On Liberal Democracy as Identity Formation

Earlier in the week (recall) I wrote about the structure of a trope in which some object of interest — the nation, the market, leadership — is the effect of or authorized by a daily plebiscite. The trope’s structure evokes Locke’s (proto-Humean) account of convention. Following Foucault, I noted that the trope was popular within twentieth century neoliberalism and (as he did not note) liberal socialism.* Obviously, it is a bit suspect that I am treating the same process as constitutive of an entity and of legitimating some such entity. But let’s leave that aside momentarily.

When I wrote that post, I realized that some people connected the market as daily plebiscite notion to the concept of consumer sovereignty. It shows up, for example, in David Gordon’s (2017) treatment of Mises. So, I was not wholly surprised when, the distinguished Tinbergen biographer, Erwin Dekker, also mentioned it on social media.

However, I deliberately want to keep the daily plebiscite trope, which can be traced to Renan’s account of nationalism, distant from the idea of consumer sovereignty for two reasons: first, it’s not used in Hutt’s classic 1940 article nor does it seem mentioned in the earlier works by himself, Hayek, and Röpke of the 1930s that he notes precede the 1940 piece. Second, a plebiscite does not require the sovereignty of the people. In fact, I explicitly mentioned Locke’s account of convention in this context as a means to distance the trope from the idea of sovereignty because I think (recall) only in the state of nature are individuals sovereign for Locke.

I don’t mean to deny that Hutt’s article and its pre-history are wholly irrelevant. We see in it an argument pattern, in the context of neoliberal debates with socialists and fascists, that the legitimacy of the market is justified by way of analogy with the (unquestioned) legitimacy of democracy. That’s quite evident in Röpke (1935: 93 “democracy of the consumer,” whose target is fascism by the way). I return to this below.

In a comment John Quiggen (a friend of this blog) alerted me to the phrase ‘dollar voting’ which conceptually traces back to John M. Buchanan’s (1954) “Individual Choice in Voting and the Market,” which is, itself, explicitly a Knight inflected refinement of Dahl and Lindblom (1953). By this I mean that for Buchanan voting becomes characterized as a form of decision under uncertainty (not risk). While one can say that the expressive content of Buchanan’s argument is also to use the legitimacy of democracy to argue for the even more superior legitimacy of markets, the official argument is meant to advance social science theory by distinguishing analytically “carefully between the selection of the power structure among individual choosers and the selection of the choice mechanism.” (p. 242)

That markets are a superior form of voting to democracy is also a theme in Mises’ (1932) preface to the German second edition of his Socialism: An Economic and Sociological Analysis. There it is coupled with the daily plebiscite of the market trope. In fact, it may be the original use of the trope in the context of markets:

When we call a capitalist society a consumers' democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers' ballot, held daily in the market-place. Every child who prefers one toy to another puts its voting paper in the ballot-box, which eventually decides who shall be elected captain of industry. True, there is no equality of vote in this democracy; some have plural votes. But the greater voting power which the disposal of a greater income implies can only be acquired and maintained by the test of election. That the consumption of the rich weighs more heavily in the balance than the consumption of the poor - though there is a strong tendency to overestimate considerably the amount consumed by the well-to-do classes in proportion to the consumption of the masses is in itself an 'election result', since in a capitalist society wealth can be acquired and maintained only by a response corresponding to the consumers' requirements. Thus the wealth of successful businessmen is always the result of a consumers' plebiscite, and, once acquired, this wealth can be retained only if it is employed in the way regarded by consumers as most beneficial to them. The average man is both better informed and less corruptible in the decisions he makes as a consumer than as a voter at political elections. p. 21 in J. Kahane’s translation [HT David Gordon]

Unfortunately, here Mises ignores the role of inherited wealth (which seems to generate plural votes in some). Some other time I will reflect a bit more on what inequality of votes in the marketplace does to the legitimacy of the process. But for present purposes crucially the notion of ‘corruption’ he deploys is, in fact, republican in character. It appeals to the idea (familiar from Rousseau and Condorcet) that voting must be sincere (and non-trivially wills the good/true). So, even in criticizing actual democracies, Mises presupposes its ideals.

So much for tracing history of ideas/tropes, why does any of this matter? I offer four points, in ascending significance. And, in doing so I draw on joint work (in progress) with Nick Cowen and Aris Tranditis.

First, the existence of such tropes (daily plebiscite, consumer sovereignty, dollar voting) undermines the idea that neo-liberalism is intrinsically anti-democratic. On the contrary, some of its most prominent arguments for the legitimacy of markets presuppose the legitimacy of some kinds of democracy! And what’s especially noticeable about this is that the neoliberals appeal to features that can be best associated with mass and majoritarian democracy. I return to this below.

To the best of my knowledge the point of the previous paragraph is not well recognized. I think this is so for four reasons: first, many right of center liberals (who lived through the electoral rise of fascism) share in Constant’s concerns over democratically legitimated despotism. Second, leftwing critics of market societies relentlessly treat it as anti-democratic. Third, mathematical economists increasingly started to conceptualize markets in terms of efficiency (I thank Ryan Muldoon for the suggestion). Fourth, followers of Hayek started to treat markets in terms of spontaneous order — and in the liberal fusion with conservatism — treated this not as a Lockean convention rooted in consent, but more Burkean as a form of historical legitimation by tradition.

Be that as it may, the neo-liberal association of markets with democracy is not wholly unique in history. Condorcet and Grouchy (both more republican than proto-liberal) saw no incompatibility between their support of free markets and majoritarian democracy. The same is very true of Bentham. It’s often forgotten that Smith and Kant, who both have a good claim to be founders of liberalism, favored free markets in the context of rule of law (rechtstaat) and representative institutions (although the extent of the franchise may be more limited in them).

Second, the daily plebiscite trope itself treats markets (nations) as an open-ended process. (This is a feature and not a bug in Austrian political economy, but itself much indebted to Smith.) In fact, the process has multiple functions at once: aggregating and conveying information, distribution of goods, and producing financial rewards/incentives (possibly more).

Third, what’s crucial about the process view is that the daily plebiscite participates in constituting the market. This was, in fact, central to Renan’s original idea of treating the nation as the effect of a daily plebiscite: without widespread ongoing consent to continue with the disposition to sacrifice and acts of solidarity the nation comes to an end: a nation’s renewed existence is at stake in a daily plebiscite. Renan, a product of Second French Empire, is clearly favorably contrasting the legitimacy of the nation with the reign of that democratic usurper, Napoleon III. (I thank Eric Brandom for the suggestion.)

Now, we’re in a position to get to the nub of the matter. But I want to frame it with a bit of further background. It is pretty uncontroversial that twentieth century neoliberalism was shaped by the reception of Lippmann’s (1938) The Good Society. I have argued (here) that it offers a robust defense of liberal democracy. A key insight in the book (recall this post) is that in modern liberal democracies — and he treats the Madisonian constitutional framework as exemplary of it — the national will (in so far as it is expressed through voting) is fractured in time and in space and, thereby, becomes more truthful. Lippmann emphasizes how elected politicians receive mandates of different (periodic) lengths and they often represent jurisdictions that may be only partially overlapping geographic boundaries and electorates. As he puts it the American "founders sought to approximate a true representation of the people by providing many different ways of counting heads" (p. 254)

But the effect of such fracturing is also to create a process of continuous democracy. Ideally, we vote on representatives a number of times of year. (This is, alas, undermined by grouping all elections on a single voting day.) Obviously, if there are robust primaries and (say) referenda, campaign seasons can last quite a while through the year.

Of course, in really existing democracies voting is just one mechanism of representation of the people. As is well known, there is lobbying by interest groups, there is intra-party debates, public opinion polls, there are membership driven NGOs, public opinion formation in the media, which in turn is shaped by interested and strategic agents, and the contributions of experts and judges mediated by whole range of institutions. And these practices are a year-round, continuous process.

So, fourth, this points to a distinct way of treating liberal democracy that is not conceptualized as a static mechanism that has an input legitimacy due to its formal qualities. The distinct way I have in mind piggybacks on the familiar idea that liberal democracy is a process that produces many kinds of goods that may well generate output legitimacy. But rather, and this is builds on the core of Renan’s trope, that in liberal democracies there is a continuous bottom-up process of discovery not just of what the voters want (and their rankings), but who/what identity they/we authorize to be.

Historically the idea combines elements from Lippmann and Dewey (who emphasized democracy in terms of experiments of living) that are often treated as polar opposites. But I think (recall) the form of the underlying idea goes back to Machiavelli’s Discourse on Livy. He emphasized (recall) that the Roman republic was characterized by a kind of bottom up creative turbulence — structured around class conflict between the senate and people — that drives social innovation and learning and is conducive to freedom and social identity formation.

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*Subsequently, Vincent Carret wrote to inform men that Jacques Rueff, another French "neoliberal" also seemed to have used a version of the metaphor in 1968: "Thus the market establishes the structure of production which will give to each solvent demand the most desired content; it is the instrument of true universal suffrage in the economic domain. The criticism leveled at it is that it is a census vote, with each request only affecting the market up to its amount, and therefore the resources that its author intends to allocate to it."* (Rueff, Les Dieux et les Rois, 1968, 255).