One of the main effects of neoliberal governmentality has been a displacement and privatisation of the domain of the public which has, in turn, contributed to an undermining of the community-centredness of nation-states and ideals of collective responsibility and democratic participation with regards to public provision. I will argue in this chapter that neoliberalism, as the discourse of global political and economic elites, has resulted in an eclipsing of the space of democratic control by citizens both in civil society within nation-states and specific national institutional sectors, thereby rendering democratic institutions less effective in the face of the powers of the state and global capital. One effect of this is that neoliberal rationality conflicts with and undermines democratic models of good governance (as can be seen in the state, or in specific institutional sectors, such as health or higher education, where the logic of the market trumps and competes with good pedagogical processes or methods and erodes traditional liberal models of professionalism and self-management). In another sense, neoliberal logic fails to respond to the mass of citizens’ democratic preferences (as can be evidenced in 2015/16 by the EU's insensitivity to the anti-austerity preferences of the majority of Greek people). At the root of these conflicts, I will argue, resides the neoliberal dismantlement and attack upon the public good which was central to the rise of the welfare state era of government. This attack was developed by certain early neoliberals and yet is often neglected in surveys of the topic. In the second part of the chapter I trace how neoliberalism advanced beyond liberalism in seeking to extend market rationality to all areas of life and reconfigure both cultures and subjects as responsible self-managing individuals within an enterprise society based upon norms of competition. Here I utilise insights from the analysis of Foucault (2008) and extend his analysis of the ordoliberals by drawing upon the later works of the German economist Wilhelm Röpke, who characterises neoliberal rationality as a top-down, state supported discourse, one where competition replaces laissez-faire, and which constitutes the context, or foundation, through which democratic will formation should take root. In the final section of the chapter, I explore the implications of the neoliberal vision for democracy during its ascendancy from the 1980s until the present, as well as for the future, where the final outcome is not assured. To date, I argue that neoliberalism has had the effect of redefining and constricting democracy, eroding the real freedom of citizens through enforced austerity programmes, as well as weakening the validity attached to democratic forms of collective politics through both a circumscription of the agenda with which democratic will formation should be concerned, as well as through a ‘hollowing out’ of the public sphere, rendering it subservient to the rules of the market. In this final section of the chapter, I will also introduce some recent empirical illustrations to lend further support to the thesis that neoliberalism conflicts with democracy. This will be demonstrated, first, in relation to the neoliberal appropriation of public education, whereby education is removed as a democratic citizen right integral to the concept of public good, on the basis of which democratic practices and aspirations can take root; and, second, in terms of the impositions of the EU over the Syriza government in Greece during 2014/15, in which the democratic aspirations of a given people against austerity failed to be acknowledged.
The attack on the idea of the public good can be seen developing in American social sciences since the 1930s in the work of writers like Henry Calvert Simons (1948), father of the Chicago School of economics, and Kenneth Arrow, who became associated with Social Choice theory and was to become a major influence on writers like James Buchanan and others associated with the ‘new right'. The major effect of Arrow's work was to challenge all conceptions of collective politics. As Amartya Sen (2002: 330) reports, Arrow, who was a PhD student at the time, was asked by Olaf Helmer, a logician at the Rand Corporation who was interested in applying game theory to international relations, ‘In what sense could collectivities be said to have utility functions?’ Arrow determined that no satisfactory method for aggregating a multiplicity of orderings into one single ordering existed. Hence, there was ‘a difficulty in the concept of social welfare’ (Arrow, 1950). The outcome was a PhD that formulated the General Possibility Theorem, which was a modification of the old paradox of voting. As Sen (2002: 262) notes, this theorem was ‘an oddly optimistic name for what is more commonly – and more revealingly – called Arrow's “impossibility theorem”', in that it describes ‘that it is impossible to devise an integrated social preference for diverse individual preferences'. Arrow's claim, essentially, was that a unified coherent social welfare function, expressing a single value, such as the public good, could not be expressed from the disaggregated preferences of individuals without dictatorially discounting some at the expense of others. As Arrow (1951: 24) states it:
If we exclude the possibility of interpersonal comparisons of utility, then the only method of passing from individual tastes to social preferences which will be satisfactory and which will be defined for a wide range of sets of individual orderings are either imposed or dictatorial. (emphasis in original)
Arrow's seminal work, Social Choice and Individual Values, was first published in 1951.1 It was a time when developments in Game Theory at the Rand Corporation were having a major effect on academic disciplines in various fields, notably economics, international relations, psychiatry and psychology, and criminology. Game Theory came into existence in 1944 with the publication of John von Neumann's and Oskar Morgenstern's Theory of Games and Economic Behaviour. The Rand Corporation, a US military think-tank, became the major centre for its development and application to different fields. Although initially developed as an arm of Cold War conflict with Russia, Helmer's interest was to have Arrow develop a model relevant to politics and institutional behaviour in general. Utilising mathematical models, and premised on conceptions of self-interested subjects, it eschewed existing theories of collective behaviour which postulated common interests, as articulated through democratic expressions, and prioritised a consistently individualistic and competitive model of human behaviour. The model of the Prisoner's dilemma, also developed at the Rand Corporation, similarly sought to explain individual behaviour based on biologically fixed, self-interested axioms in human nature. Expressing the logic of the Cold War, it advanced the thesis that selfishness is always the safest outcome and can serve as the basis for social stability. Central to this, as to other neoliberal theories, was a profound distrust of all traditional models of collective politics premised on a conception of a democratically negotiated public good. It received important theoretical inspiration, of especial relevance to the development of institutional theories of neoliberalism, by John Nash (1950a, 1950b, 1951) – made famous in the film, A Beautiful Mind – whose development of the Nash equilibrium postulated a game-theoretic conception of optimal strategies for individuals to pursue in response to other rational egoists also pursuing self-interested aims.2 According to Nash (1950a), a system driven by self-interest did not have to lead to chaos but could reach a point of equilibrium where everyone's self-interest was balanced against everyone else's.3 Such a conception reinforced the model of the market as the system best geared to balance individual desires; as the superior information processor; and as the ‘fairest’ system for representing individual aspirations. In this model, markets are the only true voting machines, they give consumers what they want and are, therefore, fair and good.4
In Sen's account, Arrow's work was central to developments in welfare economics and ‘fits solidly into a program of making the analysis of social aggregation more systematic’ (Sen, 2002: 343). Such work has relevance, says Sen, ‘in the context of political thought in which aggregative notions are used, such as the “general will” or the “common good” or the “social imperative”’ (Sen, 2002: 343). What became clearly ‘apparent’ to writers like James Buchanan and his contemporaries is that ‘these political ideas require[d] re-examination in the light of Arrow's results’ (Sen, 2002: 343). Two of Buchanan's own articles published as early as 1954, in the Journal of Political Economy, reveal the major influence of Arrow's work in his conception of and attack upon the notion of the public good (Buchanan, 1954a, 1954b). For most economists at the time, as Sen (2002: 343) expresses it, ‘the economic policies of governments are rarely justified in terms of aggregation of individual preferences'. Under conditions of optimal social choice, all individual rankings of states of affairs, or preferences, could not be calculated in terms of a single value, like stability, or be Pareto optimal, unless conditions of dictatorship were presumed to operate. Hence, the important link with democracy. In theoretical terms, this makes effective government in any positive sense, for example, implementing or administrating welfare, creating systematic opportunities, or even collective action for pure individual convenience (like minting money or taking action against pollution) difficult to justify. It indirectly supports, then, a procedural role for the state as an institution that simply keeps the peace, or engineers the market.
Impressed by Arrow's argument that a consistent social welfare function for a society could not be derived from individual preferences, Buchanan came to accept his view that any coherent social welfare approach must inevitably entail imposition of the will of some members or groups over others. Hence, he effectively denied the efficacy or utility of the concept of the ‘public interest’ altogether, claiming it could not be derived from the aggregate self-interests of individuals.5
In disputing that civil servants, bureaucrats and public employees served the public good, or interest, Buchanan sought to develop quasi-market procedures to render such institutions efficient based on the classical economic model of individuals as ‘self-interested appropriators'. Essentially, this meant structuring incentives and targets to appeal to their selfishness as individuals while disputing the relevance of a model of the public good itself. In The Limits of Liberty (1975), Buchanan maintains that a coincidence of interests between the civil servant's private interests and their conception of the public interest ensues, such that ‘within the constraints that he faces the bureaucrat tends to maximise his own utility’ (Buchanan, 1975: 161). If preferences are inherently subjective, then they cannot be known and transferred into a collective value judgement, such as a public good, for such a notion neglects the rights of consumers whose interests the public service and politicians are meant to serve, but do not. Similarly, in The Calculus of Consent (1962), Buchanan and Tullock continue the theme, arguing that as public officials have neither the desire nor knowledge to further the public interest, it is foolish to establish policy on the basis that they will do so. Because they act selfishly, they bend public purposes to their private interests and, on this basis, public officials cannot be trusted with public power. Buchanan and Tullock (1962: 317, note t) cites Wicksell, who stated that ‘…it is easy for capable but unprincipled politicians to exploit the party constellations of the day for the purpose of swelling public expenditure far beyond the amount corresponding to the collective interest of the people'.6 Acting in the public interest is, therefore, always wasteful. In Chapter 10 of The Calculus of Consent (1962), Buchanan and Tullock claim that farmers acting collectively to build and repair roads results in double the expenditure than if they each acted individually to pay only for the roading that each wanted. Repeatedly throughout The Calculus of Consent, they claim that the public interest doesn't exist, public authorities do not promote it, and claims to do so disguise mechanisms for advancing private interests. In their book, the usual forms of public action are replaced by aggregated individual interests represented as private. At no stage do they contemplate the (in my view defendable) thesis that private interest and the public good could co-exist and be rendered compatible. In this, as Brian Barry argues in his influential book, Political Argument (1990), Buchanan and Tullock ‘aim to destroy a whole tradition of political theorizing'. Essentially, ‘the public has no place in their world'. This is the tradition that recognises the existence and ‘promotion of widely shared common interests – public interests – the most important reason for the existence of public authorities’ (Buchanan and Tullock, 1962: 256).
The attack on the notion of the public good went hand in hand with new theories of institutional and organisational behaviour, and new models of public service. The school of Public Choice Theory advocated the application of economic theories to public-sector institutions in the interest of making public organisations subject to the similar costs and benefits as operate in the private sector. In this, Public Choice Theory represents an application of economic models and theories to politics on the assumption that economic behaviour (homo economicus) describes the true state of human nature and, thus, is applicable to all aspects of life. In what can only be described as a supreme arrogance of economists during the post-war era, economic rather than political models were utilised to explain and account for political society and political conduct. As Buchanan and Tullock (1962: 250) explain:
One of the great advantages of an essentially economic approach to collective action lies in the implicit recognition that political exchange, at all levels, is basically equivalent to economic exchange.
With Hayek and Friedman, Buchanan characterises economics as a process of ‘catallaxy'; that is, of the voluntary exchange of goods and services between competing individuals. Lying behind such an analysis is a strong normative commitment to free-market individualism which, for Buchanan, provides a common rationality linking the economic and political worlds and defining his orientation to democracy. Political action is represented as being governed by the same interests and motivation that govern the market. This reflects Buchanan's deeply individualist approach to public affairs. As far as political prospects were concerned, only those that resulted from the subjective choices of individuals were acceptable. Collective entities, such as a ‘society’ or ‘the public interest', were held not to exist because they were reducible to individual experiences. Underpinning this was a strict ‘methodological individualism’ in which ‘all theorizing, all analysis, is resolved finally into considerations faced by the individual person as decision-maker’ (Buchanan, 1975: ix).
Related to the argument against collective politics, or the public good, Public Choice Theory suggests redesigning public institutions to make them reflect more accurately the preferences of individuals. This involves counteracting the possible forms of ‘capture’ which serve to deflect the interests of public officials from the real needs of the public. To do this, Public Choice Theory advocates a variety of quasi-market strategies, such as contracting out services to the private sector, increasing competition between units within the public sector, placing all potentially conflicting responsibilities into separate institutions, separating the commercial and non-commercial functions of the state, separating the advisory, regulatory and delivery functions into different agencies, as well as introducing an assortment of accountability and monitoring techniques and strategies aimed to overcome all possible sources of corruption and bias, particularly those arising from the pursuit of self-interest. It is on this basis that public sector reforms have sought to restructure the basis of accountability through notions tied to individually attached incentives and targets, and through periodic monitoring and assessment through audits. Such a transformation, I will claim below, severely affects how democratic decision-making has traditionally operated with public sector institutions in western societies.
Because the attempt to exercise public power simply cloaks the self-interest of bureaucrats, Buchanan and Tullock argue for the ‘unanimity model', by which no changes are allowed unless agreed by all. By rejecting ‘majority rule', they present what is effectively a conservative endorsement of the status quo, in that it is not in anyone's interest to allow change unless there is unanimous support. They accept the present state of affairs and property relations as given, and impose a rule of unanimity to prevent significant change in the future. As Barry observes:
The authors’ constructions clearly depend heavily on the existence of some status quo on which everyone agrees; otherwise we have no base-line against which to measure the ‘changes’ which are supposed to require unanimity. According to the authors such a status quo is provided by a position where there are no public expenditures and the only laws are concerned with the maintenance of certain ‘human rights’ and the legal framework of laissez-faire… (Barry, 1990: 243–244)
In theorising unanimity, Buchanan and Tullock assume that no one will use their power of veto, except in self-defence to avoid being worse off. Although they thereby assume that unanimity will prevail in situations when all groups stand to win and none is disadvantaged, as Barry argues, it may even then fail to arrive at ‘mutually profitable arrangements’ because vetos may well be applied for purely strategic motives of gaining power or preventing others from doing so. Barry suspects that Buchanan and Tullock fail to see this because they are ‘blinded by a picture’ (Barry, 1990: 245). Ultimately, their prognosis on unanimity holds as a decision-making principle in an ideal market order of pure competition, where markets clear and agents act rationally (rather than strategically) in voting for change where no disadvantage to any will occur or where no group would be worse off. But, as Barry suggests, given the likelihood of strategic rather than rational voting, unanimity is likely to be both inefficient and inequitable.
In opposing the idea of a public good, the neoliberal's arguments were continuous with those proffered in the mainstream of political liberalism from the third quarter of the twentieth century, as developed in the works of Rawls and supported (in this respect at least) in the contributions of Nozick, Ackerman and Dworkin. These political liberals opposed the notion of a public interest or good on much the same grounds as the neoliberals, but they utilised different arguments to achieve their purpose.7 Unlike the neoliberals, moreover, the political liberals did not posit the market as the normative touchstone guiding society.
Understanding the differences between neo and classical liberal discourse provides an important key to understanding the distinctive nature of the neoliberal revolution impacting throughout much of the western world in the last three decades. Michel Foucault's (2008) lectures at the Collège de France of 1978–1979 provide an important text for understanding the nature of these differences. Whereas classical liberalism represents a negative conception of state power, in that the individual was taken as an object to be freed from the interventions of the state, neoliberalism has come to represent a positive conception of the state's role in creating the appropriate market by providing the conditions, laws and institutions necessary for its operation. Whereas in classical liberalism the individual is characterised as having an autonomous human nature and can practise freedom, in neoliberalism the state seeks to create an individual that is an enterprising and competitive entrepreneur. Foucault (2008: 176–179) recounts how the ordoliberal programme in Germany embodied this positive state role. It is not that the conception of the self-interested subject is replaced or done away with by the new ideals of ‘neoliberalism', but that if business growth is to develop it is necessary to create new forms of vigilance, surveillance, performance appraisal, accountability, and new forms of monitoring and control.
Buchanan shares with the ordoliberals this more directive orientation to state action and, in this sense, he can be represented as more neoliberal than Hayek, whose affinities still resided with the classical liberal worldview premised upon state power being limited to negative freedom and the rule of law. Although the classical liberal tradition had stressed the role of markets as ‘self-regulating', representing a strong commitment to the naturalistic doctrine of laissez-faire, or, for Hayek, ‘spontaneous order', Buchanan so distrusted that the required efficiency gains would emerge through automatic mechanisms of the market that, in a way parallel to the ordoliberals in Germany, he supported efficiency achievements through the deliberate tightening of state control. This signalled an important rupture with Hayek and, by extension, the rest of the classical liberal tradition. The thesis becomes explicitly manifest in The Limits of Liberty, where Buchanan (1975: 194n) suggests:
My basic criticism of F.A. Hayek's profound interpretation of modern history and his diagnosis for improvement is directed at his apparent belief or faith that social evolution will, in fact, ensure the survival of efficient institutional forms. Hayek is so distrustful of man's explicit attempts of reforming institutions that he accepts uncritically the evolutionary alternative.
In this, Buchanan introduced a major shift from liberal to neoliberal governmentality from a naturalist faith in markets to an anti-naturalistic thesis that expresses a much greater faith in conscious political action to legitimate the ‘long over-due task of institutional over-haul’ (see Reisman, 1990: 74). It was on this ground that he opposed Hayek's naturalist faith in markets as spontaneous self-ordering systems. In Buchanan's view, the state should tighten the screws on individuals and encourage supply-side monitoring in the interests of promoting efficiency in market terms.
Foucault represents the same thesis but through his analysis of the ordoliberals. For Foucault, this difference, while important, signifies only one dimension of a series of differences between liberalism and neoliberalism. For it is through the active, positive arm of state power that ‘the new way of the world’ (Dardot and Laval, 2013) is constructed. Neoliberalism, says Foucault (2008: 118), signals ‘a shift from exchange to competition in the principle of the market'. He continues, ‘Only competition … can ensure economic rationality … through the formation of prices … which can measure economic magnitudes and thus regulate choices’ (Foucault, 2008: 119). Competition assumes the role of a fundamental principle that subtends democracy, which is to say that the basic ordering of society as an enterprise culture structured by competition is not intended as itself to be subject to the democratic will, but rather is prior to it. It becomes, as it were, the organising framework guaranteed by the state rather than as a function of the market as ruled by laissez-faire. Drawing on Röpke, Foucault maintains that unemployment is no longer a problem – as seen by the ordoliberals at least – but rather constitutes a ‘transition’ from an ‘unprofitable activity to a more profitable activity’ (Foucault, 2008: 139).8 Similarly, these matters are no longer to be determined through democratic mandate, but constitute the context in terms of which more limited choices will constitute the agenda of public will formation and arbitration. Foucault draws on Walter Eucken,9 who tells us that government must be ‘perpetually vigilant and active’ and intervene to establish this context in two ways: first, through regulatory actions (actions régulatrices) and, second, through organising actions (actions ordonnatrices) (Foucault, 2008: 138). The point here is that regulation should establish the conditions for, rather than interfere with, the mechanism of the market. These conditions are necessarily prior to the democratic decisions of citizens in the same way that the form of the economy as based upon private property rights is taken as a given and not, therefore, democratically decidable. Although, during the first half of the twentieth century, western welfare states were constituted through processes of democratic determination, the accomplishment of neoliberalism, for the ordoliberals at least, was to establish the principle of competition as prior to and outside democratic decision-making; as determining the ‘framework’ through which the market would rule. The aim of regulation is price stability, ‘understood not as fixed prices but as control of inflation’ (Foucault, 2008: 138–139). Through its ‘organising actions', the state will establish what the ordoliberals termed ‘the framework’ of the market (Foucault, 2008: 140), which would effectively do away for a need for protectionism, credit control, foreign trade control, public investment, or interfering with the mechanism of the market. The framework must attend to both the population, order of justice and opportunity, as well as techniques, such as the availability of implements concerning such things as population, technology, training and education, the legal system, the availability of land and the climate, all seen by Eucken as the ‘conditions’ for the market. These conditions not only guarantee the order of competition, but also guarantee the neoliberal conception of fair play and justice. That is, they guarantee equality of access and ‘opportunity', but not of ‘outcomes'. Access and opportunity guarantee that all can play in the game of the marketplace. Outcomes are taken care of by the order of competition which now, along with property rights, becomes a part of the ‘framework’ and non-negotiable. They constitute the conditions by which democratic citizenship participation is exercised, but are not themselves subject to democratic determination. Social policy for the ordoliberals cannot be used as a ‘counterweight’ or ‘compensation’ to the dictates of the economy. This is to say that it cannot have equality as an objective, but must let inequality have free reign, for competition itself depends upon inequality of outcomes. Inequality, as Foucault incorrectly attributes to Röpke, ‘is the same for all’ (Foucault, 2008: 143).10 Beyond providing a ‘social minimum', society cannot guarantee individuals against risks (Foucault, 2008: 144). The ‘framework’ is necessary, say the ordoliberals, if economic growth is to result. It is in this sense that competitive mechanisms which constitute the ‘conditions’ of the framework must join fundamental property rights as being themselves beyond democratic determination, as well as enabling ‘a general regulation of society by the market’ (Foucault, 2008: 145). Foucault refers to this active, top-down, positive role of the state as constituting a ‘sociological liberalism’ (Foucault, 2008: 146, footnote 51), or a ‘policy of society’ (Foucault, 2008: 146), which permits a new ‘art of government’ differing radically from Keynesian-type systems. What is crucial here is that the object of government action for neoliberalism becomes a new form of biopower concerned with ‘the social environment’ (Foucault, 2008: 146). The society is regulated by reference to the market, but ‘the regulatory principle should not be so much the exchange of commodities as the mechanisms of competition’ (Foucault, 2008: 147). Rather:
It is the mechanisms [of competition] that should have the greatest possible surface and depth and should also occupy the greatest possible volume in society. This means that what is sought is not a society subject to the commodity effect, but a society subject to the dynamic of competition. (Foucault, 2008: 147)
Competition becomes the new ‘eidos’ (Foucault, 2008: 147), the new dynamic. As Foucault continues:
Not a supermarket society, but an enterprise society. The homo economicus sought after is not the man of exchange, or man the consumer; he is the man of enterprise and production. (Foucault, 2008: 147)
Röpke fundamentally sets out the neoliberal social policy in his text ‘The Orientation of German Economic Policy', where he says that social policy must aim at: ‘the multiplication of the enterprise form within the social body. … It is a matter of making the market, competition, and so the enterprise, into what could be called the formative power of society’ (cited by Foucault, 2008: 148).
Extending research on Röpke beyond that carried out by Foucault by drawing from his book A Humane Economy: The Social Framework of the Free Market (1971 [1958]), the precise character of Röpke's liberalism becomes even more readily apparent. Foucault had considered Röpke's earlier book, The Social Crisis of Our Time (1950). Yet, Röpke's later book aims to establish the appropriate foundations and conditions of the market economy beyond the previously accepted context of supply and demand. For such a market order cannot function, he says, ‘in a social system which is the exact opposite in all respects'. What is essential to understand is that the market economy ‘rests not on one pillar but two. It presupposes not only the principle of free prices and competition but also the institution of private ownership in the true sense of legally safeguarded freedom…’ (Röpke, 1971: 94). The cultural context of the social structure must support this, however. As he puts it:
We start from competition… Competition may have two meanings: it may be an institution for stimulating effort, or it may be a device for regulating and ordering the economic process. In the market economy competition … constitutes therefore an unrivalled solution of the two cardinal problems of any economic system: the problem of the continual inducement to maximum performance and the problem of continuous harmonious ordering and guidance of the economic process. The role of competition in the market economy is to be mainspring and regulator at one and the same time, and it is this dual function which is the secret of the competitive market economy and its inimitable performance. (Röpke, 1971: 95)
A collectivist economic system, including the welfare state, ‘is necessarily debarred from [using] competition, because no collectivist system can create the necessary precondition without losing its own identity'. This precondition, Röpke explains, is the ‘economic independence of firms', for ‘there can be no independence of firms without private ownership and related freedom of action’ (Röpke, 1971: 96). While previously ownership has been defined narrowly as constituting the essential foundation which is non-negotiable and prior to democracy, for Röpke, ‘[o]wnership illustrates the fact that the market economy is a form of economic order belonging to a particular philosophy of life and to a particular social and moral universe'. The foundation for this is not laissez-faire; Röpke is not describing a naturalistic but a constructivist or anti-naturalistic thesis. Laissez-faire was the naïve fiction of early liberalism. ‘In all honesty, we have to admit that the market economy has a bourgeois foundation’ (Röpke, 1971: 98).
The market economy, and with it social and political freedom, can thrive only as a part and under the protection of a bourgeois system. This implies the existence of a society in which certain fundamentals are respected and color the whole network of social relationships… (Röpke, 1971: 98)
Röpke criticises Croce, who maintained that there was no necessary relationship between ‘political and spiritual freedom on the one hand and economic freedom on the other'. For him, ‘the economy was in the front line of the defense of liberty’ (Röpke, 1971: 105). Röpke's authoritarian version of liberalism is evident when he acknowledges that:
In a sound society, leadership, responsibility, and exemplary defense of society's guiding norms and values must be the exalted duty and unchallengeable right of a minority that forms and is willingly and respectfully recognized as the apex of the social pyramid hierarchically structured by performance. … What we need is true nobilitas naturalis. … We need a natural nobility whose authority is, fortunately, readily accepted by all men, an elite deriving its title solely from supreme performance and peerless moral example and invested with the moral dignity of such a life. … No free society … which threatens to degenerate into mass society, can subsist without such a class of censors. … In turn, it will be of crucial importance for the ultimate fate of the market economy whether this aristocracy includes, above all, people who, by position and conviction, have close ties with the market economy and who feel responsible for it… (Röpke, 1971: 131)
Röpke adds that ‘the task of leadership falls to the natural aristocracy by virtue of an unwritten but therefore no less valid right which is indistinguishable from duty’ (Röpke, 1971: 133). Only such persons can save us from the ‘slowly spreading cancers of our western economy and society', which include the ‘irresistible advance of the welfare state and the erosion and value of money, which is called creeping inflation’ (Röpke, 1971: 151).
The possible contradiction as to how a social market economy such as this can be safeguarded from the democratic will of the mass of citizens is left largely unresolved. While Röpke clearly intends that these social conditions of the economy must join private property ownership as essential conditions prior to and outside democratic control, he acknowledges that:
A solution must be found to the problem of how the executive can gain in strength and independence so that it can become the safeguard of continuity and common interest without curtailing the essentials of democracy, namely, the dependence of government on the consent of the governed, which alone makes government legitimate, and without giving rise to bureaucratic arbitrariness and omnipotence. … To this end, it is invaluable to have independent institutions beyond the arena of conflicts of interests – institutions possessing the authority of guardians of universal and lasting values which cannot be bought. I have in mind the judiciary, the central bank, the churches, universities, and foundations, a few newspapers and periodicals of unimpeachable integrity, an educational system [to cultivate] the universal and the classical…, and finally, that natural nobility of which we have already spoken. (Röpke, 1971: 149)
Each of these institutions is intended to operate as nodes in a hierarchical but only loosely coordinated system, enforcing neoliberal norms through independently committed institutions. This would amount to something similar to the manner of organisation of classical liberal autonomy, in Montesquieu's sense, as ‘corps intermédiaires, whose function is to loosen the giant unity of the state by geographical or professional separatism…’ (Röpke, 1971: 143). Röpke's conception of pluralism is more severely truncated, however, for the balance of conflicting interests is circumscribed by a mutual adherence to market principles. In this he recognises two variants of pluralism: ‘one justified and one unjustified, one sound and one unhealthy'. Sound pluralism comprises ‘particular groups defending themselves and their rights against the power of the state', while ‘unhealthy pluralism’ consists of groups trying to use the power of the state for ‘[their] own purposes and make it subservient to these purposes’ (Röpke, 1971: 144). The rise of unhealthy pluralism over the preceding thirty or forty years has, suggests Röpke, ‘gained ground in exactly the same measure in which liberal economic policy has been displaced by centralist socialist policies’ (Röpke, 1971: 145).
The view, expressed here, of power and control as not residing or being expressed in a unitary sense from the state apparatus, but as comprising a broad and diverse repertoire of technologies of conduct that operate quasi-independently throughout society, is present also in Foucault's (2008) characterisation of power for the ordoliberals as dispersed, decentralised and no longer in any simple sense governed solely by the state. Under neoliberalism, power will be decentralised or dispersed, the state will become smaller, funding will shift to indirect, supply-side forms of taxation (e.g., student fees), and welfare and benefits will be replaced by a high(er) wage, workfare economy. Subjects will be constituted and normalised by society as active, growth-orientated, and responsible for planning and living out their own lives. It will be an enterprise society committed to the creation of entrepreneurial subjects managed through strategies and processes of responsibilisation (Foucault, 2008; Rose, 1996, 1999) in the interests of capital. Massively ‘hollowed out’ conceptions of democracy and welfare will decide which team can manage the capitalist economy best.
The contradictions between neoliberal cultural engineering and democracy, which in theory can always reject such norms, is sharpened by the rejection of the doctrine of economic naturalism by Röpke and the ordoliberals. The inability of laissez-faire to operate to ensure market growth and vitality is premised upon the scepticism expressed by Röpke and the other ordoliberals as to the viability of the naturalistic thesis as regards the economy. In this Röpke and the ordoliberals dissented from Smithian-styled naturalism that there was any integral propensity to ‘truck and barter', or that markets were particularly fundamental to the human condition and naturally self-regulating. Rather, the appropriate context and order of the market needed to be constructed. In this, the ordoliberals accepted much of the analysis of market critics of the sort that was maintained in the twentieth century by Karl Polanyi (1944) in The Great Transformation, which maintained that markets played little role in many pre-modern societies in the way that Smith described. Indeed, during the middle ages, markets were regarded with suspicion and kept under firm control so as to minimise their dysfunctional consequences for communities. Similarly, in the early modern period right up and into the twentieth century, markets were monitored informally by the economically unsupported remnants of a decaying feudal order.11 Broader anthropological research related to other non-western societies supports a similar conclusion. In order that markets can function properly in an industrial-capitalist economy, said Polanyi, various objects that were not initially commodities (land, money, labour, implements) had to be constructed and conceptualised as commodities, that is, as objects tradable on a market. Polanyi introduces the concept of ‘commodity fiction', defined as a ‘vital organizing principle in regard to the whole of society', which was circulated as a consequence of industrialisation (cited in Davis, 2009: 235).
Ultimately, while accepting that markets must be constructed, Röpke fails to resolve the contradiction between the neoliberal organisation of society and institution of democracy. If markets were to be abolished or constrained, there would be no contradiction with nature at all, given that the market is not, as I have just argued, a natural mechanism. This raises the possibility that the priority on competition as the eidos of society is perhaps more precarious and fragile than it appears at first, and is potentially subject to being adapted, altered, or rolled back through democratic contestation. While a succession of recent crises has so far failed to derail the neoliberal project, the prospect of either regional successes or specific programmatic retreat or modification to established neoliberal tenets is never far off the horizon. The vitality of the doctrine remains tenuous, notwithstanding that it currently still survives in the second decade of the twenty-first century as dominant and effective. The credit-crunch of late 2008, when the US mortgage industry imploded, saw a temporary resurgence of Keynesian-styled questioning, with some commentators (Stiglitz, 2008) announcing the impending death-knell of neoliberalism altogether.12 Elsewhere, criticisms of neoliberal economics from groups such as Occupy and similar movements, globally, have given impetus to new demands for increased government supervision, monitoring and oversight (Skidelsky, 2010; Springer, 2015; Stiglitz, 2008).
Some of these criticisms, as Springer (2015) argues, treat neoliberalism as a monolithic entity. What may be more likely is piecemeal incremental adaptations to neoliberalism, such that supply-side policies are themselves brought within the ultimate purview of state monitoring or oversight to enable a vetting or modification to specific policies in the interests of the global or national common good premised on equality. Minor adaptations and departures from the general model are likely, however, to constitute the thin end of the wedge and, at some point, it will be decided that one settlement has given way to another. Crises around climate change or environmental degradation, nuclear accident or terrorism, national or global security, violence, terrorism or ethno-nationalism, biodiversity or food production, corporate corruption, inequalities in the distribution of resources, all caused or exacerbated, directly or indirectly, by population explosion, together potentially add grist to the mill of impending potential problems for the continuation of the existing relatively unfettered and unconstrained neoliberal mode of governmentality.
In higher education, for instance, neoliberal governmentality has subverted what I have called elsewhere (Olssen, 2016; Raaper and Olssen, 2015) a ‘collegial-democratic’ model, while replacing it with a new model based on external audits and appraisals premised on performance incentive targets and increased monitoring and managerialism. The top-down, authoritarian aspect of neoliberalism is evident in the new forms of governmentality implemented from the 1980s in universities. It gives a new significance to the notion of ‘rule by managers’ when one understands that neoliberal theorists advocated the interpellation of a new strata of managers to counter the classical liberal conception of professionalism, based as it was upon autonomy and self-management, and to counter it as a form of what Buchanan refers to as ‘rent-seeking’ behaviour. In Britain, four years after Margaret Thatcher was elected, for instance, the Griffith Report of 1983 premised reforms for the health sector, including the creation of new senior management roles in the National Health Service in order to replace the traditional management functions in health as carried out by professional medical staff.13 This emergence of a strata of dedicated professional managers quickly became embedded in legislation and transferred laterally from health to higher education and across the entire public sector. Ideas of ‘internal markets’ were also introduced in relation to health in the 1980s, and received expression in health in the 1989 White Paper, ‘Working for Patients'.14 New models of ‘student-led’ funding and new corporate managerial models of governance and line-management were also implemented at this time, feeding off theoretical ideas developed in supply-side economics, Public Choice Theory, agency theory, and transaction-cost economics. Ideas of line-management, based upon ‘principal-agent’ hierarchies of command and compliance, replaced ‘collegial-democratic’ patterns of governance based on classical liberal models of professionalism premised on autonomy and self-governance.15 Suggestions that universities should increase the appointments of lay and business personnel on councils and boards of governors, as advocated in America by McCormick and Meiners (1988), were intended to reduce academic internal influence and increase the responsiveness of the universities to the outside business community. Further governance ideas and techniques saw the downgrading of the influence of senates and the rise of closed ‘executive boards’ to augment the implementation of line-management systems.16 In Britain, the major responsibility for all of these developments emanates directly from the state through the funding councils. The major levers are all imposed by the state, which itself responds to global interests. The revolution in the way universities were run was world-wide. Collegial models of self-governance, premised on autonomous institutional spheres, are replaced by ‘top-down’ managerial models, directed from the centre – the state and global capital. This also undermines the semi-autonomous power of universities within civil society, which is itself historically important in terms of understanding liberalism as a natural system of autonomy of spheres and free expression. In this new age of neoliberalism, universities as a ‘fifth estate', a critical bulwark for the safeguarding of democracy, are now rendered impotent against the powers of business, superbly administered by the state. Röpke's analysis seems particularly apt. The abolition of systems of tenure of employment and enforcement of new norms with regards to research, research funding and teaching, means that most academics are too intent on ‘watching their backs’ to speak of dissidence or serious critique. The assessment of ‘impact’ escalates this process, and seeks now to control and monitor the ‘content’ of what universities produce, to render knowledge production as ‘useful’ for the society. In this sense, it constitutes a very worrying ‘sign', especially given the epistemic difficulties with the way it is assessed. The resulting implications for democracy are evident in relation to the end of self-governance through collegial models of academic participation, as well as externally through the erosion of the independent critical authority of universities in relation to business and the state. It is easy to be despondent as regards the deprofessionalisation effected by managerial governmentality in relation to universities or other parts of the public sector, for the disempowerment that results is the product of more general processes of disaggregation unleashed by the fetish of competition that cuts across the whole of the public sphere and democratically incapacitates civil society. It is in this sense that the features of the crisis of neoliberalism for democracy reside in the impotence of societal democratic institutions and citizens to resist changes unleashed by the powers of international capital and supported by the organs of the state, or to prevent the privatisation of the public sphere.
The achievement of good governance is what is central to the theme of democracy in relation to neoliberalism as a central aspect in social and economic development. While neoliberalism need not be incompatible with good governance in all arenas, in traditional public-sector realms it has resulted in lessening democratic controls over the standards and norms of professionalism, and undermining autonomy as the public sphere has become further dominated by private, commercial concerns. The process of deprofessionalisation has witnessed the instantiation of a new and different employment relationship, resulting in the immense casualisation of labour, insecurity of tenure, and withdrawal of historical rights and benefits of employment that characterised public sector institutions in the era of the welfare state. This more fragile economic (in)security ‘hollows out’ the modern citizen-subject, says Wendy Brown (2015), in a way that undercuts essential supports for the practice of democracy as both control and participation.
At the level of the macro-economy beyond national politics, civil society and public-sector institutions, democratic will formation and exercise is restricted for nation-states as global neoliberal norms of ‘good’ economic practice may come into collision with democratically expressed preferences of a particular nation's citizens. The election of Syriza in Greece on an anti-austerity platform, widely accepted by the majority of the Greek people, is a case in point. As the former Greek Finance Minister, Yanis Varoufakis, has pointed out repeatedly, a democratic mandate to oppose austerity has been considered by the EU as nothing but a nuisance and unacceptable when negotiating the terms over a bailout in response to the Greek sovereign debt crisis (e.g., Varoufakis, 2016).
The extent to which there is any prospect for change in the dominance of the neoliberal paradigm depends on developments at the political level, both within and beyond nation-states. Rather than seeing neoliberalism as a ‘crisis without end', to use a phrase posed as a question by Andrew Gamble (2014), we must see it as a precarious and potentially unstable constellation of forces. While to date it can be said that the continued dominance of neoliberal hegemony, both in national and global life, signifies the marked absence of viable social-democratic alternatives to the neoliberal framework, Gamble (2014) points out that the prospects for the future are far from certain. Left, anti-austerity political movements, as in South America (Argentina and Brazil, especially), Spain (Podemos), Greece (Syriza), Scotland (SNP) and the new direction of the British Labour Party under Jeremy Corbyn, could at any time halt the advance of the neoliberal project. Indications of a left-turn against neoliberalism has manifested itself from the late 1990s throughout Latin America in response to pressing social, political and environmental forces, as evidenced by Juan Pablo Ferrero in his book, Democracy against Neoliberalism (2014). In Britain, as in other countries in Europe, an array of minor political parties (Greens, Plaid Cymru), and growing anti-austerity activism by the House of Lords in 2015/16 – manifest in their opposition to tax credits as a penalty against work which disproportionately affects the poorest sections of society – make the precariousness of the present settlement manifestly evident. ‘The neoliberal project has failed and people are looking for alternatives', says Natalie Bennett, leader of the Green Party, in an article titled: ‘Politics is Changing, Corbyn could be next PM’ (The Guardian, 25 September 2015). The contradiction between neoliberalism's need to socially engineer a culture of competition and the conception of democracy as the consent of the governed, left largely unresolved by Röpke and the other ordoliberals, may eventually constitute the ultimate undoing of the neoliberal vision of a social market economy that was postulated.
Gamble claims that ‘the deeper structural crisis of the neoliberal order remains effectively unresolved'. This structural crisis is expressed through three conundrums: a ‘governance conundrum', a ‘growth conundrum', and a ‘fiscal conundrum', all of which could derail the project or force major modifications and political constraints on its excesses. Concerning the ‘governance conundrum', neoliberalism promotes competition and impedes order and cooperation, which are desperately needed in ‘an increasingly interconnected and multipolar world'. The ‘fiscal conundrum’ concerns ‘how legitimation can be achieved in the face of debt, austerity and falling living standards', and the ‘growth conundrum’ concerns ‘how sustainability can be achieved in the face of new stagflation and environmental risks’ (Gamble, 2014: 99). Crises as seemingly far removed as climate change, over-population, nuclear proliferation, corporate corruption, or terrorism, added to economic stagflation and growing inequalities, are already forcing increased governmental regulation which is offsetting and constraining the order of neoliberal competition in several respects. In Britain, the stark realities of ‘national security', or the ‘public good', especially as intensified under the pressures of terrorism, is forcing an increase in state regulation on many matters, such as education, health, transport, or security, in order to keep the neoliberal order of competition within reasonable limits bounded by what is perceived as the ‘good for the nation'. As austerity policies bite harder, shifting electoral loyalties together with deepening or unexpected crises make it rash to predict a continuation of the project.
Notwithstanding its continuation against all odds to date, it must still be concluded that neoliberalism is not, in the final analysis, a ‘crisis without end', for the events outlined above signal possible adaptations to the neoliberal project in the direction of equality and fairness for all over the coming decades. Because markets, if unregulated, mean serious disequilibria, it is imperative that the state play a major role in establishing and maintaining the framework of control – globally, through inter-state coordination; nationally, through policy formation and processes of good governance; and at the level of institutions like higher education, through protecting student and citizen interests from the burdens of debt and by restoring professional rights and statuses to accompany and check the new forms of accountability, transparency and control. While some of the supply-side technologies may be productively used for both efficiency and differentiation, what is imperative is that their utilisation is not as defined by the market, resulting in escalating inequalities, but solely in relation to protecting citizen interests for the social good of society and humanity as a whole. In the end, it will be the impending material contradictions which will spell the end or substantial modification of the neoliberal project. Even if it could continue to deliver sustained economic growth, the fact that, in doing so, it results in cumulative and compounding inequalities makes it politically fragile. It cannot guarantee the fundamentals of well-being for many citizens and countries. And in its efforts to do so, it contributes to the reconstitution of subjects as competitive, nervous, stressed-out zombies. Neoliberal rules are unlikely to protect the quality of life or the environment for most. Only a few can win on the basis of the paradigm. Democracy hasn't triumphed yet, but may well do so in the near future.
The first part of this chapter draws from and reproduces material from Olssen (2016) and Olssen (2017). The respective publishers are thanked for the duplication of material in this context.
As this chapter represents a summative account of my position on neoliberalism, the ideas expressed, although substantially reformulated for the context of this chapter, and substantially extended in relation to Foucault and ordoliberalism, also generally build upon material, and occasionally directly reproduce sections, that I have previously written and developed, notably Olssen, Codd and O'Neill (2004) and Olssen and Peters (2005). Again, respective publishers are thanked for the duplication of material in this chapter.
1. The second edition was published in 1963. The quotation is on p. 59 of that edition.
2. For a general account of game theory and Nash's contribution, see Hargraves Heap and Varoufakis (2004).
3. A set of strategies is deemed to be a Nash Equilibrium so long as it constitutes the best set of responses in relation to all other strategies. ‘Best’ in this sense is defined as those strategies that succeed in competitive market terms. Nash won a Nobel Prize for his contributions in economic theory. He developed various cruel games, the most famous which he called, ‘Fuck You Buddy', where the only way to win was to betray your opponent, and which reinforced the priority of competition and irrelevance of cooperation as either personal or group strategies. He later acknowledged that his paranoid schizophrenia was a major cause of his excessively individualistic and competitive approach to social relations (see Adam Curtis's 2007 film, The Trap: What Happened to Our Dream of Freedom, available at: www.youtube.com/watch?v=BomLz15ibS4).
4. I am not intending here to document all of the failures of free market theory, simply to state that Keynes documented the various ways in which dysfunctional market patterns and imperfect equilibriums could survive for long periods of time. Markets also do not guarantee inclusion and constantly reject players; indeed, they are self-diminishing in terms of the number of players in any game, and generate well-known problems in relation to monopoly and concentration (the big fish eat the little fish), which makes any association between markets as mechanisms of democracy or justice highly questionable. I believe, as did Keynes, that while markets have an important role to play, it is only as subordinate to, not instead of, political direction.
5. Buchanan develops these themes in all his writings, but see 1954a and 1954b for his early enthusiasm for Arrow's insights. Also see Buchanan, 1978.
6. The source for Wicksell's statement given by Buchanan is R.A. Musgrave and A.T. Peacock, Classics in the Theory of Public Finance (London: Macmillan, 1958).
7. These liberals utilised arguments on perfectionism and state neutrality as well.
8. Wilhelm Röpke (1899–1966) was professor of economics at the University of Marbourg, until his dismissal for political reasons.
9. Walter Eucken (1891–1950) was a philosophical disciple of Husserl and seen as the head of the German neoliberal school whose programme was promoted through the journal Ordo. He was a co-author (with H. Grossmann-Doerth of ‘Our Task’ in ‘The Ordo Manifesto of 1936’ [Die Ordnung der Wirtschaft], republished in English in A. Peacock and H. Willgerodt (eds), Germany's Social Market Economy: Origins and Evolution (London: Macmillan, 1989).
10. The editors to Foucault's manuscript comment that the phrase is nowhere to be found in Röpke's writings (see Foucault, 2008: 154, footnote 39).
11. Even today, much of Britain comprises the remnants of a feudal order of not insignificant proportions.
12. A number of commentators, including Will Hutton and Gordon Brown in the UK, invoked Keynesian ideas in the immediate aftermath of the 2008 credit crunch. Joseph Stiglitz went on a world lecturing tour announcing the death-knell to neoliberalism. Many announced a revival of the idea of state interventionism in the economy. The ‘optimism’ was to be premature.
13. For an assessment of the Griffith Report and its impact, see ‘The Griffith NHS Management Inquiry: Its Origins, Nature and Impact’ (2010), in M. Gorsky (ed.), Center for History in Public Health, London School of Hygiene and Tropical Medicine. Available at: http://history.Ishtm.ac.uk/Griffiths%20Inquiry%20Witness%20Seminar%20final%20versionsecure.pdf
14. Department of Health (1989) ‘Working for Patients', White Paper, January. London: HMSO.
15. Paradoxically, this has created a new privatisation of decision-making whereby line officials simply decide and announce decisions on matters such as new staffing, teaching allocations, or learning and teaching policies, traditionally effected through consultative and participative deliberation by the whole staff (at Department or School meetings) or by Senates (at the University or Faculty level). It also leads to anti-proceduralism, where matters of quality control are now simply announced and standards, boards of trustees’ decisions, are compromised on the altar of pragmatism and cost or to conform with external audit criteria.
16. Decisions which had been consultative and participative across the ‘flat’ organisation of the university were now confined within closed managerial committees.
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