The second important point in this neo-liberal program is the question of conformable actions (actions conformes). This theory of conformable actions, this programming of conformable actions, is essentially found in a text which was actually one of the great charters of contemporary German policy. It is a posthumous text by Eucken which appeared in 1951 or 1952, called Grundsätze der Wirtschaftspolitik (the foundations of economic policy) and which is, as it were, the other, practical side of the text called Grundlagen der Nationalökonomie published a dozen years earlier, which was the theoretical side. In this Foundations these Fundamental principles of economic policy, Eucken tells us that liberal government, which must be perpetually vigilant and active, must intervene in two ways: first, through regulatory actions (actions régulatrices) and second, through organizing actions (actions ordonnatrices).
Regulatory actions first of all. We should not forget that Eucken is the son of Eucken, the neo-Kantian Nobel prize-winner of the beginning of the twentieth century. As a good Kantian, Eucken says: How should government intervene? It should intervene in the form of regulatory actions, that is to say, it must intervene in fact on economic processes when intervention is imperative for conjunctural reasons. “The economic process always leads to temporary frictions, to modifications which risk giving rise to exceptional situations with difficulties of adaptation and more or less serious repercussions on some groups.” It is necessary then, he says, not to intervene on the mechanisms of the market economy, but on the conditions of the market. Rigorously following the Kantian idea of regulation, intervening on the conditions of the market would mean identifying, accepting, and giving free play to the three typical and fundamental tendencies in the market, but in order to encourage these tendencies and somehow push them to their limit and full reality. These three tendencies are: the tendency to the reduction of costs, the tendency to the reduction of the profit of the enterprise, and finally, the provisional, localized tendency to increased profit, either through a decisive and massive reduction of prices, or by an improvement in production. These are the three tendencies that regulation of the market, that regulatory action must take into account, inasmuch as
they are themselves tendencies of the regulation of the market.
In clear terms this means first of all that the main objective of regulatory action will necessarily be price stability, understood not as fixed prices but as control of inflation. Consequently all other objectives apart from price stability can only be secondary and, so to speak, adjuncts. At any rate, they can never be the primary objective. In particular, the primary objectives must not be the maintenance purchasing power, the maintenance of full employment, or even balancing the balance of payments.
Second, what does this mean for the instruments to be used? It means first of all using the policy of credit, that is to say, establishing the discount rate. It means using foreign trade by reducing the credit balance when you want to contain the rise in foreign prices. Shifts in taxation will also be employed, but always moderate ones, when seeking to act on saving or investment. But none of the kind of instruments used by planning will be resorted to, namely: price control, support for a particular sector of the market, systematic job creation, or public investment. All these forms of intervention must be rigorously banished and replaced by the pure market instruments I have just mentioned. The neo-liberal policy with regard to unemployment in particular is perfectly clear. Whatever the rate of unemployment, in a situation of unemployment you absolutely must not intervene directly or in the first place on the unemployment, as if full employment should be a political idea and an economic principle to be saved at any cost. What is to be saved, first of all and above all, is the stability of prices. Price stability will in fact allow, subsequently no doubt, both the maintenance of purchasing power and the existence of a higher level of employment than in an unemployment crisis, but full employment is not an objective and it may be that a reserve of unemployment is absolutely necessary for the economy. As, I think it was Röpke said, what is an unemployed person? He is not someone suffering from an economic disability; he is not a social victim. He is a worker in transit. He is a worker in transit between an unprofitable activity and a more profitable activity. These then, are the regulatory actions.
Organizing actions are more interesting, however, because they bring us closer to the specific object. What are organizing actions? Well, [they are] actions with the function of intervening on conditions of the market, but on more fundamental, structural, and general conditions of the market than those I have just been talking about. Michel Foucault, 14 February 1979, translated by Graham Burchell, Lecture 6, The Birth of Biopolitics.137-139
After inscriping German neo-liberalism into the history of philosophy by way of Eucken's connection to Husserl (recall this post on the fifth lecture of 7 february 1979), and the dueling (recall) receptions of Max Weber, Foucault now has a bit of more fun and treats Eucken as a neo-Kantian.* Perhaps this means Foucault thinks of Husserl, not implausibly, as a species of Kantianism. The underlying conceptual point, that for the ORDOs markets need to constructed, is, thereby, reinforced. They are to be contrasted with earlier liberalism(s) and, perhaps, what he tends to call American-anarcho liberalism (p. 117--sometimes he speaks of American anarcho-capitalism), for whom the market is taken to be natural or spontaneous.
While Foucault treats organizing actions as more interesting in virtue, I think, of their closer connection to biopolitics, today I focus on the regulatory actions. I do so, in part, because in many way the ORDOs have been so influential on this score that their significance may be worth pausing over, despite the seeming banality (to Foucault and us) of them.
First, the (constructed) proper functioning market has three tendencies: "(i) the tendency to the reduction of costs, (ii) the tendency to the reduction of the profit of the enterprise, and finally, (iii) the provisional, localized tendency to increased profit, either through a decisive and massive reduction of prices, or by an improvement in production." The first tendency is good for consumers who over time can buy more for less. So, while Foucault is right to note that the primary aim is not purchasing power, it falls out, as it were, for free in proper functioning markets. In fact, the first natural tendency also means that deflation is a natural and expected byproduct of competitive market. And that inflation is, temporary shocks excepted, itself the product of monopoly enhancing, juridical-political interventions in the market.
The previous comment is a reminder that on the constructive perspective, monopoly is not just an economic but also, and primarily, a political problem that functions to undermine the Ordo's political purpose for the market: a domain where, for all its inequity, bad luck, and perhaps exploitation, no group can be too powerful (recall this post on Mestmäcker.)
Strikingly, Foucault does not mention the Weimar experience. But if price stability is the primary aim, and markets naturally tend toward lower prices, then in ideal circumstances, when markets are competitive, policy must offer some countervailing inflationary measures. I would have to go back to Eucken to see if this is so. What this tells us is that in the constructive framework, there are regulatory policies apt for when markets are competitive and different kinds of regulatory policies that are apt when markets are less competitive. If you look that the policies mentioned -- "the policy of credit, that is to say, establishing the discount rate;... using foreign trade... to contain the rise in foreign prices; [modest] shifts in taxation..., when seeking to act on saving or investment" -- these can all be adjusted to stimulate or reduce inflation.
Second, this approach also provides one with epistemic access to knowing when a market is less than fully competitive; that is, when a corporation is capable of more than occasional, but structurally high profits. This also signals concentrated power, which is dangerous politically and economically. This is why anti-cartel policy is so important to ORDOs from the start. (Foucault has insightful things to say about this in the same lecture.)
As an aside, Foucault is silent on another, distinctive (Kantian) feature of the Ordo regulatory policies: that these, in turn, must be rule-following. This has the good-making consequence of being predictable to agents in the market-place, and so reduce uncertainty. It also has the good-making consequence to an ORDO of creating conditions that minimize the possibility of political rent-seeking (which violate the rules). (I must check whether Foucault notes this in future lectures.)
Third, this regulatory framework incentivizes open-ended technological productivity enhancing innovation because that's the main way corporations can capture extra profits. Interestingly enough, Foucault notes this: social policy can develop "organizing actions" that create the social pre-conditions for such technological improvements in generating a productive workforce capable of adapting to open-ended changing circumstances. This spirit of adaptation is a key feature neoliberals inherit of Lippmann. In the future I return to this.
Finally, Foucault has no time for the tendency among lazy critics of ORDO-liberalism to read them as applied Schmittians. (This is by now a trope of scholarship.)+ That ordinary markets give "risk giving rise to exceptional situations" is not an invitation to a state of emergency. Rather it is an invitation to develop a rule based response or to constitute circumstances that prevent it from recurring. This means that for the ORDOs the business of regulatory policy (at both the level of regulatory actions and organizing actions) is always unfinished, it's perpetually vigilant and active.
*Foucault mentions Walter Eucken's father, Rudolf Eucken, going out of his way to alert his audience that he was a "the neo-Kantian Nobel prize-winner of the beginning of the twentieth century." This is an interesting definite description for this Lebensphilosoph.
+I do not deny that EU institutions give rise to quasi-permanent state of emergencies [sic], but that's for another time.
Comments