Script: Are we living in a Post-Capitalism Society?

Introduction

Imagine that you’re sitting in the Manhattan advertising firm, Sterling Cooper, and your boss, Don Draper, the creative director of the company, looks you in the eyes to explain how you need to think about advertising a product.

Let’s say it’s a Hershey's chocolate bar.

Draper's philosophy hits you square in the face: "You are the product. You, feeling something."

From a 21st century perspective, it's a moment that captures the essence of a bygone era, an era of capitalism in whichadvertising a product isn’t just about showcasing its desirable qualities, but rather, about selling an experience, an emotion, a feeling.

Years later, and also in the this world, James Poniewozik clarifies what’s happening here: ‘You don’t buy a Hershey bar for a couple of ounces of chocolate.

You buy it to recapture the feeling of being loved that you knew when your dad bought you one for mowing the lawn.’

Draper is onto something big here. His sentiment reflects a fundamental shift in how capitalism would evolve through the power of branding.

Now, let’s say you’re an early capitalist – before Drapers’ time – all the way back to when the industrial society is taking off. Drapers’ advice would be irrelevant.

In this age, your main drive is to generate cash by putting a price on things that didn’t used to have a price – to profit off the commodification of then common lands, or human labor, and later innovative consumer products.

But in his time, in this evolved stage of capitalism, Draper knows that you don’t need to efficiently produce and sell goodproducts that people actually crave.

No, in this post war era, to rake in good money you simply need to commercialize nostalgia. It’s become less about selling a good product, and more about the ability to manufacture a desire for your product.

What Draper has discovered is so powerful that he’s able to charge extra for a product identical to what a competitor might sell.

What he’s discovered is brand loyalty. Follow his advice, and you can raise the price of your product, and because of your brand, your customers will stay loyal and buy your crap.

Basically, Draper is giving us an example of how to make money even with an uninventive product, all based on your brand.

Sounds like good profit, right? Well, it isn’t actually profit – not in the capitalistic sense. This is an example of rent based income.

Profit vs. Rent

Capitalism, as a system, triumphed when we commodified land and labor, and this is important, when profit overcame rent.

Let’s start with that: How capitalism was actually a revolutionary change from feudalism, the predominant economic system in medieval Europe, because of this shift from rents being collected, for no protective efforts, to the domination of profits that rely on entrepreneurial activity.

So, in Feudalism, rents rule the lands. Well, lords rule the lands, but they do so by collecting rents from their estates, their so-called fiefs.

Let’s say that you’re a lord in medieval Europe – a little further from your reality, I know, but bear with me here.

If you’re a feudal lord, you rent your land out to vassals – these are barons or knights – and in exchange you get their allegiance, and importantly, their payment to you in agricultural goods.

These vassals don’t actually work the land, but they will carry out the work for you. They’re a sort of middleman, and they’ll work the bottom of the barrel, the low-class serfs, the peasants.

The serfs will farm your land and basically pay most of their production to you as rent.

Sure, they can keep a bit for sustenance, but you need to maintain the status quo around here, so you send in a sheriff or two to police the fief and make sure they don’t keep too much.

In this age, as a lord, you don’t really need to do much to accumulate wealth. The fact that you own land in itself, gets you paid.

But as times change, as shipbuilding and navigation, and eventually industry and innovation open up global trade and competitive share markets, suddenly there’s a new way to generate wealth that’s not just about collecting rent from your land.

The advent of capitalism upon you, and seize the opportunity for serious wealth creation you must embrace profit.

Okay so what is profit in this sense? Is it not just like rent, another word for generating surplus money?

Well, although both rent and profit practically amount to this same thing: there is a, somewhat abstract, difference.

Both rent and profit are an economic surplus - that’s the money that’s left over after costs have been covered. But the difference is, and it’s a significant one, that rent is not subject to market competition, while profit is.

And the reason is: I’m going to quote Yanis Varoufakis here, the former Greek Minister of Finance, and author of the book “Technofeudalism”, also from which this video is based.

He says, “The reason [that profit is vulnerable to market competition, and rent is not,] 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. “

As capitalism takes off, profit seems attractive to you. It doesn’t reek of the exploitation that rent relies on – you know, working of serfs, who are pretty much de-facto slaves, right.

No, rather, profit stands out as a just reward for brave entrepreneurial risk-taking.

It does entail some degree of uncertainty, as you need navigate “the treacherous currents of stormy markets” (109). But if you take the right risk, you’ll be in rewarded for your efforts.

Take Ford… Krupp…. or Edison… and later… Sony… or Apple as examples.

What do all these companies all have in common?

They all generate income from profits that overshadow rents. They help establish capitalism as the dominant economic system of the modern era.

Krupp pioneers the steel foundry, railway tyres, that are used for the US railway system, and later the breech-loading canon, the first canon loaded from the rear, which wins wars and, really, affirm the value of innovation backed by profit.

Ford and Edison both propel their respective companies into mega-firms thanks to such innovative ideas and products, of which I hardly think I need to mention.

And let’s look at Sony for a classic example. In 1978 Sony’s stock price hovers around 3 US dollars. Then within just two years, it shoots up to $9, before plateaus at $6.

So, it doubles in value in just 2 years. Why? The Walkman, that’s why. Sony invests in something that hasn’t existed before. The 1979 Walkman rakes in massive profits.

But eventually, mp3 players are released and later Apple comes along with the iPod, taking over this portable music player market. Sony’s profits begin to diminish from the Walkman.

And that’s the whole point. Sony’s now needs to make something even better to stay competitive.

This way, profit maintains a level of innovation. In a competitive market society, you either innovate or wither away.

This is also why profit is subject to market competition, and rent is not, and why the dominance of profit might have been seen as a moral victory over rent. Entrepreneurial activity versus idle exploitation.

But wait a second: Remember how I told you about Don Draper and his whole thing about the magic of advertising, the power of branding, and about how, if you have brand loyalty, you need don’t need a good, or innovative product to make money?

Seems contradictory.

Rent Strikes Back

If you successfully sell a product because of branding rather than its inherent quality, what’s happening here is that you’re not generating profit, in this sense.

You’re generating brand-based rent. Nothing new here is being invented here, except an idea.

What Draper discovers in the 1950s eventually changes the course of capitalism entirely, (along with financialization).

Although rent survives its early stages through such business as oil, in the latter half of the 20th century, rent makes a surefire comeback, and now we’re getting to the good stuff.

No company reflects this shift better than Apple.

Apple survives fierce competition from competitors like Blackberry, Sony, and so on, because of their esteemed brand.

Apple’s sleek designs and claimed user-friendliness allows Steve Jobs to charge significant premiums on his products – premiums that amount to brand rents.

But that’s not all. Jobs takes it one step further, not only does blow fresh air into rent-based income, he helps usher in a new economic age where rent rules supreme once more.

What Jobs achieves with the iPhone, he takes further the with AppStore, and it’s is devastating for competitive market capitalism.

Cloud Rent

Let’s do one last hypothetical to tie this whole mess together. This time, you’re not a capitalist though, nor are you a feudal lord. Let’s just say you’re a regular old Joe in the 21st century.

Imagine that it’s a nice slow weekend, and you decide to go to take a trip to a new market you’ve discovered in a nearbytown - just to check it out what the hype’s about.

As you arrive at the market, people seem to be going about their business, trading gadgets, clothes, and whatnot. Everything seems in order here – it’s just another market in, well, just another town.

As you walk around and browse the wares in the different stalls, however, you start to notice that the stuff being sold here really stand out to you.

Pretty much every ware here is great, almost as if tailored for you. Something you want or need even! And that’s when you get a whiff that something about this place is a little off, but it’s not so easy to put a finger on what it is.

Never mind that for now, there’s good stuff here to be purchased. As you walk around and browse all the great wares, things get a little weirder though.

You’ve seen something you want to buy at one of the stalls. So, naturally you walk over there, and you ask the merchant how much it’ll cost.

The merchant, friendly enough, tells you the price, but to put 40 percent of what you pay in a jar that sits on the side of his stall. Why, you ask?

It’s for Jeff, he solemnly answers, he owns all the shops, all the buildings here. And he takes a cut from every single sale being made in his town.

He says this quietly, keeping one eye peeled at an ominous character, a character you’ve actually noticed walking around the stalls.

That’s the sheriff, the merchant tells you. He seems to be keeping track of the stalls, this sheriff. The merchant leans forward towards you, but still watchful of the sheriff, and whispers, you don’t want to get on the wrong side of Jeff’s algorithm.

And that’s when it becomes clear. You realize that you’re the only outsider here. Where is everyone?!

The merchant looks at you with a knowing smile. This is all for you, he says.

You see, Jeff not only decides what gets sold here, he owns the dirt you walk on, the bench you sit on, and the air you breathe.

He owns so much land around here that he has a created a distinct market for you, and for each and every individual on this entire planet.

That’s right, personalized. The sheriff, the algorithm, it knows you. You’ve actually told it all about yourself through the data that you’ve given to Jeff online.

And he’s trained the algorithm on it to function optimally as a sheriff.

This is no market town, you realize, this is no market at all. It all belongs to Jeff! There is no competition between sellers here, no disinterested invisible hand to guide competition.

No, only an algorithm that carries out his command. This, of course, is Amazon.com.

And essentially, what’s happening here is that Jeff - let’s just call him Bezos at this point - has concentrated the power of Don Drapers genius to implant desires on our mind by knowing exactly what we want and giving us the ability to buy it with a click, with the ability to avoid competition altogether by owning the entire environment, or pseudo-market, of sale.

Is this post-Capitalism?

Jeff Bezos is a technofeudal lord, just as Steve Jobs was before him.

Capitalists, producers and developers alike, who sell their products on Amazon.com or on the AppStore are their vassals. Jeff Bezos, like Steve Jobs did, gives them land to sell their goods on, and they collect a good chunk of their revenue as rent.

So, this land, the platform, the cloud, so to speak, is basically their digital fiefdom.

Unfortunately, that means that we’re the serfs. And all the attention and data that we willingly give to guys like Bezos is his produced means of, not production, but behavioral modification, becomes his capital – cloud capital.

While a central feature of capitalism the exchange wages for labor to produce capital for the capitalist, Bezos relies on free labor, our attention and data to accumulate his cloud capital.

This is what makes his platform viable, just as serfs made their lords land valuable, and similarly, we aren’t getting paid for it.

In the end, Bezos gets richer without needing to lift a finger.

“Since the [S&P500] index hit its latest low in October 2022, seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have collectively risen nearly 117 percent, far outpacing the performance of the other 493 companies in the S&P 500. Together, these stocks have become known as the “Magnificent Seven.”

https://www.nytimes.com/interactive/2024/01/22/business/magnificent-seven-stocks-tech.html

This is a recent headline from the NY times. What do these “magnificent seven” have in common? They all have significant cloud capital that they use to accumulate cloud rents.

You’ve might have heard how the economy is doing great right now, how the SP500 is at an all-time high, but at the same time, you might not have noticed it in your life.

I mean, just look at the “Home Price to Median Household Income Ratio” in the US: Housing has gotten increasingly unaffordable when compared to median disposable income. And this isn’t just a US phenomenon.

https://www.longtermtrends.net/home-price-median-annual-income-ratio/

Much of the money that has advanced our economy since the crash of 2008 has gone into the pockets of techno feudalist lords. So, the economy is doing great, but only for this new class of people.

Right, so it’s all really bad for the common folk then, but aren’t we still operating in a capitalist system? Maybe just a more unjust version of capitalism?

Why shouldn’t we just call this platform capitalism, hyper capitalism or something of that sort?

I think it’s only appropriate to give the final word to Yanis Varoufakis himself, who’ll describe it better than I would by paraphrasing.

“If markets have been replaced by these digital fiefdoms and profits by rents, then that’s not capitalism anymore. Now of course you could say, let’s call it platform capitalism or rentier capitalism, would that be wrong? No. However, in the same way that it wouldn’t be wrong for Adam Smith no to refer to the new capitalist system as capitalist but to refer to it as the indusdtrial profit driven feudalism. By dropping the word feudalism in the alienating century, intellectuals, especially in brittain, helped us understand that this was a big thing. It was a great transformation. And that’s what Yanis is trying to do – to alert people that we are living in a very different world now where the laws of society that prevailed before 2010, 2015, 2020, no longer prevail, and this is why central banks, and governments, and world leaders, globalization, is now in tatters.” (interview w channel 4)

If you’re interested in diving deeper and having some of this stuff better explained, definitely check out Varoufakis’ latest book, “Technofeudalism” – he goes into all of this and way more. You can probably get it on Amazon.

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