Wednesday, 18 June 2014

A tension in ordoliberalism

(I'm still feeling my way regarding the implied reader for this blog.  The ideal thing would be to have background links at the beginning of each post, I suppose.  At any rate, ordoliberalism is the specifically German variety of neoliberalism, where liberal here is used in the European/social theory sense of pro-market. The big difference from the more familiar AAA [Anglo-American-Austrian] version of neoliberalism is a much more forthright embrace of the role of the state in shaping market economies. Ordoliberalism in Germany has also made its peace with an extensive welfare state and role for organised interest groups, including labour.)

Lecturing in 1979, Foucault gave a remarkably good account of ordoliberalism (especially remarkable given that he seems to have based it largely on a handful of not particularly brilliant French secondary sources). He argued that unlike classical laissez-faire liberalism, which sought to limit the state's interference in a market it saw as prior to the state, ordoliberals believed a competitive market economy could never exist without the state, and sought to deduce the proper form of the state from the requirements of such a market. Two key elements of ordoliberalism were the result:
  • Commitment to the rule of law, "defined as a state in which the actions of the public authorities will have no value if they are not framed in laws that limit them in advance."(169) In particular, laws should be crafted to enable the promotion of competitive markets while forbidding interference with them.
  • Promotion of the diffusion of entrepreneurial subjects who, because they can flourish in competitive markets, won't demand alteration of their outcomes. (Foucault describes this under the heading of "the policy of society.")    
It's easy to see both these aspects of ordoliberalism in the German reaction to the Eurozone crisis
  • Rule of law: Germany has pushed the promulgation of all sorts of legal constraints, such as "debt brakes" in national constitutions that limit the amount of borrowing a sovereign may do, while seeking to give very sharp edges to the provisions of existing treaties and insisting they not be violated.  
  • Promotion of entrepreneurial subjects: Germany has demanded that states implement structural reforms meant to ensure "competitiveness," which has become the central buzzword of German and Eurocrat discourse on the crisis.  (Sometimes I feel like Wettbewerbsfähigkeit--competitiveness--is about half the vocabulary one needs to read the German papers on the topic!) States so reorganised would presumably not need bailouts nor push to water down treaty provisions like the no-bailout rule.  
That it's so easy to read recent developments through Foucault is, to my mind, a pretty convincing demonstration of how penetrating his perception was. But what Foucault does not seem to analyse is a potential tension between these two commitments. What if what's required for the promotion of entrepreneurial subjects is case-by-case decision making not readily formulated in pre-announced rules?

And indeed there has been some interesting criticism of Eurozone policy along these lines. Changes in Eurozone practice and treaties have granted the Commission very wide discretion in requiring adjustment of domestic policies in the presence of budget deficits and other macroeconomic imbalances.  Michelle Everson and Christian Joerges argue in a great paper that
the machinery of the new  regime  with  its  individualised  measures  which  are  oriented  only  by necessarily  indeterminate  general  clauses,  is  regulatory  in  its  nature, establishing  a  ‘political  administration’  outside  the  realm  of  democratic politics and the form of accountability which the rule of law demands. 
Now, it's certainly the case that from the outset ordoliberals were not particularly enthusiastic about letting democracy get in the way of markets (see Ptak). But they were serious about the rule of law involving limited discretion, and what Everson and Joerges call "authoritarian managerialism" does not embody it.

P.S. On how Germany's ordoliberalism has shaped its reaction to the crisis, see Blyth and Dullien and Guerot.  On the authoritarian drift of Eurozone policy, Scharpf and Majone are also both very good. In different ways, both these scholars had been inclined previously to downplay the EU "democratic deficit" on the grounds that limitations of democracy were legitimate to promote good outcomes.

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