Big Tech’s so-called Magnificent Seven are on everyone’s lips. The exorbitant stock market valuations of Google, Meta, Apple, Microsoft, Nvidia, Amazon and Tesla provoke an amalgam of awe and fear. Their trillion-dollar investments in AI prompt some to predict the brightest of futures and others to dread humanity’s dumbing down, unemployment, redundancy even. In this overwhelming din, it is easy to miss the larger picture: a new type of capital is killing markets, capitalism’s habitat.
At its very beginning, capitalism was underpinned by faith in competitive markets. In the liberal fantasy, spearheaded by Adam Smith, bakers, brewers and butchers laboured within markets so cut-throat that none could make more money than the bare minimum necessary to keep their small, family-owned businesses running. This in turn provided us with our daily bread, ale and meat.
Then came the second industrial revolution and the conglomerates whose market power would make Smith weep with joy. This was the era of Big Business and the “robber barons”. And so another — neoliberal — fantasy was created, to justify the new big beasts that were now monopolising almost every market that mattered. Joseph Schumpeter, a former Austrian finance minister who made America his home, was the new creed’s most effective advocate. Progress, he argued, is impossible in competitive markets. Growth needs monopolies to fuel it. How else can enough profit be earned to pay for expensive research and development, for new machines, new product lines and all the paraphernalia that helps innovation take root? To monopolise markets, conglomerates need to dazzle us with remarkable new products that kill off the competition, like Henry Ford’s Model-T or Apple’s iPhone. Should we worry about all that concentrated power? No, Schumpeter reassured us. Once they reach their pinnacle, these monopolies get flabby and complacent and, eventually, they’re brought down by some upstart: one example being Toyota’s toppling of General Motors.
More recently, Peter Thiel, Palantir’s co-founder, said something that many thought was a restatement of Schumpeter’s dictum: “Competition is for losers!” While the pioneers of Big Business like Thomas Edison and Henry Ford would have agreed wholeheartedly, what Thiel was implying went beyond their wildest imagination. It went much further even than Schumpeter’s pseudo-Darwinian idea that progress comes through the rise and fall of monopolists in an endless struggle for existence.
What Thiel was saying is that today, winners do not just kill off the competition to monopolise a market. No, they keep going until they kill the market itself and replace it with something quite different: a kind of cloud fief that lacks all of the ingredients of a proper market — indeed that lacks all of the advantages that liberals and neoliberals alike recognise in the machinery of decentralised markets. In fact, today’s winners —the Magnificent Seven, plus Thiel’s own Palantir — are reviving an economic model that all of us thought dead and buried after the fall of the Soviet Union: economic planning systems that match buyers and sellers outside anything that can be usefully described as a market.
Gosplan was the Soviet Union’s State Planning Committee, the engine room of its command economy. Its remit was to match the supply and demand of critical resources (oil, steel, cement) but also consumption goods (food, clothes, appliances), without using market prices. Once buyers and sellers were matched, prices were assigned with a view to achieving political and social objectives (such as to ensure basic affordability, or subsidise certain industries) — not to balance markets.
Gosplan was disbanded immediately after the red flag was lowered over the Kremlin on Boxing Day of 1991, but it is now back. Where? In the algorithms powering Jeff Bezos’s Amazon, Peter Thiel’s Palantir and the rest of Big Tech’s digital platforms that pretend to be, but are not, markets.
Before you protest the audacity of my claim, think of what happens when you visit Amazon. Unlike when you visit a shopping mall, either with friends or mingling with strangers, the moment you follow the link to amazon.com, you exit the marketplace and enter a space of pristine isolation. It’s just you and Jeff Bezos’s algorithm. You type, say, “espresso machines” into the search box and the algorithm matches you with a number of vendors. However, to achieve what it was coded for, the algorithm had started working months, even years, earlier.
Over that period, you will have revealed to it many of your whims and desires through your searches, purchases, clicks and reviews. Using these cues, as well as data from other sources, the algorithm has trained you to train it to know you even better, enabling it to advise you on what books, music and films to buy. It has already won your trust. So, now that you are in a hurry to replace your broken espresso machine, the chances are that you will choose one of the top search results it has given you.
The algorithm knows your spending pattern. It knows how to guide you to the espresso machine with the highest price you are prepared to pay, all in order that Amazon can collect up to 40% of it the moment you click the purchase button. It is an extortionate cut, but the espresso machine’s makers tolerate it, because they know that if they don’t, their company will never appear in the top search results of anyone prepared to pay for their product. As AI improves, this power to manipulate your behaviour increases — and this is why Big Tech’s valuations are going through the roof.
This is nothing less than a capitalist, privately-owned, super high-tech reincarnation of the USSR’s Gosplan. Amazon’s software matches you with particular vendors and bans you from talking to any seller or even from observing what other buyers are doing — unless of course it calculates that it serves its own purposes to let you see a small selection of them. As for the price you pay, this follows (rather than precipitates) your being matched with a seller. Rather than being the variable that equilibrates demand with supply, prices in Amazon fulfil another role: that of maximising Jeff Bezos’s cloud rents.
“Had the Soviet leaders lived to witness the workings of Silicon Valley’s Big Tech, they would be kicking themselves.”
In this sense, prices in Amazon and other Big Tech platforms function in a manner far closer to Gosplan than to any farmers’ market, money market or shopping mall you have ever experienced. In fact, had the Soviet leaders lived to witness the workings of Silicon Valley’s Big Tech, they would be kicking themselves, lamenting that it was American capitalists who perfected their Gosplan model, complete with a surveillance system that would make their KGB henchmen green with envy.
Gosplan failed to turn into a success story as it lacked Big Tech’s greatest weapon: cloud capital, that is, the algorithms, data centres and optic fibre cables working as an integrated network to train you to train it. As you impart your data, cloud capital learns how to input desires into your mind and then satiate these desires by selling you stuff within its privately owned version of Gosplan.
But, is there really a difference — I hear many of you ask loudly — between Thomas Edison and Jeff Bezos? Are they not cut from the same cloth of megalomaniac monopolists seeking to dominate markets and our imagination? Yes, despite their similarities, there is a difference — and it is gigantic. Edison’s and Ford’s capital was productive. It produced cars, electricity, turbines. Bezos’s cloud capital produces nothing, except the enormous power to encase us in his cloud fief where traditional capitalist producers are squeezed for cloud rents and we, the users, provide our free labour. With every click, like and review, we enhance the power of cloud capital.
Once upon a time, an old Trotskyite told me that the Soviet Union, in the name of socialism, had created a form of industrial feudalism. Independent of whether he was right or not, his comment is pertinent today in relation to Big Tech. Come to think of it, while the trading process on platforms like Amazon is reminiscent of the USSR’s Gosplan mechanism, it is also the case that the enormous sums that Amazon, Uber, Airbnb etc, charge the actual producers of the goods and services peddled on their sites are akin to the ground rents that the landed gentry used to charge their vassals — except that, here, they are cloud rents that accrue to the owners of cloud capital. So, just as the Soviet Union generated one kind of feudalism in the name of socialism and human emancipation, today, Silicon Valley is generating another kind of feudalism — technofeudalism, I have called it — in the name of capitalism and free markets.
The parallel extends to the state. The USSR was meant to be a workers’ paradise in contrast to the USA whose raison d’être was to be a haven for capitalist producers. It turns out that both promises were false. As Big Tech’s cloud capital accumulates and concentrates into fewer and fewer hands, states are becoming dependent on corporate techlords. By outsourcing core functions — archives, health data, even military software — to rented cloud infrastructure, governments lease back their own operational capacity from Amazon Web Services, Microsoft, and Google. This dependency enables a new dimension of technofeudal power.
From this perspective, just as the Soviet Union was a feudal-like industrial society pretending to be a workers’ state, the United States today is performing a splendid impersonation of a technofeudal state, with repercussions that extend to every realm of state activity, including health services, education, the tax office, our borders and faraway battlefields.
In Ukraine and Gaza, and along our militarised borders, cloud capital is trained to extend its reach. Amazon’s AI tool Rekognition is used by law enforcement, including ICE, while Palantir’s vast surveillance software runs on Amazon’s cloud. Through Project Nimbus, Amazon and Google provide the Israeli military with advanced cloud and AI capabilities, reportedly enabling rapid, AI-driven targeting in Gaza with minimal human oversight.
Let us briefly return to the comparison with the early 20th century’s original monopolist capitalists. Whether we admire or abhor the Magnificent Seven’s stock market valuations, it is helpful to keep this in mind: the old capitalist giants, the “robber barons”, actually produced things. The new technofeudal lords produce a new social order. They have replaced the invisible hand of the market with the visible, algorithmic fist of the cloudalist.
Free-market enthusiasts have nothing to celebrate and much to regret. But it will take a brave soul amongst them to stare reality in the face. Just like pro-Soviet Marxists remained in denial that the Soviet experiment had failed for many years after 1991, so free-market ideologues refuse to see that capitalism begat a form of capital — cloud capital — that replaced markets with something out of the Soviet past. In the process, it has killed capitalism.