TCS Webs Exclusive: Couze Venn writes on Foucault’s analysis of neo-liberalism: Implications for the present

In this special feature for TCS Online, Couze Venn analyses Michel Foucault’s conception of neoliberalism as located within an integral part of his analyses of the relationships between power, governmentality and political economy

From laissez-faire to neo-liberal ‘framework’

The critical reading of neoliberalism which Foucault developed in The Birth of Biopolitics elaborates a perspective which enables us to better understand the global world today from the standpoint of the possibility of overcoming present conditions. As such it is both prescient – being the edited version of lectures he gave in 1978-79 – and a challenging renewal of critical theory at a moment when contemporary societies face fundamental crises arising from the limits that the global world is approaching regarding climate change, the depletion of basic resources and economic growth. One should locate it as an integral part of his analyses of the relationships between power, governmentality and political economy, and thus part of the series of lectures from Society Must be Defended (2003 [1975]) which re-examines power in terms of the multiplicity of the relations of force that can be coded as ‘war’ or ‘politics’ and which political economy reconstituted in terms of biopolitics.  

Foucault’s approach is clear when at the start of his detailed interrogation of neo-liberalism, he asserts that ‘Neo-liberalism is not Adam Smith; neo-liberalism is not market society; neo-liberalism is not the Gulag on the insiduous scale of capitalism’ (BB: 131). This assertion is meant to distinguish his position from three approaches to neo-liberalism, namely, the economic point of view that it is ‘no more than the reactivation of old, secondhand economic theories’ (BB: 130), the sociological point of view that ‘it is just a way of establishing strictly market relations in society’ (ibid), and the political point of view which claims neo-liberalism to be ‘no more than a cover for a generalized administrative intervention by the state’ (ibid.).  This distinction marks a point of departure from conventional left analyses whilst opening up a position that shifts the gaze to genealogy, to conditions of possibility and to the practices constitutive of actual state of affairs. So, for him ‘The problem of neo-liberalism is rather how the overall exercise of political power can be modeled on the principles of a market economy … to discover how far and to what extent the formal principles of a market economy can index a general art of government’ (BB: 131).  The answer leads Foucault to a study of the transforations in classical liberalism that were necessary for neo-liberalism to become the new framework for this reordering of modern society. 
The first of these was ‘that of dissociating the market economy from the principle of laissez-faire’ (BB: 131). Much is at stake here which is unpacked in the lectures partly through a genealogical analysis of the emergence of classical political economy towards the end of the 18th century and its role in the reconstitution of the rationality underlying governmental action, and partly through reconstructing the steps whereby ordo-liberals in Germany, then neo-liberalism in America and in Britain and France, depart from key aspects of the discourse of liberalism. The first of these shifts for Foucault was the foregrounding of competition, rather than laissez faire, as organizing principle framed by the recognition that competition was not a ‘primitive and natural given, [but] … a structure with formal properties .. that assured, or could assure, economic regulation through the price mechanism’ (BB: 131).  The thinking for early neo-liberals and German ordo-liberals of the Freiburg School was that laissez-faire ‘naturally’ lead to monopolies and thereby the elimination of competition, which introduces distortions that disrupt the price mechanism as theorised by classical political economy  (BB: 134). So, on the one hand, a permanent vigilance was needed, and, on the other hand, related to vigilance, the need to establish the ‘rules of the game’ to ensure that competion  could operate as regulating mechanism allowing the market to determine the ‘true’ price and the rational allocation of resources. In any case the argument was that for concentration to turn into monopoly, there needed to be ‘the support of the state, laws, courts, public opinion’ (Foucault, citing Rustow, BB: 136). An important point is made here, taken up on several occasions, which underlines the fact that ‘laissez-faire’ itself is not ‘natural’ but requires conditions which a state must put into place, including laws, say about property and ownership, the framework of transactions, the regulation of labour and so on. Foucault’s analysis refers to the Walter Lippmann Colloquium of 1939 at which key thinkers of ordo-liberalism, associated with the Freiburg School (Ropke, Rustow, Hayek, von Mises in particular), debated the way forward for liberal capitalism in the light of the failures of laissez-faire exemplified in the great crash of 1929 and the critiques of liberal capitalism which people like Schumpeter had been elaborating. 
   There is an interesting history in the background to this shift, which Foucault’s genealogy reconstructs, partly in Birth of Biopolitics and partly in Security, Territory, Population. Its main lines concern the attempt by the Physiocrats in the 18th century to ground state rationality in the economy rather than in a notion of the power of the Prince or sovereign power, and Adam Smith’s arguments against the assumptions of the Physiocrats, particularly the assumption that the state must be able to have perfect knowledge of the market and its operations in order to act as arbiter. Smith for example argued that such perfect knowledge was not possible, given the complexity of market transactions, and the new spatial geography of commercial activity, which by the eighteenth century was colonial and global (Venn, 2006). The debate therefore was about the role of the state, a topic which has remained central for political economy ever since. For Smith, only the market itself could regulate itself, as if naturally, through the principle of the ‘invisible hand’, that is to say, a process whereby although the individual decisions of participants in the market are motivated by private interest alone, unconcerned by the common interest or general good, nevertheless things work for the benefit of all, as if an invisible hand were guiding the transactions to ensure this outcome (Smith, 1812: 352, 354, BB; 278, see Venn, 2009). Foucault later points out that the presumption of an ‘invisibility’ masking a kind of providential power ensuring the general interest as ultimate outcome implies that, for liberal political economy, the collective benefit must not be an objective for either the individual or the state (BB: 279-280). It is this laissez-faire assumption of naturalism – which can be thought of as the theological underside of liberalism – that ordo-liberals reject, though neo-liberals, especially in the USA, continue to uphold the principle of non-intervention by the state, or at least the minimal state, on the assumption that the market will naturally arrange things for the best.
   For early neo-liberals, the recognition that the state has a role to play, if qualified and reconstituted, limited to establishing the ‘framework’, but within the rationality of the market, focussed attention on social policy. The state for European neo-liberals must intervene at the level of civil society, not as ‘counterweight’ to the effects of inequality (BB: 142), but to socialise some elements of consumption such as medical and cultural goods, or to effect transfers in the form of family allowances and thus to prevent open conflict and ensure growth, which would finance more generous social policy (BB: 142).  So, the principle limiting state intervention is that there should be ‘no transfer of income from some to others’ (BB: 143), that is, no redistribution strategy – as in what the ordo-liberals call a ‘socialist social policy’ – because social policy should aim for a ‘vital minimum’and must operate through ‘privatization’ and the individualisation of risk (BB: 144). Foucault then remarks that ‘there is only one true and fundamental social policy: economic growth’ (BB: 144). I shall return to this at the end regarding the implications for a future economy that would need to be based on no aggregate growth.
  For now, it would be useful to examine the other elements of the neo-liberal regulation of society according to the model of the market which Foucault foregrounds, particularly, competition, enterprise society, homo oeconomicus or enterprise man, law. These shifts signal the following distinctions between classical liberal capitalism and neo-liberal order: ‘not so much the exchange of commodities as the mechanisms of competition … Not a supermarket society, but an enterprise society. The homo oeconomicus sought after is not the man of exchange or man the consumer; he is the man of enterprise and production … It is a point of intersection of a whole series of things’ (BB: 147). 

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