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CHAPTER 4

High-Tech Feudalism

Technological innovation has long been connected with the growth of capitalist economies. The capitalist revolution of the Early Modern period had far-reaching consequences, disrupting old rhythms of life, as Fernand Braudel explained.¹ But capitalism and new technology together laid the basis for a broadly shared improvement in material well-being and for social mobility. By the same token, the recent tech revolution was once widely seen as not only transformative but generally beneficial. Some have envisioned a new civilization with great opportunities for human development and societal improvement. Yet today we see diminishing social mobility and little real material progress for most people, as economic power is increasingly dominated by fewer companies, particularly in the finance and technology sectors.² Our future is coming to look like the “high-tech middle age” that the Japanese futurist Taichi Sakaiya predicted more than three decades ago.³

The pioneers of the modern tech industry were once celebrated as exemplars of capitalist competition, illustrating what Joseph Schumpeter called the “creative destruction” that breaks up monopolies and allows others to rise from below. But today’s tech leaders increasingly resemble an exclusive ruling class, controlling a few exceptionally powerful companies, and like aristocracies everywhere they are often resistant to any dispersion of their power. As they conquer ever more of the precious digital real estate, they are building a more stratified economic and social order, with widening class divisions, not only in the United States but around the world.⁴

The Birth of the New Oligarchy

California’s Santa Clara Valley seems an unlikely incubator for neo-feudalism. Half a century ago, it was just beginning to change from an agricultural region into a vast middle-class suburb. Wealthy people from San Francisco bought elegant estates in the South Bay and created an elite horse country alongside the farms, but most of the growth took the form of modest tracts inhabited by the middle and working classes, including many veterans. “The more people who saw the nicest place in the world to live with their own eyes, and realized it was no more expensive than back home,” observes one Bay Area native, “the more they concluded ‘I want to live here, too.’”⁵

By the 1950s and 1960s, these pleasant surroundings were attracting skilled but decidedly middle-class technicians and engineers, including Lee DeForest, inventor of the vacuum tube. An emerging tech economy was supercharged by massive defense and space contracts. UC Berkeley, the nation’s premier public university, was located not far to the north. Closer by was Stanford, which excelled in the physical sciences and established the Stanford Research Park in 1951. Stanford graduates had already founded Hewlett-Packard in 1939, and an engineering professor who became provost of the university, Frederick Terman, nurtured tech companies in the area.⁶

In the ensuing decades, the Bay Area, including San Francisco, became the world’s leading technology hub. This rapid technological growth resulted in a consolidation of wealth and power in a handful of companies. A relatively small cadre of engineers, data scientists, and marketers—a tiny sliver of humanity—began reshaping the world’s economy, and its culture as well.⁷

In the Middle Ages, the power of the nobility rested on the control of land and the right to bear arms; the power of today’s ascendant tech aristocracy comes mainly from exploiting “natural monopolies” in web-based business. The winners of the digital land grab are a few companies located mostly in Silicon Valley and in the Puget Sound region. Having seized the strategic digital territory, they are eclipsing and replacing the old industrial economy.⁸

By 2018, four tech firms—Apple, Amazon, Google, and Facebook—had a combined net worth amounting to nearly one-quarter of the S&P 500 Top 50, and equal to the GDP of France.⁹ Seven of the world’s ten most valuable companies are in this sector.¹⁰ The tech giants have also generated huge individual fortunes: eight of the twenty richest people on the planet acquired their wealth in the tech industry.¹¹ Nine of the thirteen richest people under age 40 are in the tech industry, and all live in California.¹² Only China, home to nine of the world’s twenty largest tech firms, presents any kind of challenge to California’s tech aristocracy.¹³

From Garages to Gargantua

Silicon Valley was once a center of grassroots innovation where tech companies were started in suburban garages, as epitomized by the remarkable story of Apple.¹⁴ Now the historic startup culture has been strangled by the largest companies with their fantastic resources. Many startups are soon acquired by established firms, rather than having a chance to grow large themselves.¹⁵

Antitrust actions in the United States have fallen by 61 percent since the early 1980s, leaving the tech oligarchy with almost unlimited power—under administrations of both parties—to acquire or crush competitors.¹⁶ In recent years, Facebook has swallowed potential competitors such as Instagram, WhatsApp, and Oculus, with little resistance from regulators.¹⁷ Google is among the most voracious in acquisitions, purchasing a new venture every other week in one year, and a total of 240 companies as of January 2020.¹⁸

Armed with massive war chests and the means to buy the best talent, a small number of companies have achieved monopolistic or duopolistic power over some of the world’s most lucrative markets. Google controls nearly 90 percent of search advertising, Facebook almost 80 percent of mobile social traffic, and Amazon nearly 40 percent of the world’s cloud business along with 75 percent of U.S. ebook sales. Google and Apple together provide over 95 percent of operating software for mobile devices. Microsoft still accounts for over 80 percent of the software that runs personal computers around the world.¹⁹

As a result, the once buoyant grassroots tech economy now suffers a seriously degraded condition. The entrepreneur not embraced by the big venture firms lives largely at the sufferance of the tech overlords.²⁰ One online publisher uses a Star Trek analogy to describe his firm’s status with Google: “It’s a bit like being assimilated by the Borg. You get cool new powers. But having been assimilated, if your implants were ever removed, you’d certainly die. That basically captures our relationship to Google.”²¹ The rush into artificial intelligence is likely to strengthen the dominant position of those firms that already have enormous reservoirs of both money and talent. A few firms will probably join the oligarchy over time, and some familiar ones may go out of existence or be acquired by others. But the top firms tend to exist as properties of a small number of financiers and technologists who operate within a narrow, self-referential universe.²²

This concentration of technological power portends a far less democratic future.²³ With their huge cash reserves, the tech oligarchs have plans to dominate older industries like entertainment, finance, education, and retail, as well as industries of the future: autonomous cars, drones, space exploration, and most critically artificial intelligence. Firms like Google, Amazon, and Apple have invested billions to gain post position in both traditional and emerging industries.²⁴

Izabella Kaminska, a technology analyst, compares the giant tech firms to the Soviet planners who operated Gosplan, the economic planning agency that allocated state resources across the USSR.²⁵ Some may consider it preferable to cede such power to private capital rather than party hacks, but it still amounts to a great deal of power in a few hands, with little accountability.²⁶

The China Syndrome

China, with its lack of legal restraints, may prove to be the cutting edge of a new technocratic despotism. Its tech sector is second only to that of the United States and increasingly sees itself as Silicon Valley’s successor. In certain sectors, including ecommerce and mobile payments, China has already established a powerful lead.²⁷ Much of China’s technology boom results from massive investments by both state-sponsored and private firms in leading-edge technologies. In 2016 this investment was greater than that of Japan, Germany, and South Korea combined, and it produced ten times as many new graduates in engineering, technology, science, and medicine as the United States.²⁸

China has spawned its own plutocratic elite, too: the number of Chinese billionaires in 2017 was just behind the number of billionaires in the United States, and growing much faster.²⁹ Since 2000, many billionaires from tech and other sectors have entered the Communist Party in a seamless manner that Mao Tse-tung would never have countenanced.³⁰ China thus has two intertwined elites—one political, the other economic. The rise of a technocratic elite might be said to fit neatly into the Marxist notion of “scientific socialism,” mobilizing scientists, technicians, and engineers for the common good.³¹ But it has demolished the basic egalitarian ethos of socialism. Marx envisioned the working class rising up against the bourgeoisie, but did not anticipate that technically skilled people could become yet another class, with their own capabilities and worldview. The merger of a wealthy tech elite with the political ruling class has created an aristocracy of intellect that replicates the historical role of the Mandarin class in Chinese culture and governance.³²

Perhaps the most disturbing part of China’s technological growth is in the government’s use of artificial intelligence to regulate society and public opinion. Sophisticated algorithms are employed to control everything from legal proceedings to permission for marriage.³³ The Communist Party is putting artificial intelligence to work monitoring businesses, in part to make sure their activities are congruent with Party priorities.³⁴ The regime also uses facial recognition technology and “social credit” scoring, which includes everything from credit worthiness and work performance to political reliability. Surveillance of citizens is sometimes done with the unconscionable connivance of major American tech firms, some of which are also experimenting with bringing similar tools to the private marketplace.³⁵

In the future, the Chinese use of surveillance technology could be a model for other countries seeking to employ technology to regulate the lives of citizens. In fact, this kind of surveillance capacity is already being sold to other countries, particularly in Africa, as a tool for regimes to control their populations and spy on political opponents.

“Clean Rich” or High-Tech Monopolists?

To a remarkable extent, the tech elites have presented themselves as dynamic, entrepreneurial outsiders who want to make the world better. In the early days of the tech revolution, some imagined an almost utopian, communitarian society on the horizon. The California author Stewart Brand, writing in Rolling Stone in 1972, predicted that when computers became widely available, we would all become “computer bums, all more empowered as individuals and as co-operators.” It would be a new era of enhanced “spontaneous creation and of human interaction.”³⁶ The “early digital idealists” envisioned a “sharing” web that functioned “free from the constraints of the commercial order.”³⁷

Instead, a technocratic economy is engendering a new kind of hierarchy, favoring highly skilled technicians and engineers. Their dominance will grow as technology plays an ever greater role in the economy, while the value of labor further declines. Americans, long enamored of the entrepreneurial spirit and technological progress, have been slow to see the tech oligarchy as a threat.³⁸ Leftist historians, alert to the dangers of aristocracy, have tended to focus their ire on financial companies that may be large and powerful but aren’t nearly as wealthy or as influential in shaping the economy as the tech sector, which seeks to capture virtually every other industry, including finance.³⁹

At the Occupy Wall Street protests in 2011, anticapitalist demonstrators held moments of silence and prayer for the memory of Steve Jobs, a particularly aggressive capitalist.⁴⁰ Some people still see Bill Gates, a clear monopolist, as one of the “meritorious entrepreneurs,” notes Thomas Piketty.⁴¹ One progressive writer, David Callahan, portrays the tech oligarchs, along with their allies in the financial sector, as a kind of “benign plutocracy” in contrast to those who built their fortunes on resource extraction, manufacturing, and material consumption.⁴²

Yet America’s tech titans have attained oligopolistic sway over markets comparable to that of moguls like John Rockefeller, Andrew Carnegie, or Cornelius Vanderbilt.⁴³ They may wear baseball caps rather than top hats, but their economic and cultural power is vast, and likely to become far more so.