"In his 1978-79 lectures, concluding just weeks before Margaret Thatcher was elected as Prime Minister of Great Britain, Foucault offered a strikingly prescient analysis of neoliberalism that was yet to emerge. In this analysis, he excavates the fundamental concepts which structure what has, forty years later, become the dominant reality. What is striking is that he treats neoliberalism not as an economic theory, but as a mode of governing — “governing” in the sense of constituting a particular form of subject. Foucault is adamant that neoliberalism is not simply a return to earlier forms of economic organisation such as laissez faire. Rather than simply having a limited role in the market economy, the state must now model itself on the economy. Neoliberalism seeks to redraw the boundary between the economy and politics by generalising the economic form throughout society. As the market becomes experienced as part of a natural order, government’s task is to attend closely to discern its complex and subtle mechanisms and avoid interference which would distort them.

According to Friedrich Hayek, economic processes are a “spontaneous order” which, like Adam Smith’s “invisible hand”, we cannot fully comprehend. Since he rules out political intervention in the processes of this spontaneous order as dangerous interference, he thinks we have no alternative but to simply submit to the imperatives of the market. Hayek’s work, which many regard as a founding theoretical underpinning of neoliberalism, purports to eschew the conflict of politics in favour of what he saw as the harmonious and mutually beneficial social relations of the market. The influential Chicago School economist, Milton Friedman, developed Hayek’s free market ideas into what he regarded as an objective and value-free science.

While avoiding state governance, neoliberalism uses it to extend competition throughout social life, by opening up areas regulated by non-market forms of social governance to market imperatives. In this vein, Gary Becker, who succeeded Friedman at Chicago, argued that it was possible to generalise the economic form of the market throughout society to include relationships not usually subject to monetary exchange. Becker’s most striking example is the mother/child relationship. Here Becker treats the time the mother spends with the child, as well as the quality of care, as an investment that constitutes human capital. Investment in the child’s human capital produces a return when the child grows to maturity and receives wages. Economic rationality eventually becomes the rationality of all human action.

With some important differences, Foucault’s account of neoliberalism dovetails into Jürgen Habermas’s notion of the “colonisation of the lifeworld”. Habermas relies on a distinction between the “lifeworld” which co-ordinates actions and integrates society by “communicative action” where reasons can be demanded and given, and “systems” like the market economy which co-ordinate societies by a chain of consequences “behind our backs”. Habermas’s claim is that systems have broken loose of the legitimation we once gave them and have turned back to “colonise” or restructure our communicative competencies. We could say that as a form of social reality, the reality of the market economy has become so dominant that we have forgotten that, unlike the natural processes climate science describes, it is our invention.

The extension of the rationality of the market throughout society forges a new type of subject. Making competition the dominant principle for guiding human behaviour means that subjects lose guarantees of protection by the state. With labour transformed into human capital and workers into entrepreneurs competing with other entrepreneurs, neoliberal governance entails the production of a particular type of subject. By slotting into already provided social roles that set social subjects against each other, subjects are constituted as self-interested and atomistic, continually calculating to avoid risk and maximise individual gain. By the sort of circular causation described by Gunnar Myrdal, the habits and inclinations of these subjects are produced while, at the same time, they maintain and extend the system that produces them. As Foucault says, “modern power fashions, observes, knows and multiplies itself on the basis of its own effects.”

If power and knowledge can only be understood together, it is surely the science of economics that provides the knowledge component of neoliberal governmentality. In an endless looping between description and prescription, neoliberal economics, aspiring to the status of a science, constructs the subject that it, at the same time, claims to discover. This subject supposedly negotiates the social realm by constantly making rational choices based on economic knowledge and strict calculation. Society becomes a game in which self-interested, atomised individuals compete for maximal economic returns".

John McIntyre