What is unique or new in neoliberalism? In ch. 6 Foucault made a case for the enterprise as a new focus in neoliberalism. The claim there was that enterprise-ification replaces commodification as the unique diacritic of contemporary liberalism. So pace Marcuse, we must critique the enterprise, not the commodity form, that is if we want to critique (i.e., understand, and remake) contemporary political society.
Now, in ch. 7, Foucault assesses the juridical rationality of neoliberalism in terms of the rule of law. So juridically, neoliberalism implements the rule of law, i.e. “the redefinition of the juridical institution and of the necessary rules of right in a society regulated on the basis of and in terms of the competitive market economy” (160). Socially, neoliberalism implements the enterprise form, i.e. “the formalization of society on the model of the enterprise” (160). These are the “two major axes” of German neoliberalism, i.e. ordoliberalism. The focus of ch. 7 is on the first of these two axes.
What characterizes the rule of law for neoliberals, according to Foucault? First, that it is formalist rather than interventionist. Foucault says that for neolibs, “The Rule of law, or formal economic legislation, is quite simply the opposite of a plan” (172). How do we make sense of this? What are some examples?
Example 1. One way of distinguishing would be in the case of the recent financial crisis. The Keynesian legacy of intervention involved bailouts of particular corporations in order to keep consumption and production levels above a minimum. The neoliberal (according to MF) approach would have been opposed to these bailouts as plans except insofar as they would be the only viable means of meeting the formal requirements of economic growth. A more paradigmatic neoliberal approach would be to insist on tighter formal regulations for the way that securities are created, backed, and traded (e.g., regulations on uses of mortgages for securitization etc.). The idea is making laws with regard to existence and trading of certain financial instruments. The plan, on the other hand, but is implemented regard to, say, distributions of already-existing financial instruments in this particular case.
Example 2. Fiscal-Centered v. Monetary-Centered. Fiscal policy is about implementing plans, and spending here or there. Monetary policy is about formal regulation, focused on monetary supply, and interest rates.
MF claims that formalization multiplies judicial intervention. The idea is that the ratio of judicial to administrative decisions increases in the favor of the former as the law is formalized. Foucault says “governmental interventions of the public authority are more and more formalized” and also “administrative intervention recedes” (176). The idea is the shift of authority and power from administration and executive power to judicial-former power. Think, for example, of formalization of traffic law, which relies on the idea of a traffic court which is the final venue for formalization of traffic (see example from Rougier as quoted by Foucault, 162). The highway code is the formalization-juridificaiton of traffic. The technique of the traffic cop would be to plan traffic: imagine a city with no traffic laws but only traffic cops.
What distinguishes neoliberalism from classical liberalism? The latter took markets to be natural and spontaneous orders—people needed to be free to exchange. The former now takes markets to be formal structures which are implemented—enterprises need to be able to compete and free markets.
Going beyond Foucault now, aren’t neoliberals as he describes them part of a more rationalist-constructivist tradition in political theory? Isn’t formal (rather than administrative) intervention still about the way in which the basics of society get set up? Isn’t this rightly contrasted with more spontaneous-order versions of liberalism (Adam Smith, Mises, Hayek, etc.)? Aren’t the latter versions not interested in ‘setting up the basics of society’ so much as they are interested in questions of social evolution and taking a historicistperspective? (If so, then we may have doubts about Foucault’s reading of Hayek.)
If the neoliberals are looking to set up society for the purposes of freeing the market, then aren’t they using a kind of Lockean-Kantian constructivist rule-of-law framework for the purposes of the Smithian idea of market freedom? For the purposes of elucidation: one might also use the same rule-of-law framework to arrive at a more interventionist conception. Another approach would be to use the Smithan classical liberal “spontaneous natural order” framework (161) for the purposes of arriving at a more social-egalitarian approach. There are, then, four options:
Constructivist Free-Market Approach: Neoliberalism
Constructivist Egalitarian Approach: Rawls
Spontaneous Order Free-Market Approach: Adam Smith’s Capitalism
Spontaneous Order Egalitarian Approach: ??
Admittedly, Smithians (and Hayekians) would probably endorse the rule of law, but they would do so for different reasons. Neoliberals endorse it for contractualist reasons broadly construed, but Austrians endorse it for spontaneous-order reasons. There is, then, a basic distinction in what we take to be the justification of a given political order: Is an order justified because the result of spontaneous-natural process? Or is it justified because it is the most rational, because it is the best kind of social design possible? What, for the neoliberals, justifies that kind of society?
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