation of shopkeepers, he meant it as an insult of course but the reality was that the British economy was far stronger than that of the French. That strength came from the myriad of small businesses who had appeared over the previous 100 years or so. The stronger economy usually wins the war, and so it proved for Napoleon. The Barons are not making our economy stronger, if anything they are making it weaker by creating monopolies or at least oligarchies which will ultimately stifle innovation. Amazon’s UK sales figures may add to GDP but the long term effect is fewer small businesses. Some small businesses become big businesses and it is these big businesses which will be the engine of our future economy. The fewer small businesses we have the smaller the pool of potential giants. Small business is the engine of innovation. If someone on the shop floor of a startup has an idea they can act on it almost immediately. In a global corporation that same idea will have to go through layer upon layer of management, focus groups, and financial analysis. It might take years to be implemented. Small businesses can try things out, experiment and then rapidly adapt if things don’t work out.
It is particularly alarming how the interests of small business have slipped from the view of our politicians. I can’t remember the last time I heard a minister or MP talking about small business, it’s almost like they don’t exist, just another relic from the past like heavy industry. A few politicians still get misty eyed when talking about heavy industry, ships, steel and rail transport, but they have been a dying breed for a long time. Now even the Tory back benchers who used to carry the small business flag have gone quiet. The COVID response showed what can happen when the government is in the pocket of the barons. As yet there has been no sign of a fightback from anywhere on the political spectrum. I hope there will be a fight back, otherwise before long we’ll all be buying our goods from huge warehouses, eating in chain restaurants and getting Balfour Beatty in to fix the gutters.
Why is this happening? Lobbying by the rich and powerful has always been an issue but these days it seems as though theres no lobbying required. Governments just seem to do the bidding of the corporations without any need for the lobbyists. I’m not a believer in conspiracy theories, but when the political elites are marching in step with the super rich it doesn’t bode well for the rest of us. This may be the start of the WEF’s Great Reset. We’re already on the way to owning nothing, but will we be happy?
Very good. Small business was crushed during covid, and extra government regulation continues to crush them. I have a friend who runs a small consulting firm, literally two employees, and he is required to have a modern slavery policy etc etc. big business can afford all this compliance. I’m not particularly optimistic either - I heard someone quip on a podcast that members of congress wait around to be lobbied . I used to listen to Econtalk and I seem to recall that he once had a guest on to discuss this “platform phenomenon”. In relation to SEO, I’m not sure what happens if 20 plumbers say, all pay to ostensibly get on the first page ?? I don’t have any solutions, perhaps we are in the last innings of 4th turning and something will break.