NFTs and Techno-Feudalism
A spectre is haunting the modern economy- the spectre of speculation. Speculation as manifest in an object is perhaps most vulgarly explicit in the non-fungible token, or NFT. The NFT constitutes a new form of this new age of hyper-neoliberalism, and represents what Yanis Varoufakis has termed ‘techno-feudalism’: a qualitative break from the system of capitalism under which we have previously lived, just as Karl Polanyi describes the qualitative break from which capitalism emerged.
For Varoufakis, under techno-feudalism, the production of tangible goods is replaced by speculation in markets, as seen in companies such as General Electric, and across the housing market altogether. No new innovations are being made here, nor is production being increased so as to increase profits to the extent that their revenues would suggest. The roots of this new profit-raising structure are first seen following the first major break in the capitalist economy. This first major transformation in the capitalist order is that from Smith to Ford, from the traditional liberal market economy to the oligopoly. This is considered the second industrial revolution, in which, rather than bringing about this great urbanisation as folks move from the country to the city for employment, and production is concentrated, the Great Depression ensues, from which a new style of political economy is formed, held together by the Bretton Woods institutions, and New Deal-era policy. Keynesian expansionist monetary policy, and regulations aimining to prevent events like the Great Depression. There exist here some financial constraints which provided some economic stability, under which the ‘golden age’ of capitalism is facilitated. In this new Fordist economy, despite its obvious shortcomings, standing in typical opposition to labour, the workers at these factories were able to afford the good being manufactured, i.e. at a Ford manufacturing company, the worker is afforded a decent wage and able to afford a Ford without great difficulty. As we can plainly see, this is no longer the case in the post-Fordist economy- workers are typically unable to afford the car, where these jobs are still available, as most manufacturing is outsourced to the cheapest bidder in the Global South in order to maximise managerial profits. In the second major transformation, from Ford to Goldman Sachs, the constructs of the first major transformation are brought to their deterioration. This new financialised capitalism emerges through the renouncing of the Bretton Woods institutions following the United States’ abandonment of the gold standard. Where currencies were hitherto defined according to the dollar, itself convertible to gold, currencies become defined according merely to the dollar itself, and its intrinsic value, and the constraints of the New Deal era are abandoned in favour of neoliberal deregulation, globalisation, and so on. These transformations culminated in the Great Depression and the Global Financial Crisis, yet they were hitherto unable to do away with capitalism, retaining its fundamental basis of profit extraction through private ownership within the market, through which production remained at least a vague signifier of financial health. However, in the aftermath of the Global Financial Crisis, the economy becomes fuelled by a constant generation of money provided by central banks, not the private profits which hitherto sustained the economy. As Varoufakis details, value extraction gradually shifts from markets to digital platforms, ‘which no longer operate like oligopolistic firms, but rather like private fiefdoms or estates’. Consumption and production becomes entangled under the banner of the platform, as databases and networks are produced through free consumption of the services of platforms like Facebook and Google, and capital stock is provided free-of-charge, other than basic hosting and other costs. In this new techno-feudalist economy, the balance sheets at the central bank constitute the only means by which the decoupling of finance from productivity may be explained, like in the case which Varoufakis cites, in which, on August 12th 2020, in the first seven months of the year, the United Kingdom’s national income had fell in excess of 20%, whilst the London Stock Exchange had a healthy boost of more than 2%. Private gains are only secured through monetary policy, as central banks continue to print money that is lent by financiers to corporations, which are then used to buy back their own shares, like Volkswagen in Germany, another of Varoufakis’ anecdotes. In this new economy, the threat of inflation is constantly pedalled, particularly by parties and politicians who treat the national economy like the household budget, e.g. the right-wing of the Democratic Party in figures like Joe Manchin, and the Liberal Party in Australia, priding themselves upon delusions of managerial prowess. However, no stimulus program is able to rectify the economy: any program is simultaneously too large and too small, as interest rates are decoupled from employment as the economy moves away from the Bretton Woods era structures, as to do so would be to precipitate further crises. This is where the techno-feudalist relations of the base become elevated and apparent in the political superstructure, in which deficit hawks patrol budgets to ensure the upkeep of private rent-raising, and no major political party is able to seriously offer an alternative. There remains no real tension between capital and labour in the popular political consciousness.
Marx lays out a distinction between two competing conceptions of value which are apparent in our everyday consumption and trade of objects. The utility of an object is its use-value, which can exist independently of whether or not the object is a commodity. However, to be a commodity it must also have exchange value, determined by the properties of the object in relation to human needs, e.g. clothing keeps one warm, whilst a roof provides shelter. Exchange value is the value realised when offered in exchange for other products in some exchange. Use value is characterised by heterogenous material, physical qualities, whilst exchange value is characterised by homogenous quantitative qualities in relation to some other commodity, e.g. money.
Here it becomes apparent how the market has been transformed, and almost all use value has been subsumed by exchange value. What is the function of owning an NFT if not for the status for which it awards amongst other NFT owners, and for the speculative gains made through purchase and sale? You will never see an NFT artwork being considered for selection in the Louvre, only alongside Ethereum graphs on crypto-Twitter. Not only is the NFT deprived of the artistic content that was never there in the first place, but all other use value is stripped away too. Its content is not copyrightable, its value is radically antithetical to its aesthetic or cultural value, and its use only correlates with greater environmental degradation.
NFTs and cryptocurrency resemble this manifestation of the ‘libertarian’ capitalist dream of laxed regulation and taxation, hyper-individualism, and complete decentralisation of the economy. Mark Fisher, in Capitalist Realism, compares this dream to the world in Wall-E- the goal of capital is to exist external to labour- ‘the idea that the infinite expansion of capital is possible, that capital can proliferate without labour’. It is here obvious how capitalism has morphed into techno-feudalism, as the traditional market is replaced by the platform. In this new ‘decentralised’ sub-economy, speculation replaces productivity, as gains are made through taking low-interest loans out against investments, which are then used to fuel speculation, without the proper taxation and regulation to afford reciprocity and redistribution, the economy dwindles in its techno-feudal state, held afloat by central bank funds, and left in the hands of the emerging hyper-bourgeoise.
The immediate limitations of this new economic thinking are strikingly evident in the upscaling of cryptocurrency as not only a means of, and instrument toward, speculative investment, but a means of common exchange. In El Salvador, businesses have been forced to facilitate cryptocurrency purchases, meaning that sellers have to accept payment in the form of currencies which could crash at any moment, making any economic security unviable, and workers are forced to commit unpaid labour in education concerning how cryptocurrencies work, and constructing the means by which they are able to barter through these means. For Adam Smith, the father of capitalism one could say, the invisible hand of the market is the most basic capitalistic force, which simultaneously conveys information to buyers and sellers, concerning how much they should buy and sell, and provides concrete incentives for buyers and sellers to maximise their utility, i.e. their revenue and benefit. This disappears under the techno-feudal crypto-economy: no concrete incentive can be consistently formulated when economic bases are so radically speculative, particularly when left to be shaped by the feelings of that particular day by major figures like Elon Musk, who can tank currencies at will.
This complete concentration of exchange value, to be distributed through speculative decentralised markets, held together by central bank funds, is the ultimate expression of what Karl Polanyi, the Austro-Hungarian economist, identifies as the qualitative break which has brought about capitalism, i.e. ‘Market Society’ as the nation-state. In all hitherto economic systems, in spite of the grotesque levels of inequality present, under master and slave, king and serf, social relations have defined economic relations. Prior to the capitalist transformation, economy was based in reciprocity and redistribution, whereas through industrialisation and the emergence of the state, the market replaces social tendencies with formal institutions which aim to promote a self-regulation of sorts. At this point, social relations are no longer defined according to economic relations, but the opposite is the case- economic relations define social relations. Although Polanyi’s account is limited, as Ellen Meiksins Wood identifies in her book The Origin of Capitalism, it serves as a retort to the Fukuyaman logic which sees capitalism as this necessary endpoint, to which all things logically evolve, through the common lens of the rational Enlightenment employed by the liberal capitalist, and to the idea that capitalism is merely the result of the quantitative expansion of production, which was hitherto fettered by structural constraints which were not possible to be abandoned prior to the state. Nonetheless, the NFT serves as a great expression of this logic: production and exchange is not oriented toward the community, nor need, nor based in any form of reciprocity or redistribution, but individual gain. The overwhelming majority of the surplus value in the modern economy extracted from such ventures is through managerialising and speculation. As Noam Chomsky puts it in his Requiem for the American Dream, by the 1970s, ‘General Electric could make more profit playing games with money than you could by producing in the United States’, making profits ‘just by moving money around in complicated ways’. For Volkswagen, this is done through stock buybacks, and for the NFT this is through social media speculation, and tying whatever artistic content remains to the speculative basis of cryptocurrency.
Not only here do economic relations define social relations, but social relations are corroded through economic relations. Workers are pitted against each other, fighting to sell their bodies to companies in exchange for meek financial reimbursement in order to survive, and this animosity is heightened even further in the era of globalisation. Outsourcing is necessitated in order for private profits to be kept in order, as the rate of profit continues to fall, as systematically predicted by Marx and reported upon by contemporary economists such as Michael Roberts, and due to the mass exploitation of the Global South, refugees are forced to pursue survival in the Global North, whether by function of climate, war, sanctions, and so on. Jobs are moved to the Global South, in concentrated wage-slavery, whilst refugees from the Global South move to the Global North to keep their families alive, and this is where the conservative xenophobic anxiety precipitates. Reciprocity and community deteriorate, as the price-setting functions of markets dictate life.
- Fisher, M, 2009, Capitalist Realism, Zero Books, London.
- Hutchinson, P.D., Nyks, K, Scott, J.P., 2015, Requiem for the American Dream: Noam Chomsky and the Principles of Concentration of Wealth & Power, PF Pictures, Naked City Films.
- Marx, K, 1867, 2013, Capital, part 1, ch. 1, translated by Ernest Untermann, Wordsworth Editions Limited, Hertfordshire, United Kingdom.
- Varoufakis, Y, 2021, ‘Techno Feudalism Is Taking Over’, Project Syndicate, <https://www.project-syndicate.org/commentary/techno-feudalism-replacing-market-capitalism-by-yanis-varoufakis-2021-06?barrier=accesspaylog>.