The problem was: given a state that does not exist, if I can put it like that, and given the task of giving existence to a state, how can you legitimize this state in advance as it were? How can you make it acceptable on the basis of an economic freedom which will both ensure its limitation and enable it to exist at the same time? This was the problem, the question that I tried to outline last week and which constitutes, if you like, the historically and politically first objective of neo-liberalism. I would now like to try to examine the answer more closely. How can economic freedom be the state’s foundation and limitation at the same time, its guarantee and security? Clearly, this calls for the re-elaboration of some of the basic elements of liberal doctrine—not so much in the economic theory of liberalism as in liberalism as an art of government or, if you like, as a doctrine of government. (102)
Nothing proves that the market economy is intrinsically defective since everything attributed to it as a defect and as the effect of its defectiveness should really be attributed to the state. So, let’s do the opposite and demand even more from the market economy than was demanded from it in the eighteenth century. In the eighteenth century the market was called upon to say to the state: Beyond such and such a limit, regarding such and such a question, and starting at the borders of such and such a domain, you will no longer intervene. This is not enough, the ordoliberals say. Since it turns out that the state is the bearer of intrinsic defects, and there is no proof that the market economy has these defects, let’s ask the market economy itself to be the principle, not of the state’s limitation, but of its internal regulation from start to finish of its existence and action. In other words, instead of accepting a free market defined by the state and kept as it were under state supervision—which was, in a way, the initial formula of liberalism: let us establish a space of economic freedom and let us circumscribe it by a state that will supervise it—the ordoliberals say we should completely turn the formula around and adopt the free market as organizing and regulating principle of the state, from the start of its existence up to the last form of its interventions. In other words: a state under the supervision of the market rather than a market supervised by the state.--116
Just as for Husserl a formal structure is only given to intuition under certain conditions, in the same way competition as an essential economic logic will only appear and produce its effects under certain conditions which have to be carefully and artificially constructed. This means that pure competition is not a primitive given. It can only be the result of lengthy efforts and, in truth, pure competition is never attained. Pure competition must and can only be an objective, an objective thus presupposing an indefinitely active policy. Competition is therefore an historical objective of governmental art and not a natural given that must be respected. In this kind of analysis we find, of course, both the influence of Husserl and, in a somewhat Weberian way, the possibility of connecting up history with the economy. The ordoliberals go on to say that the task of economic theory is the analysis of competition as a formal mechanism and the identification of its optimum effects. But what actually takes place in the societies we know cannot be analyzed on the basis of this theory of competition. We can only analyze it by taking the real historical systems within which these formal economic processes function and are formed and conditioned. Consequently, we need an historical analysis of the systems that intersect, as it were, as a horizontal intersects a vertical, the formal analysis of economic processes. Economics analyzes the formal processes and history will analyze the systems in which the operation of these formal processes is either possible or impossible.
The third consequence they draw from this is that the relation between an economy of competition and a state can no longer be one of
the reciprocal delimitation of different domains. There will not be the market game, which must be left free, and then the domain in which the state begins to intervene, since the market, or rather pure competition, which is the essence of the market, can only appear if it is produced, and if it is produced by an active governmentality. There will thus be a sort of complete superimposition of market mechanisms, indexed to competition, and governmental policy. Government must accompany the market economy from start to finish. The market economy does not take something away from government. Rather, it indicates, it constitutes the general index in which one must place the rule for defining all governmental action. One must govern for the market, rather than because of the market. Michel Foucault, 7 February 1979, translated by Graham Burchell, Lecture 5, The Birth of Biopolitics. 120-121
Foucault's fifth lecture is full of spectacular gems: a history of twentieth century German philosophy in the wake of Max Weber (who displaces Marx) with Freiburg and Frankfurt as two orbiting poles (and Heidegger as unspoken shadow, black hole) and so the joint history of philosophy and political economy; the indebtedness of Marcuse to Sombart; the political significance of the road to serfdom thesis, etc. Here I want to focus on one strain in the lecture (and which frames it and connects it to the other lectures): a key innovation in the liberal art of government by German neo-liberalism (or ORDOs).
And this innovation is part of a natural history of liberalism that Foucault is telling. And, in fact, the German neo-liberals are a third or even fourth stage in this natural history. To simplify today, Foucault recognizes that there is a shift, schematically, from (i) the Lockean picture in which states promote growing populations and economies by focusing on non-zero-sum policies and are to become self-limiting to (ii) markets that must be left free (late nineteenth century laissez faire) to (iii) free markets most be constructed and policed by the state.* On (iii), Foucault had noted the week before (recall here; here), and repeats in lecture 5, that in virtue of preserving basic rights and generating economic goods, including the interests of the "weak and the poor," the ORDOs created a form of output legitimacy that could legitimate the state as such.
Now, before I get to my main point, I want to note that much discussion inspired by Foucault takes up what we may call the Husserlian and neo-Kantian theme about the necessity to construct markets and market regulations under neoliberalism. And, the best critics of neoliberalism will, quite rightly, call attention to the amount of policing and violence needed to do such constructing. (I am thinking of Melinda Cooper on American family policy.) Unlike their American counterparts who love police and prisons, the German ORDOs prefer a juridical and regularized form of constructing (recall this post on Mestmäcker).** And I do not wish to downplay the significance problems with a purportedly emancipatory theory of freedom that (to echo Rousseau) forces, lethally forces, people to be free. But for the ORDOs much of the work that needs to be done has the character of antitrust law, preventing corporations from colluding and, not insignificantly thereby, lacking, freedom to lord over their employees. (The point of antitrust is not consumer welfare but a blockage against concentrated power.)
But the more important point Foucault makes, en passant, is that in the very critical acumen of the ORDO critique (of the Marxists, Keynesians, and Nazis) there is a paradox hiding in plain sight. I quote again, "it turns out that the state is the bearer of intrinsic defects, and there is no proof that the market economy has these defects, let’s ask the market economy itself to be the principle, not of the state’s limitation, but of its internal regulation from start to finish of its existence and action." Remember, this is part of neoliberal critique of the critics of liberalism. And, especially, if one is willing to grant this critique of the standard criticism of liberalism, one is stuck with the following problem: if the market economy becomes the principle of its own internal regulation, and the model for the state, the state is still required as a kind of formal and efficient cause to help construct the market (and be its independent umpire or 'supervisor').
Now, this is not a problem if market and state both approach the ideal limit. So, in optimal circumstances there is no paradox. But as Foucault notes, the ORDOs recognize that "what actually takes place in the societies we know cannot be analyzed on the basis of this theory of competition." Scientifically, this has the salutary effect of attempting to integrate political economy with history ("we can only analyze it by taking the real historical systems within which these formal economic processes function and are formed and conditioned.") The ORDOs can't help it that the Swedish nobel committee preferred a different conception of science.
But politically, it puts neo-liberalism in a catch-22. The very state that needs to be modeled on the market, and, in turn, construct the market and govern for it, will be captured by many interests. And, while the ORDOs can smile wryly and wisely at their left-wing and youthful critics, who will treat 'true democracy' as a magic wand for any problem, it reinforces the cul-de-sac they are in. The state, whose legitimacy depends on proper functioning markets which protects basic rights, protects the vulnerable, and limits the accrual of power, must itself be modeled on the market, but which it can only shape and police properly, if it is in some sense already proper functioning, and so on.+ A regress looms once one recognizes that the government most constitute the free-market and, in turn, modeled on the market. But like a great entertainer ('good serial'), Foucault postpones discussion of this catch-22.
*This is not the whole of Foucault's natural history of liberalism because he has a space for the physiocrats and Bentham in the narrative and will add add Becker/Stigler to the narrative.
**Foucault does not mention it; but it fits in his larger narrative about the significance of Max Weber.
+This is why some will be tempted by benevolent despotism.
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