Michel Foucault, The Birth of Biopolitics - Chapter Seven

• Social policy of neo-liberalism (Gesellschaftpolitik) is ‘active, intense, and interventionist’, but is not a compensatory policy for impacts of the market economy on the social fabric. It is rather ’a historical and social condition of possibility for a market economy, as the condition enabling the formal mechanism of competition to function’ (p. 160)

• The two key elements are:
1. Formalisation of society on the model of the enterprise;
2. Redefinition of the juridicial institution and the rule of law.

• Walter Lippmann symposium 1939 – emphasizes that the market economy is not a “natural order” but rather ‘the result of a legal order that presupposes juridicial intervention by the state’ (Louis Rougier) – Foucault identifies this as a turning point between classical liberalism and neo-liberalism

• This is not a juridicial order that is superstructural to economic relations – ‘The juridicial gives form to the economic, and the economic would not be what it is without the juridicial’ – ‘like Max Weber, they situate themselves from the outset at the level of the relations of production rather than at the level of the forces of production’ (p. 163)

• ‘The economic must be considered as a set of regulated activities from the very beginning … The economic can only ever be considered as a set of activities, which necessarily means regulated activities … these economic processes only really exist, in history, insofar as an institutional framework and positive rules have provided them with their conditions of possibility’ (p. 163)

• ‘The history of capitalism can only be an economic-institutional history’ (p. 164) – Foucault rejects the Marxist idea that Capitalism can be understood as a singularity – ‘the historical capitalism we know is not deducible as the only possible and necessary figure of the logic of capital’ (p. 165)

• German economic theory was concerned to show that capitalism could have a non-contradictory logic. It therefore focused on the one hand on the theory of competition, and whether or not it led inexorably to monopoly, and on the other on the economic-institutional ensembles which promoted the development of capitalism (e.g. Weber on the Protestant ethic)

• If we are not dealing with an essential Capitalism derived from a pure logic of capital, then the forms of legal intervention that change the economic-institutional ensemble become critical to ‘act … in such a way as to invent a different capitalism’ (p. 167)

• This raises the question of the “economic constitution” (Wirtschaftsordnung), and the development of debates about the Rule of law (l’Etat de droit or Rechtstadt) – rule of law emerged in opposition to both despotism and the police state – it requires that ‘public authorities act within the framework of the law’ (p. 169). It also generates a distinction between the Rule of law as it applies universally, and laws as generated in specific contexts and applied for particular actors (e.g. market regulations), which are generated by specialist administrative courts and institutions.

• The Rule of law as developed by von Hayek in The Constitution of Society presents the Rule of law in the economic order as the opposite of a plan. Economic planning has: (1) definite aims (e.g. a prescribed rate of growth); (2) modifications of the plan in light of circumstances to achieve the goal; and (3) public authorities supplanting individuals as the core decision-makers, and (4) public authorities as holders of all relevant information.

By contrast, the Rule of law as understood by Hayek requires: (1) restriction of state authority to setting formal laws and not dictating economic ends; (2) it must operate through fixed rules only and not by means of discretion; (3) economic agents can operate on the basis of certainty about the legal framework; and (4) formal laws are binding on the state as they are binding on others. Its correlate is that ‘the state must be blind to the economic processes. It must not be expected to know everything concerning the economy’ (p. 173) – ‘The economy is a game and the legal institution which frames the economy should be thought of as the rules of the game’ (p. 173)

• There is also the ‘growth of juidical demand’. The major challenge of classical liberalism was how to establish a general system of laws imposed on everyone in the same way. But the rise of an enterprise society has as its correlate ‘the number and size of the sources of friction between these competing units will increase and occasions of conflict and litigation multiply’ (p. 175) – this juridicial interventionism increasingly has to take the form of ‘arbitration within the framework of the rules of the game’ (p. 175) – ‘the de-functionarization of the economic action of plans, together with the increased dynamic of enterprises, produces the need for an ever-increasing number of judicial instances, or anyway of instances of arbitration’ (p. 175)

• Joseph Schumpeter shared with the ordoliberals a view that capitalism was not inherently contradictory at the economic level, but he did believe that monopolistic tendencies were inherent to capitalism as organized at a social level – this concentration of power would reduce the dynamism of capitalism and see it tending towards socialism. Schumpeter’s pessimism about the social pressures to absorb economic processes within the state is contrasted to the ordoliberals, who believe that the rule of law and social intervention can modify this tendency by promoting an enterprise society.