The West is on a war footing. The German government is working on an app that helps people locate their nearest bunker. A 32-page pamphlet entitled If Crisis or War Comes was published in Sweden, and a similar one was downloaded countless times in Finland. Venerable newspapers publish wargame scenarios where Russia, with China’s backing, invades Norway’s arctic islands.
In the EU, top officials say that the key to unlocking Europe’s chronically low level of investment is its arms industry. US President Donald Trump casually talks about taking over Greenland and the Panama Canal. To top it all off, a storm is gathering over Taiwan, the Philippines and the South China Sea.
Trump and his political opponents disagree on almost everything. However, one thing they do agree on is that the US is caught in what Harvard University professor of government Graham Allison calls the Thucydides Trap — the fate of a hegemon confronted by a rising power, China. Meanwhile, the West is running the risk of falling into the Oedipus trap: exacerbating a crisis with actions intended to prevent it — just as Oedipus ended up killing Laius, his father, only because Laius took harsh measures aimed at thwarting the Delphic prophecy that he would be killed by his son. Either of those traps could trigger a catastrophic war.
Meanwhile, we are increasingly dominated by cloud capital — a new form of capital consisting of networked machines running algorithms that we train to know us well enough to alter what we want and then sell it to us outside any actual market. Unlike diesel engines and industrial robots, which are manufactured means of production, cloud capital produces an exorbitant capacity to modify our behavior, bestowing unprecedented power on its owners — our technofeudal masters. That reinforces the Thucydides and Oedipus traps in four distinct ways.
First, especially when augmented with artificial intelligence (AI) capabilities, cloud capital lowers the threshold for deploying weapons of mass, albeit targeted, destruction. It is far cheaper to send a swarm of micro drones, equipped with AI facial recognition, into urban areas to take out prespecified targets autonomously than it is to deploy heavy bombers. It is also easier for presidents and prime ministers to muster the moral conviction to give the order. That is why the capitalization of a cloud capital-intensive company such as Palantir has surpassed that of a legacy behemoth such as Lockheed Martin.
Second, to deliver maximum revenues, the cloud capital powering our social media is optimized to maximize engagement, a goal most easily achieved by getting us heated, angry and abusive toward one another. The poisoning of public debates that results from that business model erodes the democratic institutions which hitherto had some capacity to restrain our more bellicose politicians and generals.
Third, cloud capital has weakened Europe to the point where it can no longer play the moderating role that it once played during the Cold War. That is because most cloud capital is concentrated in the US and China. As high concentrations of cloud capital have become a prerequisite for substantial economic and political power, Europe has slid into relative irrelevance.
Fourth, in China, cloud capital has created a real challenger to the US’ near-monopoly of the international payments system, which historically has given US governments the leeway to sanction any country or person they choose. That is far more significant than any animosity within the US caused by the emergence of DeepSeek, the Chinese AI firm whose most recent offering led to losses of US$1 trillion in US stock markets.
China’s chief challenge stems from a deep asymmetry vis-a-vis the US that has nothing to do with technology: Wall Street treats Silicon Valley as a potential usurper of its financial revenues, a tussle in which it can count on the support of the US Federal Reserve. In contrast, China’s financial sector, central bank and largest tech firms are working in unison, resulting in a seamless, free-to-use, private-public digital payments system that the West cannot match.
Although it resembles a pristine multilane freeway that few outside the country use, the Chinese payments system poses a serious long-term threat to the global monopoly of the US dollar-denominated payments system, and gives the Chinese government and its allies options that alleviate the fear of US sanctions. In a never-ending cycle of negative reinforcement, that newfound confidence fuels the US’ eagerness to “get tough” on China.
War is in the air more than peace these days. That reflects not only the salience of well-known strategic traps, but also the rise of technofeudal power, which is driving us into them.
Yanis Varoufakis, a former finance minister of Greece, is leader of the MeRA25 party and professor of economics at the University of Athens.
Copyright: Project Syndicate
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