Now, they say, how can we avoid the error of planning? Precisely by seeing to it that the tendency Schumpeter identifies in capitalism towards the organization, centralization, and absorption of the economic process within the state, which he saw was not a tendency of the economic process but of its social consequences, is corrected, and corrected precisely by social intervention. At this point, social intervention, the Gesellschaftspolitik, legal interventionism, the definition of a new institutional framework of the economy protected by a strictly formal legislation like that of the Rechtsstaat or the Rule of law, will make it possible to nullify and absorb the centralizing tendencies which are in fact immanent to capitalist society and not to the logic of capital. This is what will enable us to maintain the logic of capital in its purity and get the strictly competitive market to work without the risk of it ending up in the phenomena of monopoly, concentration, and centralization observable in modern society. As a result, this is how we will be able to mutually adapt to each other, on the one hand, a competitive type of economy, as defined or at least problematized by the great theorists of the competitive economy, and, on the other, an institutional practice whose importance was demonstrated in the great works of historians or sociologists of the economy, like Weber. Broadly speaking, according to the ordoliberals the present historical chance of liberalism is defined by a combination of law, an institutional field defined by the strictly formal character of interventions by the public authorities, and the unfolding of an economy whose processes are
regulated by pure competition.
This analysis, political project, and historical wager of the ordoliberals has, I think, been very important, forming the framework of modern German policy. And if there really is a German model, it is not the frequently invoked model of the all-powerful state, of the police state, which, as you know, has so frightened our compatriots. The German model being diffused is not the police state; it is the Rule of law (l’État de droit). And I have not made these analyses just for the pleasure of engaging in a bit of contemporary history, but so as to try to show you how it was possible for this German model to spread, on the one hand, in contemporary French economic policy, and, on the other, in a number of liberal problems, theories, and utopias like those we see developing in the United States. So, next week I will talk about some aspects of Giscard’s economic policy and then about American liberal utopians. Michel Foucault, 21 February 1979, translated by Graham Burchell, Lecture 7, The Birth of Biopolitics, 178-179
Foucault closes his seventh lecture -- the midpoint of the series -- with a two-fold clear contrast between the realististic German Ordo-Liberals (ORDOs) and Schumpeter, who is the pessimistic outlyer toward the left, and the Chicago school American liberal utopians, which fuel, it seems, "a stubborn American extreme Right born in the Midwest" (174).* The key point vis a vis Schupeter is that for ORDOs capitalist monopoly and concentration is always the effect of a political process, or badly formed laws, that facilitate rents or high profits. So, a proper rule of law both aims to prevent that from occurring, or intervenes not by redistributing income (or wealth) directly, but by proper antitrust law, patent-law, property-rights, etc. And crucially, the latter must not be ad hoc, but ground in principles. In addition, there must be an investment in human capital, and even culture that can help shape an enterprising spirit.
The nature of the rule of law then becomes crucial. The core of the lecture is, in fact, Foucault's analysis of the competing conceptions of the rule of law. In a crucial way, law must be capable of doing four things at once: first, (i) it must be a site where citizens (and corporations) encounter each other as relative equals and resolve conflicts peacefully; second, (ii) it must be a site where individuals can hold the state to account, the "possibility of judicial arbitration, by one or another institution,
between citizens and the public authorities," (171) ; third, (iii) it is a site where new social problems -- due to technological change and increasing growth, and so more mutual "friction" (175) -- are diagnosed and resolved. (Obviously, (i)&(iii) can blend in each other.) And (iv) "public authorities act within the framework of the law and can only act within the framework of the law" that is, there is no political or conceptual space for non-law-governed sovereign agency as is common in despotism or security-states. (169; this is why states of exception attract our notice.)
Now, I call, following Lippmann and Rougier (recall here; and Locke; here), the rule of law in (iii) the source of the 'principle of adaptation' that liberal society must instantiate if it is to survive in liberal fashion (164). One natural problem is that is by no means obvious that existing legal principles can survive the encounter with new sources of friction and technological change unscathed. So, (iii) will also be a source of legal innovation in the principles that are supposed to guide the framework (which I call principled rule of law).
There is an obvious problem here in how the principle of adaptation and the principled rule of law interact once they go out of sync. There seem three option: (a) for Lippmann (who is not discussed by Foucault) it is clearly the role of politics to do the mediation, but for this to succeed he requires from politicians that they do so in impartial, judicial faction. This strikes me as too far-fetched to expect in practice. For, (b) Hayek, who is discussed at length in this lecture, we must trust the evolving jurisprudence of the common law as a kind of bottom up discovery engine. It can only be such an engine, if economic agents can feel secure in the expectation that "the legal framework is fixed in its action and will not change." (173, Foucault paraphrasing Constitution of Liberty.)+ A fixed legal framework is uncertainty reducing, confidence inspiring, and allows for mutual coordination. This approach can allow existing principles to be reinterpreted, but as Lippmann noted, it can be abused as an instrument to preserve a status quo (which registers previous existing economic/social powers). So, it is not obvious that this allows for the transformation of legal principles where needed. As Hayek and with Hayek James Buchanan became more influential among ORDOs this more status quo friendly tendency is also visible among them.
Even so, as Foucault clearly recognizes, a third option (c), is visible among the (early) ORDOs. To be sure all ORDOs agree with Hayek that even soft forms of planning (associated with Keynes and New Deal) are to be rejected. But these early ORDOs recognize that intellectual and political leadership is needed to implement, and, where necessary, develop an apt legal framework. That is to say, an intellectual class must be nourished, students who combine/integrate law, history, economics, sociology and philosophy become the source of innovation in the principles that can guide the framework, or Gesellschaftspolitik. This class must, in particular, generate expertise in the workings of institutions within and among (legal, economic, social, etc.) orders as well as in their wider frameworks (see, especially, 167).
Admittedly, Foucault does not quite explicitly say (c), although his repeated quotes from Ropke and, especially, Eucken suggests indicate it. The problem, of course, is that (c) shades into views more commonly associated with Pareto and Schumpeter, an administrative technocracy/elite. But regardless whether the development of such a class was fully intended by Eucken (as I think it was), it is clear that is partially generated by the ORDO agenda in light of (iii). And, I think, it is no surprise we encounter such a class in the institutions -- be it the 'Geneva' ones centered on internal trade and law, described by Quinn Slobodian or in the EU -- non-trivially influenced by ORDO thought.
I should close here, but I do want to note that the tension between (iii) and (iv) is characteristic of the European Central Bank's (ECB) problems during the 2007-2013 Euro-crisis. It needed new principles to act, but it felt constrained by a lack of legal mandate; and it lacked the intellectual class to supply it (and the political elites/democracies) with the principles to do so. From the perspective of the ORDOs, the ad hoc and upwardly redistributive nature of European monetary policy is clearly a threat to the survival of liberalism and rule of law, in terms of (i), if only because it has enshrined in law a class of economic agents (systematically significant banks) as privileged (because too big to fall).
*To be clear, it is possible that Foucault wishes to distinguishes more sharply between the liberal utopians (by which he means Becker) from the American extreme right (if that right is nativist and authoritarian).
+It is interesting that Foucault does not treat Hayek as a liberal utopian here. As Pete Boettke notes the phrase is ued by Hayek in “The Intellectuals and Socialism” (1949).
Comments