At its very beginning, capitalism was underpinned by faith in competitive markets. In the liberal fantasy, spearheaded by Adam Smith, bakers, brewers and butchers labored within markets so cut-throat that none could make more money than the bare minimum necessary to keep their small, family-owned businesses running. This in turn provided us with our daily bread, ale and meat.

Then came the second industrial revolution and the conglomerates whose market power would make Smith weep with joy. This was the era of Big Business and the “robber barons”. And so another — neoliberal — fantasy was created, to justify the new big beasts that were now monopolizing almost every market that mattered. Joseph Schumpeter, a former Austrian finance minister who made America his home, was the new creed’s most effective advocate. Progress, he argued, is impossible in competitive markets. Growth needs monopolies to fuel it. How else can enough profit be earned to pay for expensive research and development, for new machines, new product lines and all the paraphernalia that helps innovation take root? To monopolize markets, conglomerates need to dazzle us with remarkable new products that kill off the competition, like Henry Ford’s Model-T or Apple’s iPhone. Should we worry about all that concentrated power? No, Schumpeter reassured us. Once they reach their pinnacle, these monopolies get flabby and complacent and, eventually, they’re brought down by some upstart: one example being Toyota’s toppling of General Motors.

More recently, Peter Thiel, Palantir’s co-founder, said something that many thought was a restatement of Schumpeter’s dictum: “Competition is for losers!” While the pioneers of Big Business like Thomas Edison and Henry Ford would have agreed wholeheartedly, what Thiel was implying went beyond their wildest imagination. It went much further even than Schumpeter’s pseudo-Darwinian idea that progress comes through the rise and fall of monopolists in an endless struggle for existence.

What Thiel was saying is that today, winners do not just kill off the competition to monopolize a market. No, they keep going until they kill the market itself and replace it with something quite different: a kind of cloud fief that lacks all of the ingredients of a proper market — indeed that lacks all of the advantages that liberals and neoliberals alike recognize in the machinery of decentralized markets. In fact, today’s winners —the Magnificent Seven, plus Thiel’s own Palantir — are reviving an economic model that all of us thought dead and buried after the fall of the Soviet Union: economic planning systems that match buyers and sellers outside anything that can be usefully described as a market. 

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By Yanis Varoufakis

Gosplan was the Soviet Union’s State Planning Committee, the engine room of its command economy. Its remit was to match the supply and demand of critical resources (oil, steel, cement) but also consumption goods (food, clothes, appliances), without using market prices. Once buyers and sellers were matched, prices were assigned with a view to achieving political and social objectives (such as to ensure basic affordability, or subsidize certain industries) — not to balance markets. 

Gosplan was disbanded immediately after the red flag was lowered over the Kremlin on Boxing Day of 1991, but it is now back. Where? In the algorithms powering Jeff Bezos’s Amazon, Peter Thiel’s Palantir and the rest of Big Tech’s digital platforms that pretend to be, but are not, markets.

Before you protest the audacity of my claim, think of what happens when you visit Amazon. Unlike when you visit a shopping mall, either with friends or mingling with strangers, the moment you follow the link to amazon.com, you exit the marketplace and enter a space of pristine isolation. It’s just you and Jeff Bezos’s algorithm. You type, say, “espresso machines” into the search box and the algorithm matches you with a number of vendors. However, to achieve what it was coded for, the algorithm had started working months, even years, earlier. 

Over that period, you will have revealed to it many of your whims and desires through your searches, purchases, clicks and reviews. Using these cues, as well as data from other sources, the algorithm has trained you to train it to know you even better, enabling it to advise you on what books, music and films to buy. It has already won your trust. So, now that you are in a hurry to replace your broken espresso machine, the chances are that you will choose one of the top search results it has given you. 

The algorithm knows your spending pattern. It knows how to guide you to the espresso machine with the highest price you are prepared to pay, all in order that Amazon can collect up to 40% of it the moment you click the purchase button. It is an extortionate cut, but the espresso machine’s makers tolerate it, because they know that if they don’t, their company will never appear in the top search results of anyone prepared to pay for their product. As AI improves, this power to manipulate your behavior increases — and this is why Big Tech’s valuations are going through the roof.

This is nothing less than a capitalist, privately-owned, super high-tech reincarnation of the USSR’s Gosplan. Amazon’s software matches you with particular vendors and bans you from talking to any seller or even from observing what other buyers are doing — unless of course it calculates that it serves its own purposes to let you see a small selection of them. As for the price you pay, this follows (rather than precipitates) your being matched with a seller. Rather than being the variable that equilibrates demand with supply, prices in Amazon fulfill another role: that of maximizing Jeff Bezos’s cloud rents.

In this sense, prices in Amazon and other Big Tech platforms function in a manner far closer to Gosplan than to any farmers’ market, money market or shopping mall you have ever experienced. In fact, had the Soviet leaders lived to witness the workings of Silicon Valley’s Big Tech, they would be kicking themselves, lamenting that it was American capitalists who perfected their Gosplan model, complete with a surveillance system that would make their KGB henchmen green with envy. 

Gosplan failed to turn into a success story as it lacked Big Tech’s greatest weapon: cloud capital, that is, the algorithms, data centers and optic fiber cables working as an integrated network to train you to train it. As you impart your data, cloud capital learns how to input desires into your mind and then satiate these desires by selling you stuff within its privately owned version of Gosplan. 

But, is there really a difference — I hear many of you ask loudly — between Thomas Edison and Jeff Bezos? Are they not cut from the same cloth of megalomaniac monopolists seeking to dominate markets and our imagination? Yes, despite their similarities, there is a difference — and it is gigantic. Edison’s and Ford’s capital was productive. It produced cars, electricity, turbines. Bezos’s cloud capital produces nothing, except the enormous power to encase us in his cloud fief where traditional capitalist producers are squeezed for cloud rents and we, the users, provide our free labor. With every click, like and review, we enhance the power of cloud capital. 

Once upon a time, an old Trotskyite told me that the Soviet Union, in the name of socialism, had created a form of industrial feudalism. Independent of whether he was right or not, his comment is pertinent today in relation to Big Tech. Come to think of it, while the trading process on platforms like Amazon is reminiscent of the USSR’s Gosplan mechanism, it is also the case that the enormous sums that Amazon, Uber, Airbnb etc, charge the actual producers of the goods and services peddled on their sites are akin to the ground rents that the landed gentry used to charge their vassals — except that, here, they are cloud rents that accrue to the owners of cloud capital. So, just as the Soviet Union generated one kind of feudalism in the name of socialism and human emancipation, today, Silicon Valley is generating another kind of feudalism — technofeudalism, I have called it — in the name of capitalism and free markets. 

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The parallel extends to the state. The USSR was meant to be a workers’ paradise in contrast to the USA whose raison d’être was to be a haven for capitalist producers. It turns out that both promises were false. As Big Tech’s cloud capital accumulates and concentrates into fewer and fewer hands, states are becoming dependent on corporate techlords. By outsourcing core functions — archives, health data, even military software — to rented cloud infrastructure, governments lease back their own operational capacity from Amazon Web Services, Microsoft, and Google. This dependency enables a new dimension of technofeudal power.

From this perspective, just as the Soviet Union was a feudal-like industrial society pretending to be a workers’ state, the United States today is performing a splendid impersonation of a technofeudal state, with repercussions that extend to every realm of state activity, including health services, education, the tax office, our borders and faraway battlefields. 

In Ukraine and Gaza, and along our militarized borders, cloud capital is trained to extend its reach. Amazon’s AI tool Rekognition is used by law enforcement, including ICE, while Palantir’s vast surveillance software runs on Amazon’s cloud. Through Project Nimbus, Amazon and Google provide the Israeli military with advanced cloud and AI capabilities, reportedly enabling rapid, AI-driven targeting in Gaza with minimal human oversight. 

Let us briefly return to the comparison with the early 20th century’s original monopolist capitalists. Whether we admire or abhor the Magnificent Seven’s stock market valuations, it is helpful to keep this in mind: the old capitalist giants, the “robber barons”, actually produced things. The new technofeudal lords produce a new social order. They have replaced the invisible hand of the market with the visible, algorithmic fist of the cloudalist. 

Free-market enthusiasts have nothing to celebrate and much to regret. But it will take a brave soul amongst them to stare reality in the face. Just like pro-Soviet Marxists remained in denial that the Soviet experiment had failed for many years after 1991, so  free-market ideologues refuse to see that capitalism begat a form of capital — cloud capital — that replaced markets with something out of the Soviet past. In the process, it has killed capitalism. 

Such forecasts were hasty. So was much of the investment. The railway bubble burst, and speculators suffered bruising losses. Three decades later, a similar bubble arose in the US. This bubble, like the British one, was soon to burst. Around 18,000 businesses failed within two years.

As a share of American GDP, investment in artificial intelligence has surpassed the telecoms boom of the dotcom bubble. In its degree of concentration, it stands second only to the railroad boom of the late 19th century. AI, then, might be approaching a moment of truth. The technology was meant to speed up the economy; now, it appears to be slowing it. Unless the trend is soon reversed, the biggest tech companies might be in for a sharp revaluation.

In fact, if you remove those companies from the stock index, so-called American exceptionalism disappears. Outside the top 10 companies, the indices have been stagnating since the start of 2025. Similarly, minus that top 10, corporate earnings have been flat for the past three years — coincidentally, the period that followed the release of ChatGPT, the event that sent the AI boom into overdrive. With the sector’s capital expenditure having risen tenfold in just the past three years, the AI bubble is now sucking up more than half of America’s investment. So insatiable is this bubble that there may not even be enough cash in America to satisfy OpenAI. Sam Altman attempted to rustle up additional cash by going abroad, seeking to raise $7 trillion from the UAE and other investors.

That rush to the top doesn’t leave much for everyone else. With all that money pouring into AI, investment in the rest of the economy has begun to decline, slowing growth. That helps to explain the rapid deceleration in the US economy now underway, a marked contrast to the recent good fortune of the “Magnificent Seven” tech companies. With job growth flat, consumption now adds less to the economy than a handful of massive AI investments.

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And the gains made by AI are, for now at least, someone else’s loss. Not only is the industry sucking in capital, but it is ravenous for electricity. Data centers consume 10 times the power of traditional servers, and are helping raise American electricity prices — up some 6.5% over the past year. AI centers also consume huge volumes of water for cooling, leading to supply strains and increased prices in many areas. That keeps upward pressure on the inflation rate, raising costs to both consumers and businesses alike and slowing the interest-rate cuts that might facilitate investment in small and medium firms.

In short, the US is currently placing its money on one huge bet: that AI will unleash a productivity revolution so great it will ultimately re-start the economy it’s presently impeding. Americans are doing their bit to make it happen, with ordinary retail investors driving the stock market rally of the last few months and OpenAI, the makers of ChatGPT, reporting that Americans prompt their chatbot some 330 million times a day. 

Yet for all that, we’ve yet to see much evidence of a transformation in output. Over the same three years that the AI revolution has been in full swing, labor productivity has grown at barely 1% a year, maintaining a decades-long trend of declining growth across Western countries. And while some might retort that productivity revolutions unfold over many years — several decades passed between the invention of the steam engine and electricity and significant changes in labor productivity — the maths behind the AI boom make little sense. Unlike the railroads built in the late 19th-century US bubble, which are still around today, AI investment is going into data centers that are set to depreciate rapidly. Nvidia, for instance, warranties its GPUs for only five years. 

In short, this bet needs to pay off soon. And while the record profits at the tech giants leading the American AI boom might suggest that’s already happening — Nvidia’s earnings have quintupled and its share price increased tenfold in the last three years — those results don’t actually tell us much. Nvidia isn’t making money off AI so much as the AI mania, capitalizing on the sale of its chips — the “picks and shovels” of the new goldrush — to other companies that then use them to build AI. In a recent earnings statement, Meta said it did not expect the gains of its AI investment to materialize for another two years. Instead, it is still making money off advertisers on its Facebook and Instagram sites, just as Apple still makes its money from iPhone sales.

The record profits of the Magnificent Seven, therefore, do not support a narrative of economic transformation. Instead, we’re awaiting the breakthrough application that will lift economic productivity to a new plateau. Enthusiasts maintain that, once the technology spreads, AI will add one percent or more to America’s annual rate of economic growth. But there’s no shortage of skeptics who question the calculations behind that optimism.

Among them is Goldman Sachs’ Jim Covello, who says that for AI to justify the current wave of investment, it must solve a trillion-dollar problem. It’s hard to see that happening. Daron Acemoglu has argued that AI’s productivity impact will be negligible, because once it gets through the easy-to-learn tasks which are currently exciting everyone, like search tools, the returns will rapidly diminish. This contention is borne out by recent macroeconomic research from Japan. The neuroscientist Eric Hoel calls this the “supply paradox of AI”: “the easier it is to train an AI to do something, the less economically valuable that thing is. After all, the huge supply of the thing is how the AI got so good in the first place.” Take the example of copy-writers. Because so many of them produce so much material, they become easy to replace. Their knowledge is cheap. This phenomenon won’t carry over to fields where knowledge is expensive.

Instead, a closer look at Meta’s bottom line may reveal what’s really going on, and why the optimistic view of AI’s productivity impacts could rest on shaky foundations. The company credits its new AI for helping steer more customers to its products, thereby boosting sales and revenue. We see a similar trend at Google, whose searches previously led people to websites, but which now keep them on the Google site where they can read quick summaries of the linked content: more eyeballs on Google, more ad revenue to it, but less for all those sites.

In other words, the tech giants have been using AI to capture revenue that previously went elsewhere. On the face of it, that’s the market doing its thing, and it’s that very possibility which excites corporate executives. They believe AI will reduce their need for labor, allowing them to similarly suck up money that would have gone elsewhere — in this case, to their workers.

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This, arguably, has been the tale of the information age: new technology doesn’t necessarily raise economy-wide output that much. Instead, it replaces labor and directs the resulting cost-saving to owners, helping to worsen income and wealth inequality. Just as the websites that make those AI summaries possible are now being plundered to the benefit of the AI giants, the LLM chatbots they’re developing are trained using content whose creators receive no compensation. Without that motherlode of free inputs, involuntarily subsidized by their creators, AI might make no sense. As one investor put it in 2023, “imposing the cost of actual or potential copyright liability on the creators of AI models will either kill or significantly hamper their development.”

That route to higher profits raises two problems. The first is that the resulting inequality could stoke a political populism that makes the economy more fragile. We might never have got the volatile policy-making of this Trump administration were it not for the sense of malaise caused by globalization’s decimation of industrial towns and industrial jobs. If AI really displaces workers, one can’t rule out a radically redistributive politics of the Right or Left. If anything, current trends favor it.

But in addition to the possibility that the AI revolution could end up eating itself, this type of job destruction can produce an economic paradox. While professionals might lose jobs to AI, not everyone will. Microsoft recently commissioned a study estimating which jobs will be most affected by AI and least; not surprisingly, those most insulated from its effects are manual laborers and personal-care workers (including health care), with knowledge-workers taking the biggest hit.

In other words, the jobs AI will disrupt least lie in those sectors of the economy where labor productivity tends not only to be lowest, but most resistant to transformation. This gives rise to what’s known as the Baumol-Bowen effect. As workers displaced by AI are forced to take new jobs in lower-skilled occupations, their productivity will decline. In consequence, the needle on economy-wide productivity may budge little.

It may yet be that someone will invent an application for AI that transforms productivity across the economy and lifts everyone’s output and income to a new plane. But time may be running short, because right now, the boom is becoming a bust for many.

So: are we facing another railroad episode? It’s certainly true that AI is starting to resemble a speculative bubble, not unlike the dot-com boom. Although the Magnificent Seven are making profits that justify their valuations, their future growth depends on the AI revolution continuing for years at its current rate or greater.

But that growth depends on AI being deployed in revolutionary new ways. If that doesn’t happen, then those growth prospects will change, and the markets could tumble. Given the weighting of the big tech companies in the US stock market — Nvidia alone is worth nearly a tenth of the market’s total value — a fall in share prices could not only hurt all those retail investors who rode the wave, but ricochet through the financial system.

In the long term, it might be good for America if the market goes back to investing in all the other sectors of the economy. In the short term, if this bubble bursts, it will be very painful. Both investors and the Trump administration are going all-in on their AI bet. If it succeeds, they’ll parade like champions. But if it fails, they’ll be running for the exits. And given last week’s lackluster response to ChatGPT’s newest update, investor patience may be wearing thin.

Watching it again this week, I was amazed by how it also echoes our contemporary political concerns. Over half a century before David Goodhart pointed out the contrasting ‘anywheres’ and ‘somewheres’, The Magnificent Seven dramatised precisely this tension in its depiction of the anywhere gunfighters and the somewhere farmers. The Magnificent Seven strikes me as the post-liberal film par excellence.

If you haven’t seen it, you really should stop reading and go do so immediately. And for those with sketchy memories, here is a quick recap. Bandits, led by the wonderfully slippery Eli Wallach, descend from the Mexican hills to terrorise a village of very ordinary (and rather boring) arable farmers. Unable to defend themselves, the village leadership decides to recruit a number of hired guns to do so on their behalf. So off they go to the local town, without much in the way of money to offer their would-be defenders. And there they meet Chris – played by Brenner. Chris recruits six more misfits, all of them drifters, all of them super cool, none of them able to stay in one place.

Spoiler alert: the alliance of farmer and gunfighter is successful in seeing off the bandits — at the cost, though, of several lives. And the action scenes are terrific. But philosophically, it is this contrast between gunfighter and farmer that I have long found fascinating. And the crucial difference between them is one of mobility.

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By Mary Harrington

In Sapiens: A brief history of humankind, Yuval Noah Harari locates the agricultural revolution to a period roughly some 10,000 years ago when humankind, having survived as a hunter and forager for over two million years, began to domesticate various plants and animals, thus to have a better control over its food supply. Harari calls this revolution “history’s biggest fraud” because he believes that what actually happened here is that plants, like wheat, domesticated human beings rather than the other way round, crops turning people into its willing slaves. Humans ended up doing back-breaking work in the fields so that crops like wheat could spread themselves over every corner of the planet.

Of course, the cultivation of crops enabled human beings to produce far more calories per unit of territory than foraging ever could. And this enabled the human population to expand exponentially, thus putting even more pressure on the food supply, thus necessitating an even greater emphasis on agriculture. Alongside this deepening spiral there were other unintended consequences as well. As Harari puts it: “Nor did the farmers foresee that in good years their bulging granaries would tempt thieves and enemies, compelling them to start building walls and doing guard duty.” In other words, the premise of story of The Magnificent Seven is as old as human settlement itself.

The agricultural revolution produced a class of human beings who were, for the first time, rooted — their crops, quite literally — to a particular geographical spot. The metaphor of rootedness is one that had been picked up by the post-liberal moment as key to understanding our current predicament. Sir Roger Scruton told me before he died that Simone Weil’s The Need for Roots was one of the foremost influences upon his philosophy of place. And the lament at feeling “deracinated” — uprooted — is a familiar complaint in contemporary discourse.

But with rootedness comes vulnerability. For to grow crops is to be tied to one place. There is no running away, no moving on when the going gets tough. One’s very survival is staked to a particular geographical patch of land. And staying put, in the face of bandits like Calvera (played by Wallach) requires courage.

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Back in the late 1990’s, I was teaching philosophy at Oxford, and I would often encourage my students to watch The Magnificent Seven. So many of them were brilliant at pulling down the philosophical positions of other people without ever proposing a position of their own. I used to call this “gunfighter cool”. They would arrive into a subject, shoot things down and blow things up, then move on. Like the gunfighters, they took no responsibility for anything.

But if you want to impress me, I used to say, try defending territory. Say what it is you stand for, and not just what you are against. And then wait for the bandits that will come over the hill for you. That is intellectual bravery, I would say. Defending territory is the only way to develop ideas, to make them grow.

This story of the vulnerable heroism of the farmer was one that I would draw upon quite heavily later in my life, during and after my troubled time at St Paul’s Cathedral. A few months after I resigned following Occupy, I gave a lecture at the BBC Free Thinking festival in Gateshead. I called it ‘The Magnificent Seven and the Crisis of Commitment’,  and in it I began to develop the idea that the bravery of the farmer, that of being staked to a place, was also a kind of spiritual bravery. There is a sort of “here I stand I can do no other” quality about the spirituality of the farmer. Someone one might even call “belief” – which is to say, something I don’t always know how to defend, but which I know to be the source of deep nourishment nonetheless.

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By James Rebanks

In more recent years, I have come to see my favourite cowboy western as an extended metaphor for the contrast between liberals and communitarians. The gunfighters are all classic liberal individualists. They prize self-reliance, mobility, they hate being tied down, without loyalty to country or town. Their fantasy is of the unencumbered life.

Three years before The Magnificent Seven was released, Jack Kerouac published On the Road, that seminal text of the beat generation that one critic of the described as “a portrait of a disjointed segment of society acting out of its own neurotic necessity”. On the Road was a stunning achievement, the critic argued, “but it is a road, as far as the characters were concerned, that leads nowhere”. The Seven’s gunfighters are cut from the same cloth. They too are drifters, with nothing to pattern their existence other than their immediate desires.

At the film’s end, the youngest of the gunfighters falls for a beautiful woman in the village. He is faced with a choice: follow the two remaining gunfighter heroes to a life of effortless cool, living out of cheap hotel rooms and under the stars, going from bar to bar and fight to fight; or give it all up for decidedly uncool, settled domesticity. Gunfighters make terrible fathers, of course. Because children — like crops — require those who planted the seed to stay put. The gunfighter chooses the girl, symbolically takes off his gun belt, lets it fall to the floor, and settles down to help her with the harvest.

The US was not ready for this message back in 1960. And not for many decades after. Yet for me, it was people like the poet/farmer Wendell Berry that most fully exemplified resistance to the dominant culture of liberal individualism, with its emphasis on continual mobility and disparagement of place. And it is other farmers also — like James Rebanks writing beautifully in UnHerd yesterday — that remain the foremost exponents of this heroic loyalty to place, and from whom we in these lock-down times have so much to learn.

The final scene of the film sums up the message. As the final two gunfighters ride out of the village, the village elder warns them that the gunfighters are always destined to lose. They are “like the wind, blowing over the land and passing on”. The Yul Brynner character agrees. “The Old Man was right. Only the farmers won. We lost. We’ll always lose.”