Since the dawn of human settlement, being rich has been a process, not an end point. In order to accumulate capital, you need to figure out a way to organize people in such a way that their extra becomes your extra. Ideally, you leave a little for them so they think helping you grow rich is to their benefit. But, 1,000 years of feudalism proves it is not a requirement. With the right system, you can grow rich and powerful at the expense of others.
That’s the other part of the process though. To keep the peasants, slaves, servants, workers and associates from revolting, you either invest some of your extra back into them or you invest it in men with weapons who will keep the order. Recently the former has been the preferred method, but the only proven way to keep order is the latter. That’s why gun laws are enforced by men with guns.
This is not how most Americans look at economics. I’m sure a few reading this are thinking I have been reading too much Marx. But, that’s the thing. Marx was not wrong about everything. He made some excellent observations. His recommended solutions were insane, but many of his observations were spot on and hold up well even today.
Marx observed that capitalism, as he defined it, destroys and reconfigures previous economic orders, but also that it must ceaselessly devalue existing wealth. We see this today with Uber. The old order of state run cab companies is under assault from the new order of distributed contractors linked by a public information network paid for by people who don’t use it.
Joseph Schumpeter argued that this process was not pure destruction as Marxist claimed, but a reordering that eventually added value to the old stock of capital. The automobile did not entirely obliterate the horse and buggy industry. The carriage makers moved to the car business. The property employed in keeping and raising horses did not go away. It was re-purposed for car maintenance. While some value was lost from the end of horse travel, much of it was retained and a whole new layer of value was added onto it.
Both men were working from the perspective of rapid material progress. Events seem like they favor Schumpeter as opposed to Marx as we have seen whole industries grow up in one generation, displacing an old industry from our parents’ generation. The example I love using is the fax machine. In my lifetime, I saw it created, dominate and then replaced with something different. My parents could not imagine it and the kids today have never heard of it.
When I see stories like this one, I wonder if rapid material progress has reached an end or at least a lull. This looks like techno-feudalism to me. Amazon is trying to arrange things such that they can get writers to work for the benefit of Amazon, rather than their own benefit. Amazon gets the benefit of being the world’s largest bookstore, without incurring any risk. Get halfway through some book and decide you don’t like it? No problem. The author will refund you the difference! Amazon looks like a hero and the writer is looking for food in neighborhood dumpsters.
Amazon is not the only billionaire operation running these scams. Apple is trying to screw performers out of royalties. They backed off this time, but you can see where they are headed with this. These new “rental” services are about locking up the pipeline between the creator and the customer. Once they gain that edge, they will stop paying royalties. The next step will be that small acts get nothing but the benefit of “advertising” themselves on Apple or Amazon. It’s classic rentier behavior.
These are two recent examples, but the entire financial system is nothing but feudalism these days. Banks charge people for savings accounts. That forces everyone to put their savings into equities where smart people charge fees on investment funds. This arrangement means that when the economy is strong, everyone gets richer, but the rich get very rich. When the economy falls, everyone gets poorer, except for the rich, they keep getting richer. It is heads they win tails you lose.
The reason for wondering if these are symptoms of systemic stagnation is that when the pie is expanding, the rich guys are rushing to get the lion’s share of the new pie. When the pie is not growing, they look to expand their share of the pie at the expense of the weak. The new business from expansion is always the most profitable. Cannibalizing the existing market is low margin. When big players like Apple and Amazon are slumming this way, it suggests they have nowhere else to turn for profit.
It’s what appears to be at the heart of the massive new trade bill that just passed. The point of it is not to expand the US market, letting a rising tide lift all boats. No one believes that anymore. This bill is about making it easier for global players to loot the American middle class. William the Conqueror imposed feudalism in the English speaking world after the Battle of Hastings. Silicon Valley and Wall Street are imposing it on America a millennium later.