A Major Defeat For Technofeudalism
I’m in Minneapolis! Today (Oct 15): Presenting The Internet Con at Moon Palace Books. Tomorrow (Oct 16): Keynoting the 26th ACM Conference On Computer-Supported Cooperative Work and Social Computing.
“Fascist” has both a crisp historical meaning — and a colloquial one: “anyone I disagree with is a fascist.”
Likewise, “feudal” has a colloquial meaning: “anything I view as outmoded,” as well as several specialized, technical meanings relating to power relationships, economics, and politics.
Economically, feudalism (and its related successor, manorialism) was defined by income derived from rents, while capitalism is dominated by profits.
These ideas might seem like historical abstractions, but they are key to understanding one of the most important struggles in our modern economy: the fight between people who do things and people who own things.
Let’s start with definitions.
“Profit” is income from capital. A capitalist invests in something needed to increase production — a factory, a tool, a machine — and then pays workers to mobilize that capital to produce goods and services.
The worker’s efforts produce surplus value, which the capitalist creams off as profit.
The capitalist wants to pocket this profit (or return it to shareholders or creditors).
But some of that profit has to be re-invested in new, improved capital (better machines, methods and facilities), otherwise the capitalist will lose ground to competing capitalists whose production methods improve, resulting in goods and services that are better and/or cheaper.
This is called “increased productivity.” When a capitalist’s competitors increase their productivity, they get more customers and more profits, while the uncompetitive capitalist’s business dwindles, leaving less profit to invest in better production.
Profit is income that comes from mixing labor and capital. It is under constant threat from competing interests, who will forever seek to erode your profits in pursuit of their own.
Economies that center on profit are dynamic. The people with all the money and power can only keep their position by investing in new ways of doing things. Marx and Engels spend the first chapter of The Communist Manifesto marveling at capitalism’s energy, innovation and ingenuity.
Now let’s think about “rents.”
Rent is income you get from owning something, rather than utilizing it. Under feudalism and manorialism, a hereditary lord owned land. Owning land provided a steady stream of income, in the form of rents.
Like profits, rents came from workers. Peasants were bound by law to the lord’s land. By default, a peasant born on a lord’s estate couldn’t move elsewhere without permission, and neither could that peasant’s descendants.
Peasants owned the capital used in their work. A peasant might own livestock, agricultural instruments and other tools and factors that went into making the land productive.
Feudal lords didn’t have to worry about competition in the form of superior peasant production on neighboring estates. If your neighbor’s peasants invented a better way to make the land productive, you could have your peasants copy it.
What’s more, feudal lords didn’t think much of peasants. They didn’t re-invest some of the rents their peasants paid by buying them better tools, or by offering stipends to peasant workers to go off and experiment with better production methods.
When it came to production, feudalism was stable, or, less charitably, stagnant. There were fallow years and fair ones, but there was no goad that drove a feudal system’s powerful people towards investment and improvement.
A feudal land grew richer by conquering another land, not by inventing new ways of producing. Feudal invention is focused on conquest, not increasing capacity.
Profits are income from workers utilizing capital.
Rents are income from owning things.
There is an irreconcilable tension between profits and rents.
Capitalists don’t want to pay rent, whether that’s rent on their factories or royalties on patents.
Rentiers (people who earn their living off rents) want capitalists to pay as much rent as possible.
Rentiers are always on the hunt for ways to insert chokepoints in capitalist production, tollbooths where rents can be extracted. This is called rent-seeking.
When we think of class struggle, we rightly focus on the struggle between workers and bosses. Class struggle is held back by “false consciousness.” We’re told that American workers are allergic to socialism because they view themselves as “temporarily embarrassed millionaires,” who throw their lot in with their bosses because they want to join their ranks.
In reality, America has virtually no upward social mobility; an American who changes class is generally a middle class person who becomes poor, or a poor person who becomes homeless.
But there’s another important class struggle, within the ruling class. That’s the struggle between capitalists and rentiers. Capitalists want to own the means of production and utilize it without paying rentiers, both so they can enrich themselves and so they can invest in superior production.
Rentiers want to own the things capitalists must use so they can cream off the profits without doing anything to produce them.
The struggle between capitalists and rentiers is rife with false consciousness. Capitalists hate capitalism. Not every worker sees themself as a temporarily embarrassed millionaire, but every capitalist sees themself as a temporarily embarrassed rentier.
Capitalists loathe competition. That’s why Peter Thiel says “competition is for losers” and Warren Buffet continuously salivates over investment in firms with “moats and walls” that prevent competitors from entering the market.
The landlord who owns a building with a coffee shop does well even if that coffee shop goes out of business when a competing shop takes away all their business. Indeed, the landlord benefits from this situation: having a vacant storefront to rent just as a neighborhood is blowing up thanks to a hot new coffee shop is an opportunity to raise the rent. “Passive income” is income that is protected from competition.
In his new book Technofeudalism: What Killed Capitalism, the economist Yanis Varoufakis argues that a new form of capital, “cloud capital,” has taken over the real economy, allowing a small number of feudal companies to insert themselves between capitalists and their customers. Amazon takes 45–51 percent out of every dollar its sellers generate, Google and Apple take 30 cents out of every dollar an app maker generates.
Digital technology, combined with regulatory capture that produces laws that allow digital companies to control their competitors, critics and customers, is a powerful tool for rent-extraction. From the “Internet of Things” to “software as a service,” networked digital tools can only be rented, never owned.
The digital society is one where capitalists are forever at war with rentiers — even as they dream of becoming rentiers themselves.
The outcome of this struggle is what determines whether the digital society is capitalist or feudalistic. Think of the recent grab by games toolsmith Unity, who have long extracted rents from the capitalists who used their tools to make games. Unity is “software as a service,” which means that you have to buy again it every month, for so long as your capitalist enterprise is in business.
The capitalists who rent Unity’s tools had resigned themselves to this, but then Unity went one step further, and demanded a royalty (a word with decidedly feudal origins!) every time a game made with Unity’s tools was distributed. The outcry was ferocious, and Unity eventually backed down, but even as they did, company executives insisted that they would continue to pursue a “sustainable system” for “shared success.”
“Shared success” is a pure expression of feudalism. Unity was not proposing a joint venture, where they would supply the capital to produce games and share the risk of that capital being competed away by a better games-maker.
Instead, Unity wants a rentier’s bargain: if the capitalist it rents do does well, so does Unity. But if the capitalist does badly — if a games-maker loses out to a competitor who is also a tenant of Unity’s IP — then unity also does well. Heads capitalists lose, tails the rentier wins.
When Unity speaks of this system being “sustainable,” they mean that they will seek to maximize the total amount of profits made by capitalists who rent its tools. Because the higher the total profits are, the more rent it can extract.
Profits are highest where competition is lowest. It’s in Unity’s interest for a single company — or a cartel of companies — to control entire genres or modes of games, and to be protected from innovators who might enter the market with better offers. Unity wants to pick some winners and bind them to its fields.
Capitalists aspire to usurp rentiers and replace them. Rentiers aspire to pushing capitalists down to serfdom, bound to the land it owns, reliably working that land to produce rents it can depend on for generations to come.
The fight between profits and rents is a critical aspect of the class struggle. BMW and other car makers who are loading up their vehicles with “features” that you have to rent — everything from seat heaters to access to your car’s own battery — are ripping off drivers, sure.
But they’re also shifting value from other capitalists — used car-lot owners, independent mechanics — to themselves. The “smart” in “smart car” is primarily a way to make sure that a mechanic can’t charge you to fix your car without paying rent to the manufacturer, and a used car lot can’t sell your car without creating a new opportunity for the manufacturer to sell the next owner the same features as they sold you.
To see the struggle between profits and rents laid bare, look to patent trolls: companies that buy up absurdly broad patents that the US Patent and Trademark Office issued without the scrutiny and diligence they are meant to employ.
The age of networked computers made the USPTO easy pickings for slick techno-grifters. For decades, con-artists have sent applications for obvious and/or useless “innovations,” merely appending “with a computer” to things that have existed for decades or centuries, and received decades of government-backed monopolies (that is, patents) in return.
Patent trolls produce nothing except lawsuits. Unlike real capitalist enterprises, a patent troll does not “practice” the art in its patent portfolio — it seeks out productive enterprises that are making things that real people use, and then uses legal threats to extract rents from them.
One of the most prolific patent trolls of the twenty-first century is Landmark Technology, whose U.S. Patent №7,010,508 nominally covers virtually anything you might do in the course of operating an online business: having a homepage, letting a customer login to your site, or having pages where customers can view and order products.
Landmark shook down more than a thousand productive businesses for $65,000 license-fees it demanded on threat of a patent lawsuit.
But that reign of terror is almost certainly over. When Landmark tried to get $65,000 out of Binders.com, the victim’s owner, NAPCO, went to court to invalidate Landmark’s patent, which never should have issued.
A North Carolina court agreed, and killed Landmark’s patent. Landmark faces further punishments in Washington State, where the attorney general has sued the company for violating state consumer protection laws in a case that has been removed to federal court.
Landmark’s patent contains “means-plus-function” claims. These a rentier’s superweapon, in which a patent can lay a claim over an invention without inventing or describing it. These claims are almost entirely used in software patents, something that has been blessed by the Federal Circuit, America’s most authoritative patent court.
A means-plus-function patent lets an “inventor” patent something they don’t know how to do. If these patents applied to pharma, a company could get a patent on “an arrangement of atoms that cure cancer,” without specifying that arrangement of atoms. Anyone who actually did cure cancer would have to pay rent to the patent-holder.
The Landmark patent was created by a travel agent named Lawrence Lockwood who testified that he “never, for any length of time, used a personal computer,” and whose sole occupation is suing productive companies for rents on his “inventions.”
Lockwood — and Landmark — are rentiers, not capitalists. They embody the struggle between profit and rent in its purest form.
Just now, rents are losing ground to profits. A little, anyway.
That’s good news for the other class struggle, between workers and bosses. A worker who expropriates a rentier gets nothing in return but a claim for extracting rent from other people. But a worker who overturns a capitalist order gets the means of production, a claim over the product of their useful labor.
Cory Doctorow (craphound.com) is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is The Internet Con: How To Seize the Means of Computation, a detailed policy plan for dismantling Big Tech (Verso, 2023);. His latest novel for adults is Red Team Blues. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias (Tor, 2023).