IN FULL Yanis Varoufakis welcomes us to the age of Technofeudalism | Full interview

I don't like to tell people oh you know you naughty boy or girl you know you should not be addicted to the machine I'm addicted to the [Music] machine right hello everyone and welcome to this month's Institute of Art and ideas live event my name is ISA Nelson I'm an economics and business reporter for the New York Times based in London thank you for joining me now for an interview with yanis baracus the grp Economist and politician on why he believes capitalism has ended what's replaced it and why central banks are partially the culprit Janis thank you so much for joining us this evening I really appreciate that pleasure you're in Athens so a little bit couple hours behind us so thank you um we're here to talk about central banks and I also want to get to the current inflation situation but I'd like to take a step back first um because you link central banks in a really interesting way to the big point you make in your latest book techn feudalism what killed capitalism could you just tell us what is techn feudalism it sounds absurd to to hear somebody like me saying that capitalism is finished because wherever you look what you see is a Triumph of capital over labor over polit politics a wholesale cap capitalist Triumph and yet here I am saying that capitalism is already gone so to be specific here um uh what do I mean by capitalism what do we mean by capitalism it's not markets the idea that capitalism is a system of markets is very very weak and it doesn't really capture what capitalism was supposed to be about capitalism was supposed to be the the economic system that uh followed from the great transformation of feudalism uh that uh shifted power from the owners of land to the owners of Machinery of capital of produced means of production and also channeled all economic activity through markets that's where markets come in so labor markets real estate markets which didn't exist under feudalism so profit takes over from ground rent and markets engulf the whole of economic um activity that in my view is on already on the way out if not dead and bu already since 20 8 we had two major major events um outcomes following flowing out of the disaster the financial sector disaster in 2008 uh the first one you already mentioned what did the Great and the good do after the great crash of 2008 they got together under if you remember the uh uh the offices of Goldman Brown in London in April 2009 and the G7 and the G20 decided to coordinate their money printing central bank money printing capacity printed around $35 trillion what we would call quantitative eing these days quantitive easing yes that's a nice polite term they printed huge quantities of money I mean torrents of cash which they gave to the financial sector to float and at the same time every single one of them whether they admitted to it or not doesn't matter uh practiced quite harsh austerity fiscal austerity so you have this amazing combination on the one hand you have the greatest liquidity in the financial circuits or financial capital in the history of capitalism huh huge liquidity and at the same time very low levels of demand for investment because when you practice hostility aggregate demand crashes even if you give money to Big Business they're not going to invest because they look at the many the masses and they say well they can't afford to buy um expensive uh products from us so we're not going to so they take the available liquidity and usually what they mostly did with it was to pump it back into the financial sector to buy back their own shares for instance and therefore you had asset price inflation and price deflation at the same time the only investment serious investment that took place between 2009 and today and 2023 let's say um was in what I call Cloud capital in big Tech algorithmic Machinery Machinery from from optic fibers server farms and so on you know silicon valleys but not only Silicon Valley but also the equivalent in China because you have these new two big techs you have a American big Tech and a Chinese big Tech and why is this relevant to what I was saying before about capitalism and being replaced or killed off well if profits if my hypothesis is right in my book that profits have been replaced on the One Hand by state money the quantity vising that you mentioned and and by the massive rents retained by big Tech so every time you buy something of amazon.com anything between 20 and 40% of the price is schemed off by Jeff Blazers from the capitalist who actually sells whatever it is that you're buying electric bicycle exercise bike binoculars you know books whatever everything you sell is charg a huge amount of what is equivalent to ground rent in fudal terms I call it Cloud rent because it is the money that capitalist vasel capitalist have to pay to Big Tech to to gain access to you and add to this the remarkable reinforcement Le mechanism machine learning Aid driven algorithms which you know take Alexa or Ci or any of these interfaces what these things do I mean they are pieces of capital right but they are not Capital like steam engines or indeed industrial robots because because they not produced means of production they produced means of Behavioral modification that has never existed before in the history of capitalism so we train Alexa to train us to train it to train us to know us well enough to give us fantastic advice advice which I personally follow because when it recommends a book I usually want to read it okay and then not only does it actually do the job of the advertiser of Don Draper in mman if you ever watch that great Series right but it also so it's an automated cap version of Don Draper but unlike Don Draper and all the great advertisers such and such and so on who were very good at implanting in your head ideas of what you wanted to buy yeah such and such and d d could not sell it to you you had to go to the shops to get it well now the same algorithm sells it to you it arrives on your doorstep bypassing markets because amazon.com is not a market so you're kind of describing you know we had the 2008 crisis huge amounts of money flooded into system and heading into direction of particularly tech companies in both the US and China and so now it's an economic system that as you say isn't being driven by profits but is instead being driven by rent but just take that one step further you know it sounds bad but I just explain why it's bad for me or you know the person my neighbor like why that change in system which we may not really perceive has happened is actually bad for us look this is I'm not making a moral case I'm not moralizing I'm not saying this is bad because you know Jeff basis is getting rich and people no what I'm saying is this the the economy that we live in when a large amount of profit turns into rent or is skimmed off by rers that economic energy think of it as economic energy is taken out of the circular flow of income because when Jeff basos gains another 10 billion through the practices of amazon.com he has absolutely no reason to invest it into the economy that your neighbors are participating in let me give you a very simple numerical example take you know General Motors or Volkswagen of or British Aerospace you one of the traditional capitalist firms they more or less it this is interesting that more or less spend am about the same proportion of their revenues on wages it's about 85% all the large corporations traditional corporations capitalist corporations of every1 pound that they extract from the market they pay 85 in wages and that money that 85 pounds circulates in the economy do you know what the percentage is that Mr zukerberg play pays his his his employees in meta less than one less than 1% goes to workers so that money again this is not moral point I'm making uh it's a it's a factual point it's a point that this money is extracted from the circular flow of and that isue what that does is it forces central banks to keep printing even today through various ways in order to replenish the Lost economic activity energy so even even though now we we've moved from deflation to inflation a serious cost of living crisis central banks even though they want to diminish the amount of money printing they do they are stopped from doing that because the more Cloud rent is extracted from the economy due to this transition from what I call from capitalism to what I call techn capitalism techn feudalism right this essentially makes the the job of central Bankers impossible governments are fiscally stressed so there's nothing they can do about it and in the meantime you have the depreciation of the quality of jobs that people do with the shift of um employment to a kind of of techn feudal environment think of people working for Uber for delu for Amazon Amazon warehouses precariously employed labor which cannot make plans for future expenditure on houses on uh uh on on durables so the whole system becomes much more prone to crisis and that is something that your neighbor should care about yeah let me I want to absolutely come back to this point about the impact it has on today's current inflation crisis but one other just kind of big broader question is does does this system only work if we are somewhat beholden to kind of these devices and it's Alexa Siri and these companies I mean we we tend to use them for what feels like quite trivial things these days you describe them as us training them and they train us but it's when you look at what people ask these things it's like what is the weather what's the like you know recipe for this thing what's the sports score in what in what ways do you feel like we are or aren't actually beholden to these you know these devices these companies the ability to actually move away from them should we should we choose is it that because you have this kind of idea of a new surom in your book look is I'm not prone to again as I said moralizing I don't like to tell people oh you know you naughty boy or girl you know you should not be addicted to the machine I'm addicted to the machine these machines are extremely useful um I find them you know in my research in my studying in my enjoyment of Life listening to music you know Spotify is a great source of joy for me you know I suddenly I I can I can listen to any song that I remember from my childhood and suddenly I can I can listen to it I'm never going to turn against the users of these apps and these platforms uh but I need to focus on the fact that these algorithms which could be perfectly useful and perfectly benign because they are owned by very very few people whose job is to maximize Cloud rent extraction these algorithms are WR in order to be addictive and to be addictive in a way which is quite pernicious for the psyche of our people and especially younger people so I don't blame people for using them I I'm not a lite I do not believe even though I shouldn't say that because Lites were very misunderstood and they were quite wonderful activists in their time and they they've been given a very bad press but you know what I mean I'm not anti- technology I'm not saying that we should go back to the cave there's no doubt that if you want to escape feudalism you know you get rid of your smartphone you get an old Nokia uh you use uh cash all the time uh you never go online but that is not the solution it is like saying if imagine if this was the 1770s when Adam Smith was writing his Stone about The Wealth of Nations and the transition of feudalism to capitalism imagine if we were saying okay well this is not a very good development um so let's abandon machinery and let's let's go back to Hammers and sickles no I I do find this uh link between the low interest rate environment that we were in up until about a year ago um to the rise of these companies to be very very interesting and it reminded me of um what was just like a flood of money quite recently towards these 10-minute grocery apps I don't know if you saw there was just as as recently as last summer you know this idea that actually there is a lot of money in system and where is it actually going if we're all if many people are experiencing some form of austerity and so I asked you know a few Bankers as I want to do what they thought of of this link um and and some you know some said actually they felt like there was more uh it was more of a a coincidental link between the rise of these tech companies and low interest rates but one one did say something that I just wanted to read you um a little bit from so one one of the central Bankers I spoke to said I do think there's an interesting point about technology having involved towards intangible Capital becoming more important in such a way as to create low marginal cost technologies that have created a Winner Takes It All environment like never before a rise in Market power and a rise in the concentration of wealth that's possibly led to lower productivity growth too but feels that low interest rates are more likely a result of this low productivity growth as well as demographics rather than the cause of it and I want to ask you how much you prescribe um you know Central Bank policy as as some of the cause some of the causes of these conditions as um versus politics and and regulation of these companies but that's a great question look um I'm not hypothesizing I'm not proposing That central banks were willfully boosting big Tech capital for goodness sake no what happened was in 2008 2009 central banks panicked they were in a state of absolute panic and because governments treasuries um were effectively hamstrung Central Bankers had the unenviable task of being the only game in town so they started printing like mad and given their Charters they couldn't give it to good causes they couldn't give it to people to actually invest directly I mean this which this was the failure of our parliaments our Parliament should have legis ated so for instance as to create you know a public Investment Bank in Britain whose bonds then the bank of England could buy to channel the central bank money printed money directly into green Investments but Parliament didn't do that so the bank of England could do only thing the only thing that they could do given their Charter and given the law which is to Simply buy whatever debt they could they could get their hands on and effectively that transferred huge quantities of of money to the financiers who then had a very big problem who was going to take the money from off their hands uh they they were not going to give it to the little people because they were little people were being squeezed by austerity so the bankers who had already lost a lot of money in 2008 as if they were going to give it to little people who would default on them so they gave it to the big companies the big companies would not invest because the little people not buy so they what what they did was they went back to the stock exchange and they bought shares and you had you know the the everything rally for years for years and the the low interest rates were not the result of policy they were the result of this in congruity huge liquidity what's liquidity it's the supply of money and very low investment which is the demand for money so when Supply constantly exceeds demand the price of this thing keeps falling what is the price of this thing it's the interest rate so you know they were completely totally at a loss to do anything else the central Bankers so I'm not again I'm not moralizing I'm saying that they did whatever whatever they could given the constraints that they had to function in it was at that time that sciously H nobody had planned it there was no design here no conspiracy whatsoever the only people who actually took the money invested in real capital in actual Capital were big Tech and they created Cloud capital and okay so that's step number one right once that happened after 2017 20 8 that is where the feedback Lo starts because the huge quanti the huge uh Power Market power of these companies the fact that it wasn't even Market power it was the capacity to replace markets as I say you know when I say that when you enter amazon.com you exit markets the immense power to extract rents from the economy then made the bankers the central Bankers job even harder and that creates that Loop that feedback negative feedback effect the Doom Loop which I think is what your central Banker friend or acquaintance has been saying in slightly more Central Banking language which Central Bankers are known for their which I try to avoid you know yes I can speak it but I don't like it as we all right to not get too caught up in Central Bank speech but let's bring that to today's crisis because you mentioned uh near at the start there that one of the things that could be a consequence of this is that Central Bankers haven't been able to uh combat the current rise in inflation maybe as forcefully as they otherwise would was that the points you were making it's one of the points I'm making it's one of the points I'm making you have this um two-way process on the one hand central banks that have caused an inflationary bout in conjunction with the supply chain disruption due to the pandemic are trying to wind this down they're trying to arrest inflation at a time when the increasing predominance the increas in power of what I call Cloud capital and its capacity to extract thre from the economy calls upon Central the central Bankers not to do that which they want to do in order to address inflation so that that is the conundrum as I said and so I mean we we can't turn back time so we can't go back and Undo You know the past decade and a and a half nor necessarily would Central Bankers have responded differently but going but going forward I mean what do you think could be done differently I mean you're not just a man of ideas you're also a man of political action um what would you what would you like to see the shape of policy be like how do you you know now you've alerted us to a a situation to avoid its escalation or to kind of take a handle on the current crisis what would you maybe like to see well a number of things firstly I think it was a very big mistake of central Bankers to assume and that was an assumption I don't think they actually thought too much about it that quantitative easing should simply be turned into quantitive tightening in the reverse what do I mean by that remember after 2009 they started reducing interest rates reducing reducing reducing until they hit the zero low bound when that didn't work they started printing money so they assume that quantitive tightening must be the opposite first they stop printing and then they increase interest rates look at the European Central Bank H okay yes but to but to various extents because obviously only the only the bank of England is the one selling assets right lots of other central banks are still kind of reinvesting much of those they sto prin they sto they stopped printing both ECB both the ECB and the FED stopped printing first stopped printing they wound down their printing slowly month by month and then they started in increasing interest rates what I had recommended was that the they they increase interest rates very quickly very quickly not by 25 basic points or 50 basic take them up immediately from 0 point something to three three and a half percent in a month but at the same time don't stop printing but what do I mean by printing print more money to channnel into productive capital in conjunction with what I mentioned before you remember I said you know for for for instance the European Union has the European Investment Bank so my recommendation to the European Union was increase interest rates immediately from minus 7% to 3 and a half% to arrest inflation while continuing to print the same quantities of money every month but not don't buy Greek bonds or Italian bonds or Coca-Cola bonds you know but buy EI bonds and have a half a trillion per year green transition investment program in order to to ensure that you do not fall into recession especially in the things that we need to invest in like you know Green energy and I was saying that before Putin invaded Ukraine so that's one thing I think that Banks should pluck the money tree but in conjunction with investment Banks green investment Banks I would prefer them to be public because private investment Banks don't really exist that actually invest in things that Humanity needs and pay we have cop 28 now it this is a major cop out and you can see that no one is seriously thinking about where the money is going to come from uh we have fiscally stressed governments the all the it's green washing but if we had that okay that's one thing I would like to see the second thing I would like to see is a serious digital tax um a a a cloud tax I would put it very simply uh there's no way of taxing Amazon properly whatever the oecd has done uh is simply not bothering Jeff basos at all he continues to pay pay exactly zero because he's got the best accountants in the world and he can always buy and sell IP licenses for whatever amount of money is necessary to report zero profits in Ireland um this is why we need to impose serious cloud taxes and make sure that that money is what replenishes aggregate demand in our countries so these are just a couple of ideas of how to maintain aggregate demand divert it into investment into the things Society needs especially in view of the climate catastrophe that we're facing okay and at the same time have interest rates going up in order to slowly deflate the asset bubbles that create where that quantity easing created in conjunction with the pandemic thank you y for joining us thank you to the audience thank [Music] you

Channel: The Institute of Art and Ideas

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Keywords: learning, education, debate, lecture, IAItv, institute of art and ideas, IAI, philosophy, yanis varoufakis, yanis veroufakis, capitalism, neoliberalism, technofeudalism, finance, economy, economics, capitalism is over, yanis technofeudalism, central banks, banker, europe, Greece, yannis varoufakis, yannis veroufakis, what killed capitalism, jeffrey sachs, feudalism, meideval, medieval period, fuedalism, money, quantitative easing, Eshe Nelson, new york times, bank policy, macroeconomy, politics

Id: X3FdIyNMaFY

Length: 24min 50sec (1490 seconds)

Published: Tue Mar 19 2024