How US Big Tech monopolies colonized the world: Welcome to neo-feudalism

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.

GeoPoliticalEconomy, By Ben Norton, 19 Aug 24

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.

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. The result: 82-90% of sales on Amazon end up using the buy box.

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 product, US Big Tech monopolies can make it disappear.

Imagine you are an entrepreneur. You develop a product, make a website, and offer to sell it online. But then you search for it on Google, and it does not show up. Instead, Google promotes 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.

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 exorbitant 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 download an app for a third party 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 the neo-feudal lord demanding its tribute.

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

Apple is not providing any service, other than allowing 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…………………………………………………………………………………………..

It all started with Big Tech corporations first 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, iOS, Apple 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……………………………………………………………………………………………………………….

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…………………………………………………………………………………………..

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.

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

This digital infrastructure should be nationalized and treated as a public good, like other basic utilities (which should also be nationalized if they have been privatized, which was increasingly the case in the neoliberal era).

This is global monopoly capitalism…………………………………………………………………………………….

Economist Yanis Varoufakis has referred to this system as “technofeudalism”, in his 2024 book with this title. Although I sometimes disagree with Varoufakis, especially in terms of his criticism of China, I do largely share his analysis of technofeudalism.

Varoufakis is also 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. ………………………….

This observation by Varoufakis hits the nail on the head. Where I think he is wrong is in his claim that China, like the US, is becoming techno-feudal.

There is a fundamental distinction between the two: 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, infrastructure, transportation, and telecommunications.

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 full 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.

The problem is not just that US corporate monopolies control markets; they create those markets themselves, through their control over digital infrastructure.

As Varoufakis has observed in his discussion of “cloud capital”, Amazon does not just dominate the market; it creates markets — and prevents any potential competitors from creating alternative markets………………………………………………

In the 21st century, the infrastructure of society itself has been privatized.

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)……………………………………………………………………………………………………………………….

This is a serious problem that should be debated worldwide. There are likely some potential creative solutions………….. https://geopoliticaleconomy.com/2024/08/19/us-big-tech-monopolies-neo-feudalism/

August 21, 2024 Posted by Christina Macpherson | business and costs, politics international | Leave a comment