The Ideological Design of the Neoliberal State

» Co-working
by Dirk Schuck

Although there may be small signs of recovery, the economic crisis is not over. On the contrary, still no real opportunities for significant change in financial and economic politics seem to be showing up. For one thing, it is quite obvious that the situation is stuck due to the global scenario of largely concentrated transnational corporate power that is closely linked to executives on a national level. ¬†At the moment most of the people in charge in late Western societies have no interest in change, but instead to go on with the same neoliberal politics that brought us into the crisis in the first place. Also, neoliberal capitalism seems to have reached a new phase of expropriation of public debt, in which it can only survive by a plundering of the public budget itself. This poses some questions about the being-liberal of neoliberalism in the first place, but it has always been a wrong view on neoliberal politics that it could function without the state actively intervening in economic and social affairs. In particular from a neoliberal perspective, it is the responsibility of the state as an institutional framework to provide and ensure freedom of market activities. The neoliberal state differs from the classical liberal state insofar as it completely relies on economics for its own legitimation, which means that from a neoliberal standpoint, the state’s only reason for existence is to enable market activities to happen. Thus, the state must produce social relations that function according to the competitive realm of the market.

I. The ideological dependence of the neoliberal state on economic growth

Since it has always been the duty of the neoliberal state to enable and ensure that the market system works, it seems as if nothing unusual has happened. During the global economic downturn in late 2008 this was exactly what happened in the Western states. To keep a stumbling financial system from completely collapsing, the state pumped unbelievable sums of money into it to keep it working. But still one has the impression that neoliberal ideology functioned better before the global economic downturn. I want to refer to Foucault’s view on neoliberalism to understand better what has happened and to what extent there might be reason to speak of an ideological gap in the present setting of neoliberal politics. To understand the present situation, we have to remember the historical process in which the idea of economic freedom could become the fundamental basis for the legitimation of the state itself. As Foucault points out in his lectures on governmentality, this history is closely linked to Germany’s situation after World War II.

Although the beginning of neoliberalism is usually located in the late seventies, according to Foucault we can find the first prototype of the neoliberal relation between state and economy earlier, namely in Germany after the Second World War. In Germany after the Nazi regime, there was an urgent need for a new form of legitimation of the state because the old sovereignty was not only gone, but the new sovereignty of Western Germany as an independent state among others was also under given political circumstances not directly possible. In 1948, it was the ideological masterminding of the political advisers of Ludwig Erhardt, who later became the first minister of economy of the new German state, to propose to let the legitimacy of the new state depend solely on its ability to build up a working market economy based on the freedom of the individual. The argument was, that with freedom at its core, the new German state would have been given once and for all a non-totalitarian structure.

The other side of this strange resurrection of the German state was its ideological dependence on economic growth. Here, economic growth became for the first time something like the reason for the state itself to exist. The advisers of Erhardt were lucky because the following two decades of stable economic growth, which were called the “German miracle of economy,” ensured that the new way of gaining legitimation for the state would work. What is so interesting about the whole period is the shift in the relation of state and economy, in which one can see a paradigmatic turn for the ideological landscape of neoliberal politics. The economy depended no longer on the sovereignty of the state, which allowed for the economy to have its own sphere – the classical model of liberal laissez-faire. Instead it was the other way around; a vital and prosperous economy allows for political sovereignty to exist. So the political sphere is not really sovereign anymore because public judgment about politics depends on the statistical development of the economy.

But even more important for the question of legitimation than the measurement of the state’s success by a statistical analysis of economic activities is the actual participation of nearly every individual in the market in one way or another. The state’s dependence on the market takes the form of the dependence of the population on the market because everyone depends on the market. In the neoliberal state, the market as a network of actors creates a political consensus simply by the fact that every individual participates in it as a free and self-responsible actor. By one’s own participation, one gives assent to the free play of the market itself, and in doing so, to a political sovereignty that not only allows for it to happen but depends on it for its own legitimation. ¬†Foucault argues that in Western Germany we can see for the first time the creation of political sovereignty out of economic activity, which is typical for the neoliberal state. The state itself becomes a means to the end of a well-functioning market.

The market and the social

But in the Western German regime, which was called “social market economy,” the social and the market were still partly contradictory principles. A central task of a social space such as the family was to compensate for the hard and cold game of competition. The family was already regarded as similar to an enterprise, but this enterprise was divided into an economic, productive part and a social, reproductive part. The way we know neoliberal governance today is more radical insofar as the market is regarded as a fundamental structure already underlying the social. Therefore, neoliberal governance is usually concerned with the construction of a fundamentally competitive order among individuals, starting as early as kindergarten. This creation of a social environment in which any relation among individuals is interpreted as a market activity can be traced back to American neoliberalism and Gary S. Becker’s theory of human capital. For Becker, social and economic perspectives do not contradict each other anymore. On the contrary, all social relations can be interpreted as following market rules. For example, caring for a child is an investment in the child’s future, and what one gets from it is a psychological reward of security.

Using market rules as a tool to interpret social relations themselves can be regarded, however, as just the next step in a logic that started in 1948 with an idea of political government that should only provide the means to the end of a well-functioning market. In such an idea of the relation between state and economy, the market as the center of capitalist economy is not only at the core of any economic activity, but it is regarded to be the vital heart of society itself. The market, then, has to be understood as much more than just an economic space. It has to become the reason for the vitality of social life. Being a free individual on the market, everyone profits from its agility. The market becomes a shared feeling of freedom and well-being, an unwritten contract for the fact that everyone who works hard can become successful and happy.

This unwritten contract between the neoliberal state and its population, which in Germany at least was somewhat damaged before, has been seriously questioned by what happened in late 2008. The major reason for this is the public obsession with economic growth. This obsession creates a public consensus as long as the economy statistically seems to be growing and a lack of legitimation when the admittance of an economic downturn is inevitable. And that is one reason why what happened in late 2008 was not harmless for the neoliberal relation between state and economy. It suddenly became clear that there is no longer an assurance of economic growth. The bust was not only too big, but financial institutions that somehow acted before as the vital core of the economy itself looked if not nearly dead, then at least severely injured. How many people believe that people whose internal diseases nearly kill them will live a long and prosperous life ever after?

II. The neoliberal relation between state and economy on the level of governance

But what does it mean for the form of neoliberal governance when the market economy itself becomes the ideological foundation for any form of legitimate state? Is this merely playing with big words, which has no effect on the reality of everyday life? On the contrary, this special way of gaining legitimation for the state has profound effects on governmental reality. A state that depends on a certain form of economic system for its own legitimation, can logically only be thought of in one possible way, and that is to be the servant of this economic system. The ideological ambivalence of the neoliberal state is for this reason to be everywhere and nowhere, which means the state somehow has to be everywhere to ensure actively that the market economy works, and in the same moment, be nowhere in order not to prohibit the free play of the market from being played. As Milton Friedman puts it in his book Capitalism and Freedom (1962), which built the bridge between German ordoliberalism and American neoliberalism, the state is responsible for the rules of the game without interfering in the game itself. Everywhere in society there should be the possibility to play the game, which is a metaphor for the market, and the state’s duty is to ensure this possibility.

There is, however, a hidden assumption here that separates classical liberalism from neoliberalism. In contrast to their idea of laissez-faire–with which classical liberals wanted to express that the economy is simply none of the state’s business–in the neoliberal idea of the state, the state is not only responsible for the rules of the game, but also that the very game be played. It is an ideological paradox of neoliberal governance to ensure something actively that in the same moment is assumed already to exist. Regarding Friedman, one can see how his reflection on government somehow tries to cope with this ambivalence: “The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the rules of the game and as an umpire to interpret and enforce the rules decided on” (Friedman 1962, p. 15).

Although governing is involved in the free game of the market all the time, at least by interpreting the rules correctly, logically, the market seems already to exist before this. But we simply have to ask ourselves if something like the market can exist before there is something like a possible frame for it to exist to show that the neoliberal doctrine is self-contradictory here. Neoliberal governance clearly shows that there is no market before its social construction.

What is new about neoliberal governing?

This hidden ideological ambivalence largely affects the way in which governmental practices create a neoliberal reality. In the same moment that something is socially constructed, it is always already assumed to exist. For example, there are only a few spaces left in neoliberal society where you are allowed to be non-competitive, but in the same moment competition is regarded to be the eternal human drive behind progress. But aside from this more or less classical form of naturalization, there is also something new about the neoliberal state regarding the question of how neoliberal governing works. Focusing on the problem via the way in which neoliberal governing creates a social reality, it is first of all important to realize that the fundamental order that is created by the neoliberal state is simply a realm of privatized individuals: “The basic requisite is the maintenance of law and order to prevent physical coercion of one individual by another and to enforce contracts voluntarily entered into, thus giving substance to ‘private'” (Friedman 1962, p. 14). As for the classical liberal state, the private sphere was something to remain untouched. For the neoliberal state the private sphere is something to be enforced and built up. Neoliberal governance is a privatization of society in the sense that every possible struggle that happens within a society is regarded as a conflict among individuals. From a neoliberal perspective, the role of the state is therefore a neutral one. From a more critical perspective, this role is precisely the neutralization of these conflicts into private ones. Regarding its neutralizing power, the neoliberal idea of the state can be regarded as the development of the bourgeois idea of the state as Marx criticized it in the middle of the 19th century. Already according to Marx, the ideological consequence of the bourgeois state was to hide class structures by interpreting social and material differences as the private business of individuals (Marx 1844). The neoliberal idea of the state seems to be one step ahead by neutralizing social issues to matters of privacy even before there is any chance to identify them as social.

One can say that the simple role of the neoliberal state we are used to is just to set up a frame in which the individual can act. And the most important effect of this frame is the simple consequence that one is regarded as free and responsible for his own actions. In the neoliberal doctrine, this simple framework also ensures political freedom. Because as Friedman suggests, the market always leaves you the possibility to act otherwise. So first there is economic freedom, which means the freedom you have as a private individual to preserve yourself on the market. Second, there is the fundamental possibility to act otherwise, which is provided by the freedom of the market itself. And that also gives you the necessary independence to follow the political path you prefer. Here we can see why neoliberalism can claim itself as being non-ideological, because from a neoliberal perspective the market just provides individuals with the opportunity to choose a political ideology for themselves. Nevertheless, it is an ideology to think that markets can do such a thing.

The idea of the freedom of private individuals who interact with each other is at the center of neoliberal governance. Neoliberal governance is always concerned with putting up a frame in which any interaction between two people can somehow be understood as an act of exchanging goods and as a negotiation of the prices involved in that exchange. To that extent, there is a neoliberal element in the idea of governance itself, as long as this idea is spelled out as an ongoing process of the self-regulation of a plurality of actors.

It is also crucial to see that the method of every neoliberal analysis of society can somehow be described as a form of methodological individualism, because from a neoliberal perspective all social phenomena can be boiled down to this basic notion of a sum of individuals in negotiation about their rules for interacting with each other. Therefore, the central neoliberal metaphor for social order is setting up the rules of the game of human interaction.

These rules are everywhere, but at the same time strangely invisible. They create the social space in which we live, which means we have to regard reality through them in order to be ourselves regarded as responsible actors. For example, if I were to infringe the right to private property by trying to write this article in the lobby of the Deutsche Bahn Headquarters right across the street from where I am now, I would be regarded by the police as an irresponsible person unnecessarily violating property rights. And if I should keep trying to do this for several days with the regular outcome of getting arrested, some psychiatrist would regard me as mentally ill. And if I were to tell him that the DB Headquarters belong to the people and that I have every right to be there, he would think I went nuts. But who would not? The rules of the game are everywhere, and we have to accept them to be able to play.

III. To what extent can we speak of a crisis of neoliberal governance?

So has the economic crisis developed into a severe political crisis and already reached an everyday level of governance? Obviously not. The rules are still accepted, and the game still gets played. Although there was a gap in the neoliberal assurance of economic stability, this gap seems already to have been succesfully closed again. In late 2008, directly after the bubble burst, nearly every political talk show in German media was concerned with the market’s ability to recover. This is interesting to see because what happened before had obviously proved this neoliberal dogma wrong. What happened needed to be reinterpreted in a way in which it would fit into the neoliberal scheme again. The global economic downturn suddenly appeared an accident, a disturbance in the self-regulation of markets. The notion of the market as vital on its own had to be reestablished again. Also, the argument of the health of destructive forces within the market game cropped up to legitimate what had happened.

One cannot ignore the overwhelming commitment to the market as an instance of self-regulation in the global Western media after the economic downturn, but it is a different thing to ask how deep the assent for a capitalist order of things within the population still is. Most people seem to think that there is just no alternative due to the overwhelming suggestion of the cultural industry in general. But when looked at closely, this is no proof of a deeply internalized assent to the present order of things.

Nevertheless, regarding the ongoing dominance of neoliberal positions in political discourse, we cannot speak of a legitimation crisis of neoliberal governance. However, precisely because of this ongoing dominance we can speak of a massive crisis of neoliberal governance in providing adequate perspectives for a sustainable solution for it. First, the lack of sovereignty in the idea of the neoliberal state as a means to the end of economic growth can account for the inability of neoliberal governance to actually face the real problem of restructuring the economy. And second, the metaphorical paradigm of neoliberal governance as merely setting up the rules for the game of freedom to be played, is deeply indebted to the neoliberal idea of a self-regulation of markets.

The state as a neutral agency of managing interaction

Recalling Friedman’s idea of the neoliberal state as an “umpire to interpret and enforce the rules decided on,” we once more need to have an eye for the slyness of such an idea as the state regarding its own legitimation. In being the “umpire,” the neoliberal state does not appear so much as a political institution, but more as a neutral agency of managing interaction. This is why in neoliberal governance different stakeholders with different interests seem to meet merely in a rational procedure of deliberation. The procedure usually takes certain interests as given and is concerned with their mediation under the general premise of rational efficiency.

The interests that are taken as given and justified by this process of deliberation are mainly the interests of investors concerned with creating capital flows out of social flows. The hidden ideological premise of such governance procedures lies in their basic assumption that an overall satisfying social construction is achieved through an exchange process of individual interests.

Here we can see how in neoliberal governance the idea of the market dominates the idea of the social. This dominance is substantiated by a set of classical liberal assumptions about the self-regulative power of the market itself. First of all, the market brings people together and initiates cooperation. Also, its general dynamics tend toward prosperity for everyone, because individual success is considered a symbolic sign for the possibility of success for everyone, and therefore, for a well-ordered economy. Given these basic assumptions, neoliberal governance just has to set up the frame for the possibility of individual success, and the self-regulating powers of the market will do the rest.

The market within the individual and above the individual

As more than thirty years of global neoliberal governance have shown us, the basic assumption of a self-regulating market is wrong and has deadly consequences for thousands of people every day. But what I am concerned with here is the underlying ideological structure on which this assumption depends. To understand the neoliberal idea of the market in its entirety, one has to focus on the connection between the idea of the market and the idea of the individual. The idea of the market is already implicit in the liberal idea of the individual. Therefore, the idea of the individual as a free actor within a space of given possibilities, is at the core of the naturalization of neoliberalism.

Regarding the history of different notions of the individual in Western society, one can see a deep connection between this idea and the development of the division of labor. The individual acquires his or her identity only by taking a position within a distinct system of the division of labor at a certain time. Whereas in the old days of liberalism, the ideal citizen usually held a lifelong position within one profession and was thus considered a useful member of society, today’s notion of the individual works in an opposite way. One cannot be flexible enough. In capitalist society the idea of the individual is always a projection of the demands of the labor market. Already in need of building up our own identities (as competitive and flexible), we are naturalizing the market as an institution of social reproduction and coordination. One cannot separate the form life takes within a certain environment from the act of being itself, and therefore, in a neoliberal environment, we always already are neoliberal to a certain extent.

To measure the ideological success of a certain social order, an appropriate method might be to analyze the scale of its naturalization, but it is important to understand what is meant by the term here. To ask if something is an integrated part of our everyday life is a much better way to measure naturalization than asking if something is called natural. Especially in neoliberalism, many things that are not really considered natural anymore are part of our everyday life and as such are in fact already naturalized. For example, the young metropolitan middle-class of today considers sexuality mostly a game to be played, and through this partial denaturalization of sexuality, the neoliberal idea of the social as a game to be played is naturalized. And this micro-level of “the market within us” also corresponds to a macro-level of the market as an institution above us.

Seeing the connection between micro- and macro-levels

Characteristic of the way neoliberalism is naturalized on the macro-level is a pragmatic perspective of dealing with facts. Accordingly, the global neoliberal project generally does not advocate itself as a political project. Usually, it presents itself more as annoying perhaps, but nevertheless necessary in dealing with the objective facts of globalization. The consequences neoliberal policies create are somehow regarded on a global scale as already given, and so we as people in a particular part of the world have to deal with them. This promotion of the neoliberal project through concerted economic and political action on a global scale is necessary for its functioning as a set of given facts. What would be needed to make the neoliberal core of present global governance visible as a political project would be a different idea of global governance that could somehow show there is a possibility do things otherwise.

This idea must nevertheless be developed out of the transformation of present notions of governance. One could for example refer to the idea of a network-plurality of actors and show how people are excluded from decision-making processes that directly concern their living conditions. As a next step, one could ask how it would be possible to involve everyone that is concerned, maybe with a different understanding of plurality. Another idea might be to understand the task of setting up a frame for the game to be played as something that should involve social and material resources that an individual must be able to use. This could include public education, health insurance and free public transport.

The view on globalization as a process in which it is inevitable that people have to adjust to the demand of global markets is the ideological backbone of neoliberal governance regarded as a neutral agency of managing interaction. Social relations that are produced by conditions of power are treated like facts. What is so dangerous about this idea of globalization is that it fosters the emotion that there is no alternative to a process that appears to be a natural force. The whole complex of global economic and political decision-making is regarded as something that is inevitably happening the way it is happening, and global leaders themselves appear as helpless individuals, if not already as puppets of a quasi-natural global disaster.

Interestingly, after the global economic downturn, financial executives started to excuse their actions based on the unpredictability of markets. Letting go of the idea of self-regulation, they came up with an old Marxist metaphor, namely the description of the capitalist market as a natural force. But Marx’s argument was that the notion of the capitalist market as a natural force, although it might determine the particular reality of an individual in a particular moment, is a fetishism. There is no such thing as a living market that can do something on its own. A different idea of global governance would have to deny the idea of a self-regulating market and would have to take into account that the reproduction of a society calls for different forms of regulation in order to function in a satisfying way.

IV. Rethinking the relation between the market and the social

The weak element in the present setting of neoliberal governance is the idea of a self-regulating market. This notion has been drastically thrown into question by what has happened in the last two years. Thus, this idea calls for a deconstruction. Imagining a neoliberal answer to the problem it might sound like this: “Well, maybe markets are not really self-regulating, but they are still the best way to regulate socio-economic reproduction. So what we have to do is actively ensure the reproduction of market rules within social environments. Although the market might not be able to sustain itself, it nevertheless regulates the social space in the most satisfactory way.”

But this answer would only play with the visibility/invisibility of the neoliberal state as it is. Because this is exactly what keeps the market economy alive by now. There are no spontaneous market mechanisms evolving out of social conditions, but social life is structured in a market-compatible way by neoliberal governance. Not only because we all depend on it, the market seems to be everywhere, but because we have no access to ourselves without regarding one another as individual actors within a market environment, it is also extremely difficult to imagine a social order without the market.

Here it is important to realize that the market as an ideological construction is not only a problem of false consciousness. The market is not primarily in our heads, but in our socially constructed relations to each other. Also, we may want it to be different at one point. We are always in competition with each other due to the way society works. Therefore we cannot refer to ourselves and others without simultaneously referring to the fundamental idea of a market. Everything I think, say or do I also regard to the extent that it might have a valuable outcome for me as an actor within a market environment.

How to let go of the market as a fundamental idea of structuring the social?

Thus, it has become commonplace that it is nearly impossible to distinguish between work and social life. The usual metaphor for this impossibility is the network. But regarding the question of how to let go of the market as a fundamental way of structuring the social, it may not even be helpful to be able to give a clear distinction of what one does while working in comparison to having a social life. From the standpoint of ideology theory, it might be more helpful to reverse the relation between the market and the social in the same way the neoliberal idea of the state changed the relation between economy and politics. Because although it appears as its fundamental principle, the market truly relies on the social to be able to exist as a socio-economic structure. And this parasitic existence gains a lot of its fundamental power from reversing this relation in its appearance.

One needs to be more concrete about what is meant by the social then. One way would be to focus on affectuation. Affect as a shared social relation between individuals produces a lot of valuable market outcome, for example, in the form of enthusiasm for the national football teams competing in the World Cup. As everyone can share the satisfaction gained from the success of their national team, a consensus is created, quite similar to the way economic growth creates a public consensus that legitimates the neoliberal state in general.

The World Cup in June 2010 was as a global tournament of nations, an interesting ideological mirror of the state the world is in today. Although everything already happens on a global level, everyone is still within a nationalist frame, celebrating the principle of competition. In the same moment that everything is determined by the global neoliberal framework, the logic of the particular games remains national. Fifa, as a small group of coordinators, is responsible for the games being staged, but they only do what everyone wants or at least manage the inevitable, namely, that only one team will win. And as we all know, it will not come from Africa.

For me, just one thing seems clear by now: rethinking the neoliberal relation between the market and the social must transcend the ideological design of the neoliberal state. The implicit barriers of political imagination set up by that strange idea of a state–which is only a servant to its own economic order, and even stranger, developed out of the particular situation of Western Germany after the Second World War–still block any possibility for a sustainable crisis solution.