We think we live in a capitalist society, but what if that’s no longer true? What if the system that defines our lives in the 21st century has more in common with feudalism than with the productive, industrial capitalism described by Karl Marx? This is the provocative idea explored in a recent Explaining History podcast, drawing on the insights of the late anarchist anthropologist David Graeber. The argument is simple but profound: the dominant economic logic of the West is no longer production, but rent extraction. And this shift explains everything from our crushing debts to the decline of Western global power.

From Production to Predation: The Rise of the Rentier

Classical capitalism, at least in theory, was about making things. A capitalist hires workers, buys raw materials, and creates a product to sell for a profit. This system, for all its brutality and exploitation, was fundamentally productive. But take a look at the economy of the US or the UK today. The largest and most profitable sector is not manufacturing, but finance.

As the podcast explains, finance is the business of “rent extraction.” When you take out a student loan, a credit card, or a mortgage, you are renting money. The interest you pay is the rent. This logic has infiltrated every corner of our lives. Car companies now make a majority of their profits not from selling cars, but from the finance deals used to purchase them. We are no longer just workers and consumers; we are tenants in an economy where everything from our homes to our money is rented from a powerful creditor class.

This marks a return to a feudal dynamic. In the feudal era, a landowning aristocracy extracted wealth from a productive peasant class in the form of rent. Today, a financial aristocracy extracts wealth from a salaried class through interest payments, fees, and a thousand other financial instruments. As economist Michael Hudson has argued for decades, this is the core of “financial capitalism”—a parasitic system that drains value from the “real” economy of goods and services.

The Neoliberal Revolution: Engineering Precarity

This shift was not an accident; it was a deliberate political project. The neoliberal revolution, spearheaded by figures like Margaret Thatcher and Ronald Reagan, was designed to create this outcome. As the podcast argues, the whole system “thrives on precarity.” A secure population with access to public services is a bad market for the rentier class. If you have state housing, you don’t need to pay rent to a private landlord. If you have public healthcare, you don’t need to buy insurance products. If you have a strong social safety net, you don’t need to take on high-interest debt to survive a crisis.

Therefore, the core mission of neoliberalismSupply Side Economics Full Description:Supply-Side Economics posits that production (supply) is the key to economic prosperity. Proponents argue that by reducing the “burden” of taxes on the wealthy and removing regulatory barriers for corporations, investment will increase, creating jobs and expanding the economy. Key Policies: Tax Cuts: Specifically for high-income earners and corporations, under the premise that this releases capital for investment. Deregulation: Removing environmental, labor, and safety protections to lower the cost of doing business. Critical Perspective:Historical analysis suggests that supply-side policies rarely lead to the promised broad-based prosperity. Instead, they often result in massive budget deficits (starving the state of revenue) and a dramatic concentration of wealth at the top. Critics argue the “trickle-down” effect is a myth used to justify the upward redistribution of wealth. was to dismantle these public goods. Inspired by the theories of economists like Friedrich Hayek and Milton Friedman, governments in the UK and US systematically shredded the welfare state, crushed trade unions, and deindustrialized their economies. This created a poorer, more insecure workforce, forced into a state of permanent dependency on financial credit to make ends meet. It was a conscious choice to sacrifice manufacturing industries in favour of turning London and New York into the world’s banks, attracting “hot flows of cash” from overseas capital with high interest rates, a policy championed by Federal Reserve Chair Paul Volcker in the late 1970s.

This process was accompanied by a massive expansion of bureaucracy, both public and private. As David Graeber detailed in his famous book Bullshit Jobs, financialization created a plethora of administrative roles that often seem to lack any real purpose, trapping millions in a world of spreadsheets and meetings that contribute little of tangible value.

The Great Unforced Error: Ceding the Future to China

The decision to deindustrialize and outsource manufacturing to countries like China was perhaps the most “extraordinary, short-sighted gambit” in modern economic history. Western elites, thinking only in terms of short-term business cycles and shareholder dividends, believed they could transition to purely “service-based” economies, reaping the profits from finance while others did the messy work of making things.

To the leaders of China, from Deng Xiaoping onwards, this must have looked like an incredible gift. While the West was shredding its industrial base, dismantling its public education systems, and creating a society plagued by poverty and social decay, China was doing the opposite. It was engaged in a long-term project of state-led development, what the podcast calls “state-led capitalism with socialist characteristics.”

The key difference, as political economist Isabella Weber has explored, is the role of the state. In the Western rentier model, the state serves the interests of capital. In China, capital is ultimately subordinate to the state. The Chinese state maintains control over its banking system, allowing it to direct vast sums of capital towards national missions: building thousands of miles of high-speed rail, dominating the renewables market, and pouring money into AI, robotics, and other cutting-edge technologies. There are billionaires in China, but they are swiftly rebuked when their power threatens to challenge that of the state.

The result is two fundamentally different economic systems now competing on the world stage. On one side, a quasi-feudal, financialized West, hollowed out by decades of rent extraction. On the other, an increasingly advanced, high-investment, industrial powerhouse. This hollowing-out process is the deep cause of America’s declining ability to project power, whether economic, military, or cultural. The grand neoliberal experiment, which promised a permanent triumph for Western capitalism, has instead led to its historic decline. The run of the West, the podcast soberly concludes, may finally be over.

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Further Reading

• David Graeber, Debt: The First 5,000 Years: A monumental history of debt, credit, and their relationship to social power. Bullshit Jobs: A Theory is also essential.
• Michael Hudson, The Bubble and Beyond and Killing the Host: Hudson is a leading theorist of financial capitalism and how it differs from industrial capitalism.
• Yanis Varoufakis, Technofeudalism: What Killed Capitalism: Argues that Big Tech has created a new form of digital, rent-extracting feudalism.
• Isabella M. Weber, How China Escaped Shock Therapy: The Market Reform Debate: A crucial account of how China rejected neoliberal “shock therapy” in favour of its own model of state-led development.
• Ha-Joon Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective: Demonstrates how wealthy countries historically used protectionismProtectionism Full Description:Protectionism involves the erection of trade barriers ostensibly to “protect” domestic industries from foreign competition. As the global economy contracted, nations panicked and raised tariffs to historically high levels in a desperate attempt to save local jobs. Critical Perspective:This created a “beggar-thy-neighbor” cycle of retaliation. When one dominant economy raised tariffs, others followed suit, causing international trade to grind to a halt. Instead of saving industries, it choked off markets for exports, deepening the crisis. It illustrates how the lack of international cooperation and the pursuit of narrow national interests can exacerbate a systemic global failure. and state intervention to develop, the very policies they now forbid developing nations from using.
• Mariana Mazzucato, The Entrepreneurial State: Debunking Public vs. Private Sector Myths: Shows how the state, not the private sector, has been the primary driver of major technological innovation, from the internet to GPS.