On the Market as Daily Plebiscite

If you like hearing my voice in Dutch, there is a new, long podcast interview with me about Sophie Grouchy and Condorcet at Iconen van de Geschiedenis (here).

Back in 1882, Ernest Renan presented a lecture “What is a Nation?” Qu’est-ce qu’une nation? at the Sorbonne. In his own age Renan (1823 – 1892) was an important and very versatile scholar and philologist and public intellectual. He is now largely forgotten and for the most part only encountered through Edward Said’s writings in Orientalism. However, the lecture is still often cited in discussions on the history of nationalism.

Near the very end of the lecture, Renan offers a preliminary summary of his own account of a nation. This account treats nations as having been shaped by history. The passage is often quoted because it seems to offer a definition. My interest will be orthogonal to that. But let me quote first:

A nation is therefore a great solidarity constituted by the feeling of sacrifices made and those that one is still disposed to make. It presupposes a past but is reiterated in the present by a tangible fact: consent, the clearly expressed desire to continue a common life. A nation’s existence is (please excuse the metaphor) a daily plebiscite [un plébiscite de tous les jours], just as an individual’s existence is a perpetual affirmation of life. Yes, I know, that is less metaphysical than divine right and less brutal than so-called law of history. In the scheme of ideas with which I present you, a nation has no more right than a king to say to a province: “You belong to me, I am taking you.” For us, a province is its inhabitants and, if anyone in this affair has the right to be consulted, it is the inhabitant. A nation never has a true interest in annexing or holding territory that does not wish to be annexed or held. The vow of nations is the sole legitimate criterion and that to which it is necessary to constantly return.—Translated by translated by Ethan Rundell

As Renan notes, this account of the nation rejects divine right and the law of conquest as providing a framework for the nation. Rather, a nation is rooted in the consent of those that belong to it. And, crucially, this consent has to be perpetual for a nation to endure. For, nationhood involves solidarity and a disposition toward mutual sacrifice. Without widespread ongoing consent to continue with this disposition and acts of solidarity the nation comes to an end: a nation’s renewed existence is a daily plebiscite.

The metaphysics and social ontology of this view are quite fascinating. But here my focus is Renan’s thought that the facticity of nationhood is not self-justifying but that it requires a kind of democratic legitimacy. And this legitimacy is ultimately rooted in individual consent. Renan keeps his distance from privileging a people over the individuals that constitute it.

When I encountered Renan’s idea of a nation as a daily plebiscite, I had to think of Locke’s (rather Humean) account of conventions. For example, For Locke, the value of money is not intrinsic, and it is established “without compact” only “by putting a value on gold and silver, and tacitly agreeing in the use of money.” (Second Treatise, Sect. 50.) Once a coin is not accepted it loses its value as an instrument of exchange. Keep that in mind.

Before I get to my point, I want to note one interesting use by Hans Morgenthau (1960), the realist theorist of international relations, of Renan’s metaphor that is pretty much simultaneous with the kinds of thing I want to discuss.

For a society whose cultural elite derives its authority from nothing but merit, spontaneously and but provisionally recognized in a daily plebiscite by those who happen to be capable of recognizing merit—for such a society mass education is the indispensable instrument for the perpetuation of the standards of excellence.—”The Social Crisis in America: Hedonism of Status Quo,” Chicago Review p. 87.

Here, the daily plebiscite is a process of the many recognizing recognizing merit in the few and, thereby, producing authority. (Morgenthau is clearly indebted to Weber.)

Okay, so much for set up.

In recent times, critics and friends of markets tend to view them through the lens of efficiency and or wealth generation. As regular readers know, my own view (inspired by Smith and Ordoliberalism) is to treat markets as a mechanism to disperse power and to block or undermine concentrated power. On this (more Machiavellian) view, the badness of monopoly is not primarily economic (although surely its bad for the economy and consumers), but political. Monopolies have concentrated power in markets and with their profits they tend to buy political power and, thereby, often gain other rents. This is not just idiosyncrasy of Smith, we find similar views in Cugoano, Condorcet, and Grouchy.

Of course, the weakness of this more Machiavellian view is that not everyone thinks concentration of power is itself something worth avoiding. Many people behave as if they prefer concentrated power in the hands of their political allies and economic friends, and only are alarmed when the opposite is the case. So, by itself this justification for markets goes only so far.

Renan’s essay seems to have inspired a different approach pioneered by some neoliberal thinkers during the middle of twentieth century. Interestingly enough the idea seems to have been picked up by free-market types as well as liberal socialists. This was for example already noted by Wilfred Prest in 1967:

The price mechanism enables consumers to register their demands as though they were voting in a daily referendum. These merits of the system have commended it to the modern school of liberal socialists, whose purpose it has been to explore the theoretical possibility of combining free markets for consumers' goods and labour with the public ownership of, at least, "key" industries.—-“Controls, Socialism, and Private Enterprise,”— p. 29

So, for example (recall), in a 1951 lecture, Röpke (an Ordoliberal discussed and admired by Foucault) sometimes models his defense of the process of market economies on the positive valence of referenda: "The process of the market economy is like an uninterrupted referendum on what use should be made (at every minute) of the productive resources of the community."[1] Now, in Röpke the referendum metaphor is primarily instructive (“is like”). But he clearly was also piggybacking on the Suisse experience with referenda -- after the Nazi rise to power Röpke had fled to Switzerland and became much enchanted with —, and so the example also borrows the political legitimacy of referenda, too. This move is quite clearly made by Mises in 1957, in a popular essay (in National Review), “Full Employment and Monetary Policy:”

The market economy is ultimately controlled by the conduct of the consumers, that is by the conduct of all the people. In buying or in desisting from buying, the consumers determine what ought to be produced, of what quality and in what quantity. They determine who should make profits and who should suffer losses. They make rich men poor and poor men rich. The consumers are continuously shifting control of the material factors of production into the hands of those entrepreneurs, capitalists, and landowners who are most successful in supplying them, the consumers, in the cheapest and best possible way. Thus, in the capitalistic economy control of the factors of production is, as it were, a revocable mandate granted by the public. The operation of the market, in a daily repeated plebiscite, assigns to everybody the place in which he is to contribute to the united effort of all. This daily plebiscite determines the height of everybody’s income.

Notice that in Mises, the market as daily plebiscite view explicitly involves a conferring of legitimacy on capitalist activity and power (“control of the factors of production”) who, thereby, can promote the common good (“united effort”). The revocable mandate — an instrument of the Paris Commune made popular by Marx — is the purest form of democracy that combines popular sovereignty rooted in individual consent with accountability.

In fact, by then this view had already widespread currency. So, for example, in a popular (1944) book, Tennessee Valley Authority (TVA): Democracy on the March, defending the New Deal and the TVA, David Eli Lillienthal writes critically:

There is prevalent an idea, often mistaken, that the needs of consumers will be met by industry quite automatically. Customers, so the idea runs, hold a kind of daily plebiscite. If sales fall off, that proves that the particular product or service does not fulfill the public’s needs; if sales rise, that establishes that they do. Such a referendum is supplemented, of course, by customer advertising, and by many devices that induce people to "vote right” on a product.—p. 113

And back in 1936, in the context of writing about civil service reform, Herman Finer, the Fabian socialist, writing in the Political Science Quarterly already treats the idea without attribution as a kind of conventional wisdom:

Price, the reward obtained in fairly free competition, embodies the consumers' control of private producers and acts almost automatically. As someone has said, it constitutes a daily referendum on the quantity, quality and appropriateness of the time of production and delivery of goods and services. It may be that a producer (one may think in terms of a civil service producer in order to make the necessary comparison) wishes to make certain articles or perform certain services because he enjoys doing so or is actuated by what Friedrich would erroneously call "objective responsibility" he believes people ought to have them. But, in fact, price settles the solvency of these practices; and unless the producer caters for effective demand, he will cease to cater at all. “Better Government Personnel,” 583

Somewhat oddly, the origin of the idea that the market involves a kind of daily plebiscite would appear to be shrouded in mystery. (I look forward to readers’ suggestions!) But I want to close with an important episode.

In his lecture series known as Birth of Biopolitics, in his lecture of 21 February 1979, Foucault highlights Rougier’s introduction to the so-called Lippmann colloquium of August 1938. In it, Rougier distinguishes the new liberalism he envisions (and as inspired by Lippmann’s The Good Society) from the old, Manchester liberalism. Louis Rougier (1889–1982), then notes (as quoted by Foucault),

Today we understand better than the great classics what a truly liberal economy consists in. It is an economy subject to a double arbitration: the spontaneous arbitration of consumers, who decide between the goods and services they are offered on the market according to their preferences through the plebiscite of prices, and [, on the other hand,]* the common arbitration of the state ensuring the freedom, honesty, and efficiency of the market[s].” p. 162

Rougier (and Foucault) would have been familiar with the passage from Renan.

Let me wrap up.

Today, my interest in this trope is not to defend it. Rather, before neoliberalism became associated with a defense of the efficiency of markets, it staked its claim on the market as a kind of process of daily democracy. This was, in fact, common ground with its more liberal socialist critics (and friends—we tend to forget the roots of Ordoliberalism in liberal socialism). And so in addition to the many consequentialist defenses of markets (promoting growth/wealth and employment, combatting concentrated power, etc.) there is, lurking in this neoliberal tradition, an intrinsic defense of markets rooted in ideas of consent and democracy. The significance of this is that it is wrong to think of neoliberalism as always inimical to or highly skeptical of democracy. In some of its most salient guises it appeals to democracy to legitimate markets.

Together with Nick Cowen and Aris Tranditis I am trying to figure out what may be worth recovering from these considerations, but that’s for another time.

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[1] "The Problem of Economic Order" (Third lecture), published in Two Essays by Wilhelm Ropke, edited by Johannes Overbeek, Lanham: University of America Press, 1987, p. 26