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Time For Informed Change. Post Covid-19 Economics

Published by Anonymous (not verified) on Fri, 14/08/2020 - 5:34am in

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Solent University, Southampton, UK

 

Published online 13th August 2020

 

Full article

 

Abstract

 

In these extraordinary times it might just be that heterodox economics gets a hearing; if only to justify government actions ruled impossible or, at least undesirable, by mainstream economics in normal times; it is back to the 2008 future all over again, big-time. So, if economics were to descend from its ‘theological heights’ (and preaching only that which suits elite vested interests), then what are we to say?  This article utilises alternative theoretical lenses to underpin views of fiscal and monetary policy and the case for state banking. It also expresses an opinion as to which capital is worth saving, post-crisis. More generally, we consider if advanced nations should aim to be more self-sufficient in the future and if so, how might developing countries fit into a new order? We are not prophets or salespeople, so we merely seek to provide some economic theory that can help us understand these issues.  The theories we apply are Modern Monetary Theory and the Temporal Single System Interpretation of Marx (which argues that his value theory is consistent and not redundant, in fact invaluable to understanding capitalism). Space will not permit us to drag up endless academic debates on the acceptability of the TSSI of Marx or MMT, and for once, in the face of crisis, we hope we may be spared from abiding by the rules of the club.

 

(218 words).

 

Keywords:  Covid crisis, Marx, MMT.

 

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The post Time For Informed Change. Post Covid-19 Economics appeared first on The Gower Initiative for Modern Money Studies.

Why the Working Class is Key

Published by Anonymous (not verified) on Fri, 07/08/2020 - 10:23pm in

image/jpeg iconkey_workers.jpg

Some may wonder why we keep harping on about the working class. Let’s briefly explain…

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The Murders of Fausto Atti and Mario Acquaviva

Published by Anonymous (not verified) on Thu, 30/07/2020 - 9:01pm in

image/jpeg iconatti_acquaviva.jpg

Under this cross fire of the Stalinists and the Blackshirts the red flag of revolution carried on flying, thanks to the extreme sacrifice of the internationalists of whom we remember first those who died at the hands of the Axis. But the two most significant deaths were not at the hands of the Nazis but the “centrists”, the new social democrats, as the Stalinists were labelled in those days.

...at the time of Acquaviva’s funeral the workers of Asti stopped work for ten minutes, doing it for the man who the leaders of [the PCI] held up as a “fascist spy”, “an agent provocateur”, and “an emissary of the Gestapo”. They knew he was a real communist above all else!

PCInt

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So, I Actually Hate the JG, Who Knew?

Published by Anonymous (not verified) on Wed, 29/07/2020 - 2:37pm in

Tags 

Economics, Marxism, MMT

This is not rocket science, Brian. (see also)
A recent exchange I had with online MMTer Brian Romanchuk -- from Canada -- about one of Chris Dillow’s posts turned out to be full of unsuspected revelations. Readers may find it as illuminating as I did.

Dillow, following Michal Kalecki’s famous 1943 essay “The Political Aspects of Full Employment”, argued that full employment (therefore a Job Guarantee) is unlikely in democratic capitalism.

(Arguably, the priority for so-called Keynesian economics should go to Kalecki and not to Keynes, at least if one believes Joan Robinson – probably the second name in the pantheon of “Keynesian” economists and contemporary of both men – and Prof. Bill Mitchell, one of MMT’s founders.)

Bear with me.

This was part of my comment:

“Dillow’s point, which is Kalecki’s point, is that full employment is unlikely under capitalism, MMT or no MMT.”

Romanchuk’ succinct reply:

“I read Kalecki’s essay. From my perspective, Kalecki’s opposition is just him talking his book. Marxists have an innate reason to hate the Job Guarantee because it shows that we don’t need Socialism.

“Saying that a policy is impossible to implement has to be literally the worst strategy for campaigning for it. MMTers have read Kalecki, we can understand why some free marketers won’t like it, but that doesn’t matter if you win elections.”

Even the least perceptive reader can see that if Romanchuk read Kalecki’s essay, he didn’t understand it at all. Neither did he understand Dillow’s post and certainly not my comment.

----------
But there are other things in his reply deserving comment, if scarcely more.

The first is his poor opinion of Kalecki: a (or even the) pioneering promoter of full employment through “Keynesian” policies must have been a rather dumb ideologue, for not seeing what’s evident to Romanchuk.

Let’s accept that, however, for argument’s sake. We are left with a question: if people are so susceptible to ideological biases, can we be as sure as Romanchuk seems to be of his own allegedly unbiased opinion?

----------
To compensate for his underestimation of Kalecki, Romanchuk overestimates the powers of a benevolent MMT-inspired Government in a liberal democracy. This, I suppose, is how things are to pan out. Against Snidely Whiplash’s money, media, think tanks, politicians dirty tricks, Dudley Do-Right prevails on the technical excellence of his good ideas and becomes Prime Minister. He just had to reason and publish good books. Once elected, Do-Right applies his Job Guarantee without opposition, which ceases – POOF! – after elections. He’s wildly successful too. And Whiplash, witnessing Do-Right’s success, recovers from ideological madness. Everybody joins hands to sing O Canada. Semi-Happy Valley becomes Fully-Happy Valley forever more. THE END.

Romanchuk, no doubt, knows a lot more about Canada than I. Surely that’s how things happen over there. Somehow I doubt it would work like that in Australia.

----------
But what really astonished me was the revelation that Marxists have an innate reason to hate the Job Guarantee, for I was not aware I hated it.

I actually used to think I much preferred the Job Guarantee to its alternatives (say, precarious employment at one hand, and the Universal Basic Income at the other). It took Romanchuk’s insightful reply for me to realise how mistaken I was!

And although I understand the reasons MMTers adduce to advance the JG[*], my preference wasn’t based on them. It was based on what I thought was a very good Marxist reason: under JG, workers remain, well, workers, with all the bad and good things being workers entails (MMTers may have read something different or understood what they read differently, but at least in my time, the working class was indispensable for Socialism).

UBI does not offer that.

In fact, mistaken as I might be, I suspect I’m in good company. I didn’t know it then, but I suspect Prof. Bill Mitchell (yes, the guy who invented the Job Guarantee and apparently the only MMT founder who has actually read Marxist literature) could feel devastated. At least in my delirium he seemed to write that the creation of jobs is important “so that workers would be aligned more strongly against capital”.

An everyday example that should speak to trade unionists: JG workers will need unions; UBI recipients will not. As a matter of fact, maybe I just dreamt the whole thing, but I thought I made that argument two years ago, almost to the day (But, do also see my exchange with one Kingsley Lewis: his question, my answer).

That coin has another side, however. Nothing of this is to say I’m totally immune to the allure of the UBI. When I take off my Marxist and union man cap, what remains is a bloke approaching 60. The only two things I have to show for some 45 years of labour are meagre savings for retirement (a situation more common than the Grattan Institute folks want to admit) and arthritic legs that make physical labour that extra bit more taxing.

A sufficiently generous UBI (in my case it doesn’t have to be particularly generous) would be a godsend to me and to those who otherwise will have to work until they drop dead, if they are lucky enough to find work. And, frankly, I don’t see MMTers – certainly not Romanchuk – taking that into account.

And, considering all that, I still prefer the JG. I take that red cap seriously.

----------
One last thing about the JG. Things may have changed, but MMTers’ love for JG, implicitly unanimous in Romanchuk’s view, was far from universal a few years back. I even seem to remember this passage by one Cullen Roche (remember him?):

“Well, this [unemployment] is where we differ. You guys [MMT founders] see no need for unemployment. I do. I think it serves an incredibly important psychological component to any healthy economy. I’ve feared for my job and been unemployed. Those moments shaped who I am and what I’ve become. They were invaluable in retrospect. If I’d been able to apply for a JG job I might not be half the man I am today. Maybe it’s just personal entrepreneurial experience speaking here, but I know what it means to hunt and kill for ones [sic] dinner.”

----------
MMTers invariably reproach those who criticise MMT without grasping its ideas. It’s a fair point, which would carry more authority if MMTers set the right example.

My advice? Don’t shoot from the hip. The likely outcome is to shoot your own foot.

And, really, you guys do need to read more and better.

Notes:
[*] A JG should appeal to those worried sick with inflation, for it’s meant to provide a measure of counter-cyclical fiscal spending; it should also appeal to those complaining about wage stagnation. People like, say, Philip Lowe, the RBA Governor.

This is how it works: during an economic downturn, Joe Sixpack losses his job. Instead of becoming unemployed and receiving the incredibly shrinking dole designed to harass him until he finds any job paying him peanuts, Joe takes on a job for the JG. Joe’s pay increases fiscal spending, no need for special laws. Unemployment does not increase.

During the recovery, Joe finds a better job and quits JG. No need for harassment “mutual obligation”. Fiscal spending automatically decreases (much like Morrison wants), no need for special laws. Joe’s pay never fell below the level the JG paid: a wage floor.

There is something in JG, however, that may not appeal to Phil Lowe: monetary policy – the part of the RBA triple legal mandate the RBA really cares about – becomes superfluous.

Remembering the Early Comrades of the Internationalist Communist Party

Published by Anonymous (not verified) on Tue, 28/07/2020 - 7:51am in

image/jpeg iconpcint_stencil.jpg

1945 represents the beginning of the period of the fastest growth of the Internationalist Communist Party (PCInt) and the “memorial” below, translated from our Italian site, gives an indication of its geographical extension.

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On the Role of Revolutionaries in the Wider Class Struggle

Published by Anonymous (not verified) on Thu, 23/07/2020 - 6:18am in

Tags 

Russia, Marxism

image/jpeg iconkustodiev.jpg

The letter which follows is part of the ongoing debate with some Russian comrades who find themselves operating, as it is easy to guess, in a very difficult environment: one that is even more scarred, if possible, by the devastation produced by the Stalinist counter-revolution and the rubble it has left behind.

Our belief, based on practical experience, is that we have a long period of work in the class ahead of us, where we must take advantage of the spaces that the struggle gives us and translate them into political initiatives.

ICT

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14 February 1979: Foucault's Polemics with 'the Left' (XVII)

Published by Anonymous (not verified) on Thu, 16/07/2020 - 9:10pm in

When you talk about contemporary neoliberalism, whether German or any other kind, you generally get three types of response.

The first is that from the economic point of view neo-liberalism is no more than the reactivation of old, secondhand economic theories.
The second is that from the sociological point of view it is just a way of establishing strictly market relations in society.
And finally, the third response is that from a political point of view neo-liberalism is no more than a cover for a generalized administrative intervention by the state which is all the more profound for being insidious and hidden beneath the appearances of a neo-liberalism.
You can see that these three types of response ultimately make neoliberalism out to be nothing at all, or anyway, nothing but always the same thing, and always the same thing but worse. That is to say: it is just Adam Smith revived; second, it is the market society that was decoded and denounced in Book I of Capital; and third, it is the generalization of state power, that is to say, it is Solzhenitsyn on a world scale.

Adam Smith, Marx, Solzhenitsyn, laissez-faire; society of the market and spectacle, the world of the concentration camp and the Gulag: broadly speaking these are the three analytical and critical frameworks with which this problem of neo-liberalism is usually approached, and which therefore enable it to be turned into practically nothing at all, repeating the same type of critique for two hundred, one hundred, or ten years. Now what I would like to show you is precisely that neo-liberalism is really something else.--Michel Foucault, 14 February 1979,  translated by Graham Burchell, Lecture 6, The Birth of Biopolitics. 129-130.

In lecture five, Foucault had identified Marcuse's criticism of capitalism with Sombart's. Foucault is disparaging about the line of argument ("confused"), and, more striking yet, had claimed that the Nazis had appropriated it; and "indeed in opposition to this destruction of society by the [capitalist]* economy and state that the Nazis proposed to do what they wished to do." (114) The claim is rather damning toward Marcuse because in his own voice, Foucault describes Sombart's voyage (not unfairly) from "quasi-Marxism to quasi-Nazism." (113) So, one way to understand Foucault's criticism of Marcuse, is not just that his criticism is old-fashioned, but the criticism is of a dangerous sort: in its diagnosis it contributes to the very problem it wishes to analyze.

So, lurking here (recall this post drawing on ideas by Niko Kolodny) are ideas about responsible speech and a polemic -- calling somebody a fellow traveler of Nazism counts as polemic -- about how to criticize and engage with liberalism and neoliberalism. That is to say, in addition to the complex positive argument of Birth of Biopolitics, which I have argued is itself a contribution to the liberal art of government, there is lurking a polemic against a bad style of criticizing liberalism in virtue of this criticism contributing to a species of totalitarian thought. And so, the lectures ask us to consider it as an exemplary form of responsible speech.

At the start of lecture six, in the passage quoted above, he addresses what we might call the general culture of anti-liberalism in certain circles. I actually think Foucault reveals some of his irritation because while his sense is clear he literally contradicts himself (e.g, X is nothing and simultaneously X is bad). The three kinds of criticism he rejects all end up flattening liberalism,  and turn 'neoliberalism' merely into a word of disapproval. 

As an aside, it is a bit sad that these lectures were only published in 2004 (in French) and in translation in 2008. For, the problem he identifies is extremely visible, as I documented, in David Harvey's very influential (2005) A brief History of Neoliberalism. I am not suggesting Harvey would have felt obliged to take on board Foucault's reservations, but given the celebrity of Foucault he or his reviewers might have responded to them.  Having said that, and this returns me to the fifth and sixth lectures, the enduringness of the anti-liberal tropes in a certain part of the 'Left' suggests it would have made little difference. Because we don't get Foucault's thoughts on why the tropes endure I leave it at that here.

With the critique of Marcuse in the background, we can discern that Foucault is making four critical claims about the three kinds purported critical analyses of liberalism. First, they are false. Liberalism "is really something else."* They fail to grasp liberalism in its historical specificity and its evolution. The whole Birth of Biopolitics is meant to support this claim. Second, the criticisms are intellectually lazy because merely repetition. And again, the lectures show what would be required to begin to engage with the details of liberalism. (As regular readers know, I am trying to keep track critically of this feature of the lectures in these digressions.) Third, the standard criticisms of liberalisms contribute to a culture that makes Nazism if not possible, at least appear more legitimate. Here, Foucault comes extremely close to accepting (recall this post on the road to serfdom thesis as an ideal type) the ORDO interpretation of history. And it is, I think, among the best evidence for recent interpretations of Foucault as a kind of fellow-traveler of neoliberalism. Fourth, the standard criticisms are analytically useless (because they flatten what needs to be explored in detail).

It is pretty clear that in addition to Marcuse, Foucault has his sights on the style of criticism of liberalism made popular (recall) by Karl Polanyi (recall also this post, in particular, on the Mises-Polanyi debate). Strikingly, Karl Polanyi is never mentioned in the lectures, while his brother is. This Foucault-ian criticism of Polanyi has recently been articulated in impressive fashion by Melinda Cooper in (2017) Family Values, itself an impressive contribution to the critical study of neoliberalism. She is a lot more critical than Foucault is (recall here; and with modest criticism here). The not naming, other than Marcuse, of targets -- undoubtedly lots of bien-pensant French intellectuals are included -- makes this feature of the lectures a bit frustrating to the later historian.+

One final point on the third criticism. In the fourth lecture, Foucault had (recall) already offered a searing criticism of Marxism as lacking an art of government. What he adds here, is that in its modern guise, it inspires an insipid and dangerous criticism of liberalism in which neoliberalism is just a cover, a masquerade, for a kind of totalitarian form of oppression (cf. Harvey). Rather than being informative this makes it impossible to make important distinctions.** And, if I understand Foucault correctly, the failure to make such distinctions contributes to making a Nazi culture possible. We might say that Ernst Thälmann's tendency to treat the Social Democrats as the real enemy is illustrative of the dangers of such a failure in thought. I am pretty sure -- and this is speculative -- that this is why Foucault doesn't even mention Pinochet (then fresh in memory). And treats the dangers of liberalism's flirtation with benevolent despots (recall for example lecture 3) in terms of the (more distant) physiocrats. 

The question is whether Foucault's point generalizes. As noted above, and as he rightly notes ORDO-liberal thought embraces, as an ideal type, a road to serfdom thesis in which lots of social phenomena are symptoms of, and simultaneously with "internal necessity" (111) contribute to, the rise of Nazism. If Foucault thinks the criticism generalizes, then this, too, is one of his targets. (I think this only gets addressed in the final lecture(s)--stay tuned!) And what is at stake here, is the general utility of the manner in which Weberian ideal types are deployed in (German) social science of the twentieth century.++

 

*There are interesting questions here about Foucault's regime of truth (recall) that he is presupposing here.

+Give the celebrity of these lectures in the moment, Foucault prorightly felt he did not need to add a round of distracting polemics that would distract from his achievement. (In addition, he clearly feels pressed for time throughout the lectures; he had more material than time.)

**We see something similar today in the use of 'fascist.'

++If so, Freiburg and Frankfurt are in the grip of a bad social science schema.

Sargon of Gasbag Smears Black Lives Matter as Anti-Semitic

Despite their recent popularity and the wave of sympathetic protests and demonstrations that have erupted all over the world in the past few weeks, Black Lives Matter is a very controversial organisation. They’re Marxists, who wish not only to get rid of capitalism, but also the police, the patriarchy and other structures that oppress Black people. They support trans rights, and, so I’ve heard, wish to get rid of the family. I doubt many people outside the extreme right would defend racism, but I’m not sure how many are aware of, let alone support, their extreme radical views.

A number of Black American Conservatives have posted pieces on YouTube criticising them. One, Young Rippa, objects to them because he has never experienced racism personally and has White friends. He’s angry because they’re telling him he is less than equal in his own country. It’s an interesting point of view, and while he’s fortunate in not experiencing racism himself, many other Black Americans have. Others have objected to the organisation on meritocratic grounds. Mr H Reviews, for example, who posts on YouTube about SF and Fantasy film, television, games and comics, is a believer in meritocracy and so objects to their demands for affirmative action. For him, if you are an employer, you should always hire the best. And if the best writers and directors are all Black, or women, or gay, their colour, gender and sexuality should make no difference. You should employ them. What you shouldn’t do in his opinion is employ people purely because they’re BAME, female or gay. That’s another form of racism, sexism and discrimination. It’s why, in his view and that of other YouTubers, Marvel and DC comics, and now Star Wars and Star Trek have declined in quality in recent years. They’re more interested in forced diversity than creating good, entertaining stories.

Now Carl Benjamin aka Sargon of Akkad, the man who broke UKIP, has also decided to weigh in on Black Lives Matter. Sargon’s a man of the far right, though I don’t think he is personally racist. Yesterday he put up a piece on YouTube asking if the tide was turning against Black Lives Matter ‘at least in the UK’. He begins the video with a discussion of Keir Starmer calling BLM a moment, rather than a movement, although he later apologised for this and retracted the description. Starmer also rejected their demand to defund the police. Benjamin went on to criticise a Wolverhampton Labour group, who tweeted their opposition to Starmer’s comment about BLM and supported defunding. Sargon also criticised the football players, who had taken the knee to show their support, and also Gary Lineker, who had tweeted his support for BLM but then apologized and made a partial retraction when it was explained to him what the organisation fully stood for. But much of Sargon’s video is devoted to attacking them because they’re anti-Semitic. Who says so? Why, it’s our old friends, the Campaign Against Anti-Semitism. Who are once again lying as usual.

Tony Greenstein put up a piece about a week or so ago on his blog discussing how the Zionist organisations hate BLM and have tied themselves in knots trying to attack the organisation while not alienating the Black community. Black Lives Matter support the Palestinians, and according to all too many Zionist groups, including the British Jewish establishment – the Board of Deputies of British Jews, the Chief Rabbinate, Jewish Leadership Council and the Jewish Chronicle and other papers, anyone who makes anything except the mildest, most toothless criticism of Israel is an anti-Semitic monster straight out of the Third Reich. This also includes Jews. Especially Jews, as the Israel lobby is doing its damnedest to make Israel synonymous with Jewishness, despite the fact that’s also anti-Semitic under the I.H.R.A. definition of anti-Semitism they are so keen to foist on everybody. As a result, Jewish critics in particular suffer insults, smears, threats and personal assault.

Yesterday BLM issued a statement condemning the planned annexation of one third of Palestinian territory by Netanyahu’s Israeli government. This resulted in the usual accusation of anti-Semitism by the Campaign Against Anti-Semitism. The deliberately misnamed Campaign then hypocritically pontificated about how anti-Semitism, a form of racism, was incompatible with any genuine struggle against racism. Which is true, and a good reason why the Campaign Against Anti-Semitism should shut up and dissolve itself.

Israel is an apartheid state in which the Palestinians are foreigners, even though in law they are supposed to have equality. In the 72 years of its existence, Israel has been steadily forcing them out, beginning with the massacres of the Nakba at the very foundation of Israel as an independent state. The Israel lobby has been trying to silence criticism of its barbarous maltreatment of them by accusing those voicing it of anti-Semitism. The Campaign Against Anti-Semitism is a case in point. It was founded to counter the rising opposition to Israel amongst the British public following the blockade of Gaza. And Tony Greenstein has argued that Zionism is itself anti-Semitic. Theodor Herzl believed that Jews needed their own state because there would always be gentile hostility to Jews. He even at one point wrote that he had ‘forgiven’ it. It’s a surrender to anti-Semitism not an opponent, although obviously you would never hear that argument from the Israel lobby.

Sargon thus follows the Campaign Against Anti-Semitism in accusing BLM of being anti-Semitic. He puts up on his video a screen shot of the CAA’s twitter reply to BLM’s condemnation of the invasion of Palestine. But there’s a piece on BLM’s tweet that he either hasn’t seen or is deliberately ignoring.

Black Lives Matter issued their condemnation as a series of linked tweets. And the second begins by noting that over 40 Jewish organisations have objected to Netanyahu’s deliberate conflation of Israel with Jews.

That tweet can clearly be seen beneath the first and the CAA’s reply as Sargon waffles on about anti-Semitism.

It says

‘More than 40 Jewish groups around the world in 2018 opposed “cynical and false accusations that dangerously conflate anti-Jewish racism with opposition to Israel’s policies of occupation and apartheid.”‘

This section of their condemnation should demonstrate that BLM aren’t anti-Semites. They made the distinction, as demanded by the I.H.R.A.’s own definition of anti-Semitism, between Jews and the state of Israel. If Black Lives Matter was genuinely anti-Semitic, not only would they not make that distinction, I doubt that they would bother mentioning that Jewish organisations also condemned it.  It is also ironic that it’s up when the Campaign Against Anti-Semitism and Sargon are doing precisely what these 40 Jewish organisations condemned.

Black Lives Matter as an organisation is controversial, and I don’t believe it or any other movement or ideology should be immune or exempt from reasonable criticism. But I don’t believe they can fairly be accused of anti-Semitism.

As for Sargon, the fact that he drones on accusing them of it while just behind him is the statement clearly showing that they aren’t tells you all you need to know about the level of his knowledge and the value of his views in this matter. But you probably guessed that already from his illustrious career destroying every organisation he’s ever joined.

I’m not going to put up Sargon’s video here, nor link to it. But if you want to see for yourself, it’s on his channel on YouTube, Akkad Daily, with the title Is The Tide Turning Against Black Lives Matter. The tweet quoting the Jewish groups denouncing the deliberate conflation of Israel and Jews to accuse critics of Israel of anti-Semitism can be seen at the bottom of the twitter stream at 5.26.

 

 

7 February 1979: Foucault on Neo-Liberal Innovation (XIV)

Published by Anonymous (not verified) on Wed, 01/07/2020 - 2:11am in

The problem was: given a state that does not exist, if I can put it like that, and given the task of giving existence to a state, how can you legitimize this state in advance as it were? How can you make it acceptable on the basis of an economic freedom which will both ensure its limitation and enable it to exist at the same time? This was the problem, the question that I tried to outline last week and which constitutes, if you like, the historically and politically first objective of neo-liberalism. I would now like to try to examine the answer more closely. How can economic freedom be the state’s foundation and limitation at the same time, its guarantee and security? Clearly, this calls for the re-elaboration of some of the basic elements of liberal doctrine—not so much in the economic theory of liberalism as in liberalism as an art of government or, if you like, as a doctrine of government. (102)

Nothing proves that the market economy is intrinsically defective since everything attributed to it as a defect and as the effect of its defectiveness should really be attributed to the state. So, let’s do the opposite and demand even more from the market economy than was demanded from it in the eighteenth century. In the eighteenth century the market was called upon to say to the state: Beyond such and such a limit, regarding such and such a question, and starting at the borders of such and such a domain, you will no longer intervene. This is not enough, the ordoliberals say. Since it turns out that the state is the bearer of intrinsic defects, and there is no proof that the market economy has these defects, let’s ask the market economy itself to be the principle, not of the state’s limitation, but of its internal regulation from start to finish of its existence and action. In other words, instead of accepting a free market defined by the state and kept as it were under state supervision—which was, in a way, the initial formula of liberalism: let us establish a space of economic freedom and let us circumscribe it by a state that will supervise it—the ordoliberals say we should completely turn the formula around and adopt the free market as organizing and regulating principle of the state, from the start of its existence up to the last form of its interventions. In other words: a state under the supervision of the market rather than a market supervised by the state.--116

Just as for Husserl a formal structure is only given to intuition under certain conditions, in the same way competition as an essential economic logic will only appear and produce its effects under certain conditions which have to be carefully and artificially constructed. This means that pure competition is not a primitive given. It can only be the result of lengthy efforts and, in truth, pure competition is never attained. Pure competition must and can only be an objective, an objective thus presupposing an indefinitely active policy. Competition is therefore an historical objective of governmental art and not a natural given that must be respected. In this kind of analysis we find, of course, both the influence of Husserl and, in a somewhat Weberian way, the possibility of connecting up history with the economy. The ordoliberals go on to say that the task of economic theory is the analysis of competition as a formal mechanism and the identification of its optimum effects. But what actually takes place in the societies we know cannot be analyzed on the basis of this theory of competition. We can only analyze it by taking the real historical systems within which these formal economic processes function and are formed and conditioned. Consequently, we need an historical analysis of the systems that intersect, as it were, as a horizontal intersects a vertical, the formal analysis of economic processes. Economics analyzes the formal processes and history will analyze the systems in which the operation of these formal processes is either possible or impossible.

The third consequence they draw from this is that the relation between an economy of competition and a state can no longer be one of
the reciprocal delimitation of different domains. There will not be the  market game, which must be left free, and then the domain in which the state begins to intervene, since the market, or rather pure competition, which is the essence of the market, can only appear if it is produced, and if it is produced by an active governmentality. There will thus be a sort of complete superimposition of market mechanisms, indexed to competition, and governmental policy. Government must accompany the market economy from start to finish. The market economy does not take something away from government. Rather, it indicates, it constitutes the  general index in which one must place the rule for defining all governmental action. One must govern for the market, rather than because of the market. Michel Foucault, 7 February 1979,  translated by Graham Burchell, Lecture 5, The Birth of Biopolitics. 120-121

Foucault's fifth lecture is full of spectacular gems: a history of twentieth century German philosophy in the wake of Max Weber (who displaces Marx) with Freiburg and Frankfurt as two orbiting poles (and Heidegger as unspoken shadow, black hole) and so the joint history of philosophy and political economy; the indebtedness of Marcuse to Sombart; the political significance of the road to serfdom thesis, etc. Here I want to focus on one strain in the lecture (and which frames it and connects it to the other lectures): a key innovation in the liberal art of government by German neo-liberalism (or ORDOs). 

And this innovation is part of a natural history of liberalism that Foucault is telling. And, in fact, the German neo-liberals are a third or even fourth stage in this natural history. To simplify today, Foucault recognizes that there is a shift, schematically, from (i) the Lockean picture in which states promote growing populations and economies by focusing on non-zero-sum policies and are to become self-limiting to (ii) markets that must be left free (late nineteenth century laissez faire) to (iii) free markets most be constructed and policed by the state.* On (iii), Foucault had noted the week before (recall here; here), and repeats in lecture 5, that in virtue of preserving basic rights and generating economic goods, including the interests of the "weak and the poor," the ORDOs created a form of output legitimacy that could legitimate the state as such. 

Now, before I get to my main point, I want to note that much discussion inspired by Foucault takes up what we may call the Husserlian and neo-Kantian theme about the necessity to construct markets and market regulations under neoliberalism. And, the best critics of neoliberalism will, quite rightly, call attention to the amount of policing and violence needed to do such constructing. (I am thinking of Melinda Cooper on American family policy.) Unlike their American counterparts who love police and prisons, the German ORDOs prefer a juridical and regularized form of constructing (recall this post on Mestmäcker).** And I do not wish to downplay the significance problems with a purportedly emancipatory theory of freedom that (to echo Rousseau) forces, lethally forces, people to be free. But for the ORDOs much of the work that needs to be done has the character of antitrust law, preventing corporations from colluding and, not insignificantly thereby, lacking, freedom to lord over their employees. (The point of antitrust is not consumer welfare but a blockage against concentrated power.)

But the more important point Foucault makes, en passant, is that in the very critical acumen of the ORDO critique (of the Marxists, Keynesians, and Nazis) there is a paradox hiding in plain sight. I quote again, "it turns out that the state is the bearer of intrinsic defects, and there is no proof that the market economy has these defects, let’s ask the market economy itself to be the principle, not of the state’s limitation, but of its internal regulation from start to finish of its existence and action." Remember, this is part of neoliberal critique of the critics of liberalism. And, especially, if one is willing to grant this critique of the standard criticism of liberalism, one is stuck with the following problem: if the market economy becomes the principle of its own internal regulation, and the model for the state, the state is still required as a kind of formal and efficient cause to help construct the market (and be its independent umpire or 'supervisor'). 

Now, this is not a problem if market and state both approach the ideal limit. So, in optimal circumstances there is no paradox. But as Foucault notes, the ORDOs recognize that "what actually takes place in the societies we know cannot be analyzed on the basis of this theory of competition." Scientifically, this has the salutary effect of attempting to integrate political economy with history ("we can only analyze it by taking the real historical systems within which these formal economic processes function and are formed and conditioned.") The ORDOs can't help it that the Swedish nobel committee preferred a different conception of science. 

But politically, it puts neo-liberalism in a catch-22. The very state that needs to be modeled on the market, and, in turn, construct the market and govern for it, will be captured by many interests. And, while the ORDOs can smile wryly and wisely at their left-wing and youthful critics, who will treat 'true democracy' as a magic wand for any problem, it reinforces the cul-de-sac they are in. The state, whose legitimacy depends on proper functioning markets which protects basic rights, protects the vulnerable, and limits the accrual of power, must itself be modeled on the market, but which it can only shape and police properly, if it is in some sense already proper functioning, and so on.+ A regress looms once one recognizes that the government most constitute the free-market and, in turn, modeled on the market. But like a great entertainer ('good serial'), Foucault postpones discussion of this catch-22. 

 

 

*This is not the whole of Foucault's natural history of liberalism because he has a space for the physiocrats and Bentham in the narrative and will add add Becker/Stigler to the narrative.

**Foucault does not mention it; but it fits in his larger narrative about the significance of Max Weber.

+This is why some will be tempted by benevolent despotism. 

 

 

On Foucault on Erhard, 31 January 1979: On Representation, Output Legitimacy, and Guaranteeing Freedom (XII)

Published by Anonymous (not verified) on Thu, 25/06/2020 - 12:05am in

Now, in April 1948, a Scientific Council formed alongside the German economic administration in what was called the Bi-Zone, that is to say, the Anglo-American zone, presented a report which laid down the following principle: “The Council is of the view that the function of the direction of the economic process should be assured as widely as possible by the price mechanism.” It turned out that this resolution or principle was accepted unanimously. And the Council voted by a simple majority for drawing the following consequence from this principle: We call for the immediate deregulation of prices in order [to bring prices in line with] world prices. So, broadly speaking, there is the principle of no price controls and the demand for immediate deregulation. We are in the realm of decisions, or of demands anyway, a realm of proposals that, in its elementary simplicity, calls to mind what the physiocrats called for or what Turgot decided in 1774. This took place on 18 April 1948. Ten days later, the 28th, at the meeting of the Council at Frankfurt, Ludwig Erhard—who was not in charge of the Scientific Council, for it had come together around him, but of the economic administration of the Anglo-American zone, or at any rate of the German part of the economic administration of the zone—gave a speech in which he took up the conclusions of this report. That is to say, he laid down the principle of no price controls and called for gradual deregulation, but he accompanied this principle, and the conclusion he drew from it, with a number of important considerations. He says: “We must free the economy from state controls.” “We must avoid,” he says, “both anarchy and the termite state,” because “only a state that establishes both the freedom and responsibility of the citizens can legitimately speak in the name of the people.” You can see that this economic liberalism, this principle of respect for the market economy that was formulated by the Scientific Council, is inscribed within something much more general, and this is a principle according to which interventions by the state should generally be limited. The borders and limits of state control should be precisely fixed and relations between individuals and the state determined. Ludwig Erhard’s speech clearly differentiates these liberal choices, which he was about to propose to the Frankfurt meeting, from some other economic experiments that managed to be undertaken at this time despite the dirigiste, interventionist, and Keynesian ambiance in Europe....What was at stake, and the text itself says this, was the legitimacy of the state.
   What does Ludwig Erhard mean when he says that we must free the economy from state controls while avoiding anarchy and the termite state, because “only a state that establishes both the freedom and responsibility of the citizens can legitimately speak in the name of the people”? Actually, it is fairly ambiguous, in the sense that I think it can and should be understood at two levels. On the one hand, at a trivial level, if you like, it is simply a matter of saying that a state which abuses its power in the economic realm, and more generally in the realm of political life, violates basic rights, impairs essential freedoms, and thereby forfeits its own rights. A state cannot exercise its power legitimately if it violates the freedom of individuals; it forfeits its rights. The text does not say that it forfeits all its rights. It does not say, for example, that it is stripped of its rights of sovereignty. It says that it forfeits its rights of representativity. That is to say, a state which violates the basic freedoms, the essential rights of citizens, is no longer representative of its citizens. We can see what the precise tactical objective of this kind of statement is in reality: it amounts to saying that the National Socialist state, which violated all these rights, was not, could not be seen retrospectively as not having exercised its sovereignty legitimately. That is to say, roughly, that the orders, laws, and regulations imposed on German citizens are not invalidated and, as a result, the Germans cannot be held responsible for what was done in the legislative or regulatory framework of Nazism. However, on the other hand, it was and is retrospectively stripped of its rights of representativity. That is to say, what it did cannot be considered as having been done in the name of the German people. The whole, extremely difficult problem of the legitimacy and legal status to be given to the measures taken [under] Nazism are present in this statement.
   But there is [also] a broader, more general, and at the same time more sophisticated meaning to Ludwig Erhard’s statement that only a state that recognizes economic freedom and thus makes way for the freedom and responsibility of individuals can speak in the name of the people. Basically, Erhard is saying that in the current state of affairs—that is to say, in 1948, before the German state had been reconstituted, before the two German states had been constituted—it is clearly not possible to lay claim to historical rights for a not yet reconstituted Germany and for a still to be reconstituted German state, when these rights are debarred by history itself. It is not possible to claim juridical legitimacy inasmuch as no apparatus, no consensus, and no collective will can manifest itself in a situation in which Germany is on the one hand divided, and on the other occupied. So, there are no historical rights, there is no juridical legitimacy, on which to found a new German state.
    But—and this is what Ludwig Erhard’s text says implicitly—let’s suppose an institutional framework whose nature or origin is not important: an institutional framework x. Let us suppose that the function of this institutional framework x is not, of course, to exercise sovereignty, since, precisely, there is nothing in the current situation that can found a juridical power of coercion, but is simply to guarantee freedom. So, its function is not to constrain, but simply to create a space of freedom, to guarantee a freedom, and precisely to guarantee it in the economic domain. Let us now suppose that in this institution x—whose function is not the sovereign exercise of the power to constrain, but simply to establish a space of freedom—any number of individuals freely agree to play this game of economic freedom guaranteed by the institutional framework. What will happen? What would be implied by the free exercise of this freedom by individuals who are not constrained to exercise it but who have simply been given the possibility of exercising it? Well, it would imply adherence to this framework; it would imply that consent has been given to any decision which may be taken to guarantee this economic freedom or to secure that which makes this economic freedom possible. In other words, the institution of economic freedom will have to function, or at any rate will be able to function as a siphon, as it were, as a point of attraction for the formation of a political sovereignty. Of course, I am adding to Ludwig Erhard’s apparently banal words a whole series of implicit meanings which will only take on their value and effect later. I am adding a whole historical weight that is not yet present, but I will try to explain how and why this meaning, which is at once theoretical, political, and programmatic, really was in the minds of those who wrote this discourse, if not in the mind of the one who actually delivered it. Michel Foucault, 31 January 1979,  translated by Graham Burchell, Lecture 4, The Birth of Biopolitics. 80-3

The long, extraordinary passage is introduced by Foucault as an example of "German neo-liberalism" which is the more "important" kind of contemporary liberal governmentality (79). The other kind is the American type. In the interest of space, I defer exploring why Foucault claims, although it is vital to understanding his intentions related to the fact that for him "he state is nothing else but the mobile effect of a regime of
multiple governmentalities." (77)

The "elementary simplicity" that drove Turgot's decision-making led, via famine and state bankruptcy, to the French revolution. By contrast, Erhard's decisions led to the Wirtschaftswunder.Foucault strongly implies that the contrasting fortunes between otherwise similar policies can be explained not just in terms of contrasting historical and economic contexts, but also in terms of the (for lack of a better word) political conceptualizations that accompany them. 

Before I get to the content of Foucault's analysis, I note that he repeatedly treats Erhard's words as "apparently banal" (87).  It's also in the French. Now, 'banale' is a term Foucault throws around quite a bit in the lectures. So, I don't want to claim that the pairing with Arendt's Eichmann is deliberate. Even so I think the use of 'banale' is quite deliberate. For, Foucault is explicit that whatever Erhard's intentions, the significance of his words came later and are added by Foucault ("I am adding a whole historical weight that is not yet present"). Erhard is treated as a functionary, who is delivering words that echo the Ordo doctrines (and it is, despite the mention of the Austrian school just before in the lecture, quite clear to Foucault that the Freiburg Ordo theorists who "wrote" it). 

Foucault makes an uncharacteristic mistake both in setting himself above the historical agents he is characterizing and in treating Erhard as a mere instrument. Under Nazism, Erhard showed more independence of mind as can be readily ascertained by reading his (1943/4) War Finances and Debt Consolidation (Kriegsfinanzierung und Schuldenkonsolidierung), which dangerously anticipated German defeat and also sheds light on some of his commitments.

I mention this, in part, because when Erhard undertook his economic reforms he was almost certainly exceeding his legal authority to do so. And so we must recognize that the very effect he was trying to achieve, re-establish, perhaps establish for the first time, "juridical legitimacy" (82) in Germany, required an act of statecraft, of a gambling will, if one so wishes, that can only be legitimated in some sense by its effects. That is to say, this is no mere functionary, who merely repeats liberal piety of the past. As he puts it at the start of the 1948 speech Foucault quotes, "I am not preaching a return to the liberalist economic patterns of historic tradition." (27)

Okay, with that in place, let's turn to Foucault's interpretation. For Foucault Erhard claims that the state maintains its legitimacy and representative character when it guarantees the basic rights of its citizens. And, indeed, Foucault is surely right that in addition to rejecting marxist planning, and Keynesian interventionism, Nazism is the more fundamental target here. It is worth emphasizing, however, that Erhard also explicitly rejects "anarchy." This is a defense of the role of the state in guaranteeing basic rights. I don't think Foucault misses this, for he is clear that German liberalism presupposes such a state role.

The nature of representation that Foucault recognizes is in  a strange way one of output legitimacy. For, the legitimacy of the new German state will be ground in both the effective protection of rights. And, in virtue of such legitimacy the state can represent, speak and authorize on behalf of, its citizens. This is not the usual notion of representation, so Foucault is right to emphasize it.The 'consent' involved is extremely indirect.  We may say that only later, once basic rights are secured, did output legitimacy shift toward a focus one economic performance. 

This is not to deny that Erhard himself presents these basic "human rights" primarily in terms of freedom of choosing one's occupation and consumptions:

Any system which does not leave completely intact an individual's free choice of occupation and of consumption contravenes human rights and harms the very social classes for whose protection these spurious measures were conceived. Who, for example, would deny today that the present controlled economy- rejected though it may be by all concerned - has brought most suffering to the weak and the poor or that this class of the community entertains the profoundest hate of all for a system which has oppressed and humiliated them.  (28)

Crucially, and Foucault oddly misses this, Erhard relies on a kind of soft, proto-difference principle that the political order must, as a necessary condition, at least also promote the interests of the "weak and the poor." That is to say, the test of legitimacy, the gaining of the representative character, is really two-fold: it's both the protection of human rights (relatively narrowly understood) and the promotion of the interests even dignity of the "weak and the poor." And this concern, with a kind of bottom up fairness is very much on display in the earlier 1943/44 discussion, which is also framed in terms of the rough perceptions of fairness of those subject to economy policy. That is to say, more than actual fairness, what matters is the political acceptance of the vulnerable and least powerful. He captures this point in 1947 in terms of the "spirit of democracy." 

Now, I happen to think that this social economy (soziale Marktwirtschaft) brings Erhard (who was a Christian-Democrat) rather close to Smith, despite the distance to versions of late nineteenth century liberalism. I don't mean to deny that Erhard's position evades complex questions about how to measure and gouge such perceptions. What's crucial for my present purposes is that in virtue of missing this second feature, Foucault reduces the German form of governmentality to a defense and state construction of the market. And while I understand why for his larger narrative this might make sense, and that in this reductionist interpretation, Foucault echos the most misguided defenders of liberalism, it is important to see that the defense of the market is presented in a larger moral-political order that is worth revitalizing.

 

*My Marxist intellectual friends tend to ignore that a planned economy tends to be experienced by the vulnerable as open-ended series of humiliations.

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