21 February 1979: Foucault on the Neoliberal Response to Marxism (ep. XXXXIII)

It seems to me that we are seeing the birth, maybe for a short period or maybe for a longer period, of a new art of government, or at any rate, of a renewal of the liberal art of government. I think we can grasp the specificity of this art of government and its historical and political stakes if we compare them with Schumpeter (and I would like to dwell on this for a few moments and then I will let you go). Basically, all these economists, Schumpeter, R��pke, or Eucken, all start (I have stressed this, and I come back to it) from the Weberian problem of the rationality or irrationality of capitalist society. Schumpeter, like the ordoliberals, and the ordoliberals like Weber, think that Marx, or at any rate, Marxists, are wrong in looking for the exclusive and fundamental origin of this rationality/irrationality of capitalist society in the contradictory logic of capital and its accumulation. Schumpeter and the ordoliberals think that there is no internal contradiction in the logic of capital and its accumulation and consequently that capitalism is perfectly viable from an economic and purely economic point of view. This, in brief, is the set of theses shared by Schumpeter and the ordoliberals.--Michel Foucault, 21 February 1979,  translated by Graham Burchell, Lecture 7, The Birth of Biopolitics, pp. 176-177.

In re-reading Foucault's seventh lecture, I now realize that my two previous digressions on it (here; and here) missed two very important themes in it that are, in a way, the capstones to his interpretation of the ORDOs. And because of this i missed out on essential features of the neoliberal response to Marxism. To grasp this, it may be useful to return to the debate between Hobson and Lenin over the roots of imperialism. I will do so in schematic fashion.

Both (recall) Hobson and Lenin noticed that (militaristic) imperialism and monopoly were mutually reinforcing. For Hobson (in 1902), monopoly capitalism was the effect of rent-seeking political behavior (by corrupt, imperial, financial interests). Lenin (ca 1916) didn't deny this, but he also thought that capitalism had an inevitable tendency toward monopoly and cartels, and imperialism (the search for monopoly markets overseas) is an effect of this tendency. 

Lenin's position doesn't just build (explicitly) on Hobson's position, but it can also grant (not in Lenin's character) that counterfactually even if Lenin were wrong about the causal arrow, Hobson lacks a political or economic solution to the problem Hobson diagnoses.

Now, I had always assumed that robust anti-trust/anti-cartel policy is the neo-liberal response to the Hobson-Lenin debate. Obviously, this only works as a response, (i) if and only if (anti-cartel/trust) policy is kept at arm's length from political arena. And this helps explain the focus on the rule of law in neoliberal thought. A non-trivial part of lecture 7 is on the nature of the rechtsstaat according to Hayek, and Foucault is very much tracking this.

It's important to recognize that the critique of monopoly capitalism among neoliberals is not primarily economic or ground in efficiency. It's political -- this is especially clear among Ordos -- because monopolies have concentrated power in the market place and in political life.

Now, as it happens while (i) is necessary, it is not sufficient. For, (ii) the content, the juridical or economic theory guiding anti-trust/cartel policy also matters greatly. And while what follows is well understood among aficionados, but surprisingly little noticed among academics that use 'neoliberalism' rather freely, there was a major divergence within neoliberalism between the content of anti-trust policy. 

To simplify greatly (and see also this nice recent intro by Biebricher), the Ordoliberals were vigilant against concentration of economic paper. And while they failed to get all their views enshrined in law, they helped shape German and EU competition policy. At 'Chicago,' they initially agreed, but eventually two things happened: first in the late 1940s (in studies by Stigler and Nutter), they found empirically (even in the aftermath of a great war) that market concentration was much less than public and academic perception had thought and in most US industries not very disconcerting (I have done scholarship on this episode here). This suggested to, say, Milton Friedman (as Biebricher also notes) that the tendency toward monopoly was (absent political decisions) overblown. In addition, Harberger proposed a method of studying and quantifying the welfare loss to consumers of existing economic concentrations that suggested the problem was not very large. And so, the Chicago school and law & economics embraced a 'consumer welfare' model that turns out to be rather forgiving of monopoly in practice in industries that are not stagnant. (And even w/o the effects of industrial lobbying, this has shaped the more permissive US antitrust since.) It's only since the post Corona pandemic rise inflation and increased power by technology companies that we are seeing second thoughts on this issue Stateside.

Okay, with that in place let's go back to Foucault. In the quote above Schumpeter represents the Leninist insight in response to Hobson. In Foucault's re-telling Schumpter agrees with Hobson that markets do not have an "inherent to the economic process of competition" tendency toward monopoly (177). But the tendency is a social effect of, and caused by, the "concentration of decision-making centers of the administration and the state" (177). This concentration is, itself, the effect of the kind of modernization that modern capitalism promotes (and facilitates). This makes rent-seeking easier, and also the centralized decisionmakers of administration and the state have a natural desire for counterparts in industry (to reduce coordination costs), which, in turn, facilitates an extrinsic tendency toward monopoly (and so Socialism is inevitable, alas). Schumpeter then adds for good measure that socialism while not ideal may be a price worth paying.

Now, the ORDO response to this is really four-fold. The first, as Foucault notes, is to deny that the price is worth paying (178). But taken by itself that's not very interesting. The other parts are where the action is. 

The second part is, in fact, something Foucault misses in this context. But pretty straightforward: it's the embrace of federalism and anti-concentration of political power--and accompanying embrace of pluralism in social organization. This is most pronounced in Ropke's fondness for Suisse political life, and the strain of topics associated with Vitalpolitik Foucault does pick up on in earlier lectures. (I return to this below.)

To grasp the other two, it is worth recalling something about Eucken's scientific (and morphological) program. This is really diagnostic in character, and it is based on a limited number of taxonomic categories (about suppliers and demand side in each market segment) that when permutated exhaustively describe all possible market types. And what this does -- and this is the third part of the response to Schumpeter and the more orthodox communist -- is to motivate the denial that 'capitalism' is one thing with its inner laws. All existing economies are fundamentally mixed (with different kind of planning in them at different levels) in innumerable permutations characterized by what Foucault calls an "economic-institutional ensemble." (It's interesting how by interpreting Eucken as a kind of applied Husserlian, Foucault's use of 'ensemble' seems quite natural.) The denial that capitalism is a single thing or that there is a logic of capitalism is explicit in Eucken, by the way as Foucault notes earlier in the lecture (see pp. 164-165). 

As an aside, if there is no logic of capitalism, then there is also no crisis of capitalism that somehow is revealed in or manifest by an impasse today (165). And this reinforces the idea that I have already attributed to Foucault that in so far as there is a crisis of capitalism, it is better viewed as constitutively part of liberal society (recall the end of lecture 3 here.) 

Now, fourth, and this is the part that Foucault emphasizes, is their sense that the economy is an effect of law and the rules as the are understood in a historical and historically evolved context. And this entails that an economy can be socially constructed (up to a degree), and can ordered in the service of competition:

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 (178-179)

I think this is right. And Foucault's way of articulating this actually is compatible with the point about federalism (at the sub-national and European levels) that I made above. As Foucault notes social intervention here does not mean, in its pure form, a 'compensatory mechanism for absorbing or nullifying the possible destructive effects of economic freedom'* (160). Rather it/Gesellschaftspolitik is directed at nullifying the 'possible anti-competitive mechanism of society...or that could arise within society' (160). And with Foucault I would emphasize that this creates a kind of attitude might well create a hyper-active social/government policy.

Folded in this fourth point are non-trivial substantive views about the nature of law and how it ought to function (recall this post for the details). And these details matter greatly if one wants to understand why Foucault would call this a "birth" of "a new art of government" or the "renewal of the liberal art of government." So, I will return to that soon.

But here I want to close with an observation, which is really a kind of dilemma at the heart of ORDO-liberalism (although variants of it show up in other forms of liberalism, too). The response to Lenin and Schumpeter involves putting a number of key governmental functions at arms length from mechanisms that allow for rent-seeking (hence an independent judiciary, independent central bank, independent cartel office, etc.). And this means that these institutions require an esprit de corps and right mechanism to prevent capture by special interests. (R��pke is actually pretty explicit about the significance of such shared attitudes.)

Often among ORDOs the site of rent-seeking is articulated in terms of democratic politics, but conceptually and empirically that's not necessary. For example, central banks are organized in such a way that rent-seeking behavior by commercial banks is pretty much woven into their structure (and so bail-outs of the entirely predictable) and their independence has not prevented this. De facto, in some contexts putting an institution at arms length from democratic political decision makers actually makes 'capture' by some special interests easier. This is why I tend to emphasize, when articulating ORDO thought, that they are suspicious of all concentrated power.

But, of course, in medias res, once one discerns rent-seeking behavior by well connected insiders, it may be too late to do something about it with existing institutional mechanisms (and their internalized attitudes). And so, it is entirely foreseeable that sometimes only political and widespread social mobilization, when attempts to shape elite opinion have failed, can save the conditions of Gesellschaftspolitik.

 

 

*I use 'pure form' because in practice a minimal safetynet is common ground among this generation's neoliberals