Foucault on the primacy of Economics over the Law

In my previous post, I quoted this excellent article on Foucault's (faux) Economic thinking.

In this, mercifully briefer, post, I touch on issues of robustness in signalling equilibria and how neglecting their nature leads quickly to paranoid nonsense. Foucault is not very different from Amartya Sen or Chomsky- though having died long ago- less at fault for not keeping abreast of developments in the Social Sciences.

We begin with a thought experiment-

let’s suppose an institutional framework whose nature or origin is not important: an institutional framework x. Let us suppose that the function of this institutional framework x is not, of course, to exercise sovereignty, since, precisely, there is nothing in the current situation that can found a juridical power of coercion, but is simply to guarantee freedom. So, its function is not to constrain, but simply to create a space of freedom, to guarantee a freedom, and precisely to guarantee it in the economic domain. Let us now suppose that in this institution x—whose function is not the sovereign exercise of the power to constrain, but simply to establish a space of freedom—any number of individuals freely agree to play this game of economic freedom guaranteed by the institutional framework. What will happen?

The folk theorem of repeated games says that this framework can do anything which a coercive framework does.

What would be implied by this free exercise of this freedom by individuals who are not constrained to exercise it but who have simply been given the possibility of exercising it? Well, it would imply adherence to this framework; it would imply that consent has been given to any decision which may be taken to guarantee this economic freedom or to secure that which makes this economic freedom possible.

There is no such implication. Suppose I sign up to be a seller on Amazon or Ebay. This would be a 'contract of adhesion'. However,  if Amazon or Ebay substantially changes its Terms and Conditions, or if I don't find the arrangement worthwhile, I am perfectly at liberty to terminate my participation. I don't have to give any reason. Amazon can write to me saying 'look, we had to change our Terms and Conditions to continue to operate. Please understand this and come back.' They can't compel me to come back.

Suppose this were not the case. Then Jeff Bezos can become the President of the World using all Amazon users as his troops.

In other words, the institution of economic freedom will have to function, or at any rate will be able to function as a siphon, as it were, as a point of attraction for the formation of a political sovereignty

Foucault was writing of the Federal Republic of Germany which, though continuing to host foreign troops, ceased being an occupied power in 1955. However, its sovereignty depended on NATO.

 In fact, in contemporary Germany, the economy, economic development and economic growth, produces sovereignty:

This is not true. West German sovereignty was a product of a decision by the occupying powers whose concern was to contain the Soviet threat.

Around this time, the Soviets agreed to give up their bit of Austria- which was proving a financial drain- and so it too became sovereign and ceased to be occupied. However, it did not join NATO. It was neutral- like Switzerland. Austria's 'economic miracle' starts a little later than Germany's and had different characteristics.

Clearly, if both Austria and Germany become sovereign at the same time- though their economic condition was different, it follows that what produced their sovereignty was the decision of the occupying powers- nothing else.

Economics does not produce political sovereignty which is why Bezos can't become President of the World.

Foucault thought otherwise-

it produces political sovereignty though the institution and institutional game that, precisely, makes this economy work. The economy produces legitimacy for the state that is its guarantor. In other words, the economy creates public law.

Our esteemed authors write-

“The economy creates public law” (BBP 84 [86])—isn’t this the ultimate formula of liberalism?

No. The folk theorem- which says public laws are unnecessary for economic flourishing- is the ultimate formula of liberalism.

Or, if you like, the affirmation of the primacy of economics over law, of governmentality over sovereignty.

There is no such primacy. Game theory explains that the 'bourgeois strategy' leads to robust public signals which are eusocial. Thus 'defend what is yours' leads to less wasteful conflict then continually arguing the toss re. what one really owns and whether it is justified to own anything.

If the Law is about robust, predictable, answers to the question 'who owns what?' then it is the precondition for Economic activity. Sovereignty is about who will fight if a border is crossed. Governmentality is an empty word which attaches itself to nothing concrete.

The economy produces political signs.

No. It produces economic signs. There may be a market for political signs of various types but, in my experience, the thing is a nuisance good which is oversupplied. It is a different matter that a costly signal involving a Credential in a certain sort of political signage may attract a rent. But economics only concerns itself with signalling, not the nature of signs inutile in themselves.

It alone is justification enough. In other words, the existence of a specific political apparatus, having as its object the definition of a territory, as its aim to ensure the collective adhesion of citizens, and as its medium the monopoly of legitimate violence, no longer seems at all to be a necessary moment.

Unless other people want to invade your country and enslave you and steal your cool stuff. Then, suddenly, sovereignty matters a great deal because you discover that being a terra nullis sucks ass big time. Just ask the Australian aborigines if you don't believe me.

The same point may be made regarding internal enemies who want to rape you and steal your TV.

No doubt, a group of people born under the Red Sun of Planet Krypton, who can kill anyone who tries to fuck with them, might not need de jure sovereignty. But that's coz they have de facto sovereignty. It would be helpful to the rest of us if they define its limits so we can give them a wide berth and thus not become subject to their X-ray vision and rude comments re. our pencil dicks.

One can perfectly well do without the power of constraint.

But even better with it because public signals re. 'bourgeois strategy' type boundaries improve correlated equilibria.

That's why wedding rings are a good idea. A lot of time and trouble is saved- and potential violence avoided- by bourgeois signals of that sort.

It is not the case that a man wearing a wedding band is submissive. He may be the top, not the bottom, at home. What is important is that, seeing the ring, you know you'd be wasting your time and money sending drinks over to his table.

Economic liberty alone produces sufficiently powerful effects to ensure the social bond and the collective adhesion of actors.

Which is why Communist China was not a real country. Anyone could invade it. There was no social bond and collective adhesion to be found in its Army.

Foucault says-

While I have been speaking about population a word has constantly recurred—you will say that this was deliberate, but it may not be entirely so—and this is the word “government.” The more I have spoken about population, the more I have stopped saying “sovereign.”. .. and the fact that government is basically much more than sovereignty, much more than reigning or ruling, much more than the imperium.
(STP, 105–106 [78])55

It is true that we can use the Statistical term 'population' in an abstract Economic theory where there is no Time or Space or possibility of Invasion or threat of Crime. But, in that case, there is no need for Governmentality any more than there is need for 'Sovereignty'.

However, a more detailed reflection on the German economic situation in 1948 and 1949 brings to bear a very different analysis.
To Foucault’s eyes, it is the liberalization of prices on June 24, 1948, that constitutes the high point of this refoundation of a German state. It is on the basis of this moment that the economic game is established, and may produce its positive effects. However, this analysis raises numerous questions, firstly historical ones, but above all theoretical ones. Strangely, when he analyzes the German renewal Foucault does not mention what was its first and most exemplary act—namely, the monetary reform of June 20, 1948. A new money, the Deutschmark (DM), was created, the old money, the Reichsmark, was abolished, and a first distribution of 40 DM per person was organized on Sunday June 20, 1948. This forgetting is even stranger given the unanimity of commentators in emphasizing the extreme importance of the role played by this reform. For this reason, June 20, 1948, is a fundamental date for contemporary Germany, the date of its birth. For the introduction of the DM marks a decisive turn for the future Federal Republic, far more significant that the latter’s official coming into force in 1949. Note in addition that the first institution operating on the set of the three Western zones of occupation was the Bank Deutscher Länder (BDL), the future central bank. In other words, the BDL is the first institutional form of existence of the GFR. Its creation precedes the constitution of the first federal government by eighteen months. And although Foucault’s analysis concentrates on the law of June 24, 1948, its very title—Law on the Principles of Management and Price Policy after the Monetary Reform (Gesetz über Leitsätze und Preispolitik nach der Geldreform)—designates it clearly as proceeding from the monetary reform. This liberalization only made sense, and was only able to have any effect, because monetary reform had taken place. It is the abolition of the oversupply of money that made price policy effective. Monetary reform was necessary in order for prices to even have any meaning. And yet Foucault does not say a word about this.

Sovereignty is asserted by the issuance of fiat currency which, by law, is made legal tender. If Foucault admitted this, then he would have been revealed to be talking arrant nonsense.