Pessimism of the intellect, optimism of the rich

LONDON — Reading [last] fall’s selection of new nonfiction books, one cannot help but recall W.B. Yeats’ prescient lines from The Second Coming: “The falcon cannot hear the falconer; things fall apart; the centre cannot hold.” As the liberal international order is beset by domestic and global challenges, the values that have shaped the West’s socioeconomic landscape since the Enlightenment appear to be in decline. The somber tone of Western intellectuals suggests that we may need to turn to China to find the falconer capable of bringing stability back to our world.

Political philosopher John Gray’s new book, “The New Leviathans: Thoughts After Liberalism”, is a prime example. In the early 1990s, Gray emerged as one of the West’s foremost pessimistic thinkers, in stark contrast to the triumphalism of Francis Fukuyama.

In his 1998 book “False Dawn: The Delusions of Global Capitalism”, Gray argued that the fall of communism would not usher in the utopian “end of history” envisioned by globalist neoliberals like Fukuyama. The Soviet Union’s collapse, in Gray’s view, marked the failure of the Enlightenment project, of which communism had been a main pillar. Instead of a harmonious global order, Gray foresaw an escalating competition for scarce natural resources.

In “The New Leviathans”, he envisions a multipolar world where rival powers, each with their own “conceptions of human well-being”, would have to reach some kind of modus vivendi. The pluralism that characterised Europe during the late Middle Ages, he argues, was more harmonious and civilised than the universalist Hobbesian Leviathan that succeeded it. But Gray does not offer a feasible or peaceful path to multipolarity. Should such a shift take place, it would likely be triggered by a succession of extreme events.

While Gray attributes our current predicament to the modern state system, former Greek finance minister Yanis Varoufakis places the blame squarely on the owners of capital. In his latest book, “Technofeudalism: What Killed Capitalism”, Varoufakis argues that instead of evolving towards socialism, as his father’s generation had hoped, capitalism is regressing into a feudal system where rents, not profits, are the primary drivers of economic activity.

This argument aligns with French economist Thomas Piketty’s observation that inequality increases when the rate of return on capital exceeds the rate of economic growth (r>g). As the world’s wealth becomes concentrated in fewer and fewer hands, capitalism mutates into a system in which a techno-feudal ruling class, which Varoufakis dubs “cloudalists”, leverages its control over vital goods and services to extract rents from capitalists, workers and consumers alike.

This techno-feudal order is epitomised by the “Big Three” asset managers, BlackRock, Vanguard and State Street, which effectively own American capitalism. Their rise has been facilitated by the trillions of dollars in cheap money that central banks injected into the financial system after the 2008 crisis, which enabled a handful of megafirms and billionaires to go on an unprecedented shopping spree. Ironically, in their bid to save capitalism, central bankers may have inadvertently killed it.

Varoufakis claims that the term “rentier capitalism” is an oxymoron, since capitalism is about making profits, not extracting rent. But this looks like a semantic quibble. Rent-seeking has always been a feature of the capitalist economy, because returns from investment are inherently uncertain, so the desire of the wealth owner to hold assets in liquid form will always prevail in troubled times. John Maynard Keynes called this desire “liquidity preference” and regarded economic downturns as episodes in which the demand for liquidity dominated the quest for profit.

We are also familiar with the idea that Western economies have been “financialising” themselves, switching from producing things to producing financial instruments, and that this is the main contemporary form of rent extraction. Whether it represents a change in system requiring a new vocabulary of cloudalists, vassals and serfs is moot.

Varoufakis’s terminology also runs the risk of obscuring the true source of technological dynamism. Like many other Marxist economists, he views technological advancement as a byproduct of the competitive pursuit of profit. When profit-making is supplanted by rent-seeking, according to this logic, the incentive for technological innovation disappears.

But this interpretation overlooks the pivotal role that the state has played in fostering technological innovation, especially through the quest for military supremacy. Silicon Valley’s creation, for example, can be traced back to the Pentagon. Without the impetus of World War II and the Cold War, many of today’s technologies might not exist. Moreover, Varoufakis downplays the influence of international relations on the regulatory environment in which these technologies are deployed.

Varoufakis is no Luddite. He urges young people to fight for what he calls “techno-socialism”, a system that involves public ownership of the “digital commons” and bears a striking resemblance to Yugoslavia’s worker-managed market socialism of the 1960s. But his pessimism about the future of capitalism leads him to the “intriguing” proposition that the only “glimmer of hope for any demos around the world shines in China,” where President Xi Jinping has “declared war on cloudalists and capitalists.”

Fears for the future of the West should not lead to a flight to the East, but rather to an effort to revive the rich Western tradition of democratically managed capitalism. Such an effort, however, requires optimism, not pessimism, of the intellect.

John Gray, “The New Leviathans: Thoughts After Liberalism” (Farrar, Straus and Giroux, 2023)

Yanis Varoufakis, “Technofeudalism: What Killed Capitalism” (Bodley Head, 2023)

Robert Skidelsky, a member of the British House of Lords, is professor emeritus of Political Economy at Warwick University. He is the author of an award-winning biography of John Maynard Keynes and the forthcoming “The Machine Age: An Idea, a History, a Warning” (Allen Lane, 2023). Copyright: Project Syndicate, 2023. www.project-syndicate.org