The revolution will not be theorized: Neoliberal thought and the problem of transition

Abstract

Neoliberalism is a notoriously contested term, and even among those who principally subscribe to it, which is mostly its critics, fierce debates persist over its nature, how to study it properly—and whether it is still the appropriate conceptual armament to understand the contemporary world and an arguably emerging “post-neoliberalism” (Davies & Gane, 2021). Not only is it controversial how neoliberalism should be defined—a governing rationality in the spirit of Foucault's governmentality lectures (Foucault, 2008), a portfolio of certain policies, or a strategy of transnational capital to restore and safeguard profit rates (Harvey, 2005)—but also on what level to study it, either that of “actually existing neoliberalism” (Brenner & Theodore, 2002; Cahill, 2014), a set of theories and arguments, or both.

My starting point and focus for most of this paper is neoliberal thought as it is represented by the writings of Friedrich Hayek, Milton Friedman, the German ordoliberals, and, importantly, James Buchanan. My aim is to develop a critical account of neoliberal thought that will abstain from explicitly normative criticisms and rather opt for a more indirect but effective and somewhat novel critique that holds neoliberalism to its own standards and shows how it fails to meet them or is pushed into adopting highly questionable positions in the attempt to do so. The argument proceeds as follows: As already suggested, the meaning of neoliberalism is heavily contested, so I will provide the basis of my argument by laying out a brief account of neoliberalism, which relies on a theoretical-historical reconstruction of its context of emergence around the middle of the 20th century. What I conclude from this reconstruction is that we are well-advised not to narrow down neoliberalism too much and not to downplay its internal heterogeneities. Therefore, rather than trying to isolate a number of doctrines or positions as quintessentially neoliberal or even considering them to be the “essence” of neoliberalism, I argue that what unites neoliberal discourse is not a set of positive convictions—although there is some significant overlap in certain areas—but rather a shared problematic that pertains to the preconditions of functioning markets.

Within that overall problematic, democracy is one of the most pressing problems according to neoliberal thinkers, because virtually all of them agree that it complicates the task of setting up and securing the workings of functioning markets significantly. Still, this basic agreement notwithstanding, neoliberal accounts of democracy display a considerable range of specific diagnoses as to the nature and source of its dysfunctionalities or even pathologies. Accordingly, the second step of the argument is a survey of some selected lines of critique of democracy as they are formulated by leading neoliberals. Among other things, this survey helps us appreciate the heterogeneities of neoliberal thought, but, more importantly for my purposes, it also gives us a sense of the deep reservations neoliberals have with regard to democracy and the trenchant nature of their critique.

As the specific critiques of democracy vary among neoliberals, so do the suggested remedies and reforms put forward. Accordingly, in the next step, several selected reform proposals are scrutinized that range from the vague call for a “strong state” to Hayek's “model constitution” and the much more specific argument for the introduction of a constitutional balanced-budget amendment, which is a signature demand of Buchanan. What this survey shows us, among other things, is the radical nature of the neoliberal reform proposals, which is important to my overall argument.

Despite the highly controversial implications of all of these reform proposals, I will deliberately forego engaging them directly based on normative arguments. Instead, my critique focuses on the missing analytical link between neoliberal diagnostics and respective remedies. In order to show this, the fourth and final part of the argument shifts attention to the politics of neoliberal transformation, that is, whether and how this kind of politics is theorized in neoliberal accounts. Again, there is a certain degree of variance between Hayek, Eucken and Buchanan, but the common denominator here is the inability to theorize such a politics without violating the respective assumptions underlying the critical diagnostics or moving beyond the confines of liberal democracy as a condition of implementing such reforms. Thus, the key thesis I wish to defend in the following contends that neoliberal thought lacks any plausible solution to the so-called problem of transition—if they care to reflect on it at all.¹

These findings lead to several different interpretations with more or less far-reaching implications that are discussed in the concluding section.

It is commonplace nowadays to note the contested nature and potential vacuity of the term neoliberalism. Faced with these allegations, scholars of neoliberalism often hasten to offer some kind of working definition of neoliberalism, lest they lend credence to suspicions that they are operating with an empty signifier carrying political rather than analytical meaning. Accordingly, a set of policies—typically centered around the agenda of the Washington Consensus—is identified as quintessentially neoliberal, certain ideas or principles are considered to make up its core or essence or, neoliberal is simply that, which members of the Mont Pèlerin Society promulgate, which is an elegant but, upon closer inspection, not entirely convincing way to circumvent the problem (Chomsky, 1999; Crouch, 2011; Mirowski & Plehwe, 2009). On the other hand, there are regular interventions by scholars who emphasize the enormous variability/transformability of neoliberalism and its characteristic ability to form more or less tension-laden amalgamations with other political-intellectual projects, which makes it seemingly impossible, or at least intellectually imprudent, to aim for some hard and fast definition that “fixes” neoliberalism and its meaning(s): “Crisply unambiguous, essentialist definitions of neoliberalism have proved to be incredibly elusive” (Peck, 2010, p. 8).

My own account of neoliberalism will try to strike a balance between overly parsimonious definitional attempts that do not hold up under closer scrutiny and the analytically defeatist solution to dissolve neoliberalism into various neoliberalisms that allegedly share nothing but Wittgensteinian family resemblances. The starting point of my conceptual approach is the observation that neoliberalism has become a truly toxic label these days, and it might therefore be useful to begin with a look at those who did describe themselves, albeit fleetingly and reluctantly, as neoliberals at the time and clarify the intellectual and political agenda that they attached the label “neoliberal” to. In other words, it is necessary to reconstruct the intellectual and political context of neoliberalism's emergence.

Processes of emergence do not have a single origin but are dispersed, and the same goes for neoliberalism. Nevertheless, it is possible to identify the Colloque Walter Lippmann as the “birth” of neoliberalism in the sense of the first culmination point of these processes and the event at which, for the first time, the term was officially adopted, denoting a shared agenda of the participants, which included not just Hayek, Wilhelm Röpke, and Alexander Rüstow but also Jacques Rueff, Louis Rougier (the convener of the meeting) and, of course, Walter Lippmann himself. At this point, an impressive scholarship on the Colloque exists, so there is no need to go into the details of the proceedings (see instead Burgin, 2012; Dardot & Laval, 2013; Innset, 2020; Reinhoudt & Audier, 2018). The overall picture that emerges from them is a liberalism on the defensive that seeks to regain the status of a real contender against its main antagonists, collectivism and—to a lesser degree back then—Keynesianism. In the eyes of practically all of the participants except for Ludwig von Mises, this endeavor presupposed a critical revision of the classical liberal agenda, and, most notably, abandoning simplistic formulas such as “laissez-faire,” or, what some referred to as “Manchesterism.”² The neoliberal discourse in formation here was, thus, a far cry from the creed of “self-regulating markets.” Instead, the entire point of the neoliberal approach is to affirm the value of markets against collectivists and Keynesians while insisting that they are not nearly as robust and self-sustaining as large parts of the liberal tradition were inclined to believe up to that point. To put it more pointedly, the market per se was not the solution to all problems; rather, the market itself turned into a problem for neoliberal thought as it was seen as an entity in need of constant care and premised upon a number of preconditions. Therefore, what I call the neoliberal problematic pertains to the preconditions of functioning markets, that is, markets on which the price mechanism reigns as unperturbed as possible.³

The irreducible heterogeneities that characterize neoliberal discourse are not the least due to the manifold and at times contradictory ways in which this problematic can be, and has been, spelled out and addressed. Still, what becomes clear is that neoliberal thought might be centered around the notion of markets, but the intellectual energies of those whose work is animated by this problematic, such as Buchanan, Hayek, or the German ordoliberals, inevitably gravitate toward the infrastructure that needs to be put in place and defended against changing adversaries for these markets to function. This is the realm of the social and the political, and therefore it is only stringent for the neoliberals to invest so much time into conceptualizing the state—and democracy.

When neoliberals talk about democracy, they typically refer to democracy in its existing form, that is, their discourse rarely ventures into philosophical inquiries into the nature and theory of democracy. The predominant form their discourse takes is that of a critique of the respective contemporary forms of representative democracy.

These respective contexts leave an imprint on the various accounts of democracy, but rather than probing the details of each, in this survey, I will highlight what I consider to be three types of arguments or varieties of the neoliberal critique of democracy that can be analytically distinguished.⁴

The first set of arguments against democracy considered here is particularly prominent in ordoliberal discourse but not exclusive to it:⁵ For Wilhelm Röpke and Walter Eucken, the main threat associated with democracy is due to the influence of a new phenomenon on the political scene, namely, the masses. With the rise of mass democracy, the latter have acquired a heretofore unknown leverage over political decisions, or at least this is the assumption under which the ordoliberals in particular are operating. Hence, the problem is not the existence of masses per se but rather their integration into the political process through mass democratic institutions as it unfolds unevenly but steadily over the course of the first half of the 20th century. While the aversion against the masses may seem no more than a variant on the venerable liberal-conservative topos of the tyranny of the majority, there is more to it. The masses are more than a majority. In a discourse crucially shaped by Gustave Le Bon's Crowds, Sigmund Freud's Group Psychology and the Analysis of the Ego, and Jose Ortega Y. Gasset's Revolt of the Masses (who was invited to the Colloque but did not participate), the concept of the masses is psychologically (and at times racially) charged. Masses are attributed with infantilism and general irrationality, which makes them the perfect molding material for demagogues who exploit their uncritical receptiveness and malleability to mobilize them for political projects—typically ones that involve state planning and collectivization from the perspective of the ordoliberals. There is ample textual evidence for this stance, so a few examples may suffice here as the basis of this interpretation. Eucken notes: “But while people can only live in certain orders, the mass tends towards destroying these exact orders” (Eucken, 1960, p. 14), and in one of the classic texts inaugurating the ordoliberal tradition from 1932, he laments “that the simultaneous process of democratisation lent the parties, and the masses and interest groups that they organised, much greater influence over the management of the state, and so upon economic policy” (Eucken, 2017, [1932], p. 59). Röpke complements these views: “In all countries, in some less, in others more, society has been ground into a mass of individuals, who have never been so closely herded together and so dependent on each other and yet at the same time they are more rootless, more isolated and more like grains of sand than ever before … All the misery, all the problems of our time have their ultimate roots here…” (Röpke, 1950, [1942], p. 92). Elsewhere, he draws on the above-mentioned social psychological framing of the masses: “As a part of ‘mass’, we are different from what we normally are and should be in healthy circumstances; we are subhuman, herdlike, and the state of society dangerously corresponds to our own” (Röpke, 1960, p. 53). And while the most extreme manifestations of what might be called the mass syndrome only occur in what Röpke terms mass in the “acute state,” massification as a permanent condition is hardly less alarming, since it heralds the reign of mediocre brutes at the expense of the “unalterable aristocracy of nature” Röpke hopes to defend (Röpke, 1960, p. 55). To sum up this line of criticism, economic policy is simply too important and much too intricate to leave it to the wayward masses, who may not sit in parliaments and run governments in representative democracies, but are still too influential under the conditions of mass democracy, even if only as the object of demagogic agitation and mobilization. If the alliance of these forces had their way, democracy is bound to transform into collectivism, that is, the prime adversary of neoliberal thought: “There is no denying it: the collectivist state is rooted in the masses” (Röpke, 1950, p. 86).

The second line of criticism also owes its classic formulation to another ordoliberal, namely, Alexander Rüstow. The target of this criticism, in addition to the mass dimension of contemporary democracy, is its alleged excessive “pluralism.” Rüstow succinctly sums up the respective core concern: “The democratic, parliamentary structure of some of the economically leading states caused the economic corruption to spread to the internal policy of the state, to the political parties, and to the [sic!] parliamentarism itself. The political parties were slowly transformed into parliamentary agencies of economic pressure groups and were financed by them. … The pathological form of government which developed this way was that of pluralism…” (Rüstow, 2017a, [1942], p. 159). Under conditions of mass democracy, (economic) pressure groups will gain such extraordinary influence that they can almost dictate their will to political parties; the result is marginalization of a vaguely defined common good, which is dissolved into what Eucken calls in no uncertain terms “group anarchy” (Eucken, 1960, p. 171). The state, as the presumptive guardian of this common good, is undermined in this process of economic-political clientelism, and Rüstow echoes the scathing criticism of pluralism by Carl Schmitt in his conclusion: “What takes place here accords with the motto: ‘The state as prey’” (Rüstow, 2017b, [1932], p. 147). Under conditions of unchecked pluralism, the state is weakened continuously and the resulting centrifugal dynamics ultimately become unmanageable as the political community falls apart at the hands of particularistic actors emerging from every corner of society.

Thirdly, there is a strictly contemporary line of criticism that still exhibits some correspondence to the critique of pluralism just sketched. The central theorem underlying this critique is that of rent-seeking, which describes a behavior that seeks to gain some kind of advantage over others not through productive action and competition but rather by lobbying for some kind of special treatment, typically an exemption from certain rules. This idea builds on the insights of game theory and rational choice approaches, according to which individual utility is often maximized when (generally beneficial) rules apply to all but the individual in question, and much of the public choice critique of democracy is built around this basal notion: Under conditions of democracy, the constant demand for special treatment of societal/economic actors is met by an eager supplier in the form of political actors hoping thus to increase their chances of reelection. As one of the cofounders of the public choice tradition, it is a matter of course, that Buchanan puts the rent-seeking theorem at the center of his critique of representative democracy and he is not the only neoliberal who does so: Milton Friedman as well as the later Hayek would occasionally, albeit not systematically, draw on the basic logic of rent-seeking (see Friedman & Friedman, 1984). The fundamental problem that allegedly ensues from rent-seeking can be summed up in the following way: Assuming that everybody else engages in rent-seeking, individual rationality dictates that one does so as well because, otherwise, one would be indirectly disadvantaged to the degree that others gain exemptions from rules that still apply to oneself. This means that rent-seeking has an inherently expansive dynamic, and as a general practice, it backfires against the intent of its subjects because even if individual rent-seeking may be successful and provides an advantage, this is vastly outweighed by the multiple disadvantages one has to suffer due to all other rent-seeking activities, assuming they are successful as well. Thus, in pursuit of their individual utility, the actors in a society end up putting themselves at a disadvantage. Just as in the pluralist scenario, it is particularism that prevails here, albeit with a tragic twist. But not only does the “rent-seeking society” (Buchanan et al., 1980) harm its current members: Exemptions and other special treatments typically come with some kind of price tag, and since financing through raising taxes is not a realistic option under public choice assumptions, and lawmakers, as well as government, have less and less control over inflation, the prime strategy to pay for rents is through deficits and debt—burdening the almost proverbial “future generations” with financial obligations that they had no say in—arguably a clear violation of the democratic principle of autonomy.

Finally, there is a line of critique that focuses on the decline of the rule of law in relation to democracy and problematizes the alleged unlimited nature of the latter. The prime exemplar of this line of argument is Friedrich August Hayek, who laid out the various aspects in numerous writings. To be sure, Hayek conceded that democracy, in principle, had its merits: “[I]t is the only convention we have yet discovered to make peaceful change possible” (Hayek, 2003, III, p. 137) However, the ideal of democracy and its basic thrust of limiting power became disfigured over time. The Constitution of Liberty already contains the central point of Hayek's critique in a nutshell: “The crucial conception of the doctrinaire democrat is that of popular sovereignty. This means to him that Majority rule is unlimited and unlimitable. The ideal of democracy, originally intended to prevent all arbitrary power, thus becomes the justification for a new arbitrary power” (Hayek, 2006, p. 93) The deeper reason for this, according to Hayek, is the erosion of the principle of the rule of law, which he chronicles in the Constitution of Liberty and that involves, prominently, the shedding of any formal prerequisites of what constitutes a genuine law. While in the heyday of liberalism, only those legal rules that were abstract, general, and directed at future behavior were considered to be law in the proper sense of the term, nowadays, Hayek claims, whatever emerges from a legislature is deemed to have the power of law, thus empowering parliaments to engage in the kind of discretionary planning activities that he considers to be harmful on any number of levels. And since there are no longer any formal restrictions on this unrestrained democracy, politicians have no instruments at their disposal to fend off the demands from societal interest groups. “The root of the trouble is, of course, to sum up, that in an unlimited democracy the holders of discretionary powers are forced to use them, whether they wish it or not, to favour particular groups on whose swing vote their powers depend” (Hayek, 2003, III, p. 139), concludes Hayek, thus echoing in this regard the second and third lines of critique sketched out above. The main thrust of Hayek's argument, though, is a combination of the critique of democracy as majority rule—spelled out most prominently in The Constitution of Liberty (see Hayek, 2006, pp. 90–102)—and the contention that this majority rule is no longer restrained in any meaningful way, thus giving rise to an almost dystopian “unlimited democracy,” which, Hayek thought, would ultimately lead toward totalitarianism: “[T]he whole work [Law, Legislation and Liberty] has been inspired by a growing apprehension about the direction in which the political order of what used to be regarded as the most advanced countries is tending. The growing conviction … that this threatening development towards a totalitarian state is made inevitable by certain deeply entrenched defects of construction of the generally accepted type of ‘democratic’ government has forced me to think through various alternative arrangements” (Hayek, 2003, I, p. xx).

It is to these alternative arrangements in the works of the various neoliberals accounts discussed here that we now turn to.

It would exceed the scope of this paper to survey every reform proposal submitted by leading neoliberals, so I will merely focus on three more or less specific reform visions being put forward by Buchanan, Hayek as well as the ordoliberals Rüstow and Eucken, respectively, which are to deal with the various shortcomings or pathologies of democracy as they are pinpointed in the diagnoses sketched out in the preceding section.

Let us begin with what arguably is the most specific proposal to be found in the neoliberal reform portfolio and which came to be a signature demand raised by James Buchanan, although a slightly different version has also been promoted by Milton Friedman. The proposal seeks to address the proclivity to engage in rent-seeking behavior or rather to grant rents to interest groups on behalf of elected officials in order to improve chances at reelection. Buchanan became ever more pessimistic in his assessment of (American) democracy over the years, eventually claiming that “the appeal to the experience of history, and not least to recent events in the United States, does suggest that government, in its current institutional setting, is close to being out of the control of the electorate” (Brennan & Buchanan, 1980, p. 25). In order to come to terms with this deteriorating situation, one of Buchanan's prime suggestions is to pursue the strategy of reining in democratic excesses through tighter controls of the way public expenditures are financed. What democracy requires is a rule that precludes the debt/deficit financing of these outlays, and it should preferably be instituted on the highest possible legal level: a constitutional balanced-budget amendment (Buchanan, 1997). The amendment would stipulate rather that all current state expenditures must be financed through actual revenue, be it taxation or otherwise; it would be simply unconstitutional to accrue deficits and debt to finance state expenditures. Given such restrictions, politicians are expected to restrain runaway spending and curtail public expenditure, instead of attempting to rely on a low tax strategy to succeed at the polls. Whether this is a realistic scenario for the impact of such a proposal could be discussed in much greater detail as could be the normative questions related to it, but following the strategy of my critique laid out initially, I will confine myself to this quick exposition and move on to the second and much more elaborate reform proposal, which is Hayek's “model constitution” (Hayek, 2003, pp. 105–127).

The major thrust of Hayek's proposal is a restoration of a strict separation of powers between government and legislature. His diagnosis problematizes the conflation of both, and therefore real bicameralism has to be reinstituted where legislatures only pass laws in the proper sense of the term that circumscribe the room for discretionary action the government enjoys. Of the many noteworthy aspects of this exercise in institutional design, I will only highlight one particularly intriguing aspect that has also drawn considerable criticism: In many respects, the governing assembly hardly differs in its main characteristics from empirically existing governments, although Hayek is seriously entertaining the disenfranchisement of anybody who receives transfers or salaries from the state in governmental elections (Hayek, 2003, p. 120). Still, the major target of criticism is the election rules for the legislature, which is arguably the real locus of power in this new institutional set-up as the governmental assembly is to be strictly “bound by the rules of just conduct laid down by the Legislative Assembly” (Hayek, 2003, p. 119). Members of the legislature are to be elected in the following way: Each year all citizens of the age of 45 choose their representatives out of the midst of their demographic cohort to replace the contingent of outgoing legislators at the end of their 15-year term. What Hayek has in mind is “an assembly of men and women elected at a relatively mature age for fairly long periods, such as fifteen years, so they would not be re-eligible nor forced to return to earning a living in the market but be assured of continued public employment in such honorific but neutral positions as lay judges, so that during their tenure as legislators they would be neither dependent on party support nor concerned about their personal future” (Hayek, 2003, p. 113). The rationale behind this design is clear enough. The long tenure, ineligibility to be reelected, and guaranteed future employment seek to minimize the incentive to engage in rent-seeking behavior on behalf of legislators and, furthermore, the structuring principle of age groups allegedly would preclude the formation of political party affiliations within the legislatures. And even if they were to form, “those leaning towards different parties would be induced to discuss the issues together, and would become conscious that they had the common task of representing the outlook of their generation…” (Hayek, 2003, p. 118). Obviously, this radical proposal is open to many criticisms from the perspective of democratic theory, but let us leave this aside and instead turn to the final proposal to be considered here, which is also the least specific, calling for the transformation of statehood into a “strong state” as its main proponents Alexander Rüstow and Walter Eucken refer to it.

This remedy manifests the stringent conclusion from the critical diagnosis of excessive pluralism, which is prevalent among most ordoliberals; even Röpke, who is less vocal on this theme, reminds his readers that “the immense danger of this unhealthy pluralism is that pressure groups covetously beset the state” and that “any responsible government must examine carefully all the possible means of resisting this pluralistic disintegration of the state” (Röpke, 1960, pp. 144, 143). Still, the most vehement calls for a strong state come from his ordoliberal compatriots Rüstow and Eucken. The former concludes his lecture State Policy and the Necessary Conditions for Economic Liberalism from 1932 with the following remarks: “The new liberalism, which I and my friends promote, demands a strong state, a state that is positioned above the economy, above the interested parties, in the place where it belongs. And with this confession of faith in a strong state that promotes liberal economic policies and—because the two mutually condition each other—in liberal economic policies that promote a strong state, with this confession I should like to end” (Rüstow, 2017b, p. 149). The state is thus to remove itself from the pluralistic rancor of political parties and interest groups and take up a position that enables it to fend off the demands coming from these actors. In the same year, Eucken published what will come to be considered a founding text of the ordoliberal tradition, entitled Structural Transformation of the State and the Crisis of Capitalism. In this far-ranging article, Eucken lays out his own version of the narrative of liberal decline, which, in his view, happens to coincide with that of Carl Schmitt in this respect and comes to the fore in “the transformation of the liberal state into an economic state” (Eucken, 2017, p. 59). For Eucken, the merging of state, society, and economy encapsulated in the economic state is of the most serious consequence as it “has undermined independent decision-making on the part of the state, something upon which its very existence depends. … All recent economic policy clearly demonstrates this corrosive process: it amounts to a plethora of measures, each of which can be traced back to the wishes of different powerful economic groups but which, taken together, have no coherence and are entirely lacking in system” (Eucken, 2017, pp. 59—60). The state, in short, “lacks the real independent power to make its own decisions” (p. 60).

Similar to Rüstow, Eucken thus demands that the state overcome its looming pluralistic dissolution and instead disentangle itself from the grip of particularistic actors in order to restore a unified and independent will formation of its own in order to become the true “guardian of the competitive order” (Eucken, 1960, p. 327) and enforce it even against powerful economic actors. How this would reflect upon the system of (pluralist) democracy and to what extent it would decline as collateral damage of this operation, if not the actual target of it, is left unaddressed by Eucken—but this omission may in itself be considered rather telling.

These three proposals entail rather controversial ingredients, but, as noted before, I have not sketched them out here to scrutinize them critically, but rather to show that neoliberals invariantly responded to the diagnosed problems of democracy with rather ambitious reform proposals. Without exception, they presupposed that the time for a pragmatic muddling through had passed, and decisive, transformative action had to be taken. What is imagined here, even in the most specific and less far-reaching demand of the constitutional balanced-budget amendment, is more than a marginal policy adjustment but rather amounts to what Hall in his classic discussion refers to as second- or even third-order/paradigmatic change—with the more encompassing proposals from Hayek and the ordoliberals certainly qualifying as the latter (see Hall, 1993). Given the large-scale and rather drastic transformations envisioned, it seems all the more important that there is some consideration given to the way these could be brought about and who the actors are that could plausibly be believed to pursue such strategies, in short, the problem of transformation. But this turns out to be more than a minor challenge for all the neoliberals discussed here.

What this section will show is that neoliberals invariably fail in theorizing a politics of neoliberal transformation, albeit in different and instructive ways. As established in the preceding section, neoliberal reforms are not designed as incremental processes of adjustment, rather they entail a decisive break with the status quo—which is only consequent, given the bleak picture that the diagnoses of contemporary democratic societies paint. But how should transformation be brought about and who are the actors that are to usher in this epochal process of change?

Let us begin with Eucken, whose position in these matters is arguably the weakest among the neoliberals considered here as his account of potential reform strategies amounts to the very absence of such an account. In some of his post-war writings and especially in the posthumously published Principles of Economic Policy, Eucken does indeed identify potential actors that are to enforce a competitive order as the crucial aspect of a broader, interlocking structure of societal orders. The state, churches, and science are thus characterized as “ordering potencies” (Eucken, 1960, p. 325), but their respective potential lies dormant and so Eucken's exposition of the three potencies amounts in large parts to lamenting their respective inability to realize this potential. In other words, Eucken is at a loss as to how the state is to disentangle itself from the sway that interest groups and political parties have over it, or how churches and science could be restored to their former authority and influence. Especially with regard to the state, the task is a formidable one as truly ordoliberal economic policy presupposes the autonomy of the state, which it supposedly achieves, and thus Eucken finds himself in a logical circle: “Without a competitive order no state capable of action can emerge and, conversely, without a state capable of action no competitive order can emerge” (Eucken, 1960, p. 338).

While in Eucken's case, the matter of neoliberal strategy is not pursued any further, Röpke addresses the question of the actors who could bring about his particular ordoliberal vision of a decentralized and demassified society. “The conviction is rightly gaining ground that the important thing is that every society should have a small but influential group of leaders who feel themselves to be the whole community's guardians of inviolable norms and values and who strictly live up to this guardianship. What we need is true nobilitas naturalis” (Röpke, 1960, p. 130). There is no need to go into the details of Röpke's extolling of a virtuous class of clerks benevolently guarding the political community, which draws on Plato's notion of a guardian class as well as classically conservative notions of natural(ized) social hierarchy. What deserves attention in our context is the already deeply pessimistic framing of Röpke's introduction of a nobilitas naturalis. “Evidently, many and sometimes difficult conditions must be fulfilled and endure if such a natural aristocracy is to develop and endure and if it is to discharge its tasks. It must grow and mature, and the slowness of its ripening is matched by the swiftness of its possible destruction” (Röpke, 1960, p. 131). Thus, as soon as the actors of Röpke's reform agenda are introduced, they all but disappear again as it turns out that theirs is a profoundly fleeting existence that depends on a rather unlikely constellation of factors and conditions that all to easily evaporate, and with it the cherished “aristocrats of public spirit” (p. 131). And to be sure, this is not just rhetoric, considering Röpke's lengthy characterizations of these “clerks.” What is required among other things to qualify as one of society's guardians is a “life of dedicated endeavor on behalf of all, unimpeachable integrity, constant restraint of our common greed, proved soundness of judgment, a spotless private life, indomitable courage to stand up for truth and law, and generally the highest example” (Röpke, 1960, pp. 130—131). Given this demanding profile, it is no surprise that the emergence and persistence of such a guardian class are characterized as exceedingly unlikely. After all, it seems as if it would take actors of almost otherworldly nature to satisfy Röpke's standards, and so it is only consequent for him to refer to them as “secularized saints,” and given the religious idiom into which these matters are transferred in Röpke's account, it seems appropriate to refer to this as a typical ‘deus-ex-machina’-motive, which reveals the lacunae in Röpke's thought.

With regard to Rüstow, we already know that the proposed remedy is the transformation of the current, weak state into a strong one. But how to bypass the entrenched networks of interested parties who are capable of whipping the masses into action against any kind of reform effort that threatens their access to the troughs of money and power? In an early intervention in the form of a lecture from 1929, Rüstow imagines a path toward a nonpluralist politics that can be referred to as transitional dictatorship without a stretch. After all, the title of the lecture is Dictatorship within the Bounds of Democracy (Rüstow, 1959, [1929]). According to his proposal, the government led by a chancellor would be granted the right to govern for a certain period of time, even if it lacks a parliamentary majority. The suspension of the possibility of being forced to resign or have bills and measures defeated in parliamentary votes is to give the government the leeway to pursue what Rüstow undoubtedly imagined to be the kind of politics that Röpke's aristocrats of the public spirit would have enacted. Once the granted time period is over, the suspension of parliamentary power and oversight ceases and the government has to face the respective scrutiny as well as the possibility of being voted out of office again. “This means the preservation of democracy because it is a time-limited dictatorship, not in the strict sense of the term, but, as it were, a dictatorship with a probational period” (Rüstow, 1959, p. 99).

In Hayek's case, things are, unsurprisingly, more complex, but the thrust of his point is clear enough. Already in Law, Legislation and Liberty, he discusses emergency powers as potentially necessary to secure the long-term stability of a political community in the midst of a crisis and/or the verge of totalitarian collectivism (Hayek, 2003, III, p. 124). This argument is located at a neuralgic point in Hayek's thought, systematically speaking, because just as in the case of other neoliberals, he faces the task of spelling out a plausible path toward a more neoliberal society amid a world that, according to his own analysis, has already begun its descent on the (in-)famous Road to Serfdom. Emergency powers and a state of exception in the form of a transitory dictatorship represent the theoretical bridge that connects the status quo with Hayek's neoliberal vision. This comes to the fore most clearly and also most controversially in Hayek's notorious comments on Chile after the coup of Augusto Pinochet, displaying his usual candor in an interview with El Mercurio in 1981: “As long-term institutions I am totally against dictatorships. But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some kind of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. … My personal impression … is that in Chile … we will witness the transition from a dictatorial to a liberal government…” (El Mercurio, 1981, p. D9).

By the early 1980s, Hayek had obviously persuaded himself that a transitional dictatorship was a legitimate option to save political communities from succumbing to totalitarianism-cum-collectivism, and as we know from the quote in the preceding section, Hayek was also convinced that this was not just a matter pertaining to Chile or other “underdeveloped” countries but that the slide into totalitarianism was a tendency inherent to actually existing contemporary democracy.

What are we to make of these proposals? Starting with Rüstow, if the envisioned “dictatocracy” is really to remain within the boundaries of democracy, it would have to be established through a parliamentary vote changing the constitution. However, as he himself notes, “I am not enough of a utopian to assume that a proposition as I just sketched it would normally find a majority to change the constitution in the Reichstag today. … If we had a Reichstag where something like that was conceivable then the proposition would be unnecessary” (Rüstow, 1959, p. 100). And given this “Catch 22,” which parallels the respective problems in Eucken, Rüstow must either bury his hopes for a truly transformative politics that walks the thin line between democracy and dictatorship, or he would have to discard his remnant democratic sensibilities and opt for dictatorial politics sans phrase.

Both Rüstow and Hayek face another more general problem, they leave largely unaddressed, namely, whether it is realistic to assume that transitional dictatorship remains transitional. To be sure, history knows instances where dictators or democratic leaders with de facto dictatorial powers quietly and dutifully stepped aside and thus enabled a return to normal conditions, but it was Hayek himself who had based his slippery slope argument in The Road to Serfdom on the notion that unchecked powers tend to become entrenched and engender a dynamic that tends toward the totalitarian. The plenitude of power required for comprehensive planning, as Hayek had argued back then, would even drag the most well-meaning socialists into the deadly politics of totalitarianism. Why would these mechanisms not apply to the transitional dictatorships that do not seek to pave the way toward socialism but liberal authoritarianism? A Hayekian line of defense may be to resort to a point contained in The Road to Serfdom, according to which such a dynamic is triggered only by economic interventionism and not political interventions, that is, if liberal authoritarianism abstained from economic interventions, it might arrest any potential totalitarian dynamic, but whether this differentiation is a convincing one is rather disputable. While Hayek at least has an argument, albeit a weak one, it remains a real mystery, why Rüstow never gave any explicit attention to this conundrum; all the more so, since he—and also Hayek—were acutely aware of the work of Carl Schmitt. And in his writings on the state of exception, one major and not entirely implausible point is that the liberal ambition of arresting the mercurial nature of a state of exception by codifying rules that govern its modalities and the emergency powers ensuing from it is ultimately futile. So if Rüstow's hope was that his version of a transitional dictatocracy would remain transitional because it was thus codified in the constitution—if there was ever a majority in favor of it—this is almost naïve from a Schmittian point of view. So we see that in both cases, the reform strategy proposed is incompatible with more or less explicit assumptions underlying the respective points of view.

Our final case study is the work of James Buchanan, who is also the most fascinating example because while Rüstow and Eucken mostly try to avoid the issue of strategy and implementation, he grapples with it directly over and over again.

Buchanan's specific challenge is not altogether different from the problems haunting the neoliberals we have already discussed. It can be stated quite succinctly in the form of a simple question that still proves to have rather devastating implications. If the assumptions of the public choice theory suggest that homo oeconomicus is a behavioral model appropriate for the analysis of political actors and rent-seeking is a practice not only rent seekers but also those who are in a position to grant rents, that is, politicians, benefit from, how can we assume that these actors will pass a constitutional balanced-budget amendment designed to curb among other things rent-seeking behavior?

Obviously, Buchanan was well aware of the problem he faced and undertook multiple unsuccessful attempts to deal with it, the chronicling of which would exceed the scope of the paper. Eventually, he found himself forced to rethink a crucial element in his own thought, namely, that of homo oeconomicus and how it was intertwined with rent-seeking behavior.

Over time he becomes more and more adamant that homo oeconomicus is just one of several personae that make up any actual person and at times suggests an almost dualist anthropology when he writes that there is “a struggle within each of us … between rent-seeker and the constitutionalists, and that almost all citizens will play, simultaneously, both roles” (Buchanan, 1991, pp. 2, 10). This battle between normative orientations will become a site of major strategic importance for Buchanan because the conclusion he draws is that “the constitutionalist” in ourselves needs to be strengthened against the “rent-seeker” just as Rousseau thought the “citoyen” had to be strengthened vis-à-vis the “bourgeois.” It is only consequent, therefore, that Buchanan writes that “the reform that I seek lies first of all in attitudes” (Buchanan, 1975, p. 176). This is noteworthy because it contradicts the claim routinely made by liberals or conservatives that they subscribe to a realist anthropology that “takes people as they are” and treats their preferences as “exogenous variables” refraining from any attempt to educate or change them but solely focus on social and political rules. Buchanan does want to change people, and he more and more explicitly embraces the notion that in this matter it is not enough to appeal to homo oeconomicus. In a paper titled “The Soul of Classical Liberalism,” Buchanan diagnoses the failure of liberalism to capture the hearts and minds of people because it lacks an appealing narrative: “Science and self-interest, especially as combined, do indeed lend force to any argument. But a vision of an ideal, over and beyond science and self-interest, is necessary, and those who profess membership in the club of classical liberals have failed singularly in their neglect of this requirement” (Buchanan, 2000, p. 112). The constitutionalist in us cannot be strengthened through a “rational” argument appealing to the authority of science or self-interest alone, because what is at stake is an entire worldview that one comes to believe in. Only when attitudinal patterns have changed to a sufficient degree will it be possible to pursue the political project Buchanan continues to envision, which he describes as no less than a “constitutional revolution,” in sharp contrast to the incrementalism of “pragmatic reform” (Buchanan & Di Pierro, 1969, p. 95). However, this strategy entails a major concession that Buchanan himself spells out: “To hold out hope for reform in the basic rules describing the sociopolitical game, we must introduce elements that violate the self-interest postulate” (Brennan & Buchanan, 1985, p. 146). This is remarkable given that the entire critique of the rent-seeking society and actually existing democracy, of course, rests on the “self-interest postulate” of homo oeconomicus.

And so here we finally come to see that not only Buchanan had to attenuate his stance regarding the potential benevolence of actors, thus moving a little closer to the views of those who like Röpke place their hopes in a particular set of actors, but he also comes to commit himself not to a state of exception as a precondition of neoliberal reform but to what might be called a politics of the extraordinary with the radical connotations of a revolution. And so, in similarity to Hayek and Rüstow, Buchanan conceives of neoliberal reform politics as a caesura that can produce a real rupture of the iron cage of the ever same in which the entrenched rent-seeking networks are dismantled and the “basic rules of the sociopolitical rules” can finally be changed. Not only are these dreams of rupture shared by Buchanan and Hayek, but they are also expressed by Rüstow when he muses on “great politics, the politics that is the art of the impossible, that which wrongly was considered impossible” (Rüstow, 1963, p. 117) and Friedman who envisions a political window of opportunity within which “what seemed impossible suddenly becomes possible” (Friedman & Friedman, 1990, p. xiv). What is on display here is an almost eschatological hope for the moment of the great rupture, the day of reckoning and of reversal, when the powers that be are unseated and a new kingdom will be erected—only here, it is not the kingdom of god but rather the realm of neoliberalism.

What I have developed in this paper is a critique of neoliberal thought that rests on the latter's inability to theorize in a consistent and plausible manner the problem of transition. The neoliberals in that sense are similar to those whom Marx described and derided as Utopian Socialists: bursting with visions about a better future but unable to develop strategies to realize these visions. Despite the variations described above, an overall pattern can still be detected: With their at times harsh criticisms of actually existing democracies, neoliberal thinkers back themselves into a theoretical corner because the more apocalyptic the critical diagnoses get, the more difficult it is to sketch a path out of the misery that is the status quo. Put differently, what the neoliberal critic gains in terms of the urgency of his diagnoses, the neoliberal reformer loses in terms of the viability of change. This confronts neoliberals with a dilemma encapsulated best in Buchanan's concession regarding the weakening of the self-interest postulate: Either neoliberals want to hold on to their trenchant critiques of democracy and the assumptions underlying them, but then they effectively forfeit the ability to also explain how conditions could possibly be changed and their accounts in effect turn into pessimistic conservatism. Or they want to be able to maintain the theoretical ability to capture the politics of neoliberal reform, but then they have to relax some of their assumptions and in effect scale back their critique of the democratic status quo significantly.

Describing this as a dilemma is the most modest version of this conclusion, which changes if we take the dimension of actually existing neoliberalism into account, which, after all, provides ample evidence for the possibility and factuality of neoliberal reform: The so-called debt brakes European countries have passed in response to the Eurozone Crisis is the equivalent of Buchanan's cherished balanced-budget amendment, and there are indeed such balanced-budget amendments on the state and municipal level in the United States (see Peck, 2014). Furthermore, when it comes to actors sufficiently isolated from democratic pressures to make “rational” decisions, there are, prominently, central banks that have been granted independence with minimal accountability requirements across the OECD world, and there is the European Commission in charge of overseeing competition and deficit rules in the Eurozone, both of which can be considered to be part of what has been referred to as “the rise of the unelected” (Vibert, 2009). Finally, one must not forget the international trade regimes, such as the WTO, free trade areas such as the European Union or Mercusor in South America, and free trade agreements such as CETA between Canada and the EU, all of which have effectively reined in the powers of sovereign nation-states in many trade-related areas and beyond (see Slobodian, 2018a). Adding this aspect prompts several further questions. First, if there are clear examples of neoliberal reform, are the lacunae in neoliberal theory not essentially moot points, and is that not an indication of the insignificance of neoliberal theory in comparison with actually existing neoliberalism? Moreover, given the realization of neoliberal reforms, might there not be something like a performative theory of transition, which can be distilled from the nonacademic endeavors of someone like Buchanan? Finally, how does the conclusion regarding the dilemma referred to above change with this in mind? Let me begin with this last question: Old-fashioned falsificationism would tell us that if the conclusion of a theory is at odds with observed reality, this necessarily means that there is something wrong with the assumptions of the theory. Applied to the constellation at hand, this means: Neoliberal theory arrives at conclusions that are at odds with observed reality, that is, the facticity of neoliberal reform politics; therefore, there is something wrong with the assumptions of the theory, meaning that the neoliberal critiques of democracy, to the extent that they rest on these assumptions, have to be considered questionable. Regarding the second question, it is true that neoliberals such as Buchanan and Hayek had their ideas about how their ideas could have an impact, which, in Buchanan's case, is chronicled by Nancy Maclean in her controversial account of his nonacademic activities, including cooperation with various interest groups and shady donors (see MacLean, 2017, pp. 199–204). Still, my point is that on the theoretical level, there are still lacunae that have repercussions for the plausibility of their critical analyses of democracy and this is what I am ultimately driving at with my argument.

Finally, Materialists will hasten to point out that identifying such lacunae will not make neoliberalism or its critique of democracy suddenly disappear and I agree. However, in order to be ultimately effective, the critique of neoliberalism must be conducted not only in the register of struggle and power politics, challenging actually existing neoliberalism but also in discursive contestation and the realm of theory on the basis of various kinds of critiques, including immanent ones pointing out inconsistencies, as I have tried to do here. Importantly, the argument contained in this paper is not supposed to “refute” neoliberal theory in its entirety, not the least because ideologies tend to contain contradictions, so identifying them does not necessarily deal a metaphorical death blow to them. My aim is a more specific one, namely, to highlight the dilemma that neoliberals face, which is most clearly on display in the case of Buchanan who openly concedes that the assumptions guiding his critique of democracy have to be relaxed in order to hold out hope for what he considers to be meaningful reforms, and thus undermine the plausibility of neoliberal arguments against democracy. There is no need to overstate the significance of such a critique, which is by no means sufficient, but, conversely, only focusing on the material level leaves to neoliberals the option of blaming unfaithful and incomplete implementation for any negative effect associated with, for example, introducing balanced-budget amendments, maintaining that their theoretical frameworks in themselves are not affected by this. It is such flaws in the framework that my critique aims to reveal.

Beyond this immediate conclusion, let me point out one more implication that appears to be worthy of more elaborate discussion in future research in light of what has been argued here:

Given the eschatological hopes neoliberals seem to harbor for a political rupture, this might also provide a link to the politics of what now is typically referred to as (right-wing) populism (but is de facto authoritarianism). After all, the self-portrayal of populist leaders who vow to “drain the swamp” and, generally, sweep aside decadent and corrupt establishments, corresponds to a considerable degree with what neoliberals apparently thought was necessary to overcome the gridlock and inertia of normal politics and implement neoliberal reforms. There can be little doubt that Hayek or Buchanan would have abhorred the notion of a Donald Trump as President of the United States or a Boris Johnson as Prime Minister of the UK—after all, they could not be any less “aristocrats of public spirit”; but still, the theoretical dilemmas their critiques of democracy create for them make the neoliberals inadvertently gravitate toward the kind of ruptural antiestablishment politics that populist movements and parties at least claim to represent. They are neoliberalism's “Frankenstein,” to borrow an expression from Wendy Brown (2018)—or its “bastards,” to borrow one from Quinn Slobodian (2018b). To be sure, one might argue that the Trump administration, to take a prominent example, attacked global regimes of economic multilateralism in the name of economic nationalism and would thus be in opposition to the kind of international free trade regimes, zones, and agreements cited above as manifestations of neoliberal reforms. However, upon closer inspection, the opposition to neoliberal designs turns out to be less than strict: The Trump administration indeed left NAFTA—but only to negotiate a new free trade zone called UMSCA with minimally better conditions for the United States. On the other hand, the tax reform under Trump could have just as well been passed under Reagan—in fact, Reagan's adviser from back then, Arthur Laffer, was also brought in as a consultant by the Trump administration. But while the opposition between them is overstated in many instances, my point is not that the substantive policies pursued by right-wing populists are all in congruence with neoliberal ideas. Rather, the major point of convergence between the two consists in their view of politics as necessarily disruptive in order to shake up the seemingly locked-in status quo dominated by mainstream political actors with no incentive to enact any real change to the “system.” By the same token, this is what turns both, neoliberals and right-wing populists, into antagonists of liberal democracy and its inertia, but while neoliberals dream of an ultra-stable world of almost self-enforcing rules to succeed in the moment of rupture, right-wing populists aim for the contrary: A world of rupture becoming permanent.