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White and Hogan on Hayek and Cassel on the Causes of the Great Depression

Published by Anonymous (not verified) on Sun, 27/12/2020 - 4:35pm in

Lawrence White and Thomas Hogan have just published a new paper in the Journal of Economic Behavior and Organization (“Hayek, Cassel, and the origins of the great depression”). Since White is a leading Hayek scholar, who has written extensively on Hayek’s economic writings (e.g., his important 2008 article “Did Hayek and Robbins Deepen the Great Depression?”) and edited the new edition of Hayek’s notoriously difficult volume, The Pure Theory of Capital, when it was published as volume 11 of the Collected Works of F. A. Hayek, the conclusion reached by the new paper that Hayek had a better understanding than Cassel of what caused the Great Depression is not, in and of itself, surprising.

However, I admit to being taken aback by the abstract of the paper:

We revisit the origins of the Great Depression by contrasting the accounts of two contemporary economists, Friedrich A. Hayek and Gustav Cassel. Their distinct theories highlight important, but often unacknowledged, differences between the international depression and the Great Depression in the United States. Hayek’s business cycle theory offered a monetary overexpansion account for the 1920s investment boom, the collapse of which initiated the Great Depression in the United States. Cassel’s warnings about a scarcity gold reserves related to the international character of the downturn, but the mechanisms he emphasized contributed little to the deflation or depression in the United States.

I wouldn’t deny that there are differences between the way the Great Depression played out in the United States and in the rest of the world, e.g., Britain and France, which to be sure, suffered less severely than did the US or, say, Germany. It is both possible, and important, to explore and understand the differential effects of the Great Depression in various countries. I am sorry to say that White and Hogan do neither. Instead, taking at face value the dubious authority of Friedman and Schwartz’s treatment of the Great Depression in the Monetary History of the United States, they assert that the cause of the Great Depression in the US was fundamentally different from the cause of the Great Depression in many or all other countries.

Taking that insupportable premise from Friedman and Schwartz, they simply invoke various numerical facts from the Monetary History as if those facts, in and of themselves, demonstrate what requires to be demonstrated: that the causes of the Great Depression in the US were different from those of the Great Depression in the rest of the world. That assumption vitiated the entire treatment of the Great Depression in the Monetary History, and it vitiates the results that White and Hogan reach about the merits of the conflicting explanations of the Great Depression offered by Cassel and Hayek.

I’ve discussed the failings of Friedman’s treatment of the Great Depression and of other episodes he analyzed in the Monetary History in previous posts (e.g., here, here, here, here, and here). The common failing of all the episodes treated by Friedman in the Monetary History and elsewhere is that he misunderstood how the gold standard operated, because his model of the gold standard was a primitive version of the price-specie-flow mechanism in which the monetary authority determines the quantity of money, which then determines the price level, which then determines the balance of payments, the balance of payments being a function of the relative price levels of the different countries on the gold standard. Countries with relatively high price levels experience trade deficits and outflows of gold, and countries with relatively low price levels experience trade surpluses and inflows of gold. Under the mythical “rules of the game” under the gold standard, countries with gold inflows were supposed to expand their money supplies, so that prices would rise and countries with outflows were supposed to reduce their money supplies, so that prices fall. If countries followed the rules, then an international monetary equilibrium would eventually be reached.

That is the model of the gold standard that Friedman used throughout his career. He was not alone; Hayek and Mises and many others also used that model, following Hume’s treatment in his essay on the balance of trade. But it’s the wrong model. The correct model is the one originating with Adam Smith, based on the law of one price, which says that prices of all commodities in terms of gold are equalized by arbitrage in all countries on the gold standard.

As a first approximation, under the Smithean model, there is only one price level adjusted for different currency parities for all countries on the gold standard. So if there is deflation in one country on the gold standard, there is deflation for all countries on the gold standard. If the rest of the world was suffering from deflation under the gold standard, the US was also suffering from a deflation of approximately the same magnitude as every other country on the gold standard was suffering.

The entire premise of the Friedman account of the Great Depression, adopted unquestioningly by White and Hogan, is that there was a different causal mechanism for the Great Depression in the United States from the mechanism operating in the rest of the world. That premise is flatly wrong. The causation assumed by Friedman in the Monetary History was the exact opposite of the actual causation. It wasn’t, as Friedman assumed, that the decline in the quantity of money in the US was causing deflation; it was the common deflation in all gold-standard countries that was causing the quantity of money in the US to decline.

To be sure there was a banking collapse in the US that was exacerbating the catastrophe, but that was an effect of the underlying cause: deflation, not an independent cause. Absent the deflationary collapse, there is no reason to assume that the investment boom in the most advanced and most productive economy in the world after World War I was unsustainable as the Hayekian overinvestment/malinvestment hypothesis posits with no evidence of unsustainability other than the subsequent economic collapse.

So what did cause deflation under the gold standard? It was the rapid increase in the monetary demand for gold resulting from the insane policy of the Bank of France (disgracefully endorsed by Hayek as late as 1932) which Cassel, along with Ralph Hawtrey (whose writings, closely parallel to Cassel’s on the danger of postwar deflation, avoid all of the ancillary mistakes White and Hogan attribute to Cassel), was warning would lead to catastrophe.

It is true that Cassel also believed that over the long run not enough gold was being produced to avoid deflation. White and Hogan spend inordinate space and attention on that issue, because that secular tendency toward deflation is entirely different from the catastrophic effects of the increase in gold demand in the late 1920s triggered by the insane policy of the Bank of France.

The US could have mitigated the effects if it had been willing to accommodate the Bank of France’s demand to increase its gold holdings. Of course, mitigating the effects of the insane policy of the Bank of France would have rewarded the French for their catastrophic policy, but, under the circumstances, some other means of addressing French misconduct would have spared the world incalculable suffering. But misled by an inordinate fear of stock market speculation, the Fed tightened policy in 1928-29 and began accumulating gold rather than accommodate the French demand.

And the Depression came.

21 March 1979: Foucault Returns to Ordoliberalism (XXXII)

Published by Anonymous (not verified) on Thu, 10/12/2020 - 12:10am in

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Adam Smith, Hayek

Let’s go back to the theme of German liberalism, or ordoliberalism. You recall that in this conception—of Eucken, Röpke, Müller-Armack, and others—the market was defined as a principle of economic regulation indispensable to the formation of prices and so to the consistent development of the economic process. What was the government’s task in relation to this principle of the market as the indispensable regulating function of the economy? It was to organize a society, to establish what they call a Gesellschaftspolitik such that these fragile competitive mechanisms of the market can function to the full and in accordance with their specific structure. Such a Gesellschaftspolitik was therefore orientated towards the formation of a market. It was a policy that had to take charge of social processes and take them into account in order to make room for a market mechanism within them. But what did this policy of society, this Gesellschaftspolitik have to consist in for it to succeed in constituting a market space in which competitive mechanisms could really function despite their intrinsic fragility? It consisted in a number of objectives which I have talked about, such as, for example, avoiding centralization, encouraging medium sized enterprises, support for what they call non-proletarian enterprises, that is to say, broadly, craft enterprises, small businesses, etcetera, increasing access to property ownership, trying to replace the social insurance of risk with individual insurance, and also regulating all the multiple problems of the environment.
Obviously, this Gesellschaftspolitik includes a number of ambiguities and raises a number of questions. There is the question, for example, of its purely optative and “light” character in comparison with the heavy and far more real processes of the economy. There is also the fact that it entails a weight, a field, an extraordinarily large number of interventions which raise the question of whether they do in fact correspond to the principle that they must not act directly on the economic process but only intervene in favor of the economic process. In short, there are a number of questions and ambiguities, but I would like to emphasize the following: in this idea of a Gesellschaftspolitik there is what I would call an economic-ethical ambiguity around the notion of enterprise itself, because what does it mean to conduct a Gesellschaftspolitik in the sense this is given by Röpke, Rüstow, and Müller-Armack? On one side it means generalizing the “enterprise” form within the social body or social fabric; it means taking this social fabric and arranging things so that it can be broken down, subdivided, and reduced, not according to the grain of individuals, but according to the grain of enterprises. The individual’s life must be lodged, not within a framework of a big enterprise like the firm or, if it comes to it, the state, but within the framework of a multiplicity of diverse enterprises connected up to and entangled with each other, enterprises which are in some way ready to hand for the individual, sufficiently limited in their scale for the individual’s actions, decisions, and choices to have meaningful and perceptible effects, and numerous enough for him not to be dependent on one alone. And finally, the individual’s life itself—with his relationships to his private property, for example, with his family, household, insurance, and retirement—must make him into a sort of permanent and multiple enterprise. So this way of giving a new form to society according to the model of the enterprise, or of enterprises, and down to the fine grain of its texture, is an aspect of the German ordoliberals’ Gesellschaftspolitik.
What is the function of this generalization of the “enterprise” form? On the one hand, of course, it involves extending the economic model of supply and demand and of investment-costs-profit so as to make it a model of social relations and of existence itself, a form of relationship of the individual to himself, time, those around him, the group, and the family. So, it involves extending this economic model. On the other hand, the ordoliberal idea of making the enterprise the universally generalized social model functions in their analysis or program as a support to what they designate as the reconstruction of a set of what could be called “warm” moral and cultural values which are presented precisely as antithetical to the “cold” mechanism of competition. The enterprise schema involves acting so that the individual, to use the classical and fashionable terminology of their time, is not alienated from his work environment, from the time of his life, from his household, his family, and from the natural environment. It is a matter of reconstructing concrete points of anchorage around the individual which form what Rüstow called the Vitalpolitik. The return to the enterprise is therefore at once an economic policy or a policy of the economization of the entire social field, of an extension of the economy to the entire social field, but at the same time a policy which presents itself or seeks to be a kind of Vitalpolitik with the function of compensating for what is cold, impassive, calculating, rational, and mechanical in the strictly economic game of competition.
The enterprise society imagined by the ordoliberals is therefore a society for the market and a society against the market, a society oriented towards the market and a society that compensates for the effects of the market in the realm of values and existence. This is what Rüstow said in the Walter Lippmann colloquium I have talked about: “We have to organize the economy of the social body according to the rules of the market economy, but the fact remains that we still have to satisfy new and heightened needs for integration." This is the Vitalpolitik. A bit later, Röpke said: “Competition is a principle of order in the domain of the market economy, but it is not a principle on which it would be possible to erect the whole of society. Morally and sociologically, competition is a principle that dissolves more than it unifies.” So, while establishing a policy such that competition can function economically, it is necessary to organize “a political and moral framework,” Röpke says. What will this political and moral framework comprise? First, it requires a state that can maintain itself above the different competing groups and enterprises. This political and moral framework must ensure “a community which is not fragmented,” and guarantee cooperation between men who are “naturally rooted and socially integrated.”-Michel Foucault, 21 March, 1979,  translated by Graham Burchell, Lecture 10, The Birth of Biopolitics, 240-243

The quoted passage, really a mini-essay, is Foucault's attempt to set up one side of the comparison between the German Ordos and the Chicago-school variants of neo-liberalism. In broad outlines Foucault is summarizing his earlier interpretation of the ORDOs, and we may see in this, just sound pedagogic repetition. Even so, this return to Freiburg, and the earlier Lippmann colloquium, also allows Foucault to be more precise in his own analysis and to deepen his treatment of the relationship between the Ordos' conception of Gesellschaftspolitik and their approach to Vitalpolitick. Foucault had touched on this, briefly, in his sixth lecture on 14 February (see p. 148). But clearly he felt the inadequacy of his earlier treatment. So, the repetition is not merely restatement, but also needed improvement in light of, I submit, the larger theme of the lecture course (that is the liberal art of government in relation to biopolitics).

And the key point Foucault wishes to make is that in one crucial respect, or at least a major theme in, the ORDOS' thinking is that it is not centered on let's say context-free, individual choice at all. But rather on embedding individuals into, and constructing the preconditions for, what we may call umwelts suitable to the needs and scale of humans. (We may call this the Protagoras commitment in Ordoliberalism.) The point then is to create environmental/social conditions such that meaningful choice is possible. And one way meaningfulness is operationalized by the ORDOs is by the circumstance of meaningful feedback mechanisms between choices (as causes) and their effects ('the individual’s actions, decisions, and choices to have meaningful and perceptible effects,").

In addition to creating the conditions of meaningful choice -- which echoes Adam Smith's conception of liberty --, the ORDOS favor, second, social circumstances in which the individual cannot be dominated by large businesses (and other institutions). That is to say, it must be possible to have meaningful exit options in the market place and other important social orders.

Somewhat surprisingly, and as I noted in commenting on lecture 5 (of 7 February), Foucault does not remind the audience that this second circumstance echoes and reinforces the ORDOS' political understanding of the, quoting now (recall) Mestmäcker, "restraining power" purpose and mechanisms of anti-trust policy, which is designed to prevent concentration of political power, and rent-seeking, by corporations and other favored social institutions through vigilant promotion of competition in the market place. 

That is to say, the commercial enterprise is supposed to be vulnerable to exit from below and horizontally from competitors. In both cases the independent state has responsibility to create these umwelt conditions. Foucault is right to wonder to what degree one can expect the state to have the will and competence to get this program right. 

Now, for those habituated in reading political thinkers of the past in terms of 'left' and 'right' (etc.), there is no doubt that the vitalpolitik of the ORDOS has distinctly illiberal socially conservative overtones connected to corporatist, even catholic traditions of social thought. And in light of the American experience of the conservative-libertarian alliance over (the policing of) family values, so ably documented (recall here; here) by Melinda Cooper.

I don't think this is how Foucault is reading them. But in the lecture he has a strange reticence to explain what the political purpose of their vitalpolitick is. So what follows is a bit speculative, but it is informed by Foucault's analysis of the ORDOS response (in lecture 5 and here) to liberal defeat in the 1930s. And, what I want to claim is that the justification for their vitalpolitik shares, and to some degree anticipates, Hannah Arendt's analysis that totalitarianism was made possible by, to simplify greatly, the mechanisms of alienation and isolation, reinforcing a stifling loneliness or solitude (personal and spiritual) characteristic of modernity. And on this picture totalitarianism is a kind of gigantic rein of the false that becomes a coping mechanism for this fragile existence.*

So, that's to say, the ORDOS choices becomes fully explicable if we see them not just as addressing the problem of how to design countervailing institutions that allow the individual to make meaningful choices and prevent corporate rent-seeking, but also, and primarily, as grounded in their analysis of, and a response to, the rise of totalitarianism. And while I do not want to ignore the ways in which the ORDOS are indebted to Marxist ideas of alienation and Republican ideals about non-domination, we cannot understand their analysis if we remove from it the lived reality of the democratic victory not just of caesarianism, but totalitarianism.

And so, while strictly speaking, Foucault is not wrong to say that the "enterprise society imagined by the ordoliberals is therefore a society for the market and a society against the market, a society oriented towards the market and a society that compensates for the effects of the market in the realm of values and existence;" what gives the ORDOS project its urgency and also its political salience, is the specter of totalitarianism.  The point of the “warm” moral and cultural values is not just to put a humane face on Homo Oeconomicus, but it is to prevent, to create inoculation against (viz., the road to serfdom) the rise of Hitlerism, which is what happens in the dissolution effectuated by wrongly directed, that is, monopolistic competition.

I should stop here. To offer this interpretation of the ORDOS is not to ignore the down-side risks of and instabilities (Foucault's "ambiguities") in their approach. But it is to note that Foucault's comparison between the ORDOS and Chicago is hampered by the fact that the latter, but not the former, take, as Foucault himself noted (recall) in lecture 9, the survival of liberal political life for granted. And while Foucault is clearly indifferent to that, we cannot afford that luxury.

 

 

*Walter Lippmann had come very close to grasping this point already in Public Opinion, and it is lurking in various places in the The Good Society, which gave raise to the Lippmann colloquium. But in the latter work, he decides, or so I claim, to make liberalism itself a kind of spiritual enterprise.

14 March 1979: Foucault on the Neo-Liberal Criticism of Ricardo and Marx (XXIX)

Published by Anonymous (not verified) on Fri, 27/11/2020 - 1:30am in

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Adam Smith, Hayek

[T]he American neo-liberals say this: It is strange that classical political economy has always solemnly declared that the production of goods depends on three factors—land, capital, and labor—while leaving the third unexplored. It has remained, in a way, a blank sheet on which the economists have written nothing. Of course, we can say that Adam Smith’s economics does begin with a reflection on labor, inasmuch as for Smith the division of labor and its specification is the key which enabled him to construct his economic analysis. But apart from this sort of first step, this first opening, and since that moment, classical political economy has never analyzed labor itself, or rather it has constantly striven to neutralize it, and to do this by reducing it exclusively to the factor of time. This is what Ricardo did when, wishing to analyze the nature of the increase of labor, the labor factor, he only ever defined this increase in a quantitative way according to the temporal variable. That is to say, he thought that the increase or change of labor, the growth of the labor factor, could be nothing other than the presence of an additional number of workers on the market, that is to say, the possibility of employing more hours of labor thus made available to capital. Consequently there is a neutralization of the nature itself of labor, to the advantage of this single quantitative variable of hours of work and time, and basically classical economics never got out of this Ricardian reduction of the problem of labor to the simple analysis of the quantitative variable of time. And then we find an analysis, or rather non-analysis of labor in Keynes which is not so different or any more developed than Ricardo’s analysis. What is labor according to Keynes? It is a factor of production, a productive factor, but which in itself is passive and only finds employment, activity, and actuality thanks to a certain rate of investment, and on condition clearly that this is sufficiently high. Starting from this criticism of classical economics and its analysis of labor, the problem for the neo-liberals is basically that of trying to introduce labor into the field of economic analysis. A number of them attempted this, the first being Theodore Schultz, who published a number of articles in the years 1950–1960 the result of which was a book published in 1971 with the title Investment in Human Capital. More or less at the same time, Gary Becker published a book with the same title, and then there is a third text by Mincer, which is quite fundamental and more concrete and precise than the others, on the school and wages, which appeared in 1975.
In truth, the charge made by neo-liberalism that classical economics forgets labor and has never subjected it to economic analysis may seem strange when we think that, even if it is true that Ricardo entirely reduced the analysis of labor to the analysis of the quantitative variable of time, on the other hand there was someone called Marx who ... and so on. Fine. The neo-liberals practically never argue with Marx for reasons that we may think are to do with economic snobbery, it’s not important. But if they took the trouble to argue with Marx I think it is quite easy to see what they could say [about] his analysis. They would say: It is quite true that Marx makes labor the linchpin, one of the essential linchpins, of his analysis. But what does he do when he analyzes labor? What is it that he shows the worker sells? Not his labor, but his labor power. He sells his labor power for a certain time against a wage established on the basis of a given situation of the market corresponding to the balance between the supply and demand of labor power. And the work performed by the worker is work that creates a value, part of which is extorted from him. Marx clearly sees in this process the very mechanics or logic of capitalism. And in what does this logic consist? Well, it consists in the fact that the labor in all this is “abstract,” that is to say, the concrete labor transformed into labor power, measured by time, put on the market and paid by wages, is not concrete labor; it is labor that has been cut off from its human reality, from all its qualitative variables, and precisely—this is indeed, in fact, what Marx shows—the logic of capital reduces labor to labor power and time. It makes it a commodity and reduces it to the effects of value produced. Now, say the neo-liberals—and this is precisely where their criticism departs from the criticism made by Marx—what is responsible for this “abstraction.” For Marx, capitalism itself is responsible; it is the fault of the logic of capital and of its historical reality. Whereas the neo-liberals say: The abstraction of labor, which actually only appears through the variable of time, is not the product of real capitalism, [but] of the economic theory that has been constructed of capitalist production. Abstraction is not the result of the real mechanics of economic processes; it derives from the way in which these processes have been reflected in classical economics. And it is precisely because classical economics was not able to take on this analysis of labor in its concrete specification and qualitative modulations, it is because it left this blank page, gap or vacuum in its theory, that a whole philosophy, anthropology, and politics, of which Marx is precisely the representative, rushed in. Consequently, we should not continue with this, in a way, realist criticism made by Marx, accusing real capitalism of having made real labor abstract; we should undertake a theoretical criticism of the way in which labor itself became abstract in economic discourse. And, the neoliberals say, if economists see labor in such an abstract way, if they fail to grasp its specification, its qualitative modulations, and the economic effects of these modulations, it is basically because classical economists only ever envisaged the object of economics as processes of capital, of investment, of the machine, of the product, and so on. Michel Foucault, 14 March, 1979,  translated by Graham Burchell, Lecture 9, The Birth of Biopolitics, 219-222. [emphasis added)

For readers familiar with Foucault's Birth of Biopolitics, it may be thought strange I have resisted plunging into his account of the relationship between genetics, development, and human capital theory which are at the heart of Lecture 9. For what seemed like a "bit of science fiction" (227) has finally arrived and will become more salient in the aftermath of the pandemic and asymmetric response(s) to unfolding climate change. (I don't wish to avoid it, but in re-reading Foucault I am always struck by moves that seem recurrently timely.) Rather, I return to material I partially quoted and skipped last time.  Today, I focus on his rational reconstruction of a historical debate that can help us situate a lot of debates about neoliberalism.

Foucault is very clear that from the perspective of Chicago economics (the American neo-liberalism of Schultz, Becker, and Mincer), the classical economics that comes out of Ricardo is a garden path (or degenerative research program). When it comes to the implied anthropology of capitalism, and, especially the significance of human capital in it, Chicago is closer to the earlier Adam Smith in some respects than Ricardo and other classical and neo-classical economists. This is why George Stigler is often quoted as saying "it's all in Adam Smith." 

As an aside, what I have said in the previous paragraph is clearly not true of Milton Friedman who was very much inspired by Marshall. But Friedman does not figure in Focuault's analysis of Chicago at all, and, unlike Stigler, also cannot be simply assimilated to it. To the point jokingly, despite the importance of (recall) Simons to Foucault's narrative, in Foucault's hands Friedman is not a characteristic (Chicago school) neoliberal.*

But as Foucault notes (225), by building on (recall) the Robbins definition of economics (as optimization under given constraints and in light of scarcity), Chicago also re-establishes the significance of a utilitarian homo oeconomicus who maximizes utility or Max U (in McCloskeys' memorable phrase). And this echoes the Benthamite (so-called English radical) tradition (recall lecture, p. 41) that merged with classical economics in the wake of Ricardo and James Mill. That is to say, a major sub-theme of Foucault's whole lecture series on the Birth of Biopolitics is a kind of natural history of the changing conceptualizations of homo oeconomicus: (i) in the classical period starting with Ricardo he is the man of exchange or man the consumer in terms of satisfaction/pursuit of needs (p. 225); (ii) in the neoliberal period, especially in the (recall) ORDO senses, "he is the man of enterprise and production." (147, lecture 6) And (iii) at Chicago he is also "an entrepreneur," but now, especially, "an entrepreneur of himself," who develops and produces/maintains his own human capital as a source of earnings (226), even a possible earning stream into the future (230). The previous sentence simplifies in a crucial way: because as the Chicago program develops, as Foucault shows in the remainder of the lecture, it starts to be able to calculate the contribution of the family, culture, schooling, and (yes) genetics into the constitution of this auto-entrepreneur.

And so, what Chicago does, on Foucault's account, is to merge this re-invented utilitarian homo oeconomicus with a kind pre-Ricardian Smithian sensibility about human nature. And, to look ahead a bit beyond Foucault, this synthesis turns out to be both fertile and unstable as the experimental and behavioral psychologists explore the Smithian sensibility and see how at odds it is with the given utilitarian framework. (This previous sentence is most manifest in the work of Vernon Smith and his school, who understands himself as returning to the Smithian tradition.)

Now, recall that the distinct element of the ORDO response to Marxism is, in part, to say that even if the Marxists are right that monopoly is inevitable under the logic of pure capitalism, society -- and especially an independent state -- can prevent this outcome by an expansive understanding of anti-trust law whose twin aims are to prevent economic monopolies and to prevent rent-seeking behavior from would be powerful economic agents. (I am not claiming that is the whole story.) By contrast, one effect of the Chicago critique of Ricardian classical economics is, as Foucault notes, that it simultaneously can accept the Marxist critique of Ricardo/classical economics and de-fang its significance so much that it can practically ignore it.**

And the way it defangs it, on Foucault's creative account, is by way of a (implicit--since this is all Foucault's rational reconstruction) genealogy of error (this is the highlighted part above) in which the Marxist critique of capitalism is itself shaped by the classical elements, which it understands as ideology, it has inherited. And both classical economists and their marxist critics look at large scale processes that make value a kind of abstraction (even though they disagree over the source and nature of this abstraction.) And in response, the neo-liberals change the topic: and focus on "what they call
substitutable choices, that is to say, the study and analysis of the way in which scarce means are allocated to competing ends, that is to say, to alternative ends which cannot be superimposed on each other." (222) And rather than explaining (the source of) value, or thereby the exploitation of a class, the focus now becomes "how the person who works uses the means available to him." (223)

The effect of this, as I noted last week, is an important moral pay-off. In the Chicago neo-liberal approach, there is a methodological and epistemological perspective that takes the "point of view of the worker and, for the first time, ensure that the worker is not present in the economic analysis as an object—the object of supply and demand in the form of labor power—but as an active economic subject." (223) That is to, the Chicago school manages to bring its tools into line with important moral and political commitments of liberalism. 

To put the point in previous paragraph in moral and rhetorical terms. The utilitarianism of the radical tradition has a tendency to treat economic agents as means. But in the neo-liberal Chicago school economic individuals are treated as agents with their own distinctive aims. And so the scientist can take their choices seriously as choices and the moralist, society, or policy-maker can hold them accountable for their choices. That this shift in perspective also generates serious moral and political problems once policy aims to program/nudge it is evident.  But in the short term it has the rhetorical advantage that when the Marxist says 'exploitation,' and has to invoke a whole conceptual structure to explain why, the neo-liberal says 'choices' and can respectfully point at what we do. And, perhaps unexpectedly, this rhetorical move turned out to be attractive not just to the traditional economic right, but also politically to all those (but now I am echoing Melinda Cooper here; and here) who wished to emancipate from the hegemony of the 'traditional' wage-earning family structure.

 

*By Foucault's lights, Friedman is surely also not an Ordo or Austrian neoliberal. But see here.

**Whether this has to with snobbery, the after-effects of McCarthy, or the more plausible sense that engaging with Marx was best left to mathematical erudites like Samuelson (1971), I leave for another time.

14 March 1979: Foucault on Two Contexts of Neoliberalism, Shallowness, and Hayekian Utopia (XXVII)

Published by Anonymous (not verified) on Tue, 10/11/2020 - 10:18pm in

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Hayek

There are some major differences between European and American neo-liberalism. They are also very obvious, as we know. I will just recall them. In the first place, American liberalism, at the moment of its historical formation, that is to say, very early on, from the eighteenth century, did not present itself, as in France, as a moderating principle with regard to a pre-existing raison d’État, since liberal type claims, and essentially economic claims moreover, were precisely the historical starting point for the formation of American independence.  That is to say, liberalism played a role in America during the period of the War of Independence somewhat analogous to the role it played in Germany in 1948: liberalism was appealed to as the founding and legitimizing principle of the state. The demand for liberalism founds the state rather then [sic?] the state limiting itself through liberalism. I think this is one of the features of American liberalism.
Second, for two centuries—whether the issue has been one of economic policy, protectionism, the problem of gold and silver, or bimetallism, the question of slavery, the problem of the status and function of the judicial system, or the relation between individuals and different states, and between different states and the federal state—liberalism has, of course, always been at the heart of all political debate in America. We can say that the question of liberalism has been the recurrent element of all the political discussions and choices of the United States. Let’s say that whereas in Europe the recurrent elements of political debate in the nineteenth century were either the unity of the nation, or its independence, or the Rule of law, in the United States it was liberalism.
Finally, third, in relation to this permanent ground of liberal debate, non-liberalism—by which I mean interventionist policies, whether in the form of Keynesian style economics, planning, or economic and social programs—appeared, especially from the middle of the twentieth century, as something extraneous and threatening inasmuch as it involved both introducing objectives which could be described as socializing and also as laying the bases of an imperialist and military state. Criticism of this non-liberalism was thus able to find a double foothold: on the right, precisely in the name of a liberal tradition historically and economically hostile to anything sounding socialist, and on the left, inasmuch as it was a question not only of criticism but also of daily struggle against the development of an imperialist and military state. Hence the ambiguity, or what appears to be an ambiguity in American neo-liberalism, since it is brought into play and reactivated both by the right and the left.
Anyway, I think we can say that for all these completely banal reasons I have just mentioned, American liberalism is not—as it is in France at present, or as it was in Germany immediately after the war—just an economic and political choice formed and formulated by those who govern and within the governmental milieu. Liberalism in America is a whole way of being and thinking. It is a type of relation between the governors and the governed much more than a technique of governors with regard to the governed. Let’s say, if you like, that whereas in a country like France disputes between individuals and the state turn on the problem of service, of public service, [in the United States] disputes between individuals and government look like the problem of freedoms. I think this is why American liberalism currently appears not just, or not so much as a political alternative, but let’s say as a sort of many-sided, ambiguous, global claim with a foothold in both the right and the left. It is also a sort of utopian focus which is always being revived. It is also a method of thought, a grid of economic and sociological analysis. I will refer to someone who is not an American exactly, he is an Austrian whom I have spoken about several times, but who then lived in England and the United States before returning to Germany. Some years ago Hayek said: We need a liberalism that is a living thought. Liberalism has always left it to the socialists to produce utopias, and socialism owes much of its vigor and historical dynamism to this utopian or utopia creating activity. Well, liberalism also needs utopia. It is up to us to create liberal utopias, to think in a liberal mode, rather than presenting liberalism as a technical alternative for government. Liberalism must be a general style of thought, analysis, and imagination.--Michel Foucault, 14 March, 1979,  translated by Graham Burchell, Lecture 9, The Birth of Biopolitics, 217-219.

I noted recently, in a comment on the lecture 8 that Foucault has a kind of historicist sensibility toward neoliberalism. There, without explanation, Foucault treats original ORDO-neoliberalism as a kind of organic political solution to circumstances.  Whereas the application of the copy of neoliberalism in France during the apparently more ordinary political crisis of the 70s is treated as disruptive and radical. In this ninth lecture he explains his conceptual decision. The Ordos and Chicago-school neo-liberalism are in a political-cultural sense indigenous to the national art(s) of government because liberalism is a 'legitimizing principle' in their national contexts. Of course, in the German context the Ordos also help invent the very, particular kind of idea as legitimizing principle in state formation whereas in the American context the Chicago school inherits it from a pre-existing semi-national tradition. I use 'semi-national' in the previous sentence because American liberalism, with its founding fathers and Lincolnesque re-founding is itself, at least partially, cosmopolitan in character and draws richly from Roman writings, native-American practices (see here;* recall), English, French (Montesquieu!), and Scottish thought (etc.).

So, Foucault offers a distinction between two contexts in which neo-liberalism is practiced: (i) where liberalism is itself an indigenous legitimizing principle of government--that is, political jurisdictions where liberalism is a constitutive principle of political life; (ii) where liberalism merely plays a moderating or ameliorative role in political life. 

And while I am primarily interested in how this distinction impacts Foucault's analysis, it is important to see how polemical this claim is in the French context since it rejects the idea that any of the French revolutions (note the plural) form a genuine rupture with what came before. And Foucault treats the rich history of French liberal theorizing as continuous which pre-existing French political life. It also means that French neo-liberalism will be understood as a rupture or radical (as Foucault does).

One other effect of the distinction is that in places where neo-liberalism is indigenous in the sense used above, it need not concern itself with foundational questions about its own legitimation. For "Liberalism in America is" and can presuppose "a whole way of being and thinking." (How quaint that reads now!) By this I do not mean that it is merely economic in character. As noted in the same lecture (recall), on Foucault's view, Chicago economics understands itself not merely as a critique of the welfare state, but it understands itself also as a critique of a kind of illegitimate social contract that underpins it. But in its criticism of 'collectivism,' it can take for granted -- and this gives it at times a seemingly shallow character -- certain background commitments to liberalism inherited from its semi-national tradition. Interestingly enough, as Ordo-liberalism became confident about the survival of the Bonn settlement, it takes on more characteristics of this apparent shallowness. 

I do not mean to deny there is something reductive about Foucault's interpretation of American liberalism which subtly get identified with economic claims ("since liberal type claims, and essentially economic claims moreover, were precisely the historical starting point for the formation of American independence.") The Bill of Right are here downgraded relative to the right to property and the Commerce Clause.

Be that as it may, I do not mean to suggest that American liberalism becomes shallow in Foucault's hands because he recognizes, almost alone among twentieth century commentators (and something missed by nearly all his would-be-followers and those that use 'neoliberalism' in the sense popularized by David Harvey; recall here, too) that the Chicago criticism of of Keynesianism is not just economic in character but, driven by concern over its role in "laying the bases of an imperialist and military state." It's for this reason Foucault's emphasis (recall) on Simons as the founder of Chicago must be explained. And part of the drama of the Chicago school's evolution is how this was lost.

And this means, in practice, that what looks like a public goods problem in France, will be understood in terms of competing freedoms Stateside. Now, one fascinating feature, and here I anticipate some of Foucault's later lectures, is that the later rise of law and economics and the re-invention (via Robbins) of homo oeconomicus at Chicago (which in some senses is a break with Simons and Hayek), and its revival and re-interpretation of, as Foucault noted in lecture 2, English (post-Benthamite) radicalism (that is, utilitarianism) also changes the character of how public services are understood in America. And, oddly enough, as we will see, by analyzing governmental practice in terms of maximizing utility, by generating a 'technical alternative' the Chicago school's effect on American public life is to turn it into being more like the French administrative state! 

And just as Foucault is about to launch into his much more concrete analysis of then contemporary Chicago economics, with a focus on Becker, he reminds his audience of the significance of Hayek.  And, again, rather than turning to polemics (which his audience wants), Foucault mentions Hayek (who had then already visited Chile for the first time) not to discredit Chicago or neoliberalism, but rather to note that if one one wishes to understand why -- even in a period of stagflation, and crisis -- liberalism as "living thought" a globalizing manner of thinking "with a foothold in both the right and the left" the contemporary author most salient to understand is Hayek. Foucault is freely quoting from Hayek's (1949) "The intellectuals and Socialism.

This is an essay in which Hayek confronts the influence of intellectuals on public life in democracies in the long run. For Hayek intellectuals are not philosophers or scientist/experts (who invent and test ideas), but "secondhand dealers in ideas." In the essay, Hayek tracks a distinction, also familiar from Arendt, between the public real of opinion, in which intellectuals act as opinion-makers, and other institutions (justice, science, perhaps markets, etc.) where truth is produced. The production of intellectuals is one of the tasks of universities (even if they can become populated by intellectuals).+

Now, one reason to mention Hayek's (1949) essay in this context is also clear. For it is the place where Hayek explicitly confronts the kind of shallowness of thought characteristic of liberalism on behalf of liberalism. For Hayek the call to a liberal utopia means that "the philosophic foundations of a free society" must be made "once more a living intellectual issue." It is somewhat extraordinary that Foucault inserts this call into his lecture just before he starts describing the manner in which (late) Chicago school liberalism becomes a matter of technique. And one cannot help but wonder if Foucault is alerting his audience to his own double role, as intellectual and philosopher

 

*A belated thank you to Kyle White for calling my attention to Young's essay years.

+Hayek writes, "Nobody, for instance, who is familiar with large numbers of university faculties (and from this point of view the majority of university teachers probably have to be classed as intellectuals rather than as experts) can remain oblivious to the fact that the most brilliant and successful teachers are today more likely than not to be socialists, while those who hold more conservative political views are as frequently mediocrities. This is of course by itself an important factor leading the younger generation into the socialist camp." Increasingly, universities have become sites of expertise.

Otto Bauer and the Origin of the Functionalist Account of European Federation

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But because it is precisely from the progress of social production and the international division of labor that the principle of nationality emerges, it is soon confronted by its own limits. Already within capitalist society, ever-closer interaction links the different states; a generally valid form of regulation of this interaction becomes even more necessary, a legal system the validity of which extends beyond the borders of the individual states. The increased interaction between states resulting from the development of the capitalist economy, the emergence of the great modern states, and the expansion of the power of the European nations over the colonial territories abroad has given rise to international law. In the first instance, the states regulate their relations through treaties. To the old pacts of alliance and peace are added agreements concerning the laws of land and naval warfare. Economic relations also gradually come to be regulated by agreements between states. Thus emerges the diverse system of treaties that constitutes the foundation of modern international law: agreements concerning inland and maritime shipping, trade and customs duties, railway traffic, postal and telegraph systems, and measures, coinages, and weights. But international law soon reaches beyond the sphere of immediate economic interests. Thus, today agreements between states regulate the policing of sanitary conditions, in particular in regard to the struggle against epidemics, and the struggle against both the white and black slave trade; thus, there is the attempt to initiate through agreements parallel systems of regulating civil and procedural law.
Out of all these agreements there emerges a series that creates a quite new structure, the international authority. Wherever the foundation of common administrative activity is to be established, the states create a common organ, an authority that, by virtue of its international mandate, is permanently to fulfill the tasks assigned it by the treaties between states. Such a character is borne by the international health commissions, the international commissions for the monitoring of the financial administration of individual states, the international rivers commissions. These are granted rights that are otherwise accorded to sovereign states and that even the theory of the state has therefore attempted to construe as a particular form of the state, as riverstates.
But by far the most important among the international authorities are the so-called administrative communities. These have been emerging since the 1860s and are based on agreements to which every state is in principle free to accede. Among them are, for example, the International Postal Union, the International Telegraph Union, the Community of States for the Protection of Commercial Property, the Association of States for the Protection of Literary and Artistic Works, the Union of States for the Struggle Against the Seizure of Slaves, the Central Office of International Transport, the Office of the Standing Sugar Commission, and so on. Some of these authorities have already been granted judicial power, for example, the Health and Rivers Commissions, the offices of the International Postal Union and the Community of Railways; in addition, since 1899 The Hague has housed the permanent Court of Arbitration.
As imperfect as these individual structures are, they carry within them the healthy seed of new social organisms. The interaction between the different states has already become so close that the law and organs of the state are proving to be no longer enough. The direction of development is toward a legal system that stands above state rights and binds the states themselves; it is creating organs the activities of which will no longer be hindered by any state frontier. State treaties and international authorities today satisfy this need. But they are beset by an internal contradiction. The community of international law has statutes and organs, but has not itself yet been constituted as a legal entity. We have statutes and are ignorant of the collective will that establishes them and whose power guarantees them; we have international organs  and are ignorant of the body whose organ they should be.
In socialist society, the agreements between the polities and the international organs will without doubt rapidly grow in number. At the same time, the increasing interaction between the different polities will in the first instance compel the implementation of the international division of labor.
However, international regulation to a far greater extent will become possible and necessary only when the social processes that are today composed of innumerable decisions and actions of individuals are consciously regulated by the different polities. For example, large migrations will be possible only on the basis of international treaties. Finally, in socialist society the planned regulation of international interaction will also be necessary due to the fact that every disappointed expectation, every inappropriate calculation affecting the individual merchant, the individual emigrant, will quite directly affect the whole society. One can imagine, for example, the consequences when a socialist polity organizes itself for the production of a good that is to be exchanged against the products of the other nations and finds this expectation disappointed. The international division of labor is impossible if the exchange of goods and interaction is not directed and regulated on an international basis.
Interstate agreements and administrative communities will thus ultimately not be able to meet the needs of the society of the future. Statutes that are not guaranteed by an organized collective will and organs that cannot be regarded as the organ of any entity will not suffice for this society. It will ultimately have to constitute the community of international law as a legal entity and provide it with permanent representatives. This will come about the day the national polities establish an international office to which they entrust supreme authority over the exchange of goods between the polities and thereby indirectly also supreme authority over the production within every polity. Just as the development of capitalist commodity production linked the manorial estates and the towns isolated during the Middle Ages to form the modern state, so too will the international division of labor create in socialist society a new type of social structure above the national polity, a state of states, into which the individual national polities will integrate themselves. The United States of Europe will thus be no longer a dream, but the inevitable ultimate goal of a movement that the nations have long since begun and that will be enormously accelerated by forces that are already becoming apparent.-Otto Bauer (1907 [1924]) The question of Nationalities and social democracy, [Die Nationalitätenfrage und die Sozialdemokratie]. translated by Joseph O'Donnell, University of Minnesota Press  pp. 412-414 (emphases in original).*

A few months ago Christopher Brooke alerted me to the significance of Bauer's work, and the passage above in particular, in the context of a series of posts on the historical and conceptual roots of modern federalism and its complex relationship to modern imperialism. When the book appeared Bauer was not yet a leading political figure and much of the excitement and turmoil of his life was still ahead. He was not, however, obscure, because Lenin makes a point of alerting his reader to the fact Bauer is one of his targets as one of “most prominent theoreticians” of the (bankrupt) Second International in his Preface to the French and German Editions Imperialism, the Highest Stage of Capitalism A Popular Outline.

It is noticeable that Bauer does not mention Hobson's Imperialism because there are many striking similarities in their analysis of the economic roots of (nationalist forms of) imperialism (recall here; here). And while Bauer is clearly marxist/socialist (as Hobson is not), not unlike Hobson, he sees in imperialism the possible seeds of something better. And in so doing Bauer articulates what we may call a functionalist account of the rise of federalism. And such functionalism is one of the ongoing, ruling commitments of the political and bureaucratic class of the EU. (I am unsure how well known Bauer's influence on this is--feel free to send literature my way!) So, it is worth taking a look at. 

Bauer's book has its roots in Bauer's PhD in law at the University of Vienna. And this is visible in the crucial passage quoted above. Internal law is rooted in capitalist development which gives rise to international trade. International trade generates the demand for international law along multiple dimensions (regulation of warfare and commerce). And with growing commerce, including commerce as a consequence of imperial conquest (this is part of Bauer's larger argument in the book), the range and complexity of international commercial law expands. 

Interestingly enough, it is the complex nature of some of modern commerce that gives an impulse to new forms of international collaboration, a "new structure, the international authority. Wherever the foundation of common administrative activity is to be established, the states create a common organ, an authority that, by virtue of its international mandate, is permanently to fulfill the tasks assigned it by the treaties between states." These international authorities have important characteristics: (i) they are created by states (ii) who create or delegate juridical authority to them; (iii) they are functionally, that is domain specific, organized;  (iv) they are technocratic in character, that is, a place where under the guise of authoritative law experts meet to solve coordination and standard setting problems; (v) they rely on the member states (with juridical/military power) for enforcement; (vi) they are heterogenous in character (not all have the same juridical power and internal structure). And (vii) in virtue of their existence, the character of states and their self-conception (that's the point of some turning into 'riverstates') and state sovereignty changes.

Crucially, for Bauer, the effect of (vii) is also to make room for, (viii), that is, there is a teleology toward both (a) a larger edifice of international law built into these new structures and (b) a (minimalist) federal state. It is pretty clear this directedness is a consequence of the economic forces of capitalism as it has turned into globalization and imperialism. 

Strikingly, the teleology is not automatic. For while, a spontaneous order ("innumerable decisions and actions of individuals") gives rise to the need for coordination and standardization, political guidance is needed for the organization and transformation of the state system ("consciously regulated by the different polities.") And what he has in mind is not just more treaty-making, but the establishment of a political (and federal) representative structure ground in international law ("constitute the community of international law as a legal entity and provide it with permanent representatives.")

If I understand him right this higher authority is also limited in character. Its jurisdiction is fundamentally economic ("the exchange of goods"). Now, the glue that would hold such a limited European Union together is, on the one hand, socialism, and, on the other hand, economic-juridical integration. 

What's striking about Bauer's approach is that it is quite clearly not wholly modeled on (say the way Kant and Adam Smith are inspired by) The United States of America, where republican/representative government comes conceptually first (or close to first alongside commercial connectedness). In Bauer's approach, politics remains in a sense nationalist (and socialist), but integrated in (and subordinated to) a larger juridical structure devoted to coordination and problem solving. (Kind of what Austrian liberals were hoping from the empire.) I use 'in a sense' because in socialism there are no incompatible ends, so it (the higher authority) need not do more (and certain kinds of politics are abolished). In addition, although this is not explicit in Bauer, socialism provides a common civic religion that ties the whole together.

It would be worth exploring what the pre-history of Bauer's ideas are. Brooke has given me hints to suggest that Cobden may be very important for this part of the story. But I close with the thought that one way to understand the present tragedy of the EU is that even more than Hayek (recall here; and here) or Mises (recall) and Kautsky (here; and recall Luxemburg's criticism) it has de facto adopted Bauer's vision (he died in 1938) without a glue like socialism that can help coordinate ends and act as a civic religion. 

 

*The book first appeared in 1907. But the translation is from the second (1924) edition, which has a new preface. 

14 March 1979: Foucault on Social Contracts, the welfare state, and American Neoliberalism (XXVI)

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The second contextual element is of course the Beveridge plan and all the projects of economic and social interventionism developed during the war. These are all important elements that we could call, if you like, pacts of war, that is to say, pacts in terms of which governments—basically the English, and to a certain extent the American government—said to people who had just been through a very serious economic and social crisis: Now we are asking you to get yourselves killed, but we promise you that when you have done this, you will keep your jobs until the end of your lives. It would be very interesting to study this set of documents, analyses, programs, and research for itself, because it seems to me that, if I am not mistaken, this is the first time that entire nations waged war on the basis of a system of pacts which were not just international alliances between powers, but social pacts of a kind that promised—to those who were asked to go to war and get themselves killed—a certain type of economic and social organization which assured security (of employment, with regard to illness and other kinds of risk, and at the level of retirement): they were pacts of security at the moment of a demand for war. The demand for war on the part of governments is accompanied—and very quickly; there are texts on the theme from 1940—by this offer of a social pact and security. It was against this set of social problems that Simons drafted a number of critical texts and articles, the most interesting of which is entitled: “The Beveridge Program: an unsympathetic interpretation,” which there is no need to translate, since the title indicates its critical sense. Michel Foucault, 14 March, 1979,  translated by Graham Burchell, Lecture 9, The Birth of Biopolitics, 216

I have deliberately gone slowly through Birth of Biopolitics because I did not want to skip straight to Foucault's discussion of 'American neo-liberalism,' (215-216; especially the celebrated treatment of Becker). In this I echo Foucalt's deliberate procedure. When he arrives at lecture nine, he announces, at its start, "Today I would like to start talking to you about what is becoming a pet theme in France: American neo-liberalism." Foucault knows -- and we have seen him repeatedly remind his audience -- that what he has to say about ORDO-liberalism is of little interest to his audience, which he often castigates as being in the grip of cliches. Their real interest is to take on the new ascending, intellectual hegemony located in Chicago and in the public eye associated with Pinochet, etc. Foucault never mentions Pinochet or the Chicago Boys. His interest is not to contribute to cold-war dialectics; he want, as he says repeatedly through the lecture course, more immanently, discuss liberal govermentality toward which liberal democracies are -- and here Foucault exhibits the political sensitivity of a poet -- already moving. And while Milton Friedman has already won the first of the Chicago nobels, in 1979, Thatcher's first election victory is still a few weeks away, it is by no means obvious that a discussion of Chicago, Becker, and Hayek is then simultaneously prophetic.

In the 'banal' (216) part of his lecture, Foucault ties American-neoliberalism to the Chicago school. He writes, "The first, fundamental text of this American neo-liberalism, written in 1934 by Simons, who was the father of the Chicago School, is an article entitled “A Positive Program for Laissez-Faire.” (216) The first remarkable feature here is that Foucault will define the school in terms of a set of fundamental texts. This is a natural move for a philosophical historian, of course. But it is odd claim for somebody focused on practice (i.e., the art of governmentality). So, for example, Foucault ignores the two features of Chicago method, that, in its early self-understanding, can be said to define it as a school: (i) Chicago price theory (the same term is used for a famous introductory course and text-book);* (ii) a commitment to Marshallian partial equilibrium. 

The second remarkable feature is that Frank Knight is completely effaced from the narrative of Chicago. Given Foucault's interests this is no surprise. But it is worth noting: the Chicago legacy of focusing on uncertainty and a kind of meta-methodological sensitivity toward, and the political embeddedness of, the limitations of economics as a science are completely effaced. I don't mean to suggest that the focus on Simons (recall here; here), who was by then long dead and undoubtedly obscure to a European audience, is a mistake.**

The passage quoted at the top is the second of "three" (banal) contextual "elements" against which american neo-liberalism is defined: "Keynesian policy, social pacts of war, and the growth of the federal administration through economic and social programs—together formed the adversary and target of neoliberal thought, that which it was constructed against or which it opposed in order to form itself and develop." (217) But as usual with Foucault, his asides are incredible illuminating. 

It may seem that to oppose the Beveridge plan is to oppose social planning. And undoubted social planning -- collectivism in the jargon of the age -- is one of the targets. But Foucault recognizes that the legitimacy of social planning is ground in a new kind of social contract. In Foucault's presentation the need for a social contract is felt by the elites, who recognize that after a decade of economic suffering calling people up for war may require justification that  goes beyond ordinary war propaganda. 

As an aside, Foucault here subtly historicizes the renewal of the social contract tradition then a decade underway by those who had been foot-soldiers (Rawls) in that great war. Rather than focusing on Rawls' religious roots, one can better understand this renewal as a (renewed) demilitarization of the social contract.

Be that as it may, to oppose Beveridge is not just to oppose social planning, but to oppose the very terms of the war-time social contract. For this social contract trades the non-negligible risk of death (or the death of a loved-one/breadwinner) in war for an obligation toward other forms of (social) security.+ That is to say, to criticize Beveridge is not just to criticize economic policy, but the very conceptualization of the polity. 

Why might one wish to do so? For one, in this hostile perspective (and it seems Foucault kind of endorses it), the very conceptualization of the welfare state is a war-state. This is a trope going back to the Vienna critic of Neurath (and Bismarck), but here it is part of the very conceptualization of the legitimacy of the welfare state. Second, it is by no means obvious that this social contract is liberal. And the problem is not so much the welfare state side of the equation (the benefit), but the war-side (the cost). The very point of a liberal state is the preservation of (bare) life. This is why, as Nick Cowen alerted me, life becomes before "liberty and the pursuit of happiness!"

In his rhetorically charged polemic, Simons (1945) presciently himself calls attention to this, "Written by a nominal Liberal, radical-reactionary in its substantive proposals, libertarian in its rhetoric, thissecond Beveridge Report may forecast or largely determine the course of British postwar policy." (212) Part of Simons' ire is that Beveridge is clothed as liberal, but substantively it is an odd mix of radicalism (that is, as Foucault had already explained in lecture 2, Benthamite utilitarianism) and reactionary-ness (that is, committed to war and hierarchy). And, indeed, Simons recognizes that for all its noble social ends, Beveridge plan is also a contribution to survival of (declining) political imperialism, "England's commercial power is to be mobilized and concentrated, to improve her terms of trade, to recruit satellites for a tight sterling bloc, and to insulate herself and them from unstable, unplanned economies, i.e., from the United States." (Simons 1945: 213)

That is to say, on the Simons interpretation of Beveridge, which Foucault shadows even amplifies beyond Simons' own rhetoric (notice the language of the "demand for war"), American neo-liberalism understands itself not merely as a critique of the welfare state, but it understands itself as a critique of an illegitimate social contract that underpins it; for from a truly liberal perspective, one cannot really, if one has minimal Hobbesian intuitions (one cannot contract away the natural right to mere self-preservation), consent to the pact inscribed in Beveridge. And, in fact, Simons is clear that if executed fully, the Beveridge plan would involve in open-ended trade wars leading to the real kind (Simons 1945: 227-228).** The point had been foreshadowed in lecture 5 (see what Foucault says about Ropke on p. 110).

Let me close with a remark. In what follows, Foucault is largely uninterested in Friedman (the focus is on Becker then still much more obscure). But the 'banal' point he has made in terms of Simons' criticism of Beveridge helps explain the increasing popularity of Friedman in the 60s and 70s. For Friedman was one of the most eloquent and visible critics of the draft (during the Vietnam war). His argument (inspired by Simons but not identical) was as much economic as it was political, "large armed forces plus the industrial complex required to support them constitute an ever-present threat to political freedom."   

 

 

*Of course what price theory, which evolved over the decades, is may well be thought contested. Glen Weyl does a good job offering a definition, even if anachronistic, that captures most of what falls under it: an "analysis that reduces rich (e.g. high-dimensional heterogeneity, many individuals) and often incompletely specified models into ‘prices’ sufficient to characterize approximate solutions to simple (e.g. one-dimensional policy) allocative problems."

+There is subtle points lurking here. First, Beveridge was British, and one may think the United Kingdom's entry in WWII was existential, and so really did not require some such pact. But Foucault's eyes are on the US here, and its entry was to a considerable degree a matter of choice. Second, it's interesting that Foucault focuses on Simons here, since Hayek was also a critic of the Beveridge plan, and Foucault had already noted, in an earlier lecture, the significance of Hayek's movement from Austria to LSE to Chicago.

**I return to Simons before long. In his criticism of Beveridge, Simon notes, en passant, "one must plan for free-market controls just
as carefully as (indeed, more so than) for socialization." (213) This is a point worth returning to.

7 March 1979: Foucault on the Radicalness of Liberal Governmentality (XXV)

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First of all, we should not forget that the diffusion of the German neo-liberal model has taken place in France on the basis of a strongly state-centered, interventionist, and administrative governmentality, with precisely all the problems this entails. Second, the attempt to introduce and implement the German neo-liberal model in France takes place in a context of an initially relatively limited, and now acute economic crisis which is the motive, pretext, and reason for the introduction and implementation of the model and, at the same time, what checks it. Finally, for the reasons I have just mentioned, the third characteristic is that the agents of the spread and implementation of this model are precisely those who administer and direct the state in this context of crisis. Because of all this, the implementation of the German model in France involves a whole range of difficulties and a sort of awkwardness mixed with hypocrisy, examples of which we will see. Michel Foucault, 7 March, 1979,  translated by Graham Burchell, Lecture 8, The Birth of Biopolitics, 192

According to Foucault, the twentieth century is characterized by two kinds of "reduction of state governmentality." (191) One is through  the "growth of party governmentality," as occurred most dramatically in fascist and communist states.* Lecturing in 1979 the Marxist kind was not yet something of the past.

As an aside Foucault is also having a bit of fun here because for Max Weber the mediating function of parties (and party bosses) is characteristic of nineteenth century developing liberal democracies.  (Of course, that is compatible with the rule of law, which, by contrast, true party governmentality erodes.) This is a core commitment of twentieth political science (see, e.g., Schattschneider). As I have noted before, this feature of liberal democracy has been eroded by the development of the open primary (this started to happen in Foucault's life-time).

Liberal democracies, by contrast, "regimes like our own" experiment with the second "form of reduction" and "attempt to find a liberal governmentality." (191) And it is very important for Foucault's argument that liberal governmentality has two different templates: one that he calls the "German model," which is the ORDO liberal version he has articulated in the first seven lectures.  This ORDO model is ""being diffused, debated, and forms part of our actuality, structuring it and carving out its real shape, is the model of a possible neoliberal governmentality." (192) The other approach is the Chicago school.*

Now, what's crucial -- and what has taken me a long time to discern -- is that Foucault makes a rather sharp distinction between the way the German model functions in its origin and what happens to it when (ahh) its copy is diffused and 'implemented' elsewhere; the implementation is, simultaneously, a "radicalization," (207). But Foucault does not make the distinction (between original and copy) fully explicit because he does not repeat the analysis of the previous weeks to draw out all of the contrast.

For, in a seeming paradox, while the ORDOs confronted a much more distinctive circumstance, the collapse of Nazi Germany and occupation, Foucault treats original ORDO-neoliberalism as a kind of organic political solution to circumstances. (Here he implicitly kind of tracks Röpke conception of what ought to happen as factual.) Whereas the application of the copy of neoliberalism in France during the apparently more ordinary political crisis of the 70s is treated as disruptive. And so lurking in Foucault there is a surprisingly nineteenth century assumption in which ideas and society form a kind of organic whole.**

One way to track the most fundamental difference is that in Germany, post Stunde Null, the ORDOs had to invent (recall lecture 4) a new kind of sovereign power, which simultaneously made the NAZIs illegitimate, and that would constitute the legitimacy of the Bonn Republic by the maintenance of certain basic rights by way of the rule of law and economic growth with social characteristics. Whereas in France, liberal governmentality is imported by leading technocrats of a legitimate state in economic crisis. And for Foucault this starts to happen around 1970 or "from 1970 to 1975 or anyway in the decade now coming to a close." (195) 

As another aside, Foucault here very quietly, and prudently, skips the collapse of the third republic, and all the turbulence of the fourth republic, and the founding of the fifth, not to mention '68. Or to be more precise, he mentions some of it in the lecture, but from a vantage point, as if, of relatively little import. Given some of the flamboyant political persona associated with Foucault, it is  no surprise that his prudence when discussing his own society goes so unremarked so often. And, he turns the rise of Giscard into a turning moment in French history (197). But it means one misunderstands him easily.

Now, for Foucault the awareness among the technocrats that France is in economic crisis is triggered by the 1973 oil crisis. Foucault's interpretation of it is worthy of attention, but I skip to the effect of it (which gives a sense of his analysis of it):  

Liberalism, that is to say, the total, unrestricted integration of the French economy in an internal, European, and world market, was the choice which appeared, first of all, as the only way to be able to rectify the erroneous investment choices made in the previous period because of interventionist objectives, techniques, and so on; so, liberalism was the only means of correcting these investment errors by taking into account the new factor of the high cost of energy, which was in reality only the formation of a market price for energy. (196)

Crucially, then, the diffusion of the ORDO template means in France not just a correction on Keynesian countercyclical dirigisme, but more importantly an insertion of France into a new kind of political economy in which energy costs would be (potentially) high and a submission (to use a Hayekian phrase) to the discipline of impersonal market forces. For students of the EU Foucault's observation is key because it suggests that from a French political perspective, the EU's Delors era (starting in 1985) originates in a change of intellectual climate of the 70s. 

Foucault's discussion of French experience with social security and the negative income tax anticipates the far more elaborate treatment (and much to recommend) of American neoliberal (recall) family policy by Melinda Cooper (Family Values).  But while interesting today I skip  to Foucault's conclusion:

Full employment and voluntarist growth [of the Keynesian era] are renounced in favor of integration in a market economy. But this entails a fund of a floating population, of a liminal, infra- or supra-liminal population, in which the assurance mechanism will enable each to live, after a fashion, and to live in such a way that he can always be available for possible work, if market conditions require it. This is a completely different system from that through which eighteenth and nineteenth century capitalism was formed and developed, when it had to deal with a peasant population which was a possible constant reservoir of manpower. When the economy functions as it does now, when the peasant population can no longer ensure that kind of endless fund of manpower, this fund has to be formed in a completely different way. This other way is the assisted population, which is actually assisted in a very liberal and much less bureaucratic and disciplinary way than it is by a system focused on full employment which employs mechanisms like those of social security. Ultimately, it is up to people to work if they want or not work if they don’t. Above all there is the possibility of not forcing them to work if there is no interest in doing so. They are merely guaranteed the possibility of minimal existence at a given level, and in this way the neo-liberal policy can be got to work. (207)

Now, what's important, and remarkable, is that Foucault is not claiming to unmask. On his presentation, the new system is not hidden. It's a self-conscious construct of French technocracy explicit in "the speeches, writings, and texts." (194) It involves the creation of a floating population that is not starving, but available (note the modality) for possible work. And the intention is to keep this population above subsistence by a safety-net. The pay-off is both a more efficient and productive economy that is capable of giving consumers what they wish in a high cost energy environment as well as reduce the amount of compulsion in society. Because unlike the friends/partisans of taylorist social democracy, Foucault tacitly grants their critics that the previous era of full employment also involved a lot of forced homogeneity.+

Since plans for negative income tax and basic income are still thought radical (despite the earned income tax credit and equivalencies elsewhere), we must acknowledge that Foucault's diagnosis is in some sense premature. And as Cooper shows, when neoliberal ideas where implemented, when political winds followed, they involve non-trivial amount of force with an ideology of moral hazard--many more sticks than carrot we might say. From our vantage point, then, neoliberalism never arrived fully (because it was hijacked by intrinsically conservative ideology). 

 

 

 

*In this lecture Foucault makes it seem initially as if the roots of the Chicago school are in the German model. But while not denying the significance of Hayek and other exhiles, he quickly corrects that, "it can also be seen as a phenomenon which is absolutely endogenous to the United States." (193)

**There is more evidence of this in the lecture, because he treats American neoliberalism as homegrown (see the previous note).

+Critics of neoliberalism forget that at heart it is an emancipatory project that was welcomed by those who wished to break the traditional gender/family/sex roles enforced by the state. 

On Liberal Transition Problems: Popper, Lippmann, and Scheall's Hayekian Political Epistemology (I)

Published by Anonymous (not verified) on Wed, 21/10/2020 - 9:17pm in

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Hayek, Politics

First, there are those epistemic burdens that, starting from a relatively illiberal context, would-be liberalizing policymakers must overcome in order to realize an effective liberal order. From a political-epistemological standpoint, a complete defense of liberalism (indeed, of any political system) requires more than establishing the relative epistemic simplicity of policymaking within such a system; it must be shown that a political system of the relevant kind can be realized through some combination of deliberate policymaking and spontaneous forces. Without such an argument – which Austrian economists and liberals more generally do not have – the case for liberalism (or whatever) is left ungrounded. In effect, the Austrians are left in the same position with respect to an effective liberal order as their socialist rivals are with regard to an effective centrally planned economy: with few reasons for thinking such a system a practicable, real-world possibility. That policymaking is less epistemically burdensome in more liberal contexts is immaterial if there is no reason to think such contexts can be realized, because policymakers’ epistemic burdens are too heavy for, and extant spontaneous forces inadequate to, their realization. Liberals need a theory of liberal transitions, that is, a theory of how more liberal contexts can be realized starting from relatively illiberal circumstances through a combination of deliberate policy action and spontaneous forces.
Second, there are those epistemic burdens that policymakers within liberal orders must overcome in order to maintain the effectiveness of the existing order. I suggest that the long-term effectiveness of a liberal order hinges on policymakers acquiring the know-how necessary to maintain in perpetuity the rule of law, one of the fundamental institutional conditions of an effective liberal order; however, those who succeed in acquiring wealth and power in an institutional environment of the rule of law, private-property rights, and competitive markets are often able to abrogate the rule of law in their own favor, while those less successful and less powerful remain subject to it, a circumstance that quite naturally fosters resentment and undermines belief in such institutions among the latter classes and tends to eventually lead to calls for the replacement of liberal social institutions with less liberal ones. In order to sustain an effective liberal order, policymakers must surmount the epistemic burden of acquiring the know-how necessary to avoid this outcome.
I argue that Austrians have not paid adequate attention to these epistemic burdens.  Indeed, it is not clear that Austrian economists have yet recognized just  how burdensome policymaking of the liberalizing and liberal order-sustaining varieties can be. However, the fact that the Austrians’ political-epistemological approach is applicable to the liberal political systems they themselves prefer and thus suggests a lacuna in their case for liberalism is no argument for illiberal government. If the problem of policymaker ignorance is a problem for liberals, it is no less a problem for defenders of other political systems, within which policymakers’ epistemic burdens are necessarily much heavier, because of the more extensive and more difficult objectives they are charged with deliberately realizing in less liberal contexts. Scott Scheall (2020) F.A. Hayek ad the Epistemology of Politics, Routledge 76-77

Scheall offers an excellent, philosophical immanent critique of what is now known as 'classical' liberal political philosophy (or Austrian political economy) and, thereby, renews it. And while some bits involve a creative interpretation of Hayek in context, it would be a shame if only Hayek-friendly folk read this; the book is fruitful to a wider audience interested in both low level public policy and more significant political transitions. This is so, even though at times the fact that it is an immanent critique means it fails to engage with already existing discussions in other parts of political philosophy.* And he lacks discussion of research in public administration. 

In particular, I am thrilled that Scheal puts transition problems at the heart of theorizing about political life. Recall that (here, here, and here), I understand the transition problem, as [I] how to move from an unjust status quo to an ideal (or vastly improved) state and, in particular, with a population raised under bad institutions. In fact, as (recall) Serene Khader taught me, there are (at least) three species of the problem: the first version [A] really turns on the challenge of finding or developing the right sort of people (with the right education or dispositions, etc.) to get us from here to there and then to have the skills and temperament to make the new circumstances work out well. The second version [B] is to create mechanisms such that the incentives of policy-makers line up with the goals to be pursued and the true interests of people/constituents. The third version is [C] that a population raised under bad institutions may rationally prefer a bad status quo if getting to the better state involves high costs to them.

Perfectionists, including many illiberal types (Plato, Al-Farabi, etc.) tend to be focused on [I]. The liberal tradition, inspired by Machiavelli, has focused primarily on [B] and judging by recent Nobel prizes in economics is still going strong. And progressives/feminists (including liberal progressives/feminists) focus on [C]. Scheall himself is responding to folks focused on [B] (and he ignores the other versions of the transition problem). But in it he is also very sensitive to the fact that [II] at each step of the way from an imperfect status quo to a better destination involves a transition problem and that [III] even maintaining a status quo over time is, in some respects, similar to a transition problem (in the sense of [II]).+ And this point generalizes to all transition problems.**

Okay with that set up, I can state that Scheall's core claim is that the problem of policy-maker ignorance has logical priority to aligning policy-maker incentives with her constituents or society's needs. The core argument is summarized as follows:

[O]n the assumption that some principle like ought implies can is true and practically useful as a guide to action, then the word “can” in such principles must mean deliberately can. Other candidate meanings for the word “can” render such principles practically useless. Thus, by reductio, “can” in ought implies can (and related principles) means deliberately can. But, by definition, deliberately can just means knows enough to. Therefore, ought implies knows enough to: nothing that we cannot know enough to deliberately realize can be an obligation. The nature and extent of our ignorance place brackets around our potential obligations. Epistemic burdens are logically prior to other normative considerations. Since this is a general fact about human decision-making in all contexts, it follows that ignorance is logically prior to incentives in specifically political contexts. (3; Emphases in original).

Before I get to meat of today's post, two qualifications: (a) I don't think Scheall is right to assume that ought implies can applies to all policy contexts. Some policy decisions and ends are not normative nor obligations, and not understood as such by decision-makers. (Pick your favorite pork-barrel spending!) So, the way feasibility enters into these decisions may be more like other forms of instrumental reasoning (with cost-benefit analysis, opportunity costs, etc.). In addition, (b) it may at times make sense to pursue infeasible/utopian ends in virtue of the fact that in some environments aiming too high is better than aiming at a target within reach. But notice that in (a) and (b) epistemic burdens do not disappear (although how to think about (b) is not trivial). So, let's leave these aside.

Now, I will return to Scheall's set up, but today I close with one line of criticism. Throughout the book Scheall assumes that if policymakers lacks the knowledge to pursue an end, they shouldn't pursue it. For, when, the "do-nothing policy is aimed at no particular end, it bears no epistemic burden." (98) [I am not sure this adheres to his own insight [III] unless we sharply distinguish between do-nothing policy aimed at status quo and aimed at no particular end.] But that raises the problem that we might never discover what works.

Here's a version of what I have in mind. Let's say one agrees with Popper that policy should be informed by the spirit of or guided by trial-and-error. I pick Popper because Hayek and Popper have claimed to be kindred spirits on these matters.++ That is to say, only if errors are permitted can policy-makers and policy-scientist discover empirically what works, what are unexpected side-effects, and make mid-way adjustments. The more subtle point here is that Scheall tends to think of each policy-decision as a one-off: if you have the knowledge (ceteris paribus) you may act for an otherwise moral end, if you lack the knowledge (ceteris paribus) you may not.

But a Popperian treats public policy as many decisions extended over time. And by doing so a public policy is conceived as learning both what the means are and (but some other time more argument) what the ends are. That is to say, and this is in the spirit of Scheall, Popperian public policy treats much policy-making as instances of [II].

One final point,  Scheall's approach as articulated has very little space for policy-makers that learn over time. And that's in part because he tends to think of them as elected politicians/officials/assemblies with short time-spans and lots of epistemic burdens. But the modern state has tried to address this: it is full of bureaucracies and dedicated research agencies that are, if institutional memory is allowed to be built up, capable of learning over time.*** This is why some kinds of cutting government can be self-undermining.

And it's not just bureaucrats. Popper was a careful reader of Lippmann. And as Lippmann noted (recall) one benefit of the 'revolving door' is that it would create a kind of permanent circulation of college graduates from universities into government; and technical, government bureaucrats returning regularly to train and teach at universities, etc. Now, it's true that this, in turn, raises other familiar problems (rent-seeking, how to decide which experts to trust), but this is why Scheall's work on [II-III] is so important. To be continued.

 

*So, for example, there is by now a huge literature on feasibility in political philosophy (Lawford-Smith 2013; Lawford-Smith & Gilabert 2012; Southwood & Brennan, etc.) 

+So, for example, recall that Bruno Latour and Graham Harman tend to think of maintaining public goods as a matter of (de-politicized) technique whereas politics is decision under great deal of (Knightian) uncertainty. Scheall's argument suggest this distinction is a matter of degree (or not permanent, as Latour & Harman recognize [recall also here]).

**Scheall does not engage with the voluminous work prompted by the theory of second best (and nth best, etc.) While that literature is not Austrian in character, it gives a sense of how to begin to think about transitions under constraints. 

++This is not to deny that Popper's stance is more receptive to a generally more activist policy stance than Hayek's. 

***Here the problem of incentives may well be more important than Scheall allows.

Hayek on the Epistemic Benefits of (Class) Diversity; the conditions of Radical Change in Spontaneous (Dis)-Order

Published by Anonymous (not verified) on Mon, 12/10/2020 - 7:02am in

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Adam Smith, Hayek

Where a real change in the law is required, the new law can properly fulfill the proper function of all law, namely that of guiding expectations, only if it becomes known before it is applied.
The necessity of such radical changes of particular rules may be due to various causes. It may be due simply to the recognition that some past development was based on error or that it produced consequences later recognized as unjust. But the most frequent cause is probably that the development of the law has lain in the hands of members of a particular class whose traditional views made them regard as just what could not meet the more general requirements of justice. There can be no doubt that in such fields as the law on the relations between master and servant,36 landlord and tenant, creditor and debtor, and in modern times between organized business and its customers, the rules have been shaped largely by the views of one of the parties and their particular interests—especially where, as used to be true in the first two of the instances given, it was one of the groups concerned which almost exclusively supplied the judges. This, as we shall see, does not mean that, as has been asserted, ‘justice is an irrational ideal’ and that ‘from the point of rational cognition there are only interests of human beings and hence conflicts of interests’,37 at least when by interests we do not mean only particular aims but long-term chances which different rules offer to the different members of society. It is even less true that, as would follow from those assertions, a recognized bias of some rule in favour of a particular group can be corrected only by biasing it instead in favour of another. But such occasions when it is recognized that some hereto accepted rules are unjust in the light of more general principles of justice may well require the revision not only of single rules but of whole sections of the established system of case law. This is more than can be accomplished by decisions of particular cases in the light of existing precedents.--Hayek (1973)  Law, Legislation and Liberty, 88-89 (emphasis added).

I have a tendency to read Hayek's political theory, especially the parts that treat the rule of law as a spontaneous order, as flirting with a variety of potentially troubling forms of status quo bias. So, it was good to be reminded of the quoted passage above.* Hayek explicitly notes three sources in which an evolved common law can have reached a kind of cul-de-sac such that it requires "radical change" (a term Hayek does not use frequently): (i) an erroneous application of legal principles or a judgment based on errors of fact; (ii) or that some legal principles generate unjust consequences over time; (iii) perversions of judgment -- a failure to be properly impartial -- due to class bias. On the previous page, Hayek also recognizes (iv) that circumstances may change faster than the law does--here he echoes Lippmann's focus on technology generating a spirit of legal adaptation.

And, in fact, (i-ii-iii) are often connected; these can endure a very long time. These facts are clear from Hayek's own footnote 36, where Hayek cites, without qualification, the nineteenth century economist, Jevons (one of the co-inventors of marginalism), as follows,‘The great lesson we learn [from 650 years of legislation of English Parliaments] is that legislation with regard to labour has almost always been class-legislation. It is the effort of some dominant body to keep down a lower class, which had begun to show inconvenient aspirations.’ (from The State in Relation to Labour (London, 1882), p. 33. Not to put too fine point on it, but Hayek explicitly recognizes that in some areas the vaunted rule of law, which has generated reliable expectations, has entrenched class warfare for much of its existence.+ 

Because of Hayek's focus on possible solutions that won't work, and the intriguing thought that a spontaneous order can require "radical change," it is easy to miss, and so especially worth noting that Hayek also explicitly recognizes that it is difficult for judges to become truly impartial when they are surrounded by like-minded with sympathy for their own. (They become effectively what used to be known as a 'faction.') That is to say, I read Hayek as suggesting that class bias isn't noticed as class bias in homogenous population of judges and legislators. That is to say, Hayek recognizes that, at least momentarily, class diversity may be constitutive, epistemically, for the discovery of more general, and more impartial principles of justice.

My own view (see pp. 202-208) is that Adam Smith was inclined to support one of the measures rejected by Hayek: "a recognized bias of some rule in favour of a particular group can be corrected only by biasing it instead in favour of another." But Hayek prefers that in practice impartiality is aimed at. So, how can this be generated on his account?

It seems to me that when it comes to the selection of judges (and legislators) some kind of carefully announced and cautiously implemented temporary affirmative action or extra effort to recruit for especially salient forms of diversity can be derived from Hayek. Obviously this is not required on Hayek's account if society has other means of discovering 'more general principles of justice' and making this discovery felt on the legislative process and case law decisions.

Undoubtedly there are Hayekian arguments against more general use of affirmative action. But if the class of legislators/judges has the character of a faction, that is, it systematically serves the group interests from which judges are appointed, then this can be a useful remedy that does not seem ruled out by Hayek.

I recognize that the previous paragraphs will be met with disbelief. But notice that Hayek recognizes that the existing rule of law is not sacrosanct and can require quite serious remedy, including the abandonment and overturning of well established common law. That is itself very costly. So, from the perspective of preventing such radical, destabilizing change, preventing a homogeneous judiciary may well be welcome.**  

 

 

 

 

 

*HT: Scott Scheall (2020) F.A. Hayek and the Epistemology of Politics, 102 note 5, which emphasizes that Hayek recognizes that existing rules of conduct may well require revision. More about this important book some other time.

+This requires us to distinguish between the idea of the common law as a spontaneous order, which provides Hayek with a kind of existence proof, and really existing common law.

**I am unfamiliar with Hayek's views on judicial appointments.

7 March 1979: Foucault on The Demands of Critical Morality (XXIV)

Published by Anonymous (not verified) on Mon, 05/10/2020 - 10:33pm in

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Hayek

I have dwelt so long on this problem of German neo-liberalism first of all for methodological reasons, because, continuing what I began to say last year, I wanted to see what concrete content could be given to the analysis of relations of power—it being understood, of course, and I repeat it once again, that power can in no way be considered either as a principle in itself, or as having explanatory value which functions from the outset. The term itself, power, does no more than designate a term of relations which are entirely still to be analyzed, and what I have proposed to call governmentality, that is to say, the way in which one conducts the conduct of men, is no more than a proposed analytical grid for these relations of power.
So, we have been trying out this notion of governmentality and, second, seeing how this grid of governmentality, which we may assume is valid for the analysis of ways of conducting the conduct of mad people, patients, delinquents, and children, may equally be valid when we are dealing with phenomena of a completely different scale, such as an economic policy, for example, or the management of a whole social body, and so on. What I wanted to do—and this was what was at stake in the analysis—was to see the extent to which we could accept that the analysis of micro-powers, or of procedures of governmentality, is not confined by definition to a precise domain determined by a sector of the scale, but should be considered simply as a point of view, a method of decipherment which may be valid for the whole scale, whatever its size. In other words, the analysis of micro-powers is not a question of scale, and it is not a question of a sector, it is a question of a point of view. Good. This, if you like, was the methodological reason.
A second reason for dwelling on these problems of neo-liberalism is what I would call a reason of critical morality. Actually, going by the recurrence of certain themes, we could say that what is currently challenged, and from a great many perspectives, is almost always the state...--Michel Foucault, 7 March, 1979,  translated by Graham Burchell, Lecture 8, The Birth of Biopolitics, 186

After my last post, I wanted to move on quickly to lecture 9 with its spectacular fireworks on Gary Becker. But an unease -- I almost wrote 'daimon' -- held me back. When last week, I re-read lecture 8, again, I realized I had underestimated the significance of Foucault's treatment of the evolution of the French welfare state, which Foucault treats not just as one of the diffussions of ORDO liberal though (in elite opinion not among wider public) -- the other, among a wider kind of counter-elite, is the American diffusion --, but also as an instance of its "radicalization." (207)

And, yet, rather than discussing the significance of such radicalization, here i am back again at the start of lecture 8, which is the middle of the lecture-series. And suddenly, with clarity, I notice that Foucault is offering, again, a kind of Apologia Pro Lectiones Sua. As the passage above shows, he offers two reasons for dwelling on the ORDOs. 

First, the lecture series is supposed to exhibit a methodological innovation. It is supposed to exhibit what happens when one discards 'power' as a ground, or explanation, and replaces it with 'governmentality,' which is the way one conducts the conduct of men, not just on the micro scale, but also on the macro-scale, in particular, "as an economic policy...or the management of a whole social body." We might say governmentality is a tool in the study of a kind of meta-orchestration. This should be distinguished, I think, from the art of government. Governmentality is a concept or method within the study of the art of government.

However, the distinction between the art of government and its study by way of governmentality is not un-permeable; in so far as the normative art of government reflects on its own ground, that is, it becomes philosophical, it can appropriate governmentality in its own self-understanding. The problematic of this lecture-series can be, then, stated that Foucault has taken upon itself (recall first lecture) the obligation to present his analysis of German neo-liberalism as yet another exemplar of governmentality, and, simultaneously, contribute to the art of government at its best.

It is important to discern that like the German counterparts -- (recall here his fifth lecture; and here) the fraternal strife between Frankfurt and Freiburg -- Foucault is grappling with the legacy of Weber. And we see him here, as it were, with stiletto in hand, deciding to strike at the fact-value distinction while, simultaneously, he is developing an ideal-typical analysis of Ordoliberalism capable of entering into a kind of, if not social science, then social theory.

Second, he explains he does so because of what he calls "a critical morality." Unfortunately, in the lecture series he does not explain what he means by this term. In my last post I explored what, in the name of a critical morality, he attacked: namely the widespread and intellectually lazy uptake of a state-phobia which manifested itself in a certain form of the road-to-serfdom thesis outside its original formulation, by thinking types across the political spectrum that becomes an instrument for manichean thinking and de facto a new form of populism. It sees the rise of fascism everywhere and, if I am not mistaken, is itself in its own way a contribution toward fascism because it refuses to make distinctions and address political reality in its concrete manifestations.

And, so, critical morality has its task to diagnose, police, and correct a kind of thinking man's (and other humans') shared conceptual deformation that prevents better thinking in the intellectual life of (ahh) public opinion. And, in my last post, I got so fascinated by Foucault's first-order analysis of the uptake of inflated state-phobia, that I failed to address the nature of serving or promoting critical morality.*

To the best of my knowledge Foucault does not use 'critical morality' [moralité critique] again. But we see here a willingness to embrace not just the demands of responsible speech, but a desire to challenge and even try to reform leading ideas in circulation. 

I have deliberately not used 'ideology' because it is clear that the main business of "critical morality" is not the policing of ideology, but rather the engagement with the kind of background, low-level conceptual framework by which intellectuals, (people like you and me), journalists, students and policy-makers describe and analyze, even try to mobilize, social reality.  That is to say, critical morality is addressed at the shared commitments of what Julien Benda called 'clerks' and their wider circle/habitat. 

Somewhat surprising, Foucault here takes on something very close to the very project Isaiah Berlin had articulated for himself in his famous inaugural lecture. Recall that Berlin thought that the role of the political theorist was to guide society's ideas (if we don't such ideas "remain blind and undirected.") In particular, Berlin believed it is the duty of philosophers to "disarm" dangerous ideas before they become too dangerous.

Foucault clearly, and one might say, more liberally, does not think it is his role to guide society's ideas. But from the perspective of critical morality, he does think, more Socratically, it his role to criticize and disarm society's critical doxa. And, so part of the point of the Birth of Biopolitics is to supply the educated with a better conceptual framework, and narrative, to describe and analyze contemporary political life. 

 

*Foucault's conceptual correction is two-fold: (i) "the welfare state has neither the same form, of course, nor, it seems to me, the same root or origin as the totalitarian state, as the Nazi, fascist, or Stalinist state;" (190) (ii) fascism and the totalitarian state are not about making the state all-powerful, but about the weakening of the state in the service of the party or leader. (191) Granted, he goes on to admit that (iii) there has been "growth of party governmentality," (191) but in liberal democracies that has not expressed itself as a monopoly (yet); rather (iv) there has been a growth of "liberal governmentality" (191) which, for all its faults/problems, he claims is in clear opposition to totalitarianism. In particular, as I have noted before Foucault agrees with the ORDOs that the independence and strength of the state (vis a vis parties, civil society, etc.) is a bulwark against fascism not its site ("I am saying that we should not delude ourselves by attributing to the state itself a process of becoming fascist which is actually exogenous and due much more to the state’s reduction and dislocation." (192))

 

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