Category: Politics & government

Categories
Books, essays and others Economics Politics & government Science & technology

[3027] The enshittification of the internet and the rise of technofeudalism

The internet was supposed to be a wonderfully liberating medium. A force for good that equalized power by circumventing gatekeepers of all kinds: information wanted to be free. Almost all internet-based companies was a social crusader out to right some wrong when it all started back in the day. Google’s motto was ‘Don’t be evil’. That was the promise of the late 1990s and the early 2000s when the internet was still new in its anarchic stage where almost everybody competed to do good. Nobody online had market power.

But anarchy is always a transient state. By the mid-2010s, it is clear many had placed too much hope on what is a tool that could either improve or hurt society. And that tool increasingly has been used to drag society towards worse equilibria.

For some time now, the internet is a shitty place to be in. We cannot live without it but we are miserable with it. More than anything, the internet collectively has inverted its promise. The cyberspace is now a surveillance tool masquerading as a crack designed to advertize and sell everything.

Enshittification by Cory Doctorow is a 2025 book that attempts to explain how we got here. The term enshittification as Doctorow defines it is a process of internet platform decay from the perspective of its users.

The concept itself could be used to describe other services off the internet although these days the internet has proliferated everywhere that it is not helpful to make the online/offline distinction anymore, as much as it is unhelpful to call any company a tech company. If Grab a tech company, or just a transport company? Is Stashaway a tech company, or just a financial service provider company? Is Amazon an internet and tech company, or just a retail platform?

The enshittification process

Enshittification is a 3-stage process.

It starts with platform operators (Twitter/X, Facebook, Amazon or Google etc), being good to everybody and that means generating massive consumer surplus to individual users. This is stage 1 (the so-called be good to users stage).

Once the number of users hits critical mass, stage 2 (the abuse users for businesses stage) begins with the platform treating individual users badly in order to attract business users. The bad treatment generally include targeted and intrusive advertisements utilizing personal and private data tracked by within the platform and elsewhere too. Here, the platform operators are draining consumer surplus and redirecting it to sellers. As a result, businesses flock to the platforms. Individual users feel and understand the abuse but most of them could not leave the platform because their social network is already entrenched on the platform. Only the determined would exit and seek social interactions via other means.

Stage 3 (the stage of abuse businesses for the platform) is when there is enough business users around with the platform becoming the essential marketplace where all the businesses’ customers are. To exit the platform is to lose a chuck of customers and revenue. Platform operators then proceed to treat businesses badly by draining producer surplus towards themselves. This is done via various platform fees and advertisement requirement (pay to be seen or we place your product on page 999 instead of page 1). At times, the platform itself competes with its business client by cloning the business and placing its products above the clients (similar to the cheatings that happened in various stock exchanges as told in Michael Lewis’s The Flash Boys). There are various details in the book showing that much of the advertisement is fraudulent (paying for ads that do not really exist or ads with no noticeable effects on earnings) but businesses could find no way to hold the platform accountable. And the fees are pure rentseeking and structured in a way that prevent businesses from selling elsewhere (and if businesses do sell outside, they are forced make it more expensive).

The end result is that everybody except the platform operators gets stuck in a shitty environment where most producer and consumer surpluses get channeled to the platforms.

For all the technological advancement we have seen in the past 2 or 3 decades, in the end, the whole internet gets boiled down to an age-old phenomenon: the middle men abusing their (dominant) position.

Generalizing an old competition problem

In many ways, enshittification appears to be the new term to describe an old problem reappearing in the digital world. It is an old-known problem in competition or anti-trust where the dominant player abuses his or her position to extract surpluses from consumers. It is what a monopolist/oligopolist does.

First, you dump into the market to kill off all competitors and once monopoly power is established, you engage in predatory pricing. In Malaysia, we have witnessed this with Grab that now charges exorbitant fares after all its effective competitors have been driven off the road due to aggressive discounts in the early days of the service.

When Doctorow offers a way out, the solutions he gives are more competition in the market along with more rigorous anti-trust actions by the state and greater labor power through unionization.

These are the typical suggestions against monopolistic power but of course, the difference between textbook solutions and the problems outlined by Doctorow is that the technological, political and regulatory challenges in the real world are many times more complex than what discussed in a competition university classes. Internet monopolists are more technologically competent than the regulators, which makes running anti-trust policy more difficult to execute when compared to more traditional sectors like aviation or steelmaking. Many times too, regulators do get captured by the monopolists.

An old condition in a new world: technofeudalism

All those platform fees are simply rent with another name.

The rise of rentseeking as a major source of revenue from internet giants causes Doctorow to digress and borrow Yanis Varoufakis’s concept of technofeudalism, explained in his 2023 book Technofeudalism.

It is a neologism describing a condition where an increasing portion of revenue gets derived from rent (revenue arising from just controlling some assets/resources) instead of profits (revenue arising from productive activities minus the cost of running those activites). Varoufakis insists this represents a new kind of economic condition more akin to feudalism where long ago, landlords exacted rents from the working peasants who largely had no other choice but to work as farmers on someone’s else land. The peasants had to pay rent in various form to the landlords, regardless of profitability/harvest. Varoufakis further insists that this is a post-capitalism age, as capitalism is less about rent and more about profits.

A major component of enshittification of the internet fits Varoufakis’s framework well. Varoufakis is of course famous for this:

He is also the former finance minister of Greece during the European debt crisis, the former economist for Valve, the owner of the gaming platform Steam and all around leftwing economist.

Gamers should recognize these technofeudal trends quickly, where instead of buying and owning the games, they have to pay for subscription to play. There are also microtransactions (the worst of it, pay-to-win), which I would take as a subset of this trend.

But internet platforms are not the only guilty parties. Subscription-based model is proliferating in other sectors. In Malaysia, Perodua is selling its electric vehicles but with the battery must be rented from the manufacturers. Battery-as-a-service, as it is called. And then there is the more established term: software-as-a-service. SaaS is the ultimate example of technofeudalism; SaaS is a fancy term for rent-based businesses.

Electronic locks and anti-circumvention law

Central to much of the rentier tech economy (tech is a very loose term here) is the cover provided by a defective but mainstream intellectual property law.

Instead of copyrighting a new way of doing things productively, companies are copyrighting electronic locks to various machines (computers, printers, cars, etc) that should be open in the first place. Since the lock is copyrighted, hacking or breaking the them amounts to a crime while using the machines itself in whatever way mostly is not.

For example, a printer should be able to use third-party ink cartridges but the printer manufacturing prevents so by introducing an electronic lock. The lock allows only the use of the manufacturer’s own cartridges. Without the electronic lock, any ink with the right configuration would work with the printer. In fact, the use of any ink for the printer you own is not illegal. But the lock itself is copyrighted and breaking the lock is a crime. The protection for the electronic locks is the anti-circumvention law.

Because of this, the manufacturer, upon selling a printer, gets to enjoy repeat business through future ink purchases. And this is a rent and the law protects rents while stifling innovation instead of protecting intellectual property in order to encourage innovation.

Printers and cartridges are simple and maybe petty examples. But if you start to think about your smartphones and the restrictions its manufacturers impose on the users (famously, this is Apple), then the whole thing starts to become a more serious matter.

And one of the solution Doctorow proposes to fight technofeudalism, and rentiers in general, is to reform intellectual property law so that it returns to its original purpose: encouraging innovation.

No longer a curiosity: first degree price discrimination

Finally, I want to visit a section of the book that discusses the ability to track customers through all the private and personal data collected and sold by internet platforms through apps and in general, cookies everywhere, along with the ability to change prices dynamically/instantaneously based on those data due to the availability of electronic price display connected to the clouds.

Imagine two persons visiting an aisle just minutes apart. The first person would see a set of price different from the second person, because the retailers now have the technology to know a specific person’s preference (the tracking is so precise that you would think the apps are listening to you) and change prices based on that preference. By the way, this is already happening online where changing any price is a technological a trivial thing.

This is first degree price discrimination, where the seller is able to discriminate individual customers so effectively and completely that all consumer surplus gets extracted.

The concept itself is not at all new but 20 years ago when I was an economics undergraduate, such a thing was taken a did-you-know theory but with impossible application in the real world. It was a curiosity much like how the demand curve could slope upward. Today, it is not just a possibility. First degree price discrimination is becoming common and in all likelihood, the standard way of pricing if no regulation is forthcoming.

Perhaps this is the point of overly long book review: rapid technological advancement in the past 10 or 20 years is forcing a rethink of what we know of the world.

Categories
Economics Politics & government

[3023] Addressing the supply crisis requires a renewed democratic mandate

I am a proponent of an early general election for Malaysia.

A distracted ruling class with a damaged reputation is working in a lame duck period

There are several reasons why I am so. The factor that I would like to highlight today is that we are entering a lame duck period as those in power and everybody else are already having an eye on the next election. With the Johor assembly dissolved recently and with several state elections to follow in the matter of months if not weeks, it is only natural for the political class to worry what comes next and shift to electioneering mode instead of the tasks of governing. That means the crisis is not getting the full attention it deserves. The crisis mostly is an FYI instead of an FYA as apparent from policymaking and the behavior of the general public.

More than that, those in power are quickly losing influence over everybody else that includes the business community, foreign governments, individual Malaysians and even members of the civil service. Even members of the ruling side with its complex multi-coalitional equation might take the government’s words and actions with a pinch of salt. Why should they not? They question and second-guess what would come next. Would this initiative be taken up by the next government? Do we still need to engage the current government or wait? Would he still be the Prime Minister after the election? Who would head this or that ministry? Would I want to associate with the ruling side now? More often than not, the safest course of action for most is to wait until the dust gets settled

The distraction and loss of influence are compounded by the government’s fear of voters’ backlash. As I have opined earlier, there is a lack of political capital to address the crisis as that capital has been used for various unhelpful episodes damaging the PH brand. Addressing the supply crisis would involve some economic pain (specifically higher prices and general living costs, and possibly some rationing too). We need to lengthen the availability of supply as long as possible that that means saving some resources instead of enjoying it all now. Nobody likes pain, but that pain is necessary in order to avoid greater complications that would definitely come if Malaysia is to take on business-as-usual path (which is what happening at the moment). Addressing the crisis comprehensively would intensify the backlash, even if compensating policy like greater cash transfers is put in place. With all these things in mind, the ruling coalitions are frozen to death about what this would mean at the ballot box. So, instead doing the right thing, the government has instead decided to coddle the voters policy-wise from what is to come.

Policymaking and execution are in stasis at a time when we need courage with all hands on deck.

There is not one, but two imminent economic crises

But what are the crises?

The first is well-known by now even as most Malaysians act as nothing is happening due to the very mild supply policy we have at the moment. It is the energy supply crisis centered around the Persian Gulf that is directly caused by the Israel-US aggression against Iran. The disrupted petroleum supply is sending ripple effects to various sectors in Malaysia (and around the world), as can be observed through the input-output model. The government has been communicating this very well to the public. Sadly, that communication runs at odds with actual policy, especially when it comes to petrol and diesel subsidies (and also… tourism).

The second is the very possible return of a strong El Nino that would hurt, among others, water supply, which in turn affecting agricultural and food production adversely. Already, fertilizer supply is a concern. El Nino would exacerbate the problem and raise market prices.

The first crisis is not being handled properly despite warning from the government’s own economists. The second crisis is largely going under the radar and would exacerbate the effects of the first crisis.

Renewed mandate is the way to go

It seems to me that in order to address the two crises effectively, the democratic mandate must be refreshed. Here, the general election is the way to shorten the lame duck and do-nothing policy period. Having the election as soon as possible could return us to the state of serious policymaking as quickly as possible democratically. There are other ways to do this, but democratically is the operating word here.

We have seen how prolonged policy inaction affected our lives before. The late February 2020 Sheraton Move caused Malaysia to lose weeks if not months’ worth of reaction policy time during the Covid-19 pandemic. That led to unnecessary deaths, overly deep economic downturn and the deepest of pain for everybody. We should heed the lesson of recent history. We need to move quickly and proactively.

No doubt, there is a risk that the election would also lead to a do-nothing period due to the need for power sharing negotiation immediately after election. The outcome of the next election would likely require multiple coalitions to work together yet again. The uncertainty involves the way the puzzle would fit together. Yet on the balance, even that government (whether PH would be in it or not) would have greater political capital than the current one, due to renewed mandate.

We must put the country first, party second.

Electoral messaging: the truth will set you free

To reiterate, Pakatan Harapan is so petrified of elections that in response to the ruling Johor Umno and Barisan Nasional dissolving the state assembly, PH-friendly social media accounts and some PH personalities have only one coherent argument: it is irresponsible to have an election during a crisis. But that argument would only work if the ruling side has the political capital to handle the crisis, which it does not. It is even more irresponsible to sit on it in fear.

Pakatan Harapan should take a different tack instead. Take the bull by the horns. They (or any coalition with national ambition) should be truthful of what lies ahead to the public going into the general election. Say it up front: the current government setup is untenable and fraying and that is preventing more effective solutions from being taken. They will be pain but it we will do the necessary to mitigate it. Tell the voters that Malaysia needs to come out of the crisis stronger and based on that, request a new mandate to take the necessary actions for the greater good.

That would be the manifesto: how would we deal with the crisis and how would we mitigate the pain. This would immediately avoid the kitchen sink manifesto that had caused Pakatan Harapan trouble in the past.

Pakatan Harapan can do this. The current government has a great record navigating global trends. Use this as a testimonial of competence. Tell voters Pakatan Harapan has the necessary plan to address the crisis but insufficient mandate to carry on. We have have the way forward and we would like you to approve the plan.

Further, doing this would allow Pakatan Harapan to regain the initiative instead of forever being reactive to its rivals. To carry on reactive as Pakatan Harapan is now would erode further the reputation of all parties in the coalition.

Categories
Economics Politics & government

[3022] Fuel subsidies, Pakatan Harapan, spending cuts and political capital exhausted wastefully

When the government in Putrajaya highlighted its policy of warmer air-conditioned office temperature as part of the drive to save energy, Malaysiakini exaggeratedly called it an austerity drive.[1]

It is not at all but several weeks later, the government is carrying out a larger spending adjustment exercise by cutting what the Finance Ministry calls non-critical expenditure across all ministries in order to accommodate for the ballooning fuel subsidy cost, which in turn is created by military conflicts in the Middle East.

I still would not call it austerity for the same reasons I rejected the charge levelled at the 2018-2020 Pakatan Harapan government: at that time, total spending and the economy itself actually grew. For 2026, total government spending and the economy would very likely expand too. It is just not the Malaysian mainstream view to expect a recession and an aggregated government spending cuts in the next 12 months. (Still, it does not help that the Anwar Ibrahim-led government itself uses the language of austerity…)

I find the cuts disagreeable though understandable.

Disagreeable because, for instance, to have RM3 billion worth of non-critical spending within the Ministry of Health that suffers from all kinds of manpower and facility shortage sounds incredible. So outrageous that even the Ministry of Health is contesting the cuts. One would think that if there were indeed that size of non-essential spending, it should be redistributed to essential services within the ministry instead of being redirected towards fuel subsidies that are not just unsustainable financially, but wasteful in terms of opportunity cost at a time when economies are competing at the technological level that could redefine future growth in a big way.

Ideally, what should be cut instead is the fuel subsidy spending, which the latest policy has failed its purpose. The regime was designed to save money but the truth is, it was designed to do minimal work during a time of low petroleum prices.

Just imagine the kind of policy we could run based on the amount used and to be used for fuel subsidies this year alone. We could turbocharge electrification throughout Malaysia and address the energy prices more sustainably. Fortify our health and education system to meet ongoing and future challenges. Build larger and stronger public transport network, which also reduces out dependency on petroleum. Provide very large cash transfer programs, which is a superior form of assistance versus subsidies. We could even pay Sabah and Sarawak large petroleum payments and address the cause of that one episode of national divisions.

Nonetheless, the cuts are understandable from various aspects. The war could end soon, somehow. Trump always chickens out. Alternative source of crude oil could be found soon, a betting man could say.

But the most important of them is the national election, which could happen as early as this year. In fact, some state elections are slated for this year, which shows Anwar Ibrahim is running out of options. Inflation negatively affects voters’ satisfaction with the government of the day. And after the electoral disaster for Pakatan Harapan in Sabah along the general discontent faced by the coalition within its own camp (with Umno sharpening some long knives in the passenger seat), anybody in PH seeking reelection would think twice before committing to an energy price hike.

For Anwar Ibrahim, it is doubly so because he and his allies have spent their political capital on self-serving items that include Azam Baki, the Sabah corruption and corporate scandals. These actions easily wash out actual (though limited) reforms done by the government. Not to mention, PH (and PKR especially) have spent an outrageous amount of time fighting its own base instead of its opponents.

As a result, in the PH tank there is no more political capital to be spent on tough policy for the common good at the non-instant gratification horizon. That is a tragedy for a coalition that ran reformasi as a slogan. PH has always needed to use its political capital for tough decisions. Close at the end of the line, it is plain to see that capital has been misspent on political machination that would never inspire confidence among the public, or fire the imagination of the PH base.

[1] — The government has decided to raise air-conditioning temperatures in all its offices as part of austerity measures and to cut down on energy spending. [Austerity: Govt turns up the heat, raises aircond temps, to relax dress code. Malaysiakini. Zarrah Morden. Zikri Kamarulzaman. April 2 2026]

Categories
Conflict & disaster Economics Politics & government

[3019] Tracing the Middle East energy flows disruption throughout the Malaysian economy

I am worried at the way the Malaysian government is handling the supply crisis emanating from the latest war in the Middle East.

Complacency

While neighboring economies have quickly engaged in some kind of mitigating measures, Malaysia appears to be carrying on with business as usual. The latest business-as-usual approach the government has taken is to provide and finance highway toll discounts for the upcoming Eid holidays, which will work to raise petrol and diesel consumption above what it would have been without discount. The subsidy regime has also left unchanged, taking any possible adaptive saving measure out of the equation. Decision on work-from-home arrangement would only be taken after Eid.

It seems the government is complacent. After all, the official communication designed to comfort Malaysians is that Malaysia is a net energy exporter and that the country has two-month’s worth of supply of petroleum products at home. Adding to this is the fact that Malaysia is one of the better prepared economies to weather the supply disruption storm.

Negative effects are unavoidable

Yet, the negative effects are a matter of when, not if.

This is so because many of the industrial (indeed petroleum) products used within Malaysia are exposed to international trade. At the very least, domestic prices are affected by global prices, even if the country is self-sufficient in one specific sector or the other. That is one of the fundamental facts for a small open economy such as Malaysia. Within context of the latest supply disruption, it means domestic prices should go up tracking global prices. This has not taken into account the problem with smuggling, which is really a feature (and not a bug as some would think) of the way Malaysia set prices for its petroleum products.

Qualitatively tracing the disruption ripples with an IO table

To understand the seriousness of the supply disruption, the ripples throughout the domestic economy could be traced through the input-output table. The table links every sector with each other by accounting for all output for all sectors as well as its input from domestic and foreign sources. The latest IO table Malaysia has is from 2021, with the next one due to be published likely this year.

O&G disruption

The clearest channel to trace that disruption is to trace the industrial linkage between oil and gas to chemicals and from there on, to other downstream sectors that use energy and chemical inputs. The chart below is a graphical representation of that linkage within the context of domestic output use (with international trade taken into account).

Here, the output of oil and gas has been traced down by five levels, i.e. from oil and gas, to refined petroleum, to basic chemicals, to special chemicals and then to the next stream user sectors that among others include pharmaceuticals (as listed in the chart).[1]

While five levels may appear deep, it is possible to drill down deeper and trace all the IO table and hence, the whole economy. For instance, a sector located downstream of pharmaceuticals includes the healthcare sector and healthcare output would be used by other services, like banking or even electricity manufacturing. Or for electricity, it could go down to land transport and then to other activities dependent on land transport.

I do only five because these five levels to me appear to be the among the sectors likely to feel the heat early on, either by the consumers, the producers or the government that may subsidize either consumption or production of certain goods. The numbers even tracing it only 5 levels already suggest a huge portion of of the economy should be affected.

That is not at all comforting.

Fertilizer disruption

O&G and is not the only source of the disruption. Fertilizer manufacturing, which uses natural gas as input, is also a major point of trouble in its own right. The chart below traces fertilizer’s immediate users.

Quantitative tracing

These charts are drawn to scale. For laypersons, that means it is more than possible to trace the expected quantitative effects on all industries using the underlying data. How would one ringgit change in output price of oil and gas affect the change in prices of other downstream sectors? How would one unit of volume change in oil and gas affect change in other sectors?

That will be some further calculations I will do in private.

[1] — for crude oil & natural gas, coke & refined petroleum, basic chemicals and specialty chemicals, the corresponding rectangles represent total output and imports of the respective sectors. For the rest sitting at the end nodes (to the most right of the chart), they instead represent sum of input from the supplying upstream sectors. For instance, while basic chemicals node represents all of its output and imports, plastic products node only represents the sum of inputs used from basic chemicals and specialty chemicals. For the end node (right most), only sectors using at least 1% of its supplier output are listed. Anything below that is aggregated under the label others. This is done for simplicity’s sake

Categories
Books, essays and others Politics & government Society

[3017] One day in Babel

As a member of the generation who grew up and still believes in the multicultural project under the aegis of liberal democratic order, the 2020s is a decade of constant disappointment at home and abroad. The disappointment stems from betrayal of various parties that used to express liberal sentiments but now has turned against it for whatever reason.

Criticisms of the current state of affairs are everywhere, including in contemporary literature. Two books from my recent readings rise to the top of my mind. Omar El Akkad’s non-fiction One Day Everybody Will Have Always Been Against This and RF Kuang’s fantasy-scifi-historical fiction Babel or The Necessity of Violence.

One of those betraying parties are many liberals in the West.

El Akkad’s thesis is clear from the book title itself, with ‘this’ being the genocide in Gaza and apartheid across occupied Palestine. He points out the hypocrisy of Western liberals, especially US liberals, where human rights are held up only for some but not others. That has been a constant criticism of the US and Western Europe (the centers of such liberalism) for a long time but the idea has gained its greater purchase in the past several years, especially with the wildly different approaches taken by then with respect to Ukraine and Palestine.

El Akkad’s criticism goes deeper than simply highlighting the hypocrisy. He believes many western liberals are really interested in messaging and virtue signalling all to make themselves look good. When push comes to shoves, they would create a caveat to wriggle their way through the issues while pretending there is no hypocrisy involved after all.

This, I believe, is one of several reasons why Western liberals no longer hold the prestige they once had in the eyes of many Asian liberals. I have summarized my thoughts on the matter on Kam Raslan’s A Bit of Culture over radio some weeks back. In the same show, I recommended El Akkad’s work as a book to be read.

That hypocrisy is one of several themes explored in Babel. But more than that is another relevant but more damning fatalist criticism developed from that hypocrisy. It is that people of different culture, or more specifically, minorities in a white world would never be considered as equal. Set during the European industrial revolution on the eve of the Opium War, the novel traces the life of the hero and his small cohort at Oxford, some who are radicalized over the injustices of British colonialism.

Babel is an excellent novel and I enjoy Kuang’s writings. In fact, Babel is my second Kuang’s work I have read, with the first being Yellowface. Even so, I won’t yet be as pessimistically fatalistic about multiculturalism as Babel is, even in this current decade of disappointment. Babel takes place during a time of severe power imbalance between the Western world and everything else, where the subscription to the idea of equality can easily be corrupted by hypocrisy that those in power.

With the ongoing multidecades-long rise of Asian economies, the gap representing power imbalance is shrinking and for some, has been reversed. This, I hope, would make that same hypocrisy harder to sustain and a more genuine inclusivity more achievable.