Creating the anti-Beveridge blueprint: German ordoliberalism

In a sense, reference to a ‘German’ neoliberalism lacks appropriate specificity and is somewhat misleading. More accurately, this is a West German neoliberalism evolving in the Federal Republic of Germany (FRG) in the years following the inception of the state in 1949. Importantly also, some of the main theoreticians were actually Austrian. Ludwig von Mises was born in what was then Austria-Hungary, as was Friedrich Hayek. Indeed, Foucault acknowledges the significance of the ‘Austrian school’.

The post-war ‘reconstruction’ of the FRG provides the temporal, political and cultural framework for the development of neoliberal economic and social policy. The Cold War was significant, although Foucault does not dwell on this dimension. During this period, key figures successfully argued that the economy needed to be deregulated and not be subject to price controls. Influential here was Ludwig Erhard, appointed FRG Minister of the Economy in 1951 and hailed as ‘father of the German economic miracle’ (p. 97). By 1952–3, ‘liberalization’ was ‘more or less established’ in the FRG (p. 87). Price controls had been abolished on food, coal, electricity and most other basic necessities. Whilst workers opposed these measures with a general strike in 1948, Erhard steadfastly maintained his economic direction. Eventually, the Social Democratic Party (SPD) was won over to the vision and, following a ‘series of renunciations’ (p. 89), the Godesberg Programme of 1959 rejected class-based politics and the political aspiration to replace capitalism. Even the policy of nationalisation was rejected by the SPD.

Foucault emphasises the significance of the academic journal ORDO established in the 1930s by the German economists Walter Eucken and Franz Böhm and associated with the Freiburg School of economic thought. ORDO provided the intellectual impetus for what became known as ordoliberalism. Alexander Rüstow, Wilhelm Röpke and Hayek were some of the most influential figures associated with this, often internally fractious, current of thought. Not only was Hayek important within Germany, he was ‘very clearly one of the inspirations of contemporary American liberalism, or of American anarcho-capitalism’ (p. 104).

All of these neoliberal thinkers drastically opposed Keynesian economics and welfare capitalism with Röpke equating the Beveridge reforms in Britain to the horrors of Nazism (p. 110). Within this framing, Nazism was essentially and ‘above all. . .the unlimited growth of state power’, but it was detectable in all other forms of state interventionism departing from the liberal model they valorised (p. 111). Foucault recognises that the coup de force of the ordoliberals was their sweeping up of ‘concentration camps and social security records, in the same critique’ presenting them both as a consequence, albeit in different ways, of the gross inflation of the state (p. 116). Within this paradigm 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 be attributed to the state’ (p. 116). Thus, Foucault summarises, the ‘ordoliberals say we should. . . 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’ (p. 116, emphasis added).

However, it is entirely erroneous to perceive this body of ideas as simply ‘Adam Smith revived’ or the type of ‘market society’ that Marx unpicked and denounced in Capital (p 130). Central to this new ‘art of government’ is a rejection of nineteenth-century laissez-faire capitalism in favour of a more regulated approach. The evocative metaphor Foucault uses to describe this shift is that of the ‘Highway code’, which dictates that ‘vehicles’ will no longer be ‘allowed to circulate in any direction, according to whim, with avoidable endless congestion and accidents’ (p. 162). To prevent such mishaps, traffic will be strictly monitored with ‘fixed hours’, ‘routes’ and speeds imposed. At a time of ‘faster means of transport this code will not necessarily be the same as in the time of stagecoaches’ (p. 162).

This form of neoliberalism was not – as some were subsequently to argue – a project aiming to ‘roll back the state’ leaving people entirely to the whims of an unregulated market (Garrett, Reference Garrett2009). Neoliberal ‘governmental intervention is no less dense, frequent, active, and continuous than in any other system’ (p. 145). What occurs, however, is a reconstitution or remaking of the state, which becomes more vigilant and active in promoting the market economy. Neoliberalism departs not only from the classical liberalism of the nineteenth century but is also at odds with what Foucault terms ‘contemporary American anarcho-capitalism’ (p. 133). As advocated by its West German and Austrian proponents, neoliberalism is a ‘positive’ and ‘intervening liberalism’ (p. 133): an evolving form in which ‘economic processes and institutional framework call on each other, modify and shape each other in ceaseless reciprocity’ (p. 164).

The transformations willed by these neoliberals are associated with a novel ‘governmental style’ (p. 133) entailing different kinds of regulatory and ‘organizing’ actions (p. 138). Setting themselves firmly against Keynesianism, the promulgators of this new form of liberalism argued that there are instances where the state should emphatically not intervene: namely, there should be no substantial state intervention to respond to, and alleviate hardships prompted by, unemployment. Within this perspective, an unemployed person should never be perceived as a ‘social victim’ (p. 139). Foreshadowing the later lexicon on so-called ‘jobseekers’, the unemployed person was better understood as merely a ‘worker in transit. . . in transit between an unprofitable activity and more profitable activity’ (p. 139; see also GOV.UK, 2014).

Relatedly, social policy should not ‘function like a compensatory mechanism for absorbing or nullifying the possible destructive effects of the market’ (p. 160). Rather, the role of social policy should be one of facilitating market processes. As Foucault remarks:

Social transfers – social security benefits – should be available, but only to provide a very basic ‘minimum’ for those who are not ‘able to ensure their own existence’ (p. 143). Central here is the ‘idea that the economy is a game’ with the state merely aspiring to safeguard ‘players from being excluded from the game’ (p. 202). Above this threshold, ‘everyone will have to be an enterprise for himself and his family’ (p. 206). More pervasively, this will be a society ‘formalized on the model’ of ‘competitive enterprise’ (p. 206). Echoing Marxist analysis, Foucault asserts, however, that there will continue to exist a ‘kind of infra- and supra-liminal floating population, a liminal population which, for an economy that has abandoned the objective of full employment, will be a constant reserve of manpower which can be drawn on if need be, but which can also be returned to its assisted status if necessary’ (p. 206); see also Marx (Reference May1990 [Reference Marx1867]): 794). This ‘floating population’ will be enabled ‘to live, after a fashion, and to live in such a way’ that it can ‘always be available for possible work, if market conditions require it’ (p. 207): an articulation, which describes the predicament of those now often referred to as the ‘precariat’ (Gill and Pratt, Reference Gill and Pratt2008).

Governments must not, therefore, ‘form a counterpoint or a screen. . . between society and economic processes’ (p. 145). Neither must they seek to ‘correct the destructive effects of the market on society’ (p. 145). The core function of governments, according to this radical neoliberal analysis, is ‘to intervene on society so that competitive mechanisms can play a regulatory role at every moment and every point in society’ thus ensuring ‘a general regulation of society by the market’ (p. 145).

As the quintessential anti-Beveridge blueprint, neoliberal society is unencumbered from the responsibility of ‘guarantee[ing] individuals against risks, whether these are individual risks, like illness or accidents, or collective risks, like damage, for example’ (p. 144). The only task for the ‘society, or rather the economy’, will be to maintain the rule of law and to ensure that every ‘individual has sufficient income to be able, either directly or as an individual, or through the collective means of mutual benefit organizations, to insure himself against existing risks, or the risks of life, the inevitability of old age and death, on the basis of his private reserves’ (p. 144, emphasis added).

According to Foucault, this type of ‘individual social policy’ is entirely counter-posed to ‘socialist social policy’ (p. 144). Founded on a socially atomising dynamic, it involves ‘an individualization of social policy and individualization through social policy, instead of collectivization and socialization by and in social policy’ (p. 144). For these European neoliberals, the ‘only one true and fundamental social policy’ is that aspiring to create ‘economic growth’ (p. 144). Nevertheless, Foucault concedes that there are various constraints hindering this project, including attachments people had to more benign and progressive forms of organising social life. Although he fails to mention it, the existence of the eastern German Democratic Republic (GDR) may also have acted as a brake on the evolution of ‘privatized social policy’ because it represented an alternative model of collective welfare provision. In France, the ‘German model’ was implanted ‘slowly, insidiously, and creakingly’ (p. 192). At the same time Foucault was delivering his lectures, reflecting the exhaustion of Labourism in the UK, the government of James Callaghan was limping through its final weeks in office (Hall et al., Reference Hall, Critcher, Jefferson, Clarke and Roberts1978). This also provided part of the historical context for his argument that everywhere ‘in spite of everything, social policy increasingly tends to follow’ the neoliberal programme (p. 144).

Anarcho-capitalism: American neoliberalism

In the second part of the ‘Birth of Biopolitics’ lecture series, Foucault turns his attention to US neoliberalism. Whilst sharing some of the characteristics of the ‘German model’, this variant originates from a markedly different national and cultural milieu. US neoliberalism is more encompassing than in the FRG and saturates the ‘whole way of being and thinking’ (p. 219). Foucault also acknowledges how US neoliberalism contains potent, popular components and a ‘sort of utopian focus which is always being revived’ (p. 218). It would, therefore, be misguided to merely perceive it as a ‘technical alternative for government’ since that would fail to grasp the project's powerful affective dimensions (p. 219). Indeed, this aspect was reflected in the subsequent presidential campaigns of Ronald Reagan, epitomised by his famous ‘Morning in America’ TV commercial from 1984.

Two years into the faltering one-term presidency of Jimmy Carter, Foucault identifies US neoliberalism as a ‘widespread movement of political opposition within American society’ (p. 193). He regards the 1930s as a crucial period and highlights the contributions of, for example, Henry Calvert Simons, an economist at the University of Chicago. The emerging corpus of US neoliberal ideas were further shaped in opposition to President Roosevelt's New Deal measures, Keynesian economic policy and a perceived inflation in the size of the federal government administration.

Subsequently, the theorisation of human capital was to become pivotal in emphasising the assets (or lack thereof) of individual agents within a competitive society. Human capital ‘represents two processes, one that we could call the extension of economic analysis into a previously unexplored domain, and second, on the basis of this, the possibility of giving a strictly economic interpretation of a whole domain previously thought to be non-economic’ (p. 219). In short, everything ‘for which human beings attempt to realize their ends, from marriage, to crime, to expenditures on children, can be understood “economically” according to a particular calculation of cost for benefit’ (Read, Reference Read2009: 28).

Primary definers include the University of Chicago economists, Theodore Schultz (Reference Schultz1961) and Gary Becker (Becker et al., Reference Becker, Ewald and Harcourt2012). According to these theorists, human capital is comprised of two elements: one ‘innate’ or ‘hereditary’ and the other, ‘acquired’ (p. 227). In terms of the first type, Foucault asserts that we ‘do not have to pay to have the body we have’ or for our ‘genetic make-up’ (p. 227). However, he invites us to engage in a bit of ‘science fiction’ and imagine how genetic risk profiling, and the related genetic matching of parents might boost or enhance the ‘innate’ capital of their offspring (p. 228). In later years, pre-birth screening has, in fact, become associated with greater calculation in this respect and more advanced forms of genetic engineering have multiplied these possibilities (Cooper, Reference Cooper2008). On another level, the increase in recourse to cosmetic surgery to alter and enhance given appearances has also occurred.

Turning to acquired human capital, Foucault suggests this is the form that most interests US neoliberals and this is reflected in their preoccupation with ‘the more or less voluntary formation of human capital in the course of individual lives’ (p. 229). How do individuals evolve into ‘abilities-machines’ to enhance their incomes? (p. 229). What in the ‘child's family life will produce human capital? What type of stimuli, form of life, and relationship with parents, adults and others can be crystallized into human capital?’ (p. 230). This is a grid of intelligibility in which ‘all the problems of health care and public hygiene must, or at any rate can, be rethought as elements which may or may not improve human capital’ (p. 230). Important here, therefore, are ‘educational investments’ which are ‘much broader than simple schooling or professional training’ (p. 229). This might include, for example, the ‘time parents devote to their children outside of simple educational activities’ (p. 229). The entire set of cultural stimuli received by the child will collectively contribute to the formation of acquired human capital. In this context, ‘more educated parents will form a higher human capital than parents with less education’ (p. 229). However, with a ‘whole environmental analysis’ of the child's life, it will be ‘possible to calculate, and to a certain extent to quantify, or at any rate measure’ the ‘possibilities of investment in human capital’ (pp. 229–30; see also Gudmand-Høyer and Hjorth, Reference Gudmand-Høyer and Hjorth2009).

Foucault takes child attachment discourse and situates it within his articulation of neoliberal ideas on human capital (pp. 243–44). He is not interested in the gendered dimension inherent in this arrangement (Thornton, Reference Thornton2014). Nor does he draw any, arguably relevant, parallels with contemporary theorisations developed by the Italian Marxist Autonomists, around the idea of the ‘social factory’ or ‘factory without walls’ in which the whole of society is placed at the disposal of profit (Negri, Reference Negri2005: 102–115: see also Garrett, Reference Garrett2014). On occasions, Foucault does refer to a Marxist framework, linking human capital to the work of Rosa Luxemburg. More specifically, the cultivation of human capital is interpreted as an attempt to counter the problem historically haunting capitalism – namely the threat of falling rates of profit – by dint of ‘innovation’ and investments ‘made at the level of man himself’ (p. 231). As people are turned into ‘abilities machines’, the honing of new skills, and not imperialism as suggested by Luxemburg, might be the vital new platform for capital accumulation.

Foucault is ambiguously attuned to how US neoliberals seek to ‘use the market economy and the typical analyses of the market economy to decipher non-market relationships’ and wider ‘social phenomena’ (p. 241). Comparing and contrasting this perspective with that of the German ordoliberals, he perceives how the Europeans were intent on ‘generalizing the “enterprise” form within the social body or social fabric’ (p. 241). ORDO social policy aspires, therefore, to conjure up a ‘vitalised entrepreneurial personality’ (Bonefeld, Reference Bonefeld2012: 642). Perhaps, this can be connected to how more contemporary social policy has become more orientated toward an emphasis on a zest for enterprise, self-activisation and resilience (Neocleous, Reference Neocleous2013; Garrett, Reference Garrett2016). The ‘individual's life itself – with his relationships to his private property, for example, with his family, household, insurance and retirement – must make him into a sort of permanent and multiple enterprise’ (p. 241). Furthermore, the ‘ordoliberal idea of making the enterprise the universally generalized social model’ functions as a ‘support to what they designate as the reconstruction of a set of what could be called “warm” moral and cultural values which are presented precisely as antithetical to the “cold” mechanism of competition’ (p. 242). Hence, it is important that economic processes are anchored within a political and moral framework – a politics of life or Vitalpolitik (see also Bonefeld, Reference Bonefeld2012). In comparison, the US variant of neoliberalism is ‘much more radical or much more complete or exhaustive’ (p. 243, emphasis added). This is because it involves ‘generalizing’ the ‘economic form of the market. . . throughout the social body and including the whole of the social system’ (p. 243, emphasis added). Across the entire society, this ‘economic analysis of the non-economic’ becomes the dominant ‘analytical schema or grid of intelligibility’ (p. 243).

Another key facet of the neoliberal project is ‘to object to activities of the public authorities on the grounds of their abuses, excesses, futility and wasteful expenditure’ (p. 246). This entails ‘anchoring and justifying a permanent political criticism of political and governmental action. . . scrutinizing every action of the public authorities in terms of the game of supply and demand, in terms of efficiency. . . and in terms of the cost of intervention by the public authorities in the field of the market’ (p. 246). Referring to the ‘cynicism of a market criticism’ which functions in the US as a ‘permanent exercise’ (p. 246), Foucault draws attention to right-wing think-tanks, such as the American Enterprise Institute, aiming to measure ‘all public activities in cost-benefit terms’ (p. 247). This incessant criticism of government policy amounts, in fact, to a ‘sort of permanent economic tribunal confronting government’ (p. 247).