US Big Tech corporations have essentially colonized the world. In almost every country on Earth, the digital infrastructure upon which the modern economy was built is owned and controlled by a small handful of monopolies, based largely in Silicon Valley.

This system is looking more and more like neo-feudalism. Just as the feudal lords of medieval Europe owned all of the land and turned almost everyone else into serfs, who broke their backs producing food for their masters, the US Big Tech monopolies of the 21st century act as corporate feudal lords, controlling all of the digital land upon which the digital economy is based.

US Big Tech corporations are like the feudal landlords of medieval Europe. These Silicon Valley monopolies own the digital land that the global economy is built on, and are charging higher and higher rents to use their privatized infrastructure.

Every other company – not just small businesses, but even relatively large ones – must pay rent to these corporate feudal lords.

Amazon takes more than 50% of the revenue of the sellers on its platform, according to a study by the e-commerce intelligence firm Marketplace Pulse.

Amazon’s cut of vendor revenue steadily rose from roughly 35% in 2016 to just over half as of 2022.

In fact, Amazon basically sets prices in markets by using its infamous “buy box”. The platform removes the button if a user sells a product at a price higher than those offered on competing websites.

A staggering 82-90% of purchases on Amazon use the buy box. So if a business does not list the price that Amazon wants, they won’t receive the buy box, and their sales will fall.

Neoclassical economists endlessly condemned the inefficiencies of the central planning of the Soviet Union, but apparently have little to say about the de facto price setting being done by neo-feudal corporate monopolies like Amazon.

A monopolist in the 20th century would have loved to control a country’s supply of, say, refrigerators. But the Big Tech monopolists of the 21st century go a step further and control all of the digital infrastructure needed to buy those fridges — from the internet itself to the software, cloud hosting, apps, payment systems, and even the delivery service.

These corporate neo-feudal lords don’t just dominate a single market or a few related ones; they control the marketplace. They can create and destroy entire markets.

Their monopolistic control extends well beyond just one country, to almost the entire world.

If a competitor does manage to create a new product, US Big Tech monopolies can make it disappear.

Imagine you are an entrepreneur. You develop a product, design a website, and offer to sell it online. But then you search for the good on Google, and it does not show up. Instead, Google recommends another, similar product in the search results.

This is not a hypothetical; this already happens.

Amazon does exactly the same: It promotes Amazon Prime products at the top of its search results. And when a product sells well, Amazon sometimes copies it, makes its own version, and threatens to put the original vendor out of business.

As Reuters reported in 2021, “A trove of internal Amazon documents reveals how the e-commerce giant ran a systematic campaign of creating knockoff goods and manipulating search results to boost its own product lines”. This happened in India, but vendors in other countries have accused Amazon of doing the same.

(Toy salesman Molson Hart produced a fascinating documentary that illustrates Amazon’s dystopian monopoly power. He interviewed small business owners whose products were ripped off by the mega-corporation.)

Amazon is more powerful than any 19th-century robber baron could have imagined. It charges exorbitant fees to vendors that sell goods on its platform (goods that Amazon had nothing to do with creating), and can copy their product and make its own version if it looks profitable.

This problem goes much deeper than Amazon. Apple, the largest company on Earth by market capitalization (with a $3.41 trillion market cap as of August 1, 2024), uses many of the same tactics as Amazon.

While Amazon extracts more than 50% of the revenue of the sellers who use its platform, it can at least try to justify this by arguing that these hefty fees include the costs of advertising and “fulfillment” (ie, storage, processing, delivery, etc.).

Apple, on the other hand, charges a staggering 30% fee on all purchases done in apps that are downloaded using the iOS store.

In other words, if a user of an iPhone, iPad, or Mac downloads a third party app through the App Store, Apple requires 30% rent for the business done by those other companies. This is despite the fact that Apple has nothing to do with that business. The other firms manage the commerce and maintain their apps; Apple is merely the neo-feudal lord demanding its tribute.

In an absolutely scandalous announcement in August, the crowd-funding website Patreon revealed that Apple is taking a 30% cut of all new memberships registered using the iOS app.

Apple is not providing any significantly service; it simply allows people to download an app that it itself does not manage. All Apple does is host the app, nothing more. It is a digital landlord. But because it has a monopoly, Apple can take 30% of the revenue that creators on Patreon receive for all of our hard work.

Patreon itself already charges fees of 8% to 12% of users’ revenue. Now Apple wants an additional 30% cut.

We at Geopolitical Economy Report do admittedly have a vested interest in this debate: As an independent media outlet, to sustain our work, we rely exclusively on donations from our readers, viewers, and listeners. We use Patreon to raise funds for our operations. We are very grateful to our supporters for their generosity.

These obligatory tithes demanded by our overlords at Big Tech monopolies have a big economic impact on independent journalists and creators like us, our friends, and colleagues.

But Apple’s Patreon fees are merely one example of a significant problem plaguing not only the United States, but most of the global economy.

It’s the perfect symbol of what awaits us in the future, if we don’t fundamentally change the current system: neo-feudal rent extraction by corporate monopolies.

Economist Michael Hudson has warned for more than a decade of the regression of Western financialized monopoly capitalism into neo-feudalism.

In a 2012 paper titled “The Road to Debt Deflation, Debt Peonage, and Neofeudalism”, Hudson wrote:

“The end product of today’s Western capitalism is a neo-rentier economy—precisely what industrial capitalism and classical economists set out to replace during the Progressive Era from the late 19th to early 20th century. A financial class has usurped the role that landlords used to play—a class living off special privilege. Most economic rent is now paid out as interest. This rake-off interrupts the circular flow between production and consumption, causing economic shrinkage—a dynamic that is the opposite of industrial capitalism’s original impulse. The ‘miracle of compound interest’, reinforced now by fiat credit creation, is cannibalizing industrial capital as well as the returns to labor”.

More recently, economist Yanis Varoufakis has referred to this system as “technofeudalism”, publishing a book with this title in 2024.

We will discuss that more a bit later.

First, we should understand, how did these monopolies become so powerful?

This all started with US Big Tech corporations like Google and Meta offering supposedly “free” services (which were paid for by selling users’ information). Those “free” platforms soon became monopolies, and were so deeply embedded into the economy that they became digital utilities, albeit privatized ones.

A 20th-century economy needed utilities like an electrical grid, water plants, sewage system, highways, etc. These natural monopolies should be publicly owned, provided by the state as public goods, in order to prevent rent-seeking by corporate landlords. (Of course, neoliberals have long sought to privatize these public utilities as well, and have had success in some countries — with inevitably disastrous results, like sky-high bills and sewage being dumped into the UK’s privatized water system.)

A 21st-century economy needs all of those basic utilities plus new digital infrastructure. But here’s the thing: all of the necessary digital infrastructure that our economies are built on is privatized! You have internet providers, Microsoft Windows, macOS, iOS, Apple App Store, Play Store, Google, Amazon, YouTube, Facebook, Instagram, WhatsApp, Apple Pay, Google Pay, etc.

Then there is the cloud infrastructure that apps and websites use, which is dominated by a few mostly US companies. Amazon Web Services (AWS) had 31% of global market share as of the first quarter of 2024, followed by 25% for Microsoft Azure, and 11% for Google Cloud.

Together, these three big US Silicon Valley companies control 67% of the world’s cloud computing market. This is a kind of monopolistic chokehold on the internet itself.

Good luck running a modern economy, in any country, without these privatized internet providers, operating systems, app stores, social media apps, messaging apps, etc.

This digital infrastructure is now nearly as important as the public utilities like the power and water grid.

If you want to make a small business, you will almost certainly go bankrupt very quickly if you don’t use Amazon to sell your product; Apple’s App Store or Google Play Store to download your app; Facebook, Instagram, and YouTube to market your good or service; or WhatsApp to make an order (especially in many Global South countries, where WhatsApp is more common than in the US). None of this is to even mention private ISPs for an internet connection, or private telecommunications companies that charge high data fees.

If your company makes an app that is not available in the Apple App Store or Google Play Store, you might as well not exist. Good luck getting the vast majority of your customer base to download it.

Now that US Big Tech monopolies are deeply embedded into the fabric of the global economy, with almost no competitors, they are jacking up the rents. This is happening everywhere (except in China, which we will discuss later).

Apple’s 30% fee on purchases made in apps downloaded in the App Store is just scratching the surface.

These Big Tech monopolists are really digital landlords. They own the land upon which the rest of the digital economy is built. They are the 21st-century version of the feudal lords of Medieval Europe, who owned the land upon which serfs toiled.

And now these neo-feudal corporate landlords are charging more and more fees to use their once “free” infrastructure.

Of course, monopoly capital is far from new. Capitalism has been in a decadent monopoly stage for decades.

Paul Sweezy and Paul Baran were already writing about US monopoly capitalism in the 1960s.

Rudolf Hilferding could see the rapid growth of monopolies in the early 20th century, which he described in his 1910 opus Finance Capital, in turn inspiring Lenin’s analysis of imperialism.

But in the 21st century, US monopoly capital has gone global, and colonized most of the world.

In fact, this has become the go-to model for most new technology corporations coming out of Silicon Valley.

Uber is the textbook example. When it first came on the scene, Uber sought to bust taxi unions in major cities by charging very low rates. Rides were so cheap that Uber lost money for years.

This was possible because of the ZIRP (zero interest rate policy) implemented by the US Federal Reserve, following the North Atlantic financial crisis of 2007-09. Thanks to ZIRP, Uber survived on a stream of cheap loans, and was able to continue rolling over its debt, operating at a loss, while undercutting its competitors in a cutthroat battle for market dominance.

Once Uber successfully destroyed the (highly unionized) taxi industries in major cities and established a monopoly, Uber hiked up its rates. It didn’t really have any significant competition. (In 2023, Uber dominated 74% of the US market, compared to just 26% for Lyft.)

Uber also spread this monopoly model worldwide, waging a scorched-earth war against taxi unions in dozens of countries.

There is one big exception to all of this.

The only large country whose economy is not entirely colonized by US Big Tech is China, where Communist Party leaders were wise enough to realize they had to develop their own electronic infrastructure, to protect their digital sovereignty, so they wouldn’t be utterly beholden to US monopolies.

The existence of China’s alternatives is one of the reasons (among others) for Washington’s new cold war on Beijing.

Instead of Google, the main search engine in China is Baidu. Instead of YouTube (which is owned by Google), China has Bilibili. Instead of Facebook and Twitter, China has Weibo. Instead of Instagram, there is Xiaohongshu. Instead of Amazon, there are companies like Taobao and Jingdong (aka JD.com).

In lieu of WhatsApp or other messaging apps, China has WeChat – which along with AliPay is also used for payments, as alternatives to Google Pay and Apple Pay.

Then, of course, China created TikTok, one of the most popular social media platforms on Earth. (Although China has its own separate version, called Douyin.)

In fact, TikTok became so popular – threatening the hegemony of Silicon Valley – that the US government announced it would ban the app unless parent company ByteDance agreed to sell TikTok to a US firm.

Washington will not tolerate at any competitors to its Big Tech monopolies.

In his 2024 book Technofeudalism, economist Yanis Varoufakis described this new form of monopolized technological capital as “cloud capital”, owned by oligarchs he dubbed “cloudalists”.

Varoufakis observed that Amazon does not just dominate the marketplace; it creates demand for products that customers did not even know existed, by manipulating its algorithm. It therefore can create (and destroy) markets.

Although I sometimes disagree with Varoufakis, especially in terms of his criticism of China, I do largely share his analysis of technofeudalism.

Varoufakis is absolutely right that one of the factors driving Washington’s new cold war on Beijing is the desire by US Big Tech monopolies to destroy their only competitors, which happen to be Chinese. As Varoufakis observed:

“with cloud capital dominating terrestrial capital, the maintenance of US hegemony requires more than preventing foreign capitalists from buying up US capitalist conglomerates, like Boeing and General Electric. In a world where cloud capital is borderless, global, capable of siphoning cloud rents from anywhere, the maintenance of US hegemony demands a direct confrontation with the only cloudalist class to have emerged as a threat to their own: China’s”.

Where I think Varoufakis is wrong is in his claim that China, like the US, is becoming techno-feudal.

There is a fundamental distinction between the two systems: In the US, capital controls the state; in China, the state controls capital.

In China’s unique system, which it refers to as a socialist market economy and “Socialism with Chinese Characteristics”, roughly a third of GDP comes from massive state-owned enterprises (SOEs), which are concentrated in the most strategic sectors of the economy, such as banking, construction, energy, infrastructure, telecommunications, and transportation.

While it is true that many technology companies in China are private on paper, the reality is much more complicated. The Chinese government has a powerful “golden share” (officially known as a “special management share”) in large firms, such as Alibaba and Tencent, which gives it veto power over important decisions.

Although these large technology companies may not be fully state-owned, China’s socialist government ensures that they act in the interest of the country and the people, not simply wealthy shareholders.

The US system is exactly the opposite. Large corporations control the government, and create policy on behalf of wealthy shareholders.

Some socialists don’t like the terms “neo-feudalism” or “techno-feudalism”, because they are afraid it will distract from the serious problems of capitalism.

But this idea is not like so-called “crony capitalism” or “corporate capitalism”, which are indeed euphemisms for plain old capitalism, as it actually exists in the real world.

Neo-feudalism really does look more and more like a distinct mode of production. Yes, capitalism in the monopoly era has had little meaningful competition, but the markets in which those firms operated were still circumscribed largely by public utilities.

Wal-Mart could put local mom-and-pop stores out of business, but it could not effectively prevent people from traveling to other areas to buy products from competitors; Amazon and Google essentially can.

It must not be forgot that capitalism was initially a progressive force compared to feudalism. Marx and Engels wrote in the mid-19th century of how the “bourgeoisie, historically, has played a most revolutionary part” in overturning the feudal order.

“The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations”, they declared in The Communist Manifesto, adding that the capitalist class “has pitilessly torn asunder the motley feudal ties that bound man to his ‘natural superiors’, and has left remaining no other nexus between man and man than naked self-interest, than callous ‘cash payment'”.

But these progressive elements of capitalism have eroded so greatly in the monopoly era that rent-seeking mega-corporations have dragged society back to a more primitive mode of production.

The fanaticism of the neoliberal era gave capital so much extreme power that today, under 21st-century neo-feudalism, society itself is being privatized (especially given that the average adult who uses the internet spends nearly half of their waking hours on websites and apps controlled by a small handful of Big Tech neo-feudalists).

The solution is clear: the digital infrastructure upon which the modern economy is built must be nationalized and turned into public utilities, like water, electricity, and highways.

That said, the US government nationalizing Silicon Valley Big Tech companies does not solve the problem of the lack of digital sovereignty in other countries.

If Amazon, Apple, Google, and Meta are nationalized, this would still mean the United States has enormous power over nations whose economies rely on this US-controlled digital infrastructure (which, again, is almost all nations everywhere, with the noble exception of China).

That said, it wouldn’t be realistic for every single country on Earth to create its own distinct social media platforms and search engines. This would also create another separate set of problems, and make it more difficult for people to communicate with their friends, family members, colleagues, and customers in a highly globalized world.

Instead, these digital utilities could remain global, but other countries could nationalize the local subsidiaries and/or operations of these Big Tech firms. Exactly how that could be done should be explored.

Perhaps some kind of answer could be found in Apple’s funny business in Ireland. The US Big Tech monopoly reports its profits mostly in Ireland, whose 12.5% corporate tax rate is lower than that of the US.

In 2022, Apple’s Irish subsidiary reported more than $69 billion in profits, and paid just $7.7 billion in taxes. But it gave $20.7 billion in dividends to its California parent company.

If Apple wants the world to believe that its operations in Ireland are so much more important than those in the US, then is it really a US company, or is it an Irish one?

The answer, of course, is that Apple is truly global, like most big multinational corporations. So each country that these monopolies operate in should have the right to defend its sovereignty and nationalize their local subsidiaries.

This is a serious problem that should be debated worldwide. There are likely some potential creative solutions.

But that is a topic for a whole other article.

https://geopoliticaleconomy.com/2024/08/19/us-big-tech-monopolies-neo-feudalism/

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