This is where the ordoliberals break with the tradition of eighteenth and nineteenth century liberalism. They say: Laissez-faire cannot and mus* not be the conclusion drawn from the principle of competition as the organizing form of the market. Why not? Because, they say, when you deduce the principle of laissez-faire from the market economy, basically you are still in the grip of what could be called a “naive naturalism,” that is to say, whether you define the market by exchange or by competition you are thinking of it as a sort of given of nature, something produced spontaneously which the state must respect precisely inasmuch as it is a natural datum. But, the ordoliberals say—and here it is easy to spot the influence of Husserl—this is naive naturalism. For what in fact is competition? It is absolutely not a given of nature. The game, mechanisms, and effects of competition which we identify and enhance are not at all natural phenomena; competition is not the result of a natural interplay of appetites, instincts, behavior, and so on. In reality, the effects of competition are due only to the essence that characterizes and constitutes it. The beneficial effects of competition are not due to a pre-existing nature, to a natural given that it brings with it. They are due to a formal privilege. Competition is an essence. Competition is an eidos. Competition is a principle of formalization. Competition has an internal logic; it has its own structure. Its effects are only produced if this logic is respected. It is, as it were, a formal game between inequalities; it is not a natural game between individuals and behaviors.
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. Michel Foucault, 7 February 1979, translated by Graham Burchell, Lecture 5, The Birth of Biopolitics. 119-121
Earlier in the lecture, Foucault had noted that for "neo-liberals, the most important thing about the market is not exchange," as it had been for eighteenth century liberals, but "competition." (118) In between the eighteenth century liberals and the neo-liberals, there is Robbins, who at the height of the crisis of liberalism in the 1930s, puts the emphasis on constrained choice with given ends. Foucault notes this a month later, (lecture 9, 7 March, p. 222ff). Robbins' conception becomes the dominant one in professional economics since. So, the neo-liberal response that is the focus of Foucault here is in a way, a minority position.
Now, because Foucault wants to talk about the neo-liberals, he does not pause to reflect on the complications involving the use of 'exchange.' There is market-exchange and non-market exchange; exchange among strangers, and exchange that presupposes familiarity. I mention this because some neo-liberals try to revive a form of exchange in response to the dominance of Robbins' redefinition of economics. I have in mind the founder of public choice economics, James Buchanan, who embraced a conception of economics focused on market exchange (and the institutions that facilitate it)--he gave the name "catallactics" (borrowed from bishop Whately) to this enterprise. Buchanan grounds his account in the propensity to (in Adam Smith's phrase) "truck, barter, and exchange."
From the perspective of the philosophical underpinnings of Ordoliberalism, Buchanan's approach is representative of the "naive naturalism" the ORDOs reject.* In practice, however, there was, and is, much mutual influence among the ORDOs and public choice theorists (especially mediated by Viktor Vanberg). This is especially so in the shared fondness for rule-based governance (in contrast to administrative discretion and the free play of the political process).
Okay, with that in place, let's turn to Foucault's treatment. In addition to a shift from exchange to competition, there is also a shift in level of analysis and, in turn, a shift in the art of government. In Husserlian phenomenology an eidos is a principle or necessary structure which is grasped.+ And this structure is shorn of contingent features and does not exist in a given empirical reality (but at some conceptual, even 'as if' level). Crucially, for present purposes, such an eidos -- and now I quote the brilliant phenomenologist, Alfred Schuetz, -- "must be capable of prescribing rules for the experiencing of all empirical particulars." (159)
This eidic approach to competition has a number of consequences (nicely captured by Schuetz's phrase). One is that competition is not naturally found in reality, but it is the effect of a constructed (even co-constituted by law and society) economic constitution. And the commitment to constructing competition means that ORDOs are not just focused on legal structure that makes competition possible, but also on mechanism that maintain competition as an "indefinitely active policy", that is, antitrust.**
Somewhat surprisingly Foucault has little interest in spelling out this antitrust focus for his audience despite the fact that it is an extremely distinctive feature of ORDO practice (and he is clearly aware of it). Unlike US antitrust policy, which aims at consumer welfare (in line with Robbins' definition), for Ordos the aim of antitrust is to maintain competition as a means of (quoting a more recent Ordo, Mestmäcker) "restraining power."***
More subtly, and Foucault is clear on this, is that competition as an eidetic structure, simultaneously functions as a regulative ideal always out of reach empirically. It is something that should be aimed for in statecraft. The liberal art of government is not now aimed at trade, growing economies (in non-zero sum fashion), growing populations, and the limitation of the state, but rather it is aimed at developing and maintaining competition. Of course, ORDOs are not against trade and growth, but it is not the fundamental aim.++ Where possible, and where it does not undermine basic state capacity to maintain rights, the rule of law, and competition, the state should promote competition. I put it like this so that it is clear that from an ORDO perspective privatization is a means, never an end; that many privatizations ended up in private monopoly is no surprise to an ORDO.
Crucially, competition is an analytic tool, but not an ideal type by which empirical society is analysed (recall this post on the road to serfdom as an ideal type). Rather, it is a formal tool, it "expresses an obvious truth of reason,"" that makes possible the structures that will govern the construction of competition. While the study of such formality takes place in economics proper, economics itself is not an empirical science because it is shorn of empirical particularity. The eidic structure that economics studies is part of a larger order-system without the particular qualities of the sensible realm.
Eucken himself captures the distinction in terms of form and process. So, there is a form of an economic system and the process within it. And his own slogan was, as he put it in his final lecture (at LSE) "State planning of forms-Yes; state planning and control of the economic process-No !" (I first saw the slogan in this 1953 article by Watkins in Ethics. But Watkins mistakenly treats Eucken as an inductivist because he misses this Husserlian element.)
As an aside, this phenomenological understanding of competition is also a rebirth of economics (in the way that Galileo was a rebirth); in which the philosophical-economist "can understand and take responsibility for the sense and right of every cognitive act." (Husserl quoted by Stone.)
In Foucault's hands for the ORDOs history is the empirical science that explores the conditions of possibilities (or not) of competition. I had not quite appreciated before that this fits with their "rejection of historicism" which is a prominent part of the (1936) ORDO manifesto. The rejection of historicism is explicitly not a rejection of historical knowledge (which is allowed to be universal). In fact, as Eucken explains in posthumous work, such historical knowledge is required to understand one's own time and to what degree it is possible to instantiate the principle of competition in it.
Let me close with an observation inspired by reading this paper by Nils Goldschmidt and Hermann Rauchenschwandtner on the relationship between Eucken(s) and Husserl.1 If you look at all the clear references in Eucken's work to Husserl and phenomenology, the word 'eidos' is never used. In addition, the ORDOs themselves have a tendency to focus more on the conjunction of economics and law and less on the conjunction of economics and history. I think the significance of these facts is that they reveal that what Foucault has done is offer a kind of rational reconstruction of the philosophy of the ORDO/german variant of neoliberalism.
This is important for two reasons. First, he quite clearly discerns (recall my previous post) that the grounds of their philosophy is not Schmittian decisionism with a submission to, and faith in, divine providence.+++ The ORDOs are far removed from this attitude.
Second, this kind of rational reconstruction tells us something of Foucault's project. Recall that in the first lecture Foucault draws a contrast between a normative (as distinct from ethical and moral) conception of the art of governing and an empirical practice of governing. Foucault is explicitly focused on the normative version. It is normative because it is a reasoned reflection on the optimal species of the art of government. And what we see Foucault doing here in this fifth lecture (and throughout the Birth of Biopolitics) is rather than offering a history or geneology of doctrine, he demands of himself an articulation of this species of the art of government. The task then is to make liberalism conscious or conscious again of its own philosophy.2
*Hayek represents a complicated case; because in some of his writings he sounds like a representative of naive naturalism of the sort that is rejected, but in other works he approaches a form of a naturalistic neo-Kantianism that is more compatible with the applied Husserlian ORDOs.
+It is grasped intuitively, but the language of 'intuition' should not be confused with the everyday notion of intuition.
**It is worth noting that competition policy might also take the form of facilitating entry; in practice it seems focused on preventing monopoly and oligopoly.
***Having said that, the ORDO approach to antitrust can be described in terms of "consumer choice" (see here). As long as one recognizes that this is orthogonal to the approaches to economic policy influenced by Robbins'' definition.
++One should not overestimate the impact of the ORDOs on German mercantile policy (ORDOs are instinctively freedtraders); but simultaneously one should not be wholly surprised that mercantilism is possible in an ORDO context.
1. I thank Stefan Kolev for alerting me to it. This other piece by Nils Goldschmidt is also useful.
+++I thank Erwin Dekker for discussion. Heidegger, in turn, is opposed to them (and Husserl).
2. One may well wonder what end this serves. But that is for another occassion.
a small point: I think it's worth noting that antitrust policy in the U.S. only switched to consumer welfare under the influence of the neoliberals (culminating in Bork)... in the 1920s and 1930s, it's all about competition. You see this in people like Brandeis. I haven't done the work to connect progressive-era antitrust with the ordoliberals, but they are at least on the same page that I understand the ordoliberals to be on (and I agree that it's unfortunate the Foucault doesn't really pursue antitrust in the Biopolitics lectures).
Posted by: Gordon | 07/24/2020 at 04:49 AM