Will Davies is a Senior Lecturer in Politics at Goldsmiths, University of London and blogs at www.potlatch.org.uk.  His book, The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition, published this year, explores how economic measurements and expertise have been used to re-model society and the state along competitive lines, and argues that the neoliberal conflation of economics and politics has ultimately undermined the legitimacy of sovereign power.  In this interview, he discusses the book with the New Left Project’s Tom Mills.

 

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What’s new in your book?  What’s original about your approach to neoliberalism?

The way in which I define neoliberalism is that it’s not primarily about opening up markets, or about deregulation or privatisation, and it’s not about shrinking the state.  What I argue is that neoliberalism is about the extension of market-based principles and techniques of evaluation into various non-market domains, including the state, cultural institutions and social institutions.  It’s the expansion of forms of evaluation and forms of measurement and forms of judgement which tend to originate in and around the market, but which are pushed into the domains which lie traditionally outside of it.  There are a couple of ways in which this is done.  One way is to push neoclassical economics, which originates as a means of analysing markets, into areas of politics and society, such as law, which is one of the areas that I look at, and to analyse those institutions in terms of measurable efficiency.  This is what the Chicago School of economics is best known for.   Gary Becker is the most famous proponent of this process, which is often called economic imperialism, but I argue that Ronald Coase, who is less commonly recognised as a neoliberal, is a more important exponent of this expansion of neoclassical economics into various social and political domains, and it was actually Coase’s theory of transaction costs that was fundamental to how the neoliberal state progressed.  The second area I examine is the use of business strategy; theories of strategic advantage and competitive strategy that originate in business schools in the second half of the twentieth century and which are pushed out of the realm of managing corporations, which they were originally invented for, and into the realm of political decision making.  This is how we get notions of national competitiveness, regional competitiveness, or urban competitiveness.  The same tools and instruments and theories which were originally developed to enable chief executives of corporations to consider the identity and strategic direction of their firms are expanded for use by politicians and those in the executive branch of government to think about the strategic direction of entire polities vis-à-vis some notion of the global competitive game.

So those are some of the key things, which I look at in the book.  And one of the things which interests me is how these techniques end up being married with forms of sovereign power.  How is it that economics gets used to transform the judiciary?  How is it that these techniques of strategic management end up being used in the executive branch of government? I’m interested in how notions of economisation and notions of sovereignty become blended with each other.

 

And the interesting thing about your discussion of this process in the book is that it shows that neoliberalism was always more than just a system of macroeconomic management, that as a project it was always looking to expand beyond the economy, across society.

Well it’s worth remembering that historically neoliberalism begins with a critique of socialism in the socialist calculation debate of the 1920s and 1930s, which I don’t really address in the book, but which I think is quite important in understanding what neoliberalism is and where it comes from.  It begins in the work of Ludwig von Mises and Friedrich Hayek as a critique of the possibility of rational and efficient socialist governing of the economy. What neoliberalism offers as a form of politics is not simply a way of running markets, it is also a way of contesting the socialist ambition to develop social goods via the welfare state.

Neoliberalism targets institutions which traditionally lie outside of the market and tries to come up with new forms of management, new forms of government which rather than necessarily dragging them into the market, which is what privatisation does, at least offers a way of remodelling them and ‘modernising’ them in ways that take on certain cultural and moral traits traditional associated with markets. What is interesting when you read a lot of the history of neoliberal thought is that their argument for the market is not an efficiency one and it’s not a utilitarian one, which argues that markets deliver the greatest output, it’s more of a crypto moral argument (it’s also an epistemological one as well but that’s another matter).  It’s about the types of behaviours and the types of ethos found in the market and about how those behaviours and that ethos can be recreated in areas such as public bureaucracies.

 

One of the approaches taken by critics of neoliberalism, and I’m thinking here mainly of economic sociologists, has been to emphasise that there is a whole social world that exists beyond and within markets – that the market isn’t all there is.  You resist that approach, and one thing you bring out quite well, I think, is the fact that the neoliberals, and those interested in competitiveness in particular, are very well aware of the existence of extra-market practices, but are able to incorporate them into their own schemes.

That’s absolutely right.  This is partly a question of judgement and value.  Liberalism, as opposed to neoliberalism, is grounded in some notion not only the separation of powers within government, but also of separate domains of society: the domain of politics, the domain of economics, the domain of the social. These three things can have distinct forms of conduct, distinct techniques of evaluation and distinct values, and that is what the economic sociologist Karl Polanyi hopes to criticise: the claim that liberalism can maintain such a separation.  But what’s very important to recognise about neoliberalism is that it’s never tolerated that liberal separation of domains.  Things which appear to be outside of the economy are evaluated using techniques developed within the economy.  So to go back to the example you were referring to, if you think about how competitiveness evaluation works – as carried out by think-tanks like the World Economic Forum and competitiveness gurus like Michael Porter and others – the argument is not that the market should be left to its own devices and the state should get out of the way.  That’s a kind of a laissez-faire Victorian liberal argument.  What they argue is that markets need various types of social and cultural goods.  They need things like good transport infrastructure to work, they need good broadband, they need an educated population who believe in the virtues of free enterprise, entrepreneurship and so on.  And they recognise that lots of those things are things that governments need to provide, or others parties need to provide, like an NGO or whatever it might be.  Those things are not valued on their own terms though.  They are not valued because it’s good to have free health care, or it’s good to have an educated population.  They are valued on the instrumental basis that they can be shown to have some economic pay off. This is an epic case of economic imperialism or economisation.

What these think tanks and gurus do is they invent whole new methodologies.  Competitiveness evaluations involve the completely naked construction of new types of social science, done very publicly.  These are new methodologies designed specifically to try and put economic values on things which often seem to defy quantification.  How do you, I don’t know, value the culture of Nigeria?  Traditionally an anthropologist might go and spend a year there and reach some kind of judgement as to what is going on.  But what these think tanks and gurus do is they come up with new techniques, polling business leaders for example.  They’ll ask them: What do you think about the culture of Nigeria?  Do you think that young people there are brought up to respect the values of property and private enterprise, or do you think that it’s anti-business?  Do you think that people have a set of values that are not conducive to competitiveness?  So they come up with new techniques through which the empirical picture of the global economy can be filled in with new forms of data.  So one of the things I am interested in in the book is what you might call a cultural political economy.  I’m not so much interested in the mechanics of how global capitalism actually works – I’m not much of a political economist myself.  I’m more interested in how experts and social scientists and elites have developed and created new types of knowledge and the different ways in which capitalism has been represented, or constructed, in ways that privilege a certain Hayekian belief that competitiveness is unavoidable and also a noble obligation which is placed upon all of us at all times.  This is a view of the world which was very carefully nurtured, constructed and developed through different forms of social science.

 

The book’s not really about power or capital.  But how do you see the relationship between those forces and the work that experts and neoliberal academics do?

Well I don’t use the word ideology in the book, and that’s done quite deliberately.  The book draws a lot on the work of Luc Boltanski, the French sociologist who is best known in this country for his book with Ève Chiapello, The New Spirit of Capitalism.  Boltanski argues specifically against the idea that there is a sort of dualism between what people think is going on and the material mechanics of what is really going on under the surface.  And I think there’s something quite useful in recognising that a lot of what goes on, and which gets called ideology, doesn’t get constructed in secret, it doesn’t get made behind the scenes.  Actually we are all complicit in what is called neoliberalism.  In reality television or sport, for example, rivalry and competitiveness is transformed into a kind of a cultural spectacle which many of us find appealing in some way.   One of the things I’m trying to do is to highlight things which are quite real and going on around us.  They’re not illusions which are draped over the global economy, but are cultural and political practices which have a kind of reality all of their own.

Now in terms of how this relates to traditional notions of power and capital, one of the things which I think is very interesting is that when you look at how competition is theorised by experts working for the US state, or advising the US state – and I’m talking now about a clear shift away from what might be called a liberal definition of competition, in which there is said to be competition if there are multiple firms all competing in a single arena.  Around about the 1960s, regulators in the US thought that large profits by large firms were a problem to be dealt with.  By 1980 that view of the world had completely changed and large firms making large profits came to be celebrated.  They are not there to necessarily be helped by the state, there’s not that notion of ‘nation champions’ you get in European industrial policy, but nevertheless large firms making large profits is seen as a sign of something going right in 1980; it is a sign of something going wrong in 1960.  Now you could analyse that shift, which is a key element in what we call neoliberalism, in terms of the material interests of particular forms of capital and that would be a perfectly legitimate way of doing it.  You could say that large US firms were coming under so much attack in the 1970s by regulators and consumer activists and by Japanese competitors that they had to mobilise a different story about the world through lobbying and so on.  That would be a sort of Gramscian view of this.  By focusing on expert discourses and knowledge there’s just a different epistemological position I’m taking, which is to say that for various reasons the ways in which states came to conceive of economic reality went under some kind of transformation over that period.  It’s true though that the key beneficiaries of that transformation were the managers and shareholders of large US corporations.  So there is clearly an alliance between capital and these new types of knowledge that are arising over the course of the ‘60s, ‘70s and ‘80s.

 

You mentioned Boltanski and things being public.  One of things you describe in the book is the influence of the World Economic Forum.  In terms of the interests of capital and power, it couldn’t be more blatant could it?  You have a gathering there of the elite of the elite and they are the ones who are pushing these expertise.

Oh, it’s certainly an elite project.  I don’t want to duck the question but the book itself doesn’t really have a theory of capital.   It’s partly about my epistemological and methodological starting point.  So the book is able to make some claims about political power and the way in which neoliberalism works as a set of political strategies.  But I’m not sure it’s able to make such strong claims about capitalist elites.  It’s really a book about the state and the ways in which the state is reconfigured.

In the book I argue that neoliberalism has brought about a disenchantment with politics by economics.  Neoliberals themselves have always been deeply fearful of politics in the sense that Hannah Arendt or other theorists of the political have done, of politics as a domain of performance, of rhetoric, of people appearing before each other in public.  They consider that understood in that way, politics is a realm of ambiguity that potentially leads to violence and that therefore it is safer to have a version of politics in which everything is as quantified as possible and as explicit as possible.  The advantage of the market price system, from a neoliberal perspective, I would argue, is partly that it creates a kind of clarity of meaning.  If something can be quantified there’s a certain lack of ambiguity in that which enables peaceful conduct.  So for neoliberals the ambiguity and uncertainty in political speech and rhetoric needs to be eliminated by economics and by market mechanisms.  That’s a core argument in the book.  And part of what I am trying to do is to show that that project is bound up in contradictions because it is itself a political project.  This attempt by neoliberals to replace politics with economics requires a political strategy, it requires the use of the sovereign state, it requires forms of authority and sovereign power which cannot be reduced to economics.

 

And that means that neoliberalism eventually loses its legitimacy?

Exactly.  Ultimately what neoliberalism is doing is paradoxical.  It is asserting the political legitimacy of certain anti-political forms of technocracy, measurements and economics.  But when those forms of technocracy, measurements, economics and so on reach some massive crisis, as they have done in recent years, then the paradox becomes visible because the only things that can happen is for the state to use all its power to prop everything up and in a sense assert it all back into being.   And so the illusion that we can have a capitalism without power, without politics, and without sovereign bodies, comes crashing down – a project of power comes again to the fore. What I’m trying to do, to get back to your point about elites, is to demonstrate that at every turn there is politics – there is rhetorical politics, there is a moral politics and there are forms of justification (which is where Boltanski comes in).  And ultimately I think there is a kind of Schmittian politics in that occasionally the neoliberal state has to draw on exceptional powers of rescue, which is what we’ve seen in the last six years since the collapse of Lehman Brothers.

 

Your central argument in the book is that neoliberalism has brought about a disenchantment with politics by economics.  The Chicago School was responsible for a key innovation in this regard. Could you describe the important transition that takes place from Ordoliberalism to the Chicago School?

Sure. There was a body of scholars during the 1930s, mainly lawyers and philosophers and some economists, but not many, who were based in Freiburg and were called the Ordoliberals.  They were led by a man called Walter Eucken and they had some sympathetic associates dotted around the world, including Hayek in London and Henry Simons in Chicago.  And their view was that the way to rescue the free market system from the threat of socialism and Keynesianism, and things like the New Deal in the United States, was to use the law to enshrine the free market as a constitutional and legal principle.  And that meant that effectively the price system became almost a matter of moral and legal philosophy.  What they believed in was the ideal of a competitive free market system, much as you read in economics text books; that fantastical view of free markets where prices and competition determine everything.  And they believed it was the job of law to convert that abstract idea of a free market into a reality.  For the Ordoliberals competition was absolutely key and that meant that their view of what a free society would look like meant that nobody, neither states nor any private economic actors, could shape economic outcomes.  Everybody could have their plans for the future, their policies, their investment strategies, and so on.  But ultimately the future was marred in uncertainty – and this was a good thing.  And they believed that law should be used to keep everybody in this state of constant competitive uncertainty so nobody could have any ultimate control over how economic activities developed.  And this was a view which was incredibly persuasive amongst the first generation of the Chicago School, people like Jacob Viner and Henry Simons, and it also had a hold over Milton Friedman, who would later become the most famous member of the Chicago School and believed something like this up to the 1960s.

Then you get a shift in the Chicago School’s understanding of competition which begins in the 1950s with another member of the Chicago School, Aaron Director.  And it goes on mostly in the law school, not in the economics department.  What changes is that they start to doubt the capacity of the state, or of lawyers working for the state, to be able to specify what appropriate competition should look like.  They recognise that what the Ordoliberals are arguing for is ultimately a normative claim about how markets ought to look, and what the Chicago School start to argue is that there is no way which markets ought to look.  Rather if you believe in competition you should stand back and let competitive actors pursue their various strategies, and provided what they are doing is efficient – that is they seem to be increasing output, or reducing prices, or meeting some other measure of efficiency – then it should be treated as legitimate.  The rationale is: who is the state to say a company shouldn’t be doing something?  The state doesn’t have the authority.  The state can’t just say to Apple, ‘I’m sorry, all these consumers and shareholders might absolutely love you, but we think you’re too big because you’ve got too profitable from selling too many iPads and iPhones.’  The Chicago School’s argument is: if Apple is so big then surely it is a good thing; it is a sign that the market is working correctly.

So there is a shift from a normative, constitutional vision of competition, held by the Ordoliberals, where everyone is in competition all the time and no one is allowed to get too big, to a Chicago view of the world, which is more of a kind of Benthamite utilitarian view.  Their view is whatever seems to produce the best measurable outcomes is best, regardless of how it comes about, or who does it.  Ultimately what this amounts to is a justification for monopoly capital.  I don’t particularly talk about it like this in the book, but ultimately that is what it comes down to.  Whereas regulators in the 1950s in the United States and Europe saw it as their job to keep a limit on the amount of power held by any particular player in the market by breaking up monopolies and so on, by the 1980s they see it as their job, not to help people be big and prosperous, but to monitor what’s going on and to make sure that if anyone is behaving in a domineering fashion they are doing it in a way which is efficient and is producing some kind of measurable economic benefit for someone.  And it’s often unclear who that someone is.  One of the things that Colin Crouch argues in his book, The Strange Non-Death of Neoliberalism, is that often these regulators claim to be acting on behalf of consumers, but that often magically aligns with the interests of shareholders.  So the definition of efficiency becomes very, very murky.  But once the state’s job is measuring outcomes and measuring efficiency, the legitimacy of the state looks very different from if its job is seen in a much more normative, legal-constitutional way of imposing a particular market order.

 

And one of the key things you describe in the book is the spread of this economic rationality into law.  Presumably this makes it very difficult for people who want to challenge neoliberalism because it is not just the market but the whole social system that has been infused with this logic, making it very difficult to develop alternative institutions and ways of organising.

Yes.  The key Chicago tradition which I look at in the book is the law and economics tradition, which I was alluding to just now.  Ronald Coase is a key figure and Richard Posner is the most famous exponent.  What the law and economics tradition does is to apply neoclassical economic analysis to institutions such as contracts, law, regulation, and almost any form of state power really.  They evaluate sovereign instruments and bodies from a utilitarian perspective.  Posner says that Bentham is the great hero in all of this because it was Bentham who first argues that the state’s purpose is to maximise some measurable empirical entity, which for him was utility.

What the Chicago School did that was so clever was they disseminated this sort of thinking not amongst economists so much, but amongst lawyers and judges in the United States.  And by the 1990s it began to permeate the European Commission and the European courts.  This was a dismantling of alternative, normative, understandings of what law is.  They argued that the only way that law makes any sense is if it is applied in ways which has resort to evidence; and the kind of evidence that matters as far as they are concerned is that produced by neoclassical economics.  Gary Backer famously argues, for example, that there is an optimal amount of crime in a society and whilst you could reduce all muggings to zero, it would cost so much in policing and so on that it probably wouldn’t be worth it, and it would be better for people to take out possessions insurance, for example.  So he doesn’t make any argument about the rights of the criminal or the victim, or the limits of a liberal state.  He doesn’t make any normative arguments about what kind of society we would like to live in.  All he’s arguing is that we want to live in a society that is run efficiently, and that society probably has a little bit of crime.

So to get back to your question, yes, there is an emptying out of the capacity of judges, lawyers and regulators to mobilise arguments on the grounds of principle.  And this is deeply problematic because right now we live in a situation where most people would like to reduce the powers of banks and the main way in which that could be done is through regulation.  But the problem is that the banks are now involved in activities which are so complex and require such expertise, that they can always turn around to the regulator and say: you don’t know or understand what we are doing as well as we do and if you were to intervene that would have a drastic impact on certain economic indicators – growth or whatever.  And the regulator has no counter-argument to that.  What’s interesting about neoliberalism, I think, which has brought us to a state of crisis which we seem unable to get out of, is that it has gutted the very bodies which might traditionally have had the authority to restore certain areas of our economy to a state of legitimacy.  It has made it impossible for anyone to come along and claim that certain practices are simply illegitimate, because the only argument about legitimacy with any force is one based on economic evidence.  Neoliberalism has gutted the capacity for any higher legitimacy; ironically the very kind of legitimacy that might have got neoliberalism back on the road again.

 

The question then is: what do people who are looking to build an alternative future in the wake of the crisis do?  Because what you’ve described creates a legitimacy crisis for neoliberalism, but it also creates a legitimacy crisis for political challenges to neoliberalism.

I think there are two different types of strategy here, and I think they are both necessary.  One is that we try and disentangle our political language from our economic language.  By saying ‘language’ I don’t mean to sound post-structuralist, as if everything’s about language.  But I think what we need to do is to be able to make claims about society, about the public and about justice in ways that aren’t reducible to economic measures – which is how policy elites think of the world.  I think it’s crucially important that we get back to arguments about the notion of justice; that’s absolutely fundamental.  You can see that in the Occupy Movement, in things like UK Uncut, and to some extent amongst politicians too.  The language of fairness, which is really a Rawlsian language of justice, has shot right up the political lexicon since 2008, although obviously with a lot of bogus usage.  So there’s disentangling to be done and a question of how we articulate certain principles about the rights of people and the nature of human needs, and so on – that’s about rediscovering a normative language.

In the book, though, I’m more interested in a second strategy, which is about not necessarily going with the grain of neoliberalism, but learning from aspects of its success.  I think one way of advancing normative arguments today is to take certain categories which are very important to neoliberalism, like entrepreneurship and property, and to start to explore ways of broadening their political and normative possibilities in the way that some of the liberal republican traditions have done in the past.  Rather than seeing morality and economy as separate, which is what a lot of normative critique does, we might instead view the two as entangled, but try and experiment with new types of contract, new types of property, new types of cooperation.   Look at someone like Lawrence Lessig and the Creative Commons movement, this is a case of a politically minded lawyer attempting to rewrite the a priori form that copyright law takes.  In a way that’s not that dissimilar to what the Ordoliberals were doing in the 1930s.  We need more of that kind of thing.

I also think that entrepreneurship is potentially a very disruptive force and in the book I argue that the reason neoliberalism celebrates entrepreneurialism as much as it does is to neutralise its political possibilities.  Entrepreneurialism is disruptive, it brings something new into being.  But one of the things which neoliberalism has always done is to divert its energies.  Although this notion of social entrepreneurship seems quite tame in a way – things like the sharing economy and so on don’t seem to ever challenge power.  But I think if you can push the notion of social entrepreneurship just a little bit further you might start to take it into some quite interesting areas.  If social entrepreneurs weren’t just changing consumption and distribution patterns, but were changing what it meant to own or build a firm, or to own or build houses, or to hold contracts with each other, then suddenly the latent political potential of social entrepreneurship would become a lot more visible.  So to end on an arguably pessimistic note, I think we have to accept that some of our sources of hope are not going to be untouched by neoliberalism.  We have to accept that some are already entangled in those areas of capitalism that we also want to criticise.

 

 

Pic Credit: Anti-G8 demonstration in Le Havre, France, the weekend before the 37th G8 summit in Deauville by Guillaume Paumier

Tom Mills is a researcher and PhD candidate at the University of Bath and a co-editor of New Left Project.

This interview was originally published on the New Left Project in two parts here and here and is licensed under a Creative Commons Attribution-Noncommercial 3.0 License.

 


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