Technofeudalism and Sanctions

Banks Economics Technology

            New Orleans        In the cheap seats where most of us sit, it’s often mysterious to understand the economic and political gyrations between countries.  We read about it, wonder for a moment, don’t have much of a clue other than a hope and prayer of understanding, and then go on.  Sanctions are a prime example.  As an alternative to direct conflict, we’re all for them, but do they really work?  Reading the papers reporting the press releases, most of us would have thought we had really laid the hammer down on Russia over the invasion of Ukraine, for example.  Yet, every report now seems to indicate that the sanctions may have caused some pain to the Russian economy, but nothing that they haven’t been able to work around.  Why’s that, I wondered?

I’m still not sure, I know, this being way outside of my lane, but I stumbled on an intriguing explanation that seems spot on for all I know, and may portend some things about the global future between the US and China, as well as this mess with Russia and Ukraine.  I was reading a book on Technofeudalism:  What Killed Capitalism by the Yanis Varoufakis, the economist and politician who the Finance Minister of Greece in the Syriza Party’s left government for about fifteen minutes.  I’ll spare you his arguments about how capitalists have become “cloudalists” in the new internet-dominated economy, even though it’s fascinating in many ways, because we’re talking sanctions today.

According to Varoufakis, looking at sanctions is really about money, and more significantly the post-Bretton Woods reliance on the dollar as the standard of exchange and finance.  He argues that the Biden Administration and Federal Reserve action to freeze “hundreds of billions of dollars that belonged to Russia’s central bank but kept within the dollar-payment circuit that the US controls fully…was the first time in capitalist history that a major central bank’s money had been, effectively, confiscated by another central bank.”

Earlier China had led the way in making a digital yuan in 2020, as it moved, as the US had already done, to link what he calls “cloud capital and finance.” This is the ability of Amazon, Google, and others, like the banking and finance industries, to use the internet and apps to take payments or rents on excess income on extensive transactions.  When China’s central bank created a digital currency, they were on the road to cutting out the middleman banks, mostly from the US, from financial transactions.  This would allow Russia, Iran, and other allies to get around sanctions, which is part of the hue and cry behind the scenes now in the West.

Varoufakis also argues this explains some of the actions in this new Cold War with China, as he writes,

And so it was that on 7 October 2022, under the guise of national security concerns over China’s development of sophisticated weaponry, President Biden declared a total export ban on anything that might help China develop top-notch microchips.

Such a move was meant to slow down this transition to a dual currency exchange, some on the dollar, and others lining up on the digital yuan.  Biden and the central bankers are in effect forcing countries to choose which side they are on financially, the US or China.

Withholding chips simply buys the US time to maintain some of its financial hegemony and protects some of the US tech and tech adjacent billionaires and others around the world that use the open door American foreign investment policies to stash their surplus rents and incomes, legally or illegally gained, in US real estate, companies, stocks and bonds.  China will catch up of course.  They know how make chips, so they will get to where they need on some timeline.

Are you still with me?  Heady stuff, huh?  I’m not sure it answers all the questions and no one can predict the future, but some of this seems right, makes sense, and may mean another world awaits us that we might not have expected.  Not that that is news, since change is always ahead, but our public policy of allowing rents and increasing inequality may find some future challenges and unexpected developments.