GOVERNANCE AND PUBLIC

POLICIES

CHAPTER 1: BASIC CONCEPTS OF GOVERNANCE

1.ORIGIN AND DEFINITION OF GOVERNANCE:

The word “governance” came from the Latin verb “gubernare,” or more originally from
the Greek word “kubernaein,” which means “to steer.” Basing on its etymology,
governance refers to the manner of steering or governing, or of directing and controlling,
a group of people or a state.

Governance is essentially related to politics, in that politics is often defined as the art of
governance. Just as politics talks about governments, institutions, power, order, and the
ideals of justice, governance also deals with the public sector, power structures, equity,
and ideals of public administration. Nevertheless, they are distinct from each other in the
sense that politics is broader than governance. Traditionally, the study of politics entails
the concept of the “good life” and the “ideal society,” which are so broad they include a
web of subjects and every possible form of government. The study of governance, on the
contrary, is generally attuned to the concept of democracy, and on how the government
and the civil society arrive at a decision in meeting their needs.

Definition of Governance

Governance is commonly defined as the exercise of power or authority by political

leaders for the well-being of their country’s citizens or subjects. It is the complex process
whereby some sectors of the society wield power, and enact and promulgate public
policies which directly affect human and institutional interactions, and economic and
social development. The power exercised by the participating sectors of the society is
always for the common good, as it is essential for demanding respect and cooperation
from the citizens and the state. As such, a great deal about governance is the proper and
effective utilization of resources.

2.GOOD GOVERNANCE:
Defining good governance
In the 1990s, the World Bank became the first international institution to adopt the concept of
good governance into lending arrangements for developing countries and introduce the idea to
the general public. In its 1992 report entitled “Governance and Development”, the notion of good
governance was written as the way in which power is used to regulate the economic and social
resources of a country for development.

Now, the term good governance has often been used by national and international organisations.
Good governance aims to minimise corruption, take into account the opinions of minorities,
listen to the voices of the oppressed people in the decision-making process, and respond actively
to the needs of the community now and in the future.

Eight principles of good governance

Citing from the United Nations Economic and Social Commission for Asia and the Pacific
(UNESCAP), the concept of good governance has eight principles.

1. Participation
Participation in the concept of good governance here is an opportunity for everyone to voice
their opinions through institutions or representations. In addition, everyone, without exception,
has the right to freedom of association and expression.

2. Rule of law
To implement good governance, the legal framework in the country must be enforced
impartially, especially concerning human rights law.

3. Transparency
Transparency means that every policy taken and implemented by the government must be carried
out under existing regulations. In addition, there must be a guarantee that any information related
to the policy can be accessed by everyone, especially those who are directly affected by the
policy.

4. Responsiveness
Good governance needs institutions and processes to attempt to serve all stakeholders within a
reasonable time.

5. Consensus oriented
This fifth principle is related to the decision-making process. When the decision-making process
cannot accommodate everyone’s wishes, then at a minimum, the decision must be a decision that
can be accepted by everyone and does not harm anyone.

6. Equity and inclusiveness

Good governance ensures justice for the community. Everyone has the same opportunity to
maintain and improve their welfare.
7. Effectiveness and efficiency
Every decision-making process and its institutions must be able to produce decisions that meet
every community need. Community resources must also be utilised optimally by the government.

8. Accountability
All institutions involved in good governance have full responsibility to the public for the sake of
improving the quality of society.

Now that we are all presented with an overall understanding of good governance and its
principles, let’s talk about how it’s harnessed at the local level and how the role of local
governments is especially crucial for a city’s development. 

The United Cities Local Governments (UCLG) has  emphasised in the Global Agenda of Local
Regional Governments that effective local governance can be a key pathway to solving the
various challenges in development at the global level. The biggest example is, of course, towards
the achievement of the 2030 Agenda or what we know as the Sustainable Development Goals, as
well as addressing crucial issues such as climate change. Therefore, being the closest to its
communities, local and regional governments have the advantage of putting people at the centre
of every decision-making process.

Local and regional governments demonstrate on a daily basis the potential that action based on
proximity has to contribute to solving major global challenges. This is UCLG ASPAC believes
that the development and improvement of people’s living conditions should be undertaken
primarily at the local level. We strive to achieve decentralisation as a way to democratise public
governance at all levels.

United Cities and Local Governments Asia Pacific is the voice of Local and Regional
Governments in the region. We aim to ensure that our values are shared among our members.
This strength is the driver of our aim to secure a more permanent seat at the global table, to
ensure the local perspectives and points of view of local and regional governments play a part in
the global decision-making processes and in the implementation on the ground of the global
agendas.

Collaboration
It can be concluded that good governance is an ideal concept to achieve its goals. Yet, of course,
implementing good governance is not as easy as it appears on paper. There are only a few
countries that have proven successful in implementing this concept in their governance. Swift
and responsible action from various parties will undoubtedly be very helpful in implementing
good governance. Meanwhile, at the local level, UCLG ASPAC believes that vertical integration
of national policies with local level implementation is key to enable greater impact in building a
sustainable and resilient city. Again, this is important as we are aware of the challenges that
cities and local governments face in terms of technical, institutional, and financial capacity,
which can be tackled when they are given a good enabling environment.
The UNDP has further underlined following main
features of good governance:
• Political accountability and legitimacy;
• A free and fair judiciary
• Accountability of bureaucracy;
• Freedom of information and expression;
• Infective and efficient public sector management and co-
operation with civil society organizations

The recent worldwide governance has articulated six indicators for

promotion of good governance:
• Accountability and Transparency
• Free from violence and stability in political system
• Effectiveness of governmental policy
• Elimination of corruption
• Quality of governance
• Establish the rule of law

In more specific definition for

good governance may be given by Preti, as that which,
“Applies to the exercise of power in a variety of
institutional contexts, the object of which is lo direct,
control, and regulate activities in the interests of people as
citizen, voters and workers.”

Additional resource:
https://www.qurtuba.edu.pk/thedialogue/The%20Dialogue/10_1/Dialogue_January_March2015_
65-77.pdf

3.Collapse & Failure of Government:

The 1970s saw growing assertions that state intervention was failing and that the state
itself was in crisis. In the 1980s the dominant neo-liberal response in Britain to this alleged
crisis largely involved turning to the market and, to a lesser extent, community or family
self-help. Successive Thatcher and Major governments promoted privatization,
liberalization, de-regulation, the use of market proxies in the residual state sector, cuts in
direct taxes to enhance consumer choice, and internationalization to promote capital
mobility and the transfer of technology and 'know-how'. They also advocated an enterprise
culture and popular capitalism to make civil society more market-friendly. This project was
intended to re-equip Britain with a liberal, night-watchman state with progressively smaller
and more balanced budgets and thereby boost this slimmed-down state's capacity to
perform its remaining core functions. However, while this neo-liberal programme was still
being pursued and, indeed, intensified, it also became apparent that the turn to the market
had not delivered all that had been promised. Market failures and inadequacies had not
been eliminated yet an explicit return to the state was ideologically and politically
unacceptable. Thus, as early as the 1980s, one could discern increasing government
interest at all levels in how public-private partnerships and similar forms of governance
might contribute to public policy and purposes. This alternative to marketization was
steadily reinforced during the Conservative years and is likely to become yet stronger
under 'New Labour' with its declared commitment to a 'stakeholding society'. The
expansion of governance is not meant to return Britain to a discredited corporatism (let
alone a tripartite corporatism with the active involvement of organized labour) but, rather,
to address real limitations of the market, state, and mixed economy as means of dealing
with various complex economic, political, and social issues. One area where a turn to
governance has been popular is local economic and social development and it is this that
provides the empirical focus of the following theoretical reflections on the various ways in
which coordination mechanisms can fail and how tendencies to failure may themselves be
governed.
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1. Market Failure
Many economists tend to assume that the 'procedural rationality' of perfect markets
guarantees market success. Failure occurs when economic exchanges do not produce
what a perfect (hence 'imaginary') market would deliver. Since market rationality depends
on free and equal exchange rather than on the purposes of economic transactions,
success or failure cannot, on most accounts, be judged through substantive criteria such
as market forces' uneven impact on wealth, income, lifechances, or regional imbalance.
For, provided that inequalities derive from (or are consistent with) the operation of perfect
markets, they must be judged as rational and fair. At best one could see such problems as
market 'inadequacies' rather than genuine market failures. There is no shortage of claims
about such inadequacies, however, nor about the need to remedy them as well as market
failures through social and political action of various kinds.
In a market-rational framework, state and market are strictly demarcated. The state should
stay at arms-length from market forces, merely establishing and defending the framework
for market institutions. The latter can then allocate goods and services in the most efficient
way. The market also functions as a learning mechanism. Thus Hayek argues that market
failure is an essentially 'trial-and-error' discovery mechanism whereby markets prompt
economic agents to learn and innovate. In the long run, on this view, the market provides
the most flexible and least disastrous coordinating and adaptive mechanism in the face of
complex interdependence and turbulent environments. Moreover, for neo-classical and
Austrian theorists alike, the initial response to market failure is 'more market, not less' --
even if this often requires, in the short-term, yet further state intervention. But it is
debateable, to say the least, whether even perfect markets could eliminate all forms of
market failure. Even neo-classical economists recognize the extent to which markets may
not 'suitably capture the full social benefits or levy the full social costs of market activity'
(Wolf 1978: 138).
The critique of markets has been taken furthest by Marxists and political ecologists.
Marxists argue that capitalism is distinctive not for markets as such but their extension to
labour-power. It is market-mediated exploitation of wage-labour that drives 'economic
growth' -- not the inherent efficiency of markets. Markets may mediate the search for
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added value but cannot produce it. The commodification of labour-power also generates
basic contradictions that cannot be resolved through the market mechanism. Among other
examples, the commodity is both an exchange-value and use-value; the wage is both a
cost of production and source of demand; money is both national money and international
currency; and productive capital is both abstract value in motion and a concrete stock of
time- and place-specific assets in the process of valorization. Thus, for Marxists,
phenomena attributed to market failures or inadequacies often express underlying
contradictions of capitalism. It follows that state intervention may at best only modify the
forms or sites of these contradictions -- introducing class struggles into the state and/or
generating tendencies towards fiscal crisis, legitimacy crisis, rationality crisis, etc.. Political
ecologists add to such criticisms the market-mediated despoliation of the environment and
commitment to unsustainable development.
2. State Failure
Whereas neo-classical economists' solution for market failure or inadequacy is to extend
the market, welfare economists call for more state intervention. This is intended both to
avoid or correct market failures and to subordinate market forces to specific public
purposes. More generally, the rationale for state activity is not procedural (as with the
market) but substantive. It is found in the definition and enforcement of collectively binding
decisions in the name of the public interest or general will. This rationale is expressed
through imperative coordination (or hierarchy) rather than the anarchy of market forces.
State failure is judged in turn according to this substantive rationality: it refers to the failure
to realize the state's own political project(s) within the terms of its own operating rules and
procedures. In democratic regimes these rules and procedures include respect for legality
and the regular renewal of popular mandates for action. In this context, the primary
criterion for identifying state failures is not allocative efficiency (as this is defined in terms
of the procedural rationality of the market). Instead, it is the effectiveness (as often
symbolic as material) with which specific state projects are realized. It is certainly possible,
however, for efficiency to count among criteria for the success of specific projects. Thus
'value-for-money' was one objective of the recent neo-liberal state project.
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Moreover, just as market failure can be related to substantive factors that block the
realization of its procedural rationality, so state failure can be linked to specific procedural
factors that block effective policy-making and implementation. Thus various commentators
suggest that planning, bureaucracy, participation, reliance on professional expertise, etc.,
may each fail in different ways to generate adequate policies and/or to secure their
effective realization. Resulting tendencies towards implementation and fiscal crises can
lead in turn to problems of political legitimacy where the state's public purposes are not
seen to be achieved. One response to this within the state is a constant cycling through
these different modes of policy-making and implementation in the attempt to compensate
for their respective tendencies to failure.
Just as neo-classical economists make unrealistic assumptions about markets, welfare
economists make implausible claims about states. They assume that states not only have
all the information necessary to maximise social welfare but also have both the internal
organizational capacities and the powers of external intervention needed to achieve their
public objectives. Yet it is widely recognized that state managers (especially elected
politicians) have short-term time horizons and are vulnerable to lobbying; that states are
subject to bounded rationality (limited information, uncertainty, and time pressures) when
acting; that they often pursue multiple, contrary, and even contradictory goals -- many of
which are also inherently infeasible; that state capacities are limited both by 'internalities'
(calculations of private costs and benefits that differ from public goals) and external
resistance; that nonmarket outputs are usually hard to define in principle, ill-defined in
practice, and difficult to measure; and that state intervention may prompt rent-seeking
behaviour among policy-takers that merely redistributes rather than creates resources
(Offe 1975; Wolf 1978).
There are different responses to state failure. Liberal critics see market forces as a self-
correcting learning mechanism and the state as inherently incorrigible and ineducable.
They do not ask whether state failure could be corrected in similar ways to market failure
but seek to replace it with the market. But other critics allow both for self-correcting policy
cycles and/or institutional re-design in the state. Relevant measures in the latter regard to
improve policy coordination and implementation can include redefining the division of
labour in the state and wider political system, increasing state autonomy so that it is less
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vulnerable to particularistic lobbying, boosting reflexivity (including through auditing and
the contract culture), and reorienting time horizons in favour of longer-term policy-making
and policy-taking.
3. Governance as a Response to Market and State Failure
Discussions of market and state failure often appear to rest on diametrically opposed
theoretical and politico-ideological positions. Yet they share some core assumptions. Both
presume a dichotomistic 'public-private' distinction and a zero-sum conception of the
respective spheres of the market and state. Thus, on the one hand, critics of state failure
see the economy as the site of mutually advantageous, voluntary exchange among
formally free, equal, and autonomous economic agents; and, on the other hand, they
regard the state as premised on organized coercion that intrudes on the private liberties of
citizens (especially in their capacity as economic agents). Conversely, critics of market
failure see the state as a sovereign authority empowered to pursue the public interest
against the particularistic, egoistic short-term interests of citizens (especially those of
property owners). In both cases, the more there is of the state, the less there is of the
market; what varies is the positive or negative evaluation of this ratio.
Literature on governance rejects this rigid polarization between the anarchy of the market
and the hierarchy of imperative coordination in favour of the concept of 'heterarchy', i.e.,
horizontal self-organization among mutually interdependent actors. It recognizes the
equivalence of the twin tendencies to market and state failure and proposes to reconcile
and transcend them by relying on procedures that cut across the market and state divides.
These include interpersonal networking, interorganizational negotiation, and 'de-centred
intersystemic context steering' (dezentrierte Kontextsteuerung). The first two of these
forms of governance should be familiar; the last requires some initial comment. It
comprises efforts to steer (guide) the development of different systems by taking account
both of their own operating codes and rationalities and of their various substantive, social,
and spatio-temporal interdependencies. This is facilitated by communication oriented to
intersystemic 'noise reduction' (mutual understanding), negotiation, negative coordination,
and cooperation in shared projects. And is reflected in the use of symbolic media of
communication such as money, law, or knowledge to modify the structural and strategic
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contexts in which different systems function so that compliance with shared projects
follows from their own operating codes rather than from imperative coordination (see
Glagow and Willke 1987).
The rationality of governance is neither procedural nor substantive: it is best described as
'reflexive'. The procedural rationality of the capitalist market is essentially formal in nature,
prioritizing an endless 'economizing' pursuit of profit maximization; the substantive
rationality of government is goal-oriented, prioritizing 'effective' pursuit of successive policy
goals. Both approaches are particularly prone to problems of bounded rationality,
opportunism, and asset specificity (Coulson 1997). Advocates of governance suggest that
these problems can be avoided by instituting negotiation around a long-term consensual
project as the basis for both negative and positive coordination among interdependent
actors. The key to success is continued commitment to dialogue to generate and
exchange more information (thereby reducing, without ever eliminating, the problem of
bounded rationality); to weaken opportunism by locking partners into a range of
interdependent decisions over short-, medium-, and long-term time horizons; and to build
on the interdependencies and risks associated with 'asset specificity' by encouraging
solidarity among those involved. The rationality of governance is dialogic rather than
monologic, pluralistic rather than monolithic, heterarchic rather than either hierarchic or
anarchic. In turn this suggests that there is no one best governance mechanism.
The conditions for such reflexive rationality are as complex as those for well-functioning
markets or state planning. Interpersonal networking, interorganizational negotiation, and
intersystemic steering are different modes of coordination and pose different problems in
this regard. Specific objects of governance also affect the likelihood of success. For
example, governing the global economy, human rights regimes, and transnational social
movements clearly involve very different problems. Turbulent environments pose different
governance problems from those that are relatively stable -- especially as time is required
for self-organization to operate consensually. Governance mechanisms must provide a
framework in which relevant actors can reach agreement over (albeit possibly differential)
spatial and temporal horizons of action vis-à-vis their environment. They must also
stabilize the cognitive and normative expectations of these actors by shaping and
promoting a common 'worldview' as well as developing adequate solutions to sequencing
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problems, i.e., predictably ordering various actions, policies, or processes over time,
especially where they have different temporal logics. At stake here is establishing secure
bases of coordination with their own structurally-inscribed strategic selectivity.
4. Governance Failure?
The growing interest in governance mechanisms as a solution to market failure or state
failure should not lead to neglect of governance failure. Governance need not prove more
efficient procedurally than markets and states as means of economic or political
coordination mechanism nor are they guaranteed to produce more adequate outcomes. A
commitment to continuing deliberation and negotiation does not exclude eventual
governance failure. The criterion for such failure is not, however, immediately obvious.
There is no pre-given formal maximand or reference point to judge governance success,
as there is with monetized profits in the economy and/or the (imaginary) perfect market
outcome. Nor is there a contingent substantive criterion -- the realization of specific
political objectives connected to the (imagined) public interest -- as there is with imperative
coordination by the state. The primary point of governance is that goals will be modified in
and through ongoing negotiation and reflection. This suggests that governance failure may
comprise failure to redefine objectives in the face of continuing disagreement about
whether they are still valid for the various partners.
But one can also apply procedural and substantive criteria to heterarchy and assess
whether it produces more efficient long-term outcomes than the market and more effective
long-term outcomes than imperative coordination by states. This involves adopting an
evolutionary perspective and requires comparative evaluation of all three modes of
coordination in terms of all three of their respective rationalities. This can be seen in the
increasing interest in heterarchy as a mechanism to reduce transaction costs in the
economy in cases of bounded rationality, complex interdependence, and asset specificity.
It is also reflected in the state's increasing interest in heterarchy's potential for enhancing
the former's capacity to secure political objectives by sharing power with forces beyond it
and/or delegating responsibilities for specific objectives to partnerships (or other
heterarchic arrangements). Likewise, of course, partnerships (or other heterarchic
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arrangements) may simplify the pursuit of their own goals by relying on the market and/or
state to fulfil certain aspects of their jointly-agreed projects.
5. Potential Sources of Governance Failure
Rather than pursue these relatively abstract arguments about markets, states, and
governance and their forms of failure, I will now try to relate them to local economic and
social development. This analysis moves in three steps: an initial review of possible
sources of governance failure, identification of some basic dilemmas of governance at the
level of public-private partnerships (as derived from case studies in the North West and
Thames Gateway regions), and some brief references to specific examples of governance
arrangements and their tendencies to failure.
There are three main sets of factors that limit the success of governance in local economic
and social development. The first set affects all forms of economic and social coordination
and is inscribed in capitalism itself. The latter has always depended on a contradictory
balance between marketized and non-marketized organizational forms. Although this was
previously understood mainly in terms of the balance between market and state,
governance does not introduce a neutral third term but adds another site upon which the
balance can be contested. For new forms of governance provide a new meeting ground
for the conflicting logics of accumulation and political mobilization.
The second set concerns the contingent insertion of partnerships into the more general
state system -- especially in terms of the relative primacy of different modes of
coordination and access to institutional support and material resources to pursue
reflexively-arrived at governance objectives. Among crucial issues here are the flanking
and supporting measures that are taken by the state; the provision of material and
symbolic support; and the extent of any duplication or counteraction by other coordination
mechanisms.
We can distinguish three aspects of this second set of constraints. First, as both
governance and government mechanisms exist on different scales (indeed one of their
functions is to bridge scales), success at one scale may well depend on what occurs on
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other scales. Second, coordination mechanisms may also have different temporal
horizons. One function of governance (as of quangos and corporatist arrangements
beforehand) is to enable decisions with long-term implications to be divorced from short-
term political (especially electoral) calculations. But disjunctions may still arise between
the temporalities of different governance and government mechanisms. Third, although
various governance mechanisms may acquire specific techno-economic, political, and/or
ideological functions, the state typically monitors their effects on its own capacity to secure
social cohesion in divided societies. It reserves to itself the right to open, close, juggle,
and re-articulate governance arrangements not only in terms of particular functions but
also from the viewpoint of partisan and overall political advantage.
The third set of constraints is rooted in the nature of governance as self-organization.
First, governance attempts may fail because of over-simplification of the conditions of
action and/or deficient knowledge about causal connections affecting the object of
governance. This is especially problematic when this object is an inherently unstructured
but complex system, such as the insertion of the local into the global economy. Indeed,
this leads to the more general 'governability' problem, i.e., the question of whether the
object of governance could ever be manageable, even with adequate knowledge (Mayntz
1993; Malpas and Wickham 1996). Second, there may be co-ordination problems on one
or more of the interpersonal, interorganizational, and intersystemic levels. These three
levels are often related in complex ways. Thus interorganizational negotiation often
depends on interpersonal trust; and de-centred intersystemic steering involves the
representation of system logics through interorganizational and/or interpersonal
communication. Third, linked to this is the problematic relationship between those
engaged in communication (networking, negotiation, etc.) and those whose interests and
identities are being represented. Gaps can open between these groups leading to
representational and legitimacy crises and/or to problems in securing compliance. And,
fourth, where there are various partnerships and other governance arrangements
concerned with interdependent issues, there is a problem of coordination among them. I
address this problem below in terms of metagovernance (section 7).
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6. Partnership Dilemmas
These potential sources of governance failure assume different forms in different contexts.
Based on interviews with those involved in partnerships in the North West and the
Thames Gateway regions, we can specify four sets of strategic dilemmas that affect
economic development partnerships as they seek to develop a consensual approach to
the joint pursuit of a medium- to long-term strategy that advances both the individual and
collective interests of their various members. These dilemmas comprise:
Cooperation vs Competition: capitalist economies operate through an unstable mix of
cooperation and competition. One horn of the resulting dilemma is how to maintain
interpersonal trust, secure generalized compliance with negotiated understandings,
reduce noise through open communication, and engage in negative coordination in the
face of the many and varied opportunities that exist for short-term self-interested
competitive behaviour -- behaviour that could soon destroy the basis for continuing
partnership. The other horn is that an excessive commitment to cooperation and
consensus could block the emergence of creative tensions, conflicts, or efforts at crisis-
resolution that could promote learning and/or learning capacities and thereby enhance
adaptability. This horn is especially acute when the environment is turbulent, speedy
action is required, incrementalism is inappropriate, and it would take time to build
consensus. Such dilemmas have been widely discussed in recent analyses of flexible
industrial districts, learning regions, innovative milieux, etc.. They also occur politically in
the trade-off between partnership and partisanship. For partnerships are typically linked to
differential advantages for political parties, tiers of government, and departmental interests
as well as to differential economic interests of various kinds. This poses dilemmas both in
relation to any given partnership and, even more acutely, in relation to the opportunities
that may exist for juggling multiple partnerships to secure partisan advantage.
Openness vs Closure: heterarchic governance arrangements operate in complex, often
turbulent, environments. They face problems in remaining open to the environment at the
same time as securing the closure needed for effective coordination among a limited
number of partners. One horn of the resulting dilemma is that closure may lock in
members whose exit would be beneficial (e.g., inefficient firms, underemployed workers,
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sunset sectors) or block recruitment of new social partners (e.g., new firms, marginalized
workers, sunrise sectors). The other horn is that openness may discourage partners from
entering into long-term commitments and sharing long-term time horizons. This may
prompt opportunism in (the potentially self-fulfilling) case that partnerships dissolve or
involve high turnover. It is reflected in the choice of maximizing the range of possible
actions by expanding relevant bases of membership or favouring the 'small is beautiful'
principle for the purpose of focused and timely action; and the choice of variable
geometries of action versus fixed spatial boundaries for membership of a governance
arrangement. An interesting variant of this latter version of the dilemma (especially given
the increasing importance of interregional cooperation in Europe) is whether to permit
transnational partnerships or to insist on the defense of national sovereignty.
Governability vs Flexibility: heterarchic arrangements are said to permit longer term
strategic guidance (lacking in markets) whilst still retaining flexibility (lacking in hierarchies
with their rule-governed procedures). But this is also the site of a dilemma: that between
governability (the capacity for effective guidance) and flexibility (the capacity to adapt to
changed circumstances). This assumes several forms. Reducing complexity through
operational rules as a precondition for governing a complex world needs to be balanced
against the recognition of complexity to mobilize the 'requisite variety' of actors and
resources. Avoiding duplication to limit resource costs needs to be balanced against
maintaining an adequate repertoire of actions and strategic capacities. A third variant is
posed in the choice between exploiting past organizational and interorganizational
learning to standardize around 'best practice' and maintaining adaptability in the face of a
turbulent environment by avoiding 'lock-in' to outmoded routines. This last problem is
particularly associated with efforts to impose 'best practice' from above rather than
encourage diversity and allow for horizontal communication and learning among
partnerships.
Accountability vs Efficiency: most public-private partnerships are expected to serve the
public interest as well as to deliver private benefits. But this blurs the public-private
distinction and poses a familiar dilemma in terms of accountability versus efficiency. On
the one hand, there are problems about attributing responsibility for decisions and non-
decisions (i.e., acts of commission or omission) in interdependent networks. These
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problems are more acute when partnerships are interorganizational rather than
interpersonal. On the other hand, attempts to establish clear lines of accountability can
interfere with the efficient, cooperative pursuit of joint goals. A related dilemma is that
public-private arrangements run the risk of allowing the exploitative capture of public
resources for private purposes and/or extending the state's reach into the market
economy and civil society to serve the interests of the state or governing party. A third
version of this dilemma concerns the relative primacy of economic performance and social
inclusion -- how far the maximand in public-private partnerships is marketized economic
performance as opposed to addressing problems of social cohesion.
7. Metagovernance
If markets, states, and governance are each prone to failure, how is economic and political
coordination for economic and social development ever possible and why is it often judged
to have succeeded? In part this can be explained through the multiplicity of satisficing
criteria and the range of potential vested interests so that at least some aims are realized
to a socially acceptable degree for at least some of those affected. A further explanation
can be derived from the observation that 'governing and governance itself should be
dynamic, complex and varied' (Kooiman 1993: 36). This highlights the role of the 'meta-
structures' of interorganizational coordination (Alexander 1995: 52) or, more generally, of
'metagovernance', i.e., the governance of government and governance.
Metagovernance should not be confused with some superordinate level of government in
control of all governance arrangements nor with the imposition of a single, all-purpose
mode of governance. Rather, it involves managing the complexity, plurality, and tangled
hierarchies characteristic of prevailing modes of coordination. It involves defining new
boundary-spanning roles and functions, creating linkage devices, sponsoring new
organizations, identifying appropriate lead organizations to coordinate other partners,
designing institutions, and generating visions to facilitate self-organization in different
fields. It also involves providing mechanisms for collective feedback and learning about
the functional linkages and the material interdependencies among different sites and
spheres of action, and encouraging a relative coherence among diverse objectives, spatial
and temporal horizons, actions, and outcomes of governance arrangements. It involves
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the shaping of the context within which these arrangements can be forged rather than
developing specific strategies and initiatives for them.
Governments play a major and increasing role in metagovernance. They provide the
ground rules for governance and the regulatory order in and through which governance
partners can pursue their aims; ensure the compatibility or coherence of different
governance mechanisms and regimes; act as the primary organizer of the dialogue
among policy communities; deploy a relative monopoly of organizational intelligence and
information with which to shape cognitive expectations; serve as a 'court of appeal' for
disputes arising within and over governance; seek to re-balance power differentials by
strengthening weaker forces or systems in the interests of system integration and/or social
cohesion; try to modify the self-understanding of identities, strategic capacities, and
interests of individual and collective actors in different strategic contexts and hence alter
their implications for preferred strategies and tactics; and also assume political
responsibility in the event of governance failure. This emerging role means that
networking, negotiation, noise reduction, and negative as well as positive coordination
occur 'in the shadow of hierarchy' (Scharpf 1994: 40). It also suggests the need for almost
permanent institutional and organisational innovation to maintain the very possibility
(however remote) of sustained economic growth.
Thus metagovernance does not eliminate other modes of coordination. Markets,
hierarchies, and heterarchies still exist; but they operate in a context of 'negotiated
decision-making'. Thus, on the one hand, market competition will be balanced by
cooperation, the invisible hand will be combined with a visible handshake. On the other
hand, the state is no longer the sovereign authority. It becomes but one participant among
others in the pluralistic guidance system and contributes its own distinctive resources to
the negotiation process. As the range of networks, partnerships, and other models of
economic and political governance expand, official apparatuses remain at best primus
inter pares. For, although public money and law would still be important in underpinning
their operation, other resources (such as private money, knowledge, or expertise) would
also be critical to their success. The state's involvement would become less hierarchical,
less centralized, and less dirigiste in character. The exchange of information and moral
suasion become key sources of legitimation and the state's influence depends as much on
14
its role as a prime source and mediator of collective intelligence as on its command over
economic resources or legitimate coercion (Willke 1992).
8. Metagovernance Failure
Recognizing possible contributions of reflexive metagovernance to economic and social
coordination is no guarantee of success. It is certainly not a purely technical matter that
can be resolved by experts in organizational design or public administration. For all the
technical activities of the state in whatever domain are conducted under the primacy of the
political, i.e., the state's concern with managing the tension between economic and
political advantages and its ultimate responsibility for social cohesion. This fact plagues
the liberal prescription of an arms-length relationship between the market and the
nightwatchman state -- since states are rarely strong enough to resist pressures to
intervene when anticipated political advantage is at stake or it needs to respond to social
unrest. This can be seen in the telling title of Michael Heseltine's report to Cabinet on the
change of direction on policies for the inner city: It took a riot (1985).
To minimize the risks of metagovernance failure, a repertoire of responses is needed to
retain the ability flexibly to alter strategies and select those that are more successful. This
may well seem inefficient from an economizing viewpoint because it introduces slack or
waste. But it also provides major sources of flexibility in the face of failure (cf. Grabher
1994). For, if every mode of economic and political coordination is failure-laden, relative
success in coordination over time depends on the capacity to switch modes of
coordination as the limits of any one mode become evident. This provides the basis for
displacing or postponing failures and crises. It also suggests that the ideologically-
motivated destruction of alternative modes of coordination could prove counter-productive:
for they may well need to be re-invented in one or another form. There are further
dilemmas here from an evolutionary viewpoint: (a) learning versus forgetting; and (b)
removing particulars versus retaining the general. If one affirms the maxim that 'it is
necessary to change society to preserve it', then there should be mechanisms for social
forgetting as well as social learning. One should also recognize that, even if specific
institutions and organizations are abolished, it may be necessary to safeguard the
underlying modes of coordination that they embody.
15
These dilemmas are evident from the experience of the Thatcher and Major governments.
The neo-liberal hostility to the interventionist state, trade unionism and corporatism,
municipal socialism, and other features of the postwar settlement was reflected in
continuing efforts to destroy, weaken, or marginalize them. But, whilst this was perhaps
necessary to change attitudes in the attempted modernization of the British economy,
state, and society, it also dissipated experience and knowledge that could still prove
useful. And, whilst it removed specific institutional and organizational obstacles to the neo-
liberal project, it also deprived the central state in the short-term of an adequate range of
modes of coordination to deal with complex issues in an environment made more
turbulent by the intended and unintended effects of its own radical policies. So the
Thatcher and Major governments eventually found it necessary to re-learn lessons about
the limits of the market mechanism and to re-invent alternative modes of coordination to
supplement, complement, or compensate for the operation of market forces. This re-
discovery was usually disguised behind changed names, innovative discourses, and
institutional turnover. Nonetheless the usual policy cycle of market, governance, and state
was repeated in central government policies for urban regeneration.
9. Two Case Studies
This section briefly illustrates some of the above themes by considering two cases from
our two regional research sites (the Thames Gateway and the North West). The first
concerns an interorganizational partnership centred in Dartford in North West Kent and
concerned with a particular property-led development project; the second concerns
networks mobilized around the Manchester Olympic bids as a larger place-marketing
exercise for Manchester and the North West. Both cases can be interpreted as instances
of governance failure as well as governance success.
a) Kent Thames-side Agency and London Science Park at Dartford
When we conducted interviews in Dartford at the beginning of our research on the
Thames Gateway region some four years ago, we were confidently informed by various
politicans, local government officers, and spokesmen for Dartford Chamber of Commerce
16
that one of the town's big successes was to have secured the London Science Park at
Dartford (hereafter LSP). At the conclusion of our research, the science park project had
been scaled down and was still far from being fully established. Exploring the reasons for
this illustrates many of the constraints on local governance identified above (sections 5
and 6).
The first set of constraints has to do with the dynamic of capitalism that were far beyond
the control of the local authority and its partners. Three major obstacles (among many) to
the LSP's timely establishment can be noted: the uneven development of the South East
economy, the problems of property-led development under a neo-liberal regime, and the
conflicting temporal and spatial horizons of action of different public and private sector
partners. The Thames Gateway initiative (initially flagged as the East Thames Corridor)
was intended to redress the overheating of the South East economy (especially to the
west of London) and to exploit the opening towards Europe by promoting growth in the
east; this would have the additional advantage of exploiting brownfield and derelict land
along the Thames and thus relieve pressure on the green belt. But the problems of
industrial and urban decay affecting the east Thames region were not removed simply
through declaration of the Thames Gateway initiative (especially given the emphasis on
private enterprise more than public funding) and continued to disfavour investment in the
region for high tech projects. Moreover, as the property-led development approach needs
continued economic expansion to justify investment, the collapse of Lawson's boom in the
late 1980s and the resulting overhang of property investments in the City and South East
proved a further disincentive. This in turn produced conflicting expectations about the
various time horizons and priorities for profitable development of the proposed LSP site
between private and public sector partners -- compounded by the greater spatial scope of
action for the two partners whose activities extended well beyond the local to the regional,
national, and international scales. This was reflected in conflicts around three issues: the
most appropriate uses, the ideal sequencing, and the proper distribution of profits from
bringing different parcels of land in different ownership into development. A merger
between Glaxo and Wellcome also altered the interests of a key partner.
The second set of constraints has to do with the insertion of the London Science Park
project into the wider set of local government and governance arrangements. Of particular
17
significance here was the turbulent political environment for the partners in the Kent
Thames-side agency concerned with the LSP. The rationale for the partnership was the
pooled interdependence of Dartford Borough Council (a major local landholder and
planning authority wishing to upgrade the town's image and economic prospects), the
Wellcome Foundation (a leading international pharmaceutical company and major local
employer), the local health authority (with a redundant hospital site and plans for
expansion), Blue Circle Industries (a major landowner and property developer by virtue of
its disused chalk pits in North West Kent), and the University of Greenwich (interested in
developing a new campus, including student accommodation, and boosting research links
with industry by locating at the LSP site). Three sources of uncertainty and turbulence
(among others) that affected the project were: (a) central government-induced changes in
the status, powers, and ownership rights of the health authority (in turn a regional health
authority, a district authority, and NHS trust) and hence in its interests in the project; (b)
politically-motivated delays in government commitments to infrastructural projects and
spending essential to the overall growth dynamic of the sub-region -- notably around the
Channel Tunnel Rail Link, the international rail terminal, and road links; and (c) changes in
central government policy on higher education and training that affected the interests of
the University of Greenwich regarding campus accommodation and research strategy.
Paradoxically, the partnership itself appears to have worked well. A clear recognition of
pooled interdependence provided a continuing framework for negotiation around the need
to balance conflicting property interests and the overall economic, political, and social
benefits of cooperation; a flexible framework that avoided a once-and-for-all decision on
the appropriate legal form and membership of the partnership encouraged a balance
between openness and closure and between governability and flexibility; and the insertion
of the LSP into a broader and largely consensual local and regional accumulation strategy
developed by the borough council permitted balance between economic efficiency and
political accountability. As delays in complementary economic projects (a major regional
shopping centre, an international rail terminal, the high speed channel tunnel rail link) are
overcome and the Thames Gateway role as the bridge between London and Europe
becomes a reality, the prospects for a scaled-down version of the LSP feeding into a more
general pattern of synergetic growth look better than they did at the end of our research.
18
b) The Manchester Olympic Bids
The Manchester Olympic bids illustrate the paradox of a successful failure, a project that
could be successfully marketed despite failing in key respects (Bovaird 1994). If one
regards them as place-marketing exercises linked to property-led development, they
helped market Manchester, mobilized important grants for urban regeneration, and
secured widespread recognition and support at home and abroad. Indeed, if one accepts
that the actual staging of the Games could prove costly, the eventual failure to secure
them could even be considered a success (contrast the Olympic experiences of Montr‚al
and Barcelona or Sheffield and the World Student Games). The presentational politics of
the bidding process required a united front among local partners and this, combined with
the broadly positive-sum nature of the Olympics-legitimated but state-aided and property-
led development project, provided the context in which the various dilemmas of
partnership were managed in the short-term.
From a governance viewpoint, three points need making. First, Manchester's Olympic
strategy illustrates the complementarity and interdependence among different scales of
economic and political action. Local governance is not confined to the local level. The bid
strategy and outcome involved a complex interplay between (a) local economic and
political capacities and priorities, (b) national and international systems of rule-setting
(especially those of the Department of the Environment and the International Olympic
Committee), and (c) European and central government political and economic strategies.
Second, the broad-based grant-coalition that fronted the Olympic bids was firmly rooted
not only in material interdependences but also in established informal interpersonal
networking among business leaders, political figures, and other local elites. This was the
basis of trust for interorganizational negotiations and the formation of a broad-based
hegemonic project for the region. Although Sir Bob Scott (whose role was famously
described as 'a man and his secretary sitting in an office and masquerading as an
institution') achieved a high profile in the bid process as the public (and acceptable) face
of private capital, a key meta-governance role was also performed by the local authorities
under the leadership of Manchester City Council. This is clear not only in promotional
activities but also in various project management activities. And, third, the Olympic bids
provided a positive-sum game for developing a broadly consensual local accumulation
19
strategy and hegemonic project. They provided the basis for levering European and
central government funding, secured property-led regeneration, enhanced the image of
Manchester (with some skilfully contrived confusion between Manchester City Council and
Greater Manchester), promised benefits to the North West more generally, and attracted
considerable local popular support. With the second failure to win the Olympics
nomination, much of this unity and support has been dissipated. A pattern of
fragmentation and duplication of partnerships has re-asserted itself. This illustrates the
role of strategy and vision as well as structures in maintaining local governance (for further
details on this case study, see Cochrane et al., 1996; and Jessop et al., 1999).
10. Concluding Remarks
In short, markets, states, and governance all fail. This is not surprising. For failure is a
central feature of all social relations: 'governance is necessarily incomplete and as a
necessary consequence must always fail' (Malpas and Wickham 1995: 40). Given the
growing structural complexity and opacity of the social world, indeed, failure is the most
likely outcome of most attempts to govern it in terms of multiple objectives over extended
spatial and temporal horizons -- whatever coordination mechanism is adopted. This
emphasis on the improbability of success serves to counter the rhetoric of partnership that
leads commentators to highlight achievements rather than failures and, where they
recognize failure, to see it as exceptional and corrigible in regard to their preferred mode
of coordination even as they see coordination failure elsewhere as inevitable. This
polarization is reflected both in the succession of governments and in policy cycles within
governments in which different modes of policy-making succeed each other as the
difficulties of each become more evident. Postwar British politics offers plenty of evidence
of this through the increasingly hectic oscillation among liberal, dirigiste, and corporatist
modes of economic intervention (witness, in particular, the successive U-turns in the
Heath government of 1970-74 and the Wilson-Callaghan governments of 1974-79).
Once the incompleteness of attempts at coordination (whether through the market, the
state, or heterarchy) is accepted as inevitable, it is necessary to adopt a satisficing
approach that has at least three key dimensions:
20
• a reflexive orientation to what will prove satisfactory in the case of failure, to compare
the effects of failure/inadequacies in the market, government, and governance, and
regular re-assessment of the extent to which current actions are producing desired
outcomes.
• deliberate cultivation of a flexible repertoire (requisite variety) of responses so that
strategies and tactics can be combined to reduce the likelihood of failure and to alter
their balance in the face of failure and turbulence in the policy environment. Moreover,
as different periods and conjunctures require different kinds of policy mix, the balance
in the repertoire will need to be varied. And
• a self-reflexive 'irony' in the sense that participants must recognize the likelihood of
failure but proceed as if success were possible. The supreme irony in this context is
that the need for irony holds not only for individual governance mechanisms but also
for metagovernance itself.
For reasons I have explored in more detail elsewhere (Jessop 1997b, 1998), I suggest
that public-private partnership in its various forms is especially appropriate for securing
economic, social, and community development in the current period despite its inevitable
tendencies towards governance failure. This suggests the need to put such governance
arrangements at the core of the coordination repertoire with diverse flanking and
supportive measures from other modes of coordination. But there must also be greater
commitment to a participatory politics based on stakeholding and to sustainable economic
and community development.
Additional Resource: http://pu.edu.pk/images/journal/studies/PDF-FILES/23_v21_1_20.pdf

4.Effects of Failure of Governance:

Light identifies five categories of causes—policy, resources, structure, leadership, and culture—
arguing that most government failures occur because of multiple causes coming together and
compounding. In a fascinating table (Table 3), he details how each type of cause contributed to
the 41 government failures. The findings are staggering and paint the picture of a government at
high risk for serious, repeated, and frequent failure in its attempt to deliver policy.

The natural next question, then, is who is to blame? Light argues that no one in government is
innocent. On Republicans in Congress and the White House, Light writes:

“They stonewalled needed policy changes, and made implementation of new programs as
difficult as possible; they cut budgets, staffs, and collateral capacity to a minimum, proving the
adage that the logical extension of doing more with less is doing everything with nothing; they
used the presidential appointments process to decapitate key agencies, and appointed more than
their share of unqualified executives; and they muddied mission, tolerated unethical conduct, and
gamed the performance measure process to guarantee failing scores for as many government
policies as possible.”

Democrats don’t escape blame, either. For example, Light notes:

“President Obama, who promised to create a government for the 21st century in his 2011 State of
the Union Address, never followed through. He was either too distracted to concentrate, too
bored by the nitty-gritty of management, or too frightened of the Republican backlash to make
the effort needed to make big government work.”

In the end, government failure arises because politics becomes the enemy of good public policy,
because presidents and their appointees are uninterested or unqualified to manage executive
branch institutions, and because agencies, themselves, can undermine effective administration. In
an effort to learn from these problems, Light offers a reform agenda. He acknowledges that the
“reform agenda may be well beyond possible given the polarization that has produced such great
dysfunction,” but those steps will help ameliorate the growing problem of government failure in
the U.S. system.
CHAPTER 2: GOVERNANCE THEORIES:

1. COMMUNITARIANISM- THEORY OF GOVERNANCE:

Communitarianism is a 20th Century political and social ideology emphasizing the interests of the
community over those of the individual. Communitarianism is often considered the opposite of
liberalism, the theory that places the interests of the individual above those of the community.

Historical Origins

The ideals of communitarianism can be traced to early religious doctrine as far back as
monasticism in 270 AD, as well as the Old and New Testaments of the Bible. For example, in
the Book of Acts, the Apostle Paul wrote, “All the believers were one in heart and mind. No one
claimed that any of their possessions was their own, but they shared everything they had.”

During the mid-nineteenth century, the concept of communal—rather than individual—

ownership and control of property and natural resources formed the basis of classical socialist
doctrine, as expressed by Karl Marx and Friedrich Engels in their Communist Manifesto of 1848.
In Volume 2, for example, Marx proclaimed that in a truly socialist society “The condition for
the free development of each is the free development of all.” 

The specific term “communitarianism” was coined in the 1980s by social philosophers in
comparing contemporary liberalism, which advocated using the powers of government to protect
individual rights, with classical liberalism, which called for protecting individual rights by
limiting the powers of government.

In contemporary politics, former British Prime Minister Tony Blair applied communitarian
beliefs through his advocacy of a “stakeholder society” in which businesses should be responsive
to the needs of their workers and the consumer communities they served. Similarly, the
“compassionate conservatism” initiative of former U.S. President George W. Bush stressed the
use of conservative policy as the key to improving the general welfare of American society.

Fundamentals of the Doctrine

The basic theory of communitarianism is revealed largely through its supporters’ scholarly
criticism of liberalism as expressed by American political philosopher John Rawls in his 1971
work, "A Theory of Justice." In this seminal liberal essay, Rawls contends that justice in the
context of any community is based exclusively on the inviolable natural rights of each
individual, stating that “each person possesses an inviolability founded on justice that even the
welfare of society as a whole cannot override.” In other words, according to Rawlsian theory, a
truly just society cannot exist when the well-being of the community comes at the cost of
individual rights.
Communitarianism depicted on a two-axis political spectrum chart. Thane/Wikimedia
Commons/Creative Commons 4.0

In contrast to Rawlsian liberalism, communitarianism emphasizes each individual’s

responsibility in serving the “common good” of the community and the social importance of the
family unit. Communitarians believe that community relationships and contributions to the
common good, more so than individual rights, determine each person’s social identity and sense
of place within the community. In essence, communitarians oppose extreme forms of
individualism and unregulated capitalistic laissez-faire “buyer beware” policies that may not
contribute to—or may even threaten—the common good of the community.

What is a “community?” Whether a single family or an entire country, the philosophy of

communitarianism views the community as a group of people living in a single location, or in
different locations, who share interests, traditions, and moral values developed through a
common history. For example, members of the many foreign diasporas, such as the Jewish
people, who, although scattered throughout the world, continue to share a strong sense of
community.

In his 2006 book The Audacity of Hope, then U.S. Senator Barack Obama expressed
communitarian ideals, which he repeated during his successful 2008 presidential election
campaign. Repeatedly calling for an “age of responsibility” in which individuals favor
community-wide unity over partisan politics, Obama urged Americans to “ground our politics in
the notion of a common good.”

Prominent Communitarian Theorists

While the term “communitarian” was coined in 1841, the actual philosophy of
“communitarianism” coalesced during the 20th century through the works of political
philosophers such as Ferdinand Tönnies, Amitai Etzioni, and Dorothy Day.

Ferdinand Tönnies

German sociologist and economist Ferdinand Tönnies (July 26, 1855—April 9, 1936) pioneered
the study of communitarianism with his seminal 1887 essay "Gemeinschaft and Gesellschaft"
(German for Community and Society), comparing the lives and motivations of individuals living
in oppressive but nurturing communities with those living in impersonal but liberating societies.
Considered the father of German sociology, Tönnies co-founded the German Society for
Sociology in 1909 and served as its president until 1934, when he was ousted for criticizing the
Nazi Party.
Bust of Ferdinand Tönnies in Schlosspark in Husum. Frank Vincentz/Wikimedia Commons/Public Domain

Amitai Etzioni

German-born Israeli and American sociologist Amitai Etzioni (born January 4, 1929) is best
known for his work on the impacts of communitarianism on socioeconomics. Considered the
founder of the “responsive communitarian” movement in the early 1990s, he founded the
Communitarian Network to help spread the movement’s message. In his more than 30 books,
including The Active Society and The Spirit of Community, Etzioni stresses the importance of
balancing individual rights with responsibilities to the community.
Amitai Etzioni speaks during the 5th annual 2012 Clinton Global Initiative University meeting at George
Washington University on March 31, 2012 in Washington, DC. Kris Connor/Getty Images

Dorothy Day

American journalist, social activist and Christian anarchist Dorothy Day (November 8, 1897—
November 29, 1980) contributed to the formulation of the communitarian philosophy through
her work with the Catholic Worker Movement she co-founded along with Peter Maurin in 1933.
Writing in the group’s Catholic Worker newspaper, which she edited for over 40 years, Day
clarified that the movement’s brand of compassionate communitarianism was based on the
dogma of the Mystical Body of Christ. “We are working for the Communitarian revolution to
oppose both the rugged individualism of the capitalist era and the collectivism of the Communist
revolution,” she wrote. “Neither human existence nor individual liberty can be sustained for long
outside the interdependent and overlapping communities to which all of us belong.”
Dorothy Day (1897-1980), American journalist and reformer in 1916. Bettmann/Getty Images

Differing Approaches

Filling niches along the American political spectrum ranging from libertarian capitalism to pure
socialism, two predominant approaches to communitarianism have attempted to define the role
of the federal government in the daily lives of the people.

Authoritarian Communitarianism

Arising in the early 1980s, authoritarian communitarians advocated for giving the need to benefit
the common good of the community priority over the need to ensure the autonomy and
individual rights of the people. In other words, if it were deemed necessary for the people to cede
certain individual rights or freedoms to benefit the society as a whole, they should be willing,
even anxious, to do so.

In many ways, the doctrine of authoritarian communitarianism reflected the social practices of
East Asian authoritarian societies such as China, Singapore, and Malaysia, in which individuals
were expected to find their ultimate meaning in life through their contributions to the common
good of the society.

Responsive Communitarianism

Developed in 1990 by Amitai Etzioni, responsive communitarianism seeks to strike a more

carefully-crafted balance between individual rights and social responsibilities to the common
good of the society than authoritarian communitarianism. In this manner, responsive
communitarianism stresses that individual freedoms come with individual responsibilities and
that neither should be neglected to accommodate the other.

The modern responsive communitarian doctrine holds that individual liberties can be preserved
only through the protection of a civil society in which individuals respect and protect their rights
as well as the rights of others. In general, responsive communitarians stress the need for
individuals to develop and practice the skills of self-government while remaining willing to serve
the common good of the society when needed.

2.DECENTRED THEORY OF GOVERNANCE:

YOUTUBE: https://www.google.com/url?
sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwjU1re4o5z9AhUBUaQEHTAW
BeYQtwJ6BAgJEAI&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv
%3D7gnu9UlSFuA&usg=AOvVaw1g7SXUfGb7DtIX5hbO9uOG

up of different and competing actors inspired by different beliefs and traditions. Four key
aspects of decentered theory are viewed as particularly illuminating when seeking to
understand the complexities and nuances of public leadership in contemporary policy
settings, most notably,
(1) a humanist and historicist understanding of social life;
(2) the pursuit of realistic and naturalistic alternatives to rationalist interpretations of
reality;
(3) a focus on the complexities of an interconnected reality; and
(4) the importance of beliefs, practices, traditions and dilemmas in the study of public
policy.
Each of these is discussed in turn below.
A humanist and historicist understanding of social life
The idea of decentering has gained prominence through its connection with a “decentered
theory” that is associated with the concept of the stateless state (Bevir, 2003, 2013; Jessop,
2016; Peters, 2016; Ranson, 2012; Robichau, 2011; Turnbull, 2018; Ungsuchaval, 2016). The
stateless state purports that the state is always and inherently made up of different and
competing actors inspired by different beliefs and traditions. As a result, it treats the idea of
the hollow state as an empirical hypothesis: the state may have lost power in some places and
some policy areas, but social scientists should no more treat hollowing out as a reified and
inevitable social process than they should reify the state. In keeping with notions of a
stateless state, decentered theory is humanist in presenting social life as a human activity
informed by the agency and reasoning of actors (not institutional structures). It is also
historicist in presenting agency and reasoning as occurring against historical backcloths that
influence them.
A focus on realistic and naturalistic interpretations of reality
Decentered theory unpacks governance and associated practices, such as public leadership,
as meaningful activities. To discuss and explain these in this way is to ascribe desires and
beliefs to the realities of relevant actors. Actions can be understood only in terms of the
intentionality of the actors. Unlike rational choice theory, for example, decentered theory
emphasizes the holistic and contingent nature of intentionality. This philosophical approach
lends itself to rich, interpretivist methods for investigation. Indeed, researchers must do the
empirical work of finding out what beliefs and desires people hold in any given case. They,
therefore, rely less on formal models than on contextual and historical explanations. Thus,
decentered theory concentrates not only on the construction of practices as people act on
beliefs but also on the narratives and traditions that provide the context and historical
background to people’s beliefs and actions. Decentered theory provides governance scholars
with an alternative micro theory to that associated with rational choice theory.
Understanding the complexities of an interconnected reality
Whereas modernist social science characteristically isolates atomistic aspects of human life,
decentered theory pursues the complexities of an interconnected reality and naturalistic
accounts of concrete activity. For example, a key challenge facing the study of public
leadership in governance settings is the analysis of power. Mid-level theorists often want to
ignore the micro level and focus on institutions and structures precisely because they believe
that power is an important structuring force within social relations. Some mid-level theorists
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argue that concepts such as “differentiated polity” and “network governance” do not allow for
the way in which power structures governance (Marsh, 2008, 2011). Decentered theory offers
a response to this challenge in so far as it encourages social scientists to rethink power as a
force lacking any center (Foucault, 1982; Torfing, 2009). If power refers to the ways in which
the actions of others define what any individual can and cannot do, then power appears
throughout state action.
Power appears wherever people connect, interpret and respond to one another. Every actor
is both enabled and constrained by the actions of others in an interconnected reality. Prime
ministers, senior civil servants, doctors, police officers and everyday citizens all find their
possibilities for action restricted by what others do. So, concepts like “differentiated polity” and
“hollow state” rightly emphasize the diverse ways in which other actors thwart the intentions of
the center. Governance scholars show how local actors – local mayors, education managers,
management consultants – intentionally and unintentionally resist the core executive.
When decentered theory invokes a fragmented state, it points to a postfoundational
critique of reified concepts of the state for their neglect of the varied contingent meanings and
activities that make up the state. As we have seen, it implies less that bureaucracy has
declined and networks grown than that the state is and always has been stateless. States have
no essence, structural quality or power to determine the actions of which they consist. The
state is just an aggregate description for a vast array of meaningful actions that coalesce into
contingent, shifting and contested practices. The complexities and interconnectivity of these
actions is central to understanding decentered public leadership in practice.
The importance of beliefs, practices, traditions and dilemmas in the study of public policy
When decentered theory addresses changes in the state, it does not presuppose a decline in
hierarchies and a rise in networks alluded to in governance theory (Capano, 2011; Capano
et al., 2015; Davies, 2000; Goetz, 2008; Holliday, 2000; Richardson, 2018; Taylor, 2000).
Indeed,
it offers a critique of any attempt to reify these concepts. Instead, decentered theory is
interested in how the spread of new ideas and beliefs about markets and networks lead to
changes in the state. Decentered theory, therefore, encourages studies of the myriad ways in
which local actors have interpreted these discourses and policies, responded to them, resisted
the intentions of the elites, and forged their own practices. Decentered theory highlights the
importance of beliefs, practices, traditions and dilemmas for the study of public leadership in
different contexts.
A decentered approach replaces formal modernist accounts of the state with a historical
narrative suggesting that the currently dominant approaches to social organization embody
a contingent modernist form of expertise, and that this modernist expertise is undermined by
not properly allowing for its own historicity. Modernist social science inspires defenses of
state planning, markets, free markets and networks. It implies that one or other of these
organizational types is, at least under specified circumstances, ideally rational. By contrast,
decentered theory foregrounds the inherent contingency and contestability of human activity
and so the variety and unpredictability of organizations and leadership action.
Consequently, decentered theory contrasts with modernist social science. It rejects
projects which seek to unpack the essential properties and necessary logics of social and
political life. It suggests that neither the intrinsic rationality of markets nor the path
dependency of institutions properly determines the forms of state activity. It conceives of
public policies as contingent constructions inspired by competing beliefs and rooted in
different traditions. Decentered theory explains shifting patterns within public settings by
focusing on the actors’ own interpretations of their actions and practices and by locating
these interpretations in historical contexts. Most fundamentally, it shifts the focus from
institutions to meanings in action. In displacing institutions, it suggests the state is stateless.
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This account of decentered theory raises important questions for the study of public
leadership in contemporary contexts. The following section sets out some of the dominant
thinking guiding public leadership research and examines how decentered public leadership
sits within it.
Decentering public leadership and its place within mainstream leadership
theory
Though leadership is often thought to be at the heart of public administration, a series of
stock-taking reviews of the field at the start of the millennium found public leadership
research to be “meagre” (Kellerman and Webster, 2001, p. 485), “muted and underdeveloped”
(Van Wart, 2003, p. 223), and lacking the maturity of leadership in related fields (Trottier et al.,
2008). Such reviews perhaps underplay more recent public leadership research that cuts
across multiple fields and disciplines (Hartley, 2018; Vogel and Werkmeister, 2021). Indeed,
research on public leadership has expanded significantly in the past decade alone.
Scholars, not least in this journal, have explored public leadership as a collective (Miao and
Ju, 2020; Torfing et al., 2019), multilevel (Capler, 2020), and highly relational (McClellan,
2020)
endeavor. Furthermore, they have developed an appreciation of leadership as imbued with
public values (Cao et al., 2018), pointing to particular ethical dimensions (Hattke and Hattke,
2019; €Ozsungur, 2020) of public leadership. The following discussion identifies several areas
where the public leadership literature has developed over recent years and where there is
some commonality and contradiction with a decentered approach, most notably:
(1) public values;
(2) narratives and storytelling;
(3) distributed and collaborative leadership;
(4) relational leadership.
Each of these aspects of public leadership is now discussed in turn.
Public values
For some scholars, attention to public value is a distinguishing feature of public leadership.
The Minnowbrook meeting in 2008 resulted in a manifesto inviting scholars to make the
study of the distinctiveness of public leadership a central focus of public administration
research. Here public leadership is understood as being values-based. It is “leadership for the
common good, for the purpose of creating public value” (Getha-Taylor et al., 2011, p. i84). Such
calls, alongside earlier critiques, helped to stimulate leadership research that seeks to
understand the specificities of goals, culture, context and practice within public sector
organizations. In this way, Kouzes and Posner describe leadership as “the art of mobilizing
others to want to struggle for shared aspiration” (2002, p. 24). Moore (2014) emphasizes the
role of public administration pursuing public value in relation to common good. Wright,
Moynihan and Pandey point out ”the inspirational power of public missions is not a given; it
needs to be cultivated” (2012, p. 212). In this stream of research, public leaders harness the
motivating power of worthwhile organizational goals by “highlighting and rewarding public
service values” (Perry and Hondeghem, 2008, p. 309). In this way, for Hartley (2018, p. 203),
public leadership is: “mobilizing individuals, organizations and networks to formulate and/or
enact purposes, values and actions which aim or claim to create valued outcomes for the
public sphere”. The focus on values echoes a commitment in decentered theory to focus on
the beliefs, practices, traditions and dilemmas in context. However, unlike much of the
mainstream public leadership literature identified above, decentered theory does not give
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prominence to the institutional structures within which values are created, contested and
reformulated.
Narratives and storytelling
Alongside work on public value, there has been a developing interest in how shared meanings
are created in organizations through narratives or stories that make sense of complexity and
change (Borins, 2011; Sternberg, 2008). A turn to narrative also points us toward the ways in
which public organizations are fueled by stories that offer compelling accounts of the past, the
present and the future and act as a basis for mediating the collective, relational action of
organizational life. Orr and Bennett (2017), for example, have argued that leadership influence
and control can be exercised effectively through expressive narratives and storytelling. This
involves making an emotional connection with people to exert influence through a
collaborative endeavor, rather than employing bureaucratic authority. Indeed, this feature of
political leadership was explored by Ayres (2021) in her decentered analysis of informal
decision-making in Whitehall, whereby social relationships were used to exert control as
opposed to hierarchy. Indeed, the literatures on informal governance and decentered theory are
natural bedfellows. Both draw attention to the importance of situated actors in shaping public
action. Decentered theory advocates social scientists listening to the narratives and stories of
those they study to construct their own narratives “as an insightful way of analyzing
governance” (Bevir, 2013, p. 8). Likewise, the literature on informal governance argues that
much can be learned about ways to improve public leadership by understanding what happens
based on the perceptions and narratives of actors involved (Ayres, 2019). Nonetheless, while
the mainstream public policy and leadership literature recognize the importance of
understanding the realities of public leadership through storytelling and narrative, they
often seek to appraise public leadership against a set of normative assumptions about where
power, legitimacy and accountability lie in relation to the state. Instead, decentered theory
encourages social scientists to rethink power as a force lacking any center and to embrace the
complexities and interconnected realities shaping public leadership in action.
Distributed and collaborative leadership
Public leadership scholars have become interested in ideas of collective, distributed and
shared leadership as counterpoints to the historical dominance of individualistic, heroic
savior leaders. Views of public leadership which emphasize collaborative process and
relationality have extended understanding beyond traditional hierarchical assumptions
about leadership and away from the public choice elements of new public management.
Collective leadership theories view leadership as emerging collaboratively from dyadic
relationships and networks. The relational turn has also offered a challenge to the dominance
of logical positivist methods. Van Wart’s (2013a, b, p. 522) work on public leadership focuses
on “the people (at all levels) and the accompanying processes and networks that lead, manage,
and guide government and non-profit agencies”. The way in which this definition
understands the significance of networks rather than reified institutions of governance is
in sympathy with a decentering approach. The turn to governance has had implications for
the study of public leadership. It became clearer that the traditional focus on state actors and
processes is inadequate for understanding the dynamics and settings for leadership. This
shift has led to calls for work which focuses on “the range of actors and processes which
influence the public sphere” (Hartley, 2018, p. 204).
Relational leadership
Since its inception, the study of leadership has been highly normative, focusing on finding the
best way in which to lead. The origins of this work lie with “great man” or “great person”
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theories, a tradition which still finds contemporary echoes. The study of leadership
progressed through an interest in style and behavior through to contingency theories which
recognized that context matters – a consideration underscored by decentered theory. More
recently, important scholarship has examined how leadership is emergent and disembodied
(Ford, 2010; Wilson, 2016) or even “spectral” (by which is meant the significance of people
who may have departed the organization but whose presence continues to linger) in its
manifestations and affects (Pors, 2016; Orr, 2014). This work has developed alongside critical
leadership studies which examines, for example, the role of leadership discourse and practice
in buttressing patterns of exploitation (e.g. Collinson, 2005, 2006; Tourish, 2019), and work
which problematizes the very concept or ontology of leadership (Kelly, 2014).
Fairhurst and Uhl-Bien (2012) highlight the relational nature of leadership: how leaders
and followers co-create meaning through interconnected relationships in highly interactive
contexts. Ospina (2017, p. 281) contributes a view of collective leadership as an “emergent,
interactive process intended to cultivate group members’” capacity and adaptability to
navigate complexity. Such emphases on relationality and networks complement a
decentering approach to the study of leadership. Examining practices through a relational
lens moves the analysis beyond the notion of the “hero leader” and instead enables us to
explore the ways in which the everyday dilemmas of organizing are inescapably collective. In
a decentering move, such work extends the focus beyond bureaucratic office holders or those
in formal leadership positions to include a wider range of actors and contexts implicated in
shaping the public sphere.
The following section introduces the five empirical contributions to this special issue,
demonstrating how a decentered approach to public leadership can offer illuminating
insights that seek to complement and extend existing conceptions and understandings of
public leadership.

3.LIBERTARIAN SOCIALISM:

libertarianism, political philosophy that takes individual liberty to be the primary political
value. It may be understood as a form of liberalism, the political philosophy associated with the
English philosophers John Locke and John Stuart Mill, the Scottish economist Adam Smith, and
the American statesman Thomas Jefferson. Liberalism seeks to define and justify the legitimate
powers of government in terms of certain natural or God-given individual rights. These rights
include the rights to life, liberty, private property, freedom of speech and association, freedom of
worship, government by consent, equality under the law, and moral autonomy (the ability to
pursue one’s own conception of happiness, or the “good life”). The purpose of government,
according to liberals, is to protect these and other individual rights, and in general liberals have
contended that government power should be limited to that which is necessary to accomplish this
task. Libertarians are classical liberals who strongly emphasize the individual right to liberty.
They contend that the scope and powers of government should be constrained so as to allow each
individual as much freedom of action as is consistent with a like freedom for everyone else.
Thus, they believe that individuals should be free to behave and to dispose of their property as
they see fit, provided that their actions do not infringe on the equal freedom of others.

Historical origins
Liberalism and libertarianism have deep roots in Western thought. A central feature of the
religious and intellectual traditions of ancient Israel and ancient Greece was the idea of a higher
moral law that applied universally and that constrained the powers of even kings and
governments. Christian theologians, including Tertullian in the 2nd and 3rd centuries and St.
Thomas Aquinas in the 13th century, stressed the moral worth of the individual and the division
of the world into two realms, one of which was the province of God and thus beyond the power
of the state to control.

Libertarianism also was influenced by debates within Scholasticism on slavery and private
property. Scholastic thinkers such as Aquinas, Francisco de Vitoria, and Bartolomé de Las Casas
developed the concept of “self-mastery” (dominium)—later called “self-propriety,” “property in
one’s person,” or “self-ownership”—and showed how it could be the foundation of a system of
individual rights (see below Libertarian philosophy). In response to the growth of royal
absolutism in early modern Europe, early libertarians, particularly those in the Netherlands and
England, defended, developed, and radicalized existing notions of the rule of law, representative
assemblies, and the rights of the people. In the mid-16th century, for example, the merchants of
Antwerp successfully resisted the attempt by the Holy Roman emperor Charles V to introduce
the Inquisition in their city, maintaining that it would contravene their traditional privileges and
ruin their prosperity (and hence diminish the emperor’s tax income). Through the Petition of
Right (1628) the English Parliament opposed efforts by King Charles I to impose taxes and
compel loans from private citizens, to imprison subjects without due process of law, and to
require subjects to quarter the king’s soldiers (see petition of right). The first well-developed
statement of libertarianism, An Agreement of the People (1647), was produced by the radical
republican Leveler movement during the English Civil Wars (1642–51). Presented to Parliament
in 1649, it included the ideas of self-ownership, private property, legal equality, religious
toleration, and limited, representative government.

In the late 17th century, liberalism was given a sophisticated philosophical foundation in Locke’s
theories of natural rights, including the right to private property and to government by consent.
In the 18th century, Smith’s studies of the economic effects of free markets greatly advanced the
liberal theory of “spontaneous order,” according to which some forms of order in society arise
naturally and spontaneously, without central direction, from the independent activities of large
numbers of individuals. The theory of spontaneous order is a central feature of libertarian social
and economic thinking (see below Spontaneous order).
Rembrandt Peale: Thomas Jefferson

The American Revolution (1775–83) was a watershed for liberalism. In the Declaration of
Independence (1776), Jefferson enunciated many liberal and libertarian ideas, including the
belief in “unalienable Rights” to “Life, Liberty, and the pursuit of Happiness” and the belief in
the “right” and “duty” of citizens to “throw off such Government” that violates these rights.
Indeed, during and after the American Revolution, according to the American historian Bernard
Bailyn, “the major themes of eighteenth-century libertarianism were brought to realization” in
written constitutions, bills of rights, and limits on executive and legislative powers, especially the
power to wage war. Such values have remained at the core of American political thought ever
since.

During the 19th century, governments based on traditional liberal principles emerged in England
and the United States and to a smaller extent in continental Europe. The rise of liberalism
resulted in rapid technological development and a general increase in living standards, though
large segments of the population remained in poverty, especially in the slums of industrial cities.

In the late 19th and early 20th centuries, many liberals began to worry that persistent inequalities
of income and wealth and the tremendous pace of social change were undermining democracy
and threatening other classical liberal values, such as the right to moral autonomy. Fearful of
what they considered a new despotism of the wealthy, modern liberals advocated government
regulation of markets and major industries, heavier taxation of the rich, the legalization of trade
unions, and the introduction of various government-funded social services, such as mandatory
accident insurance. Some have regarded the modern liberals’ embrace of increased government
power as a repudiation of the classical liberal belief in limited government, but others have seen
it as a reconsideration of the kinds of power required by government to protect the individual
rights that liberals believe in.
The new liberalism was exemplified by the English philosophers L.T. Hobhouse and T.H. Green,
who argued that democratic governments should aim to advance the general welfare by
providing direct services and benefits to citizens. Meanwhile, however, classical liberals such as
the English philosopher Herbert Spencer insisted that the welfare of the poor and the middle
classes would be best served by free markets and minimal government. In the 20th century, so-
called welfare state liberalism, or social democracy, emerged as the dominant form of liberalism,
and the term liberalism itself underwent a significant change in definition in English-speaking
countries. Particularly after World War II, most self-described liberals no longer supported
completely free markets and minimal government, though they continued to champion other
individual rights, such as the right to freedom of speech. As liberalism became increasingly
associated with government intervention in the economy and social-welfare programs, some
classical liberals abandoned the old term and began to call themselves “libertarians.”

In response to the rise of totalitarian regimes in Russia, Italy, and Germany in the first half of the
20th century, some economists and political philosophers rediscovered aspects of the classical
liberal tradition that were most distinctly individualist. In his seminal essay “Economic
Calculation in the Socialist Commonwealth” (originally in German, 1920), the Austrian-
American economist Ludwig von Mises challenged the basic tenets of socialism, arguing that a
complex economy requires private property and freedom of exchange in order to solve problems
of social and economic coordination. Von Mises’s work led to extensive studies of the processes
by which the uncoordinated activities of numerous individuals can spontaneously generate
complex forms of social order in societies where individual rights are well-defined and legally
secure.

Libertarian philosophy
Classical liberalism rests on a presumption of liberty—that is, on the presumption that the
exercise of liberty does not require justification but that all restraints on liberty do. Libertarians
have attempted to define the proper extent of individual liberty in terms of the notion of property
in one’s person, or self-ownership, which entails that each individual is entitled to exclusive
control of his choices, his actions, and his body. Because no individual has the right to control
the peaceful activities of other self-owning individuals—e.g., their religious practices, their
occupations, or their pastimes—no such power can be properly delegated to government.
Legitimate governments are therefore severely limited in their authority.

Nonaggression axiom

According to the principle that libertarians call the nonaggression axiom, all acts of aggression
against the rights of others—whether committed by individuals or by governments—are unjust.
Indeed, libertarians believe that the primary purpose of government is to protect citizens from the
illegitimate use of force. Accordingly, governments may not use force against their own citizens
unless doing so is necessary to prevent the illegitimate use of force by one individual or group
against another. This prohibition entails that governments may not engage in censorship, military
conscription, price controls, confiscation of property, or any other type of intervention that
curtails the voluntary and peaceful exercise of an individual’s rights.
Power

A fundamental characteristic of libertarian thinking is a deep skepticism of government power.

Libertarianism and liberalism both arose in the West, where the division of power between
spiritual and temporal rulers had been greater than in most other parts of the world. In the
Hebrew Bible (Old Testament), I Samuel 8: 17–18, the Jews asked for a king, and God warned
them that such a king would “take the tenth of your flocks, and you shall be his slaves. And in
that day you will cry out because of your king, whom you have chosen for yourselves; but the
Lord will not answer you in that day.” This admonition reminded Europeans for centuries of the
predatory nature of states. The passage was cited by many liberals, including Thomas Paine and
Lord Acton, who famously wrote that “power tends to corrupt, and absolute power corrupts
absolutely.” Libertarian skepticism was reinforced by events of the 20th century, when
unrestrained government power, among other factors, led to world war, genocide, and massive
human rights violations.

Individualism

Libertarians embrace individualism insofar as they attach supreme value to the rights and
freedoms of individuals. Although various theories regarding the origin and justification of
individual rights have been proposed—e.g., that they are given to human beings by God, that
they are implied by the very idea of a moral law, and that respecting them produces better
consequences—all libertarians agree that individual rights are imprescriptible—i.e., that they are
not granted (and thus cannot be legitimately taken away) by governments or by any other human
agency. Another aspect of the individualism of libertarians is their belief that the individual,
rather than the group or the state, is the basic unit in terms of which a legal order should be
understood.

Spontaneous order

Libertarians hold that some forms of order in society arise naturally and spontaneously from the
actions of thousands or millions of individuals. The notion of spontaneous order may seem
counterintuitive: it is natural to assume that order exists only because it has been designed by
someone (indeed, in the philosophy of religion, the apparent order of the natural universe was
traditionally considered proof of the existence of an intelligent designer—i.e., God). Libertarians,
however, maintain that the most important aspects of human society—such as language, law,
customs, money, and markets—develop by themselves, without conscious direction.
David Hume

An appreciation for spontaneous order can be found in the writings of the ancient Chinese
philosopher Lao-tzu (6th century bce), who urged rulers to “do nothing” because “without law or
compulsion, men would dwell in harmony.” A social science of spontaneous order arose in the
18th century in the work of the French physiocrats and in the writings of the Scottish philosopher
David Hume. Both the physiocrats (the term physiocracy means the “rule of nature”) and Hume
studied the natural order of economic and social life and concluded, contrary to the dominant
theory of mercantilism, that the directing hand of the prince was not necessary to produce order
and prosperity. Hume extended his analysis to the determination of interest rates and even to the
emergence of the institutions of law and property. In A Treatise of Human Nature (1739–40), he
argued that “the rule concerning the stability of possession” is a product of spontaneous ordering
processes, because “it arises gradually, and acquires force by a slow progression, and by our
repeated experience of the inconveniences of transgressing it.” He also compared the evolution
of the institution of property to the evolution of languages and money.

Smith developed the concept of spontaneous order extensively in both The Theory of Moral
Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
He made the idea central to his discussion of social cooperation, arguing that the division of
labour did not arise from human wisdom but was the “necessary, though very slow and gradual,
consequence of a certain propensity in human nature which has in view no such extensive utility:
the propensity to truck, barter, and exchange one thing for another.” In Common Sense (1776),
Paine combined the theory of spontaneous order with a theory of justice based on natural rights,
maintaining that the “great part of that order which reigns among mankind is not the effect of
government.”
Free markets

According to libertarians, free markets are among the most important (but not the only) examples
of spontaneous order. They argue that individuals need to produce and trade in order to survive
and flourish and that free markets are essential to the creation of wealth. Libertarians also
maintain that self-help, mutual aid, charity, and economic growth do more to alleviate poverty
than government social-welfare programs. Finally, they contend that, if the libertarian tradition
often seems to stress private property and free markets at the expense of other principles, that is
largely because these institutions were under attack for much of the 20th century by modern
liberals, social democrats, fascists, and adherents of other leftist, nationalist, or socialist
ideologies.

Rule of law

Libertarians consider the rule of law to be a crucial underpinning of a free society. In its simplest
form, this principle means that individuals should be governed by generally applicable and
publicly known laws and not by the arbitrary decisions of kings, presidents, or bureaucrats. Such
laws should protect the freedom of all individuals to pursue happiness in their own ways and
should not aim at any particular result or outcome.

Limited government

Although most libertarians believe that some form of government is essential for protecting
liberty, they also maintain that government is an inherently dangerous institution whose power
must be strictly circumscribed. Thus, libertarians advocate limiting and dividing government
power through a written constitution and a system of checks and balances. Indeed, libertarians
often claim that the greater freedom and prosperity of European society (in comparison with
other parts of the world) in the early modern era was the result of the fragmentation of power,
both between church and state and among the continent’s many different kingdoms,
principalities, and city-states. Some American libertarians, such as Lysander Spooner and
Murray Rothbard, have opposed all forms of government. Rothbard called his doctrine “anarcho-
capitalism” to distinguish it from the views of anarchists who oppose private property. Even
those who describe themselves as “anarchist libertarians,” however, believe in a system of law
and law enforcement to protect individual rights.
David Ricardo

Much political analysis deals with conflict and conflict resolution. Libertarians hold that there is
a natural harmony of interests among peaceful, productive individuals in a just society. Citing
David Ricardo’s theory of comparative advantage—which states that individuals in all countries
benefit when each country’s citizens specialize in producing that which they can produce more
efficiently than the citizens of other countries—libertarians claim that, over time, all individuals
prosper from the operation of a free market, and conflict is thus not a necessary or inevitable part
of a social order. When governments begin to distribute rewards on the basis of political
pressure, however, individuals and groups will engage in wasteful and even violent conflict to
gain benefits at the expense of others. Thus, libertarians maintain that minimal government is a
key to the minimization of social conflict.

International relations

In international affairs, libertarians emphasize the value of peace. That may seem unexceptional,
since most (though not all) modern thinkers have claimed allegiance to peace as a value.
Historically, however, many rulers have seen little benefit to peace and have embarked upon
sometimes long and destructive wars. Libertarians contend that war is inherently calamitous,
bringing widespread death and destruction, disrupting family and economic life, and placing
more power in the hands of ruling classes. Defensive or retaliatory violence may be justified, but,
according to libertarians, violence is not valuable in itself, nor does it produce any additional
benefits beyond the defense of life and liberty.

Contemporary libertarianism
Despite the historical growth in the scope and powers of government, particularly after World
War II, in the early 21st century the political and economic systems of most Western countries—
especially the United Kingdom and the United States—continued to be based largely on classical
liberal principles. Accordingly, libertarians in those countries tended to focus on smaller
deviations from liberal principles, creating the perception among many that their views were
radical or extreme. In the early 21st century, self-identified libertarians constituted a major
current of the antigovernment Tea Party movement in the United States. However, explicitly
libertarian political parties (such as the Libertarian Party in the United States and the Libertarianz
Party in New Zealand), where they did exist, garnered little support, even among self-professed
libertarians. Most politically active libertarians supported classical liberal parties (such as the
Free Democratic Party in Germany or the Flemish Liberals and Democrats in Belgium) or
conservative parties (such as the Republican Party in the United States or the Conservative Party
in Great Britain); they also backed pressure groups advocating policies such as tax reduction, the
privatization of education, and the decriminalization of drug use and other so-called victimless
crimes. There were also small but vocal groups of libertarians in Scandinavia, Latin America,
India, and China.

Robert Nozick

The publication in 1974 of Anarchy, State, and Utopia, a sophisticated defense of libertarian
principles by the American philosopher Robert Nozick, marked the beginning of an intellectual
revival of libertarianism. Libertarian ideas in economics became increasingly influential as
libertarian economists, such as Alan Greenspan, were appointed to prominent advisory positions
in conservative governments in the United Kingdom and the United States and as some
libertarians, such as James M. Buchanan, Milton Friedman, F.A. Hayek, and Vernon L. Smith,
were awarded the Nobel Prize for Economics. In 1982 the death of the libertarian novelist and
social theorist Ayn Rand prompted a surge of popular interest in her work. Libertarian scholars,
activists, and political leaders also played prominent roles in the worldwide campaign against
apartheid and in the construction of democratic societies in eastern and central Europe following
the collapse of communism there in 1989–91. In the early 21st century, libertarian ideas
informed new research in diverse fields such as history, law, economic development,
telecommunications, bioethics, globalization, and social theory.
Criticism

A long-standing criticism of libertarianism is that it presupposes an unrealistic and undesirable

conception of individual identity and of the conditions necessary for human flourishing.
Opponents of libertarianism often refer to libertarian individualism as “atomistic,” arguing that it
ignores the role of family, tribe, religious community, and state in forming individual identity
and that such groups or institutions are the proper sources of legitimate authority. These critics
contend that libertarian ideas of individuality are ahistorical, excessively abstract, and parasitic
on unacknowledged forms of group identity and that libertarians ignore the obligations to
community and government that accompany the benefits derived from these institutions. In the
19th century, Karl Marx decried liberal individualism, which he took to underlie civil (or
bourgeois) society, as a “decomposition of man” that located man’s essence “no longer in
community but in difference.” More recently, the Canadian philosopher Charles Taylor
maintained that the libertarian emphasis on the rights of the individual wrongly implies “the self-
sufficiency of man alone.”

Libertarians deny that their views imply anything like atomistic individualism. The recognition
and protection of individuality and difference, they contend, does not necessarily entail denying
the existence of community or the benefits of living together. Rather, it merely requires that the
bonds of community not be imposed on people by force and that individuals (adults, at least) be
free to sever their attachments to others and to form new ones with those who choose to associate
with them. Community, libertarians believe, is best served by freedom of association, an
observation made by the 19th-century French historian of American democracy Alexis de
Tocqueville, among others. Thus, for libertarians the central philosophical issue is not
individuality versus community but rather consent versus coercion.

Other critics, including some prominent conservatives, have insisted that libertarianism is an
amoral philosophy of libertinism in which the law loses its character as a source of moral
instruction. The American philosopher Russell Kirk, for example, argued that libertarians “bear
no authority, temporal or spiritual,” and do not “venerate ancient beliefs and customs, or the
natural world, or [their] country, or the immortal spark in [their] fellow men.” Libertarians
respond that they do venerate the ancient traditions of liberty and justice. They favour restricting
the function of the law to enforcing those traditions, not only because they believe that
individuals should be permitted to take moral responsibility for their own choices but also
because they believe that law becomes corrupted when it is used as a tool for “making men
moral.” Furthermore, they argue, a degree of humility about the variety of human goals should
not be confused with radical moral skepticism or ethical relativism.

Some criticisms of libertarianism concern the social and economic effects of free markets and the
libertarian view that all forms of government intervention are unjustified. Critics have alleged,
for example, that completely unregulated markets create poverty as well as wealth; that they
result in significant inequalities of income and wealth, along with corresponding inequalities of
political power; that they encourage environmental pollution and the wasteful or destructive use
of natural resources; that they are incapable of efficiently or fairly performing some necessary
social services, such as health care, education, and policing; and that they tend toward monopoly,
which increases inefficiency and compounds the problem of inequality of income and wealth.
Libertarians have responded by questioning whether government regulation, which would
replace one set of imperfect institutions (private businesses) with another (government agencies),
would solve or only worsen these problems. In addition, several libertarian scholars have argued
that some of these problems are not caused by free markets but rather result from the failures and
inefficiencies of political and legal institutions. Thus, they argue that environmental pollution
could be minimized in a free market if property rights were properly defined and secured.

Libertarian socialism is fundamentally an effort to replace hierarchal State governance that is

based on violence and coercion with systems based on free association, lateral accountability,
and cooperation. In essence, a libertarian socialist society is a self-managed society where there
is no separation between those who govern and those who are governed.

That’s worth restating: the left-libertarian alternative to the State isn’t “no government”, it’s
collective governance and self governance instead of government imposed from above via
force.

There are obvious limits to a self-governing society free from State coercion. First, and most
obviously, it requires a functioning and healthy civil society and some significant degree of
social cohesion. It can’t work in an atomized society like the North American Settler culture
where people’s sense of responsibility to their community has been deliberately eroded and
“freedom” is often interpreted to mean the ability to hurt people without consequences. To make
such a project work, you need a culture where freedom and responsibility are inextricably and
explicitly linked, where people believe that individual self-actualization is only possible in a
community, and we recognize that humans are social creatures and we need each other. It also
requires a sense of connection to place and to the natural world. Native Americans didn’t need
the EPA to tell them not to destroy their homes, but the settler culture has proven over and over
again that it cannot be trusted not to destroy everything in its path.

That means in order to get there, we have to start by changing our culture.

There are many potential models for Libertarian Socialism, both inside and outside the western
“Anarchist” tradition. Ideologies are useful lenses to understand sets of ideas, but they all blur at
the edges and carry baggage. If we can shed that baggage, we open up new possibilities.

What follows is one of a nearly infinite number of potential proposals for how a libertarian
socialist society might look. Other visions might be radically different in important areas. These
are my own thoughts and I’ve borrowed heavily from thinkers and writers in the
anarchosyndicalist, mutualist, social ecologist, indigenist, communalist, and chicano nationalist
and black nationalist movements.

What might a left libertarian society look like?

In a society where the State has been abolished, the basic political unit becomes an individual or
a community. Typically this means a village, town, or neighborhood. This is one of the core
recurring ideas that links Chicano nationalist thought (as typified by the Plan de Santa Barbara
de Aztlan and other foundational documents), with Huey Newton’s Inter-communalism,
Zapatismo, Social Ecology, Kurdish Democratic Confederalism, and social anarchism.

All of these models are based on free networks of self-governing and self-managed communities,
as most communities through the vast majority of human history have been. None of them relies
on the States.

This is an important point, in virtually all pre-state societies, local communities were more or
less self governing. A king or an emperor might demand taxes for protection, but outside of
capital cities, the day to day life of a village or town was controlled by the people who lived
there. This idea of a strong central government that makes all the important decisions about
people’s lives is less than 400 years old! Looking at the incredible damage capitalism and the
state have wrought in that time, it’s clear that the State is a failed experiment.

So what do you replace it with? While it would be absurd for me to try to legislate the political
structure of a hypothetical future society from my desk, there are a few core principles that are
common across the various political traditions mentioned above.

1. Free association – society should be organized from the bottom up, not the top down, and that
organization should be voluntary. If a community wishes to secede from a larger body to which
they are attached it is their absolute right to do so.
2. Lateral accountability – hierarchal systems of accountability consistently fail to hold people at
the top of the hierarchy accountable. Horizontal structures where peers hold each other
accountable are far more effective. This is true among groups of individuals and it’s true for
groups of communities.
3. Smaller is better – lateral accountability only works up to a certain scale, past which point the
mental bandwidth of keeping track of who did what when becomes too much and accountability
breaks down.
4. Non-aggression – using offensive violence or even the threat of it to achieve political ends
destroys the social fabric and cannot be tolerated. Aggression must be met with resistance. This
does not mean pacifism. Self defense is always legitimate, aggression is never legitimate.
5. Decentralization – the more power is distributed the more opportunities there are to maintain
accountability. Further, human diversity means that different communities will often have
different ideas about how best to do things and decentralizing power allows decisions to be
made at the most local level possible.
6. Self management – Every person and community that has a stake in a decision should get a vote
in that decision, and people who are not stakeholders should not be making decisions for people
who are. One of the biggest problems with State based systems is the division between the
people doing the governing and the people who are governed. Libertarian Socialism erases this
division.
7. A radically decentralized economy based on free exchange of goods and ideas. That could be
market-based, as in mutualism, it could be planned as in anarcho-communism, or it could be a
hybrid of the two. That’s a decision for the people who live in that society to make.
8. An approach to technology and science based on creating solutions and technology that serves
humanity and our planet – not driving profit margins for the owning elite
Social goods in Libertarian Socialism

Unlike State-based systems that start with an army and a police force to assert control, a
libertarian socialist system of governance builds legitimacy by serving the public good. This
most often comes in the form of strong social safety nets, enforcing environmental protections,
and other activities that directly improve people’s quality of life.

Critically, there’s no reason those functions should be part of one single institution. The unitary
State that handles everything from safety regulations to national defense to arts funding is an
artifact of the way modern States grew out of monarchies – allowing the aggregated interests of
the Capitalist class to replace monarchies, but otherwise leaving the structure virtually
unchanged. Freedom will require outgrowing such structures.

By breaking the State up so each of its useful functions are handled by a separate autonomous
institution, you fragment its power.

If each of these new social institutions is autonomous, there’s no reason why they should all
have the same borders either. After all, modern Nations are the result of States imposing
boundaries on a fluid world map. A syndicate (group of people in charge of a specific function)
in charge of providing drinking water should probably map its borders to the water tables or the
bio-region, while a syndicate for research biologists might be distributed globally. A syndicate in
charge of coordinating healthcare across a region should probably map to a specific urban area
and its suburbs. Transportation infrastructure would likely be managed by a network of
autonomous regional syndicates that coordinate across regions to make sure the roads connect
and the trains arrive on time. Those syndicates and networks of syndicates could grow as large or
shrink as small as is practical. Freed from rigid State boundaries, each function would be free to
find the form that best serves its use case.

Breaking the State up into all its constituent functions would insure that school funding and
programs to take care of the sick or build transportation infrastructure can never again be put on
the chopping block to pay for programs that only benefit a minority, because their funding
streams would be completely separate. The result of that would be a tremendous victory for
everyone campaigning to fully fund schools, social programs, and other programs that actually
help people.

Funding to support these institutions can be handled any number of ways. I think it’s likely that
most communities would opt to have a set percentage of all the wealth an individual or collective
produces be paid into a common fund. Those who don’t want to opt in would not be forced to do
so, but also would probably not be welcome to stay in that community. The result is something
closer to collective bargaining than taxation – a group of neighbors pooling funds to pay for
something that helps all of them instead of systematic theft by an unaccountable State that
squanders the money on war and corporate subsidies.

In practice the details of funding would be up to the communities that want access to the various
syndicates’ services, and most syndicates would likely offer some sort of sliding scale for less
prosperous communities. And if no pre-existing syndicate is willing or able to supply a necessary
service, there’s nothing stopping people in a self-governing self-managing community from
starting their own. Don’t like PG&E? Currently, there’s a state-backed monopoly in place
stopping your town from setting up a community grid! In a truly Libertarian system, people are
free to start their own.

Socialism without the State

Under Capitalism, land is owned by individuals and in Marxism it’s owned by the State. In a
libertarian socialist system it’s not owned at all.

Instead, land and resources are managed collectively by the people who use them. Primary goods
such as machinery (factories still exist, even if not many of them are in the US any more) would
belong to the workers and communities that created them or who voluntarily traded for them.
Returning all the wealth stolen by capitalists and their predecessors is a necessary pre-condition
for a free market since unequal access to startup capital creates massive barriers to entry and
wildly distorts the market.

Science and technology are likewise part of the common heritage of humanity and must be
collectively owned by everyone. Every innovation is built on other innovations that preceded it.
In a world that rejects the concept of intellectual property, I might very well come up with an
innovative new machine, but anyone else who wanted to could create their own version of it as
well – and improve on it. In return for sharing my improvement to the pre-existing technology I
gain access to all the improvements others create to mine. These principles are already well
established in the world of open source and work well in practice all over the world. Rules
governing the details of how all this is managed could be set by trade and industrial associations
– a role that many labor unions already play. I’m sure some people would attempt to keep their
innovations to themselves, at least for a while, but there are very few truly unique ideas in the
world and eventually everything would get added back to the collective since it would no longer
be possible to use legally enforced patents and copyrights and stifle innovation.

This is an incredibly powerful difference. Currently, science and technology serve the interests
of Capitalists and States that fund them and their progress is constantly warped by the need to
drive returns on investments or increase the State’s power. In a libertarian socialist system,
access to knowledge and the ability to use best-in-class tools to solve problems is made available
to everyone.

Rather than relying on States or philanthropy to save people, this economy would be designed to
empower people to save themselves and solve their own problems in their own way. And, in so
doing, share the resulting innovations with others who may be facing similar problems. From
computer systems to malaria research, this approach liberates human ingenuity and makes
progress serve humanity – not the bottom line.

Meanwhile, collective ownership of the means of production and the abolition of wage labor
means that individuals own the full value of everything they create – and are able to exchange
that value with anyone else. In practice that could mean simple co-working arrangements or full
on democratically run worker owned businesses.
There would be no corporations, no state-backed limited liability or fiat currencies, no bailouts,
no regulatory capture, no inheritance, no intellectual property; just free people working together
to produce and exchange the things they need to live. I believe that this free market socialism,
also known as mutualism, is the only form of socialism that can ever achieve the goal of a self-
managed and truly egalitarian society. Others disagree, and that’s ok.

And, of course, if a community decides they want to go full libertarian communist and institute
income sharing they are free to do so. I believe such arrangements are unlikely to last, but I’m
open to being proven wrong. Political decentralization opens the floodgates for experimentation,
and as people discover newer better ways to do things you would expect to see other
communities follow their lead and iterate. But they would be doing so independently and
voluntarily, not based on the dictates of billionaires, technocrats, or a ruling party. In a real way,
this creates a free market of ideas, and as different communities and collectives try different
things, others are free to follow their lead and take what works – or not – as they see fit.

Startup capital for new businesses and collectives can come from credit unions, existing
syndicates, community funds, or other sources; but the ownership model does not allow people
to trade monetary investment for ownership in an enterprise where they do not work themselves.
There is no stock market. No landlords. No rent-seeking.

Because no one would be able to use private ownership of the means of production and the threat
of starvation as a weapon to steal the surplus value other people create, no one would ever be
able to amass the fortunes that are possible under capitalism. No one in all of human history has
ever earned a billion dollars, but capitalism has let a few greedy sociopaths steal billions of
dollars from workers, and then use that stolen wealth to reshape the world in their own image. In
a mutualist economy, a skilled craftsperson or a hard worker could certainly have a comfortable
existence, but their maximum wealth would be limited by the value that an individual can create
over a lifetime. On the other end of the scale no one would be paid starvation wages and left
destitute. It’s not perfect equality, but it is freedom.

Libertarian Socialism and Defense

Defense and policing in all forms of libertarian socialism follows a militia model – not like the
crazy right wing “militia’s” in the US, but a democratically run and accountable version of the
national guard. It would be made up of citizens who have other jobs but spend a set portion of
their time every year training and are able to step in protect their fellow citizens as needed. In
times of conflict, the result would be similar to the CNT’s democratically run worker’s militias
that fought fascism in Catalonia in the 30’s or the Zapatista and Kurdish YPG where volunteer
citizen armies have successfully repelled aggressive States and liberated their homelands.

In any society there will need to be some group of armed citizens to deal with threats, but having
people do that all the time as their only job produces a violent mindset that jumps to the use of
force as the first option. It also means that police and military are used for all sorts of things
where they aren’t really the best option. Soldiers are not disaster relief workers, police are not
mental health counselors, and using bodies of armed people to respond to every crisis – as most
States do – creates violence and oppression. By funding and supporting nonviolent solutions and
making an armed response the absolute last option, you eliminate the need for policing as we
know it. This is the logical conclusion of current calls to defund police and defund the military.

The end result of this is a global network of networks, free people and communities self-
managing their own affairs. It would be a society with no States, no clear borders, no presidents,
no CEO’s, no extremes of wealth. That’s my utopia.

4.INSTITUTIONALISM:

institutionalism, in the social sciences, an approach that emphasizes the role of institutions.

The study of institutions has a long pedigree. It draws insights from previous work in a wide
array of disciplines, including economics, political science, sociology, anthropology, and
psychology. The reappearance of interest in institutions in the early 1980s followed a familiar
pattern: it was a reaction to dominant strands of thought that neglected institutions, historical
context, and process in favour of general theorizing. Accordingly, institutionalism is frequently
characterized by the attention it gives to history. The institutionalism that emerged in the 1980s
is called new institutionalism (NI), but it is less “new” than it is a restatement of previous
scholarship. The following discussion traces the development of institutionalism from the 19th
century to the emergence of NI in the last decades of the 20th century.

European institutionalism during the 19th century

A full overview of the institutionalist tradition would go back to Aristotle’s discussion of regime
types (politeia). More recent interest in institutions emerged during the 19th century among the
German historical economists (GHE), also called the institutional economists. Providing a
critical response to the universal theories of the classical economists, these scholars disparaged
deductive work, which they considered to be self-referential mathematical modeling. They
argued that economic life is better understood through empirical work rather than through logical
philosophy.

Their key insight was the need for historically and sociologically informed empirical analysis of
reality. The earliest figure from this group was the German economist Wilhelm Roscher. His
work insisted on the importance of context—historical, social, and institutional—for
understanding the laws of political economy, economic behaviour, and the empirical diversity of
social life. Early research focused on the relationship between the social and economic
organization of society, stages of development, and evolutionary processes. Bitter conflicts with
their Marxist contemporaries (followers of the theories of Karl Marx) notwithstanding, some
scholars have come to see a close analytical affinity between the two traditions.

It is customary to divide the GHE into three generations: Early, Younger, and Last. The latter is
noteworthy because it encapsulates some of the work of the German sociologist Max Weber,
who was influenced by early GHE. Weber is perhaps the most influential modern institutionalist.
Contemporary institutional works that posit institutions as an independent and non-
epiphenomenal variable are indebted to Weber’s theorizing a political realm that is autonomous
from economics and ideas. In his discussion of the state and bureaucracy, he proposes a
macrosociological theory of institutions.

Institutionalist insights are also present in Weber’s theory of authority. For Weber, charismatic
authority is inherently transient. As charisma exhausts itself and becomes routinized, traditional
or rational-legal forms of authority take its place. With routinization, social relations and
interactions become increasingly regular, predictable, and impersonal. Under modern capitalism,
these take on a rational-legal form and become more extensive and elaborate. Some usages of the
term institutionalization are thus a subset of Weber’s process of routinization.

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Early 20th-century American institutionalism

Institutionalism appeared in American scholarship during the late 19th and early 20th centuries
in the works of the American institutional economists (AIE). The American economist and
sociologist Thorstein Veblen was a pivotal figure who criticized the neoclassical approach for its
focus on individuals. He argued that individuals are shaped by their institutional and
sociocultural context. He emphasized habit, instinct, and emulation as alternatives to utility-
calculation models of behaviour. Veblen theorized institutional persistence and developed
several mechanisms of change, including conflict between institutions, exogenous shocks, and
the interplay between routines and the variable and volatile action of agents.

Although Veblen embraced an organicist approach to social science, favouring the biological
metaphor of evolution over the physical metaphor of mechanics deployed by economists, he was
explicitly antifunctionalist. He raised the possibility of social breakdown and described history as
an unfolding process that is cumulative but also crisis-ridden, rather than as a self-balancing
smoothly changing system.

A later figure among the AIE was the American economist John R. Commons, who in the 1920s
and ’30s rejected the framework of the classical economists in which providence endows
individuals with freedom to enter into relations of economic exchange and economics is separate
from politics. Commons argued that economics was a series of transactions that were made
possible by institutional supports. He identified three types of transactions: rationing, managerial,
and negotiated (associated with communism, fascism, and capitalism respectively). Institutions
have to guarantee liberty and property before negotiated transactions can occur. He defined
institutions as the working rules of collective action that are laid down and enforced by various
organizations including the state. Institutions produce order by creating expectations toward
which individuals can orient their economic behaviour. This interpretation of institutions is at the
heart of rational choice institutionalism (RCI) and the new institutional economics (NIE).

Mid-20th-century American institutionalism

An anthropological version of economic institutionalism emerged later in the work of Karl

Polanyi. Influenced by the GHE, he argued that economic relations are historically contingent
and cannot be understood outside of their social context. For Polanyi, economics is always
embedded in society. Rather than economic relations producing social integration, Polanyi
argued, the social background, and institutions in particular, integrated the economy. According
to this logic, markets are not the product of spontaneous acts of exchange. Instead, personal-level
acts of exchange produce prices only under a system of price-making markets—a system that
cannot arise solely from random acts of exchange. Historically, the market system is a relatively
recent innovation and only one of several, contingent institutional solutions to the problem of
economic integration. Additional forms of integration are reciprocity (e.g., lend-lease) and
redistribution (e.g., the Soviet Union).

Polanyi defined institutions broadly as uniting, stabilizing, and giving structure to the economic
process. Although economic institutions such as price and money are important, Polanyi also
stressed the importance of noneconomic institutions such as religion and government. Haggling
over price and individual choice are understood as a product of institutions; this foreshadows
later sociological institutionalists (SI) who see human behaviour as following a “logic of
appropriateness” and institutions as creating identities. Like his predecessors, Polanyi rejected
the idea that contemporary economic science can universally capture economic relations.

Institutionalism also appeared in political science during the mid-20th century, when American
political science was dominated by the study of democratic progress in the United States.
Analysis of other countries was rare. Nevertheless, theorists such as Carl J. Friedrich focused on
institutions in their cross-national work on constitutionalism. For Friedrich, constitutionalism
was characterized by both a concern for individual autonomy and institutional arrangements—
divided government and federalism—to prevent the concentration of power, especially in the
state. Institutions are the rules of politics and the instruments of their enforcement. However,
Friedrich was careful to note that institutions must reflect social and political reality, and without
belief in their legitimacy they are greatly weakened. Friedrich sharply contrasted modern
constitutionalism from nonconstitutional systems such as totalitarianism, and his work on the
latter influenced an entire generation of Sovietologists. Finally, he was also interested in
questions of institutional crafting, although he was agnostic about the existence of a “universal
common denominator” for institutional design. Friedrich’s insights can be seen in both HI and
RCI.

Institutionalism appeared in sociology with the emergence of organizational science (OS), which
was a response to the rapid growth in the size of firms starting in the 1860s. The earliest and
most influential figure was Chester Irving Barnard, who in the 1930s argued that an organization
is a complex system of cooperation and highlighted the need to understand the behaviour of the
individuals that compose it. He identified a disconnect between an organization’s conscious
system of coordination (formal aspects) and its unconscious processes (informal aspects). The
latter include customs, habits, attitudes, and understandings. The role of the executive is to create
open communication and inducements for individual members.

Barnard stressed the importance of nonmaterial inducements, which facilitated individuals’

carrying out orders without consciously questioning authority. From this perspective, a manager
directs the values of the organization so that individuals work toward a common purpose. He
also argued that organizational forms vary across organizations because the configuration of
individuals is unique to each organization, as is the appropriate organizational solution.
Institutionalism revisited

After World War II, institutionalism lost some of its prominence in the social sciences, displaced
by theories focusing on social structures or individual behaviour. In the 1980s, however, research
on social structures led to a revival of interest in institutions and the emergence of new
institutionalism (NI). Theorists of comparative politics suggested that the state was autonomous
and called for bringing the state back in as an explanatory variable. The study of institutions was
significantly advanced with research in political economy on the state-led development of the
Asian NIEs, as well as institutional reforms in the developed countries. Researchers also became
increasingly interested in cross-national comparison of institutions, with a view to understanding
the process of democratization. Finally, the global expansion of capitalism and European Union
(EU) integration led to significant research demonstrating the role of institutions as
intermediaries between structures and outcomes.

Some social scientists explicitly referenced earlier institutional works in their call for bringing
institutions back in. This new body of work that came to be labelled NI sought to investigate
among other things the interaction of society and institutions, the sources of institutional
coherence, how historical processes lead to delayed outcomes, and nonutilitarian models of
behaviour.

5.MARXISM:

Marxism, a body of doctrine developed by Karl Marx and, to a lesser extent, by Friedrich
Engels in the mid-19th century. It originally consisted of three related ideas: a philosophical
anthropology, a theory of history, and an economic and political program. There is also Marxism
as it has been understood and practiced by the various socialist movements, particularly before
1914. Then there is Soviet Marxism as worked out by Vladimir Ilich Lenin and modified by
Joseph Stalin, which under the name of Marxism-Leninism (see Leninism) became the doctrine
of the communist parties set up after the Russian Revolution (1917). Offshoots of this included
Marxism as interpreted by the anti-Stalinist Leon Trotsky and his followers, Mao Zedong’s
Chinese variant of Marxism-Leninism, and various Marxisms in the developing world. There
were also the post-World War II nondogmatic Marxisms that have modified Marx’s thought with
borrowings from modern philosophies, principally from those of Edmund Husserl and Martin
Heidegger but also from Sigmund Freud and others.

The thought of Karl Marx

The written work of Marx cannot be reduced to a philosophy, much less to a philosophical
system. The whole of his work is a radical critique of philosophy, especially of G.W.F. Hegel’s
idealist system and of the philosophies of the left and right post-Hegelians. It is not, however, a
mere denial of those philosophies. Marx declared that philosophy must become reality. One
could no longer be content with interpreting the world; one must be concerned with transforming
it, which meant transforming both the world itself and human consciousness of it. This, in turn,
required a critique of experience together with a critique of ideas. In fact, Marx believed that all
knowledge involves a critique of ideas. He was not an empiricist. Rather, his work teems with
concepts (appropriation, alienation, praxis, creative labour, value, and so on) that he had
inherited from earlier philosophers and economists, including Hegel, Johann Fichte, Immanuel
Kant, Adam Smith, David Ricardo, and John Stuart Mill. What uniquely characterizes the
thought of Marx is that, instead of making abstract affirmations about a whole group of problems
such as human nature, knowledge, and matter, he examines each problem in its dynamic relation
to the others and, above all, tries to relate them to historical, social, political, and economic
realities.

Historical materialism

In 1859, in the preface to his Zur Kritik der politischen Ökonomie (Contribution to the Critique
of Political Economy), Marx wrote that the hypothesis that had served him as the basis for his
analysis of society could be briefly formulated as follows:

In the social production that men carry on, they enter into definite relations that are indispensable
and independent of their will, relations of production which correspond to a definite stage of
development of their material forces of production. The sum total of these relations of production
constitutes the economic structure of society, the real foundation, on which rises a legal and
political superstructure, and to which correspond definite forms of social consciousness. The
mode of production in material life determines the general character of the social, political, and
intellectual processes of life. It is not the consciousness of men which determines their existence;
it is on the contrary their social existence which determines their consciousness.

Raised to the level of historical law, this hypothesis was subsequently called historical
materialism. Marx applied it to capitalist society, both in Manifest der kommunistischen Partei
(1848; The Communist Manifesto) and Das Kapital (vol. 1, 1867; “Capital”) and in other
writings. Although Marx reflected upon his working hypothesis for many years, he did not
formulate it in a very exact manner: different expressions served him for identical realities. If one
takes the text literally, social reality is structured in the following way:

1. Underlying everything as the real basis of society is the economic structure. This structure
includes (a) the “material forces of production,” that is, the labour and means of production, and
(b) the overall “relations of production,” or the social and political arrangements that regulate
production and distribution. Although Marx stated that there is a correspondence between the
“material forces” of production and the indispensable “relations” of production, he never made
himself clear on the nature of the correspondence, a fact that was to be the source of differing
interpretations among his later followers.

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2. Above the economic structure rises the superstructure, consisting of legal and political “forms
of social consciousness” that correspond to the economic structure. Marx says nothing about the
nature of this correspondence between ideological forms and economic structure, except that
through the ideological forms individuals become conscious of the conflict within the economic
structure between the material forces of production and the existing relations of production
expressed in the legal property relations. In other words, “The sum total of the forces of
production accessible to men determines the condition of society” and is at the base of society.
“The social structure and the state issue continually from the life processes of definite individuals
. . . as they are in reality, that is acting and materially producing.” The political relations that
individuals establish among themselves are dependent on material production, as are the legal
relations. This foundation of the social on the economic is not an incidental point: it colours
Marx’s whole analysis. It is found in Das Kapital as well as in Die deutsche Ideologie (written
1845–46; The German Ideology) and the Ökonomisch-philosophische Manuskripte aus dem
Jahre 1844 (Economic and Philosophic Manuscripts of 1844).

Analysis of society
To go directly to the heart of the work of Marx, one must focus on his concrete program for
humanity. This is just as important for an understanding of Marx as are The Communist
Manifesto and Das Kapital. Marx’s interpretation of human nature begins with human need.
“Man,” he wrote in the Economic and Philosophic Manuscripts of 1844,

is first of all a natural being. As a natural being and a living natural being, he is endowed on the
one hand with natural powers, vital powers…; these powers exist in him as aptitudes, instincts.
On the other hand, as an objective, natural, physical, sensitive being, he is a suffering, dependent
and limited being…, that is, the objects of his instincts exist outside him, independent of him, but
are the objects of his need, indispensable and essential for the realization and confirmation of his
substantial powers.

The point of departure of human history is therefore living human beings, who seek to satisfy
certain primary needs. “The first historical fact is the production of the means to satisfy these
needs.” This satisfaction, in turn, opens the way for new needs. Human activity is thus
essentially a struggle with nature that must furnish the means of satisfying human needs: drink,
food, clothing, the development of human powers and then of human intellectual and artistic
abilities. In this undertaking, people discover themselves as productive beings who humanize
themselves through their labour. Furthermore, they humanize nature while they naturalize
themselves. By their creative activity, by their labour, they realize their identity with the nature
that they master, while at the same time, they achieve free consciousness. Born of nature, they
become fully human by opposing it. Becoming aware in their struggle against nature of what
separates them from it, they find the conditions of their fulfillment, of the realization of their true
stature. The dawning of consciousness is inseparable from struggle. By appropriating all the
creative energies, they discover that “all that is called history is nothing else than the process of
creating man through human labour, the becoming of nature for man. Man has thus evident and
irrefutable proof of his own creation by himself.” Understood in its universal dimension, human
activity reveals that “for man, man is the supreme being.” It is thus vain to speak of God,
creation, and metaphysical problems. Fully naturalized, humans are sufficient unto themselves:
they have recaptured the fullness of humanity in its full liberty.

Living in a capitalist society, however, the individual is not truly free. He is an alienated being;
he is not at home in his world. The idea of alienation, which Marx takes from Hegel and Ludwig
Feuerbach, plays a fundamental role in the whole of his written work, starting with the writings
of his youth and continuing through Das Kapital. In the Economic and Philosophic Manuscripts
the alienation of labour is seen to spring from the fact that the more the worker produces the less
he has to consume, and the more values he creates the more he devalues himself, because his
product and his labour are estranged from him. The life of the worker depends on things that he
has created but that are not his, so that, instead of finding his rightful existence through his
labour, he loses it in this world of things that are external to him: no work, no pay. Under these
conditions, labour denies the fullness of concrete humanity. “The generic being (Gattungwesen)
of man, nature as well as his intellectual faculties, is transformed into a being which is alien to
him, into a means of his individual existence.” Nature, his body, his spiritual essence become
alien to him. “Man is made alien to man.” When carried to its highest stage of development,
private property becomes “the product of alienated labour…the means by which labour alienates
itself (and) the realization of this alienation.” It is also at the same time “the tangible material
expression of alienated human life.”

Although there is no evidence that Marx ever disclaimed this anthropological analysis of
alienated labour, starting with The German Ideology, the historical, social, and economic causes
of the alienation of labour are given increasing emphasis, especially in Das Kapital. Alienated
labour is seen as the consequence of market product, the division of labour, and the division of
society into antagonistic classes. As producers in society, workers create goods only by their
labour. These goods are exchangeable. Their value is the average amount of social labour spent
to produce them. The alienation of the worker takes on its full dimension in that system of
market production in which part of the value of the goods produced by the worker is taken away
from him and transformed into surplus value, which the capitalist privately appropriates. Market
production also intensifies the alienation of labour by encouraging specialization, piecework, and
the setting up of large enterprises. Thus the labour power of the worker is used along with that of
others in a combination whose significance he is ignorant of, both individually and socially. In
thus losing their quality as human products, the products of labour become fetishes, that is, alien
and oppressive realities to which both the individual who possesses them privately and the
individual who is deprived of them submit themselves. In the market economy, this submission
to things is obscured by the fact that the exchange of goods is expressed in money.

This fundamental economic alienation is accompanied by secondary political and ideological

alienations, which offer a distorted representation of and an illusory justification of a world in
which the relations of individuals with one another are also distorted. The ideas that people form
are closely bound up with their material activity and their material relations: “The act of making
representations, of thinking, the spiritual intercourse of men, seem to be the direct emanation of
their material relations.” This is true of all human activity: political, intellectual, or spiritual.
“Men produce their representations and their ideas, but it is as living men, men acting as they are
determined by a definite development of their powers of production.” Law, morality,
metaphysics, and religion do not have a history of their own. “Men developing their material
production modify together with their real existence their ways of thinking and the products of
their ways of thinking.” In other words, “It is not consciousness which determines existence, it is
existence which determines consciousness.”

In bourgeois, capitalist society the individual is divided into political citizen and economic actor.
This duality represents his political alienation, which is further intensified by the functioning of
the bourgeois state. From this study of society at the beginning of the 19th century, Marx came
to see the state as the instrument through which the propertied class dominated other classes.

Ideological alienation, for Marx, takes different forms, appearing in economic, philosophical,
and legal theories. Marx undertook a lengthy critique of the first in Das Kapital and of the
second in The German Ideology. But ideological alienation expresses itself supremely in
religion. Taking up the ideas about religion that were current in left post-Hegelian circles,
together with the thought of Feuerbach, Marx considered religion to be a product of human
consciousness. It is a reflection of the situation of a person who “either has not conquered
himself or has already lost himself again” (the individual in the world of private property). It is
“an opium for the people.” Unlike Feuerbach, Marx believed that religion would disappear only
with changes in society.

Analysis of the economy

Marx analyzed the market economy system in Das Kapital. In this work he borrows most of the
categories of the classical English economists Smith and Ricardo but adapts them and introduces
new concepts such as that of surplus value. One of the distinguishing marks of Das Kapital is
that in it Marx studies the economy as a whole and not in one or another of its aspects. His
analysis is based on the idea that humans are productive beings and that all economic value
comes from human labour. The system he analyzes is principally that of mid-19th-century
England. It is a system of private enterprise and competition that arose in the 16th century from
the development of sea routes, international trade, and colonialism. Its rise had been facilitated
by changes in the forces of production (the division of labour and the concentration of
workshops), the adoption of mechanization, and technical progress. The wealth of the societies
that brought this economy into play had been acquired through an “enormous accumulation of
commodities.” Marx therefore begins with the study of this accumulation, analyzing the unequal
exchanges that take place in the market.

According to Marx, if the capitalist advances funds to buy cotton yarn with which to produce
fabrics and sells the product for a larger sum than he paid, he is able to invest the difference in
additional production. “Not only is the value advance kept in circulation, but it changes in its
magnitude, adds a plus to itself, makes itself worth more, and it is this movement that transforms
it into capital.” The transformation, to Marx, is possible only because the capitalist has
appropriated the means of production, including the labour power of the worker. Now labour
power produces more than it is worth. The value of labour power is determined by the amount of
labour necessary for its reproduction or, in other words, by the amount needed for the worker to
subsist and beget children. But in the hands of the capitalist the labour power employed in the
course of a day produces more than the value of the sustenance required by the worker and his
family. The difference between the two values is appropriated by the capitalist, and it
corresponds exactly to the surplus value realized by capitalists in the market. Marx is not
concerned with whether in capitalist society there are sources of surplus value other than the
exploitation of human labour—a fact pointed out by Joseph Schumpeter in Capitalism,
Socialism, and Democracy (1942). He remains content with emphasizing this primary source:
Surplus value is produced by the employment of labour power. Capital buys the labour power
and pays the wages for it. By means of his work the labourer creates new value which does not
belong to him, but to the capitalist. He must work a certain time merely in order to reproduce the
equivalent value of his wages. But when this equivalent value has been returned, he does not
cease work, but continues to do so for some further hours. The new value which he produces
during this extra time, and which exceeds in consequence the amount of his wage, constitutes
surplus value.

Throughout his analysis, Marx argues that the development of capitalism is accompanied by
increasing contradictions. For example, the introduction of machinery is profitable to the
individual capitalist because it enables him to produce more goods at a lower cost, but new
techniques are soon taken up by his competitors. The outlay for machinery grows faster than the
outlay for wages. Since only labour can produce the surplus value from which profit is derived,
this means that the capitalist’s rate of profit on his total outlay tends to decline. Along with the
declining rate of profit goes an increase in unemployment. Thus, the equilibrium of the system is
precarious, subject as it is to the internal pressures resulting from its own development. Crises
shake it at regular intervals, preludes to the general crisis that will sweep it away. This instability
is increased by the formation of a reserve army of workers, both factory workers and peasants,
whose pauperization keeps increasing. “Capitalist production develops the technique and the
combination of the process of social production only by exhausting at the same time the two
sources from which all wealth springs: the earth and the worker.” According to the Marxist
dialectic, these fundamental contradictions can only be resolved by a change from capitalism to a
new system.

Class struggle
Marx inherited the ideas of class and class struggle from utopian socialism and the theories of
Henri de Saint-Simon. These had been given substance by the writings of French historians such
as Adolphe Thiers and François Guizot on the French Revolution of 1789. But unlike the French
historians, Marx made class struggle the central fact of social evolution. “The history of all
hitherto existing human society is the history of class struggles.”

In Marx’s view, the dialectical nature of history is expressed in class struggle. With the
development of capitalism, the class struggle takes an acute form. Two basic classes, around
which other less important classes are grouped, oppose each other in the capitalist system: the
owners of the means of production, or bourgeoisie, and the workers, or proletariat. “The
bourgeoisie produces its own grave-diggers. The fall of the bourgeoisie and the victory of the
proletariat are equally inevitable” (The Communist Manifesto) because

the bourgeois relations of production are the last contradictory form of the process of social
production, contradictory not in the sense of an individual contradiction, but of a contradiction
that is born of the conditions of social existence of individuals; however, the forces of production
which develop in the midst of bourgeois society create at the same time the material conditions
for resolving this contradiction. With this social development the prehistory of human society
ends.
When people have become aware of their loss, of their alienation, as a universal nonhuman
situation, it will be possible for them to proceed to a radical transformation of their situation by a
revolution. This revolution will be the prelude to the establishment of communism and the reign
of liberty reconquered. “In the place of the old bourgeois society with its classes and its class
antagonisms, there will be an association in which the free development of each is the condition
for the free development of all.”

But for Marx there are two views of revolution. One is that of a final conflagration, “a violent
suppression of the old conditions of production,” which occurs when the opposition between
bourgeoisie and proletariat has been carried to its extreme point. This conception is set forth in a
manner inspired by the Hegelian dialectic of the master and the slave, in Die heilige Familie
(1845; The Holy Family). The other conception is that of a permanent revolution involving a
provisional coalition between the proletariat and the petty bourgeoisie rebelling against a
capitalism that is only superficially united. Once a majority has been won to the coalition, an
unofficial proletarian authority constitutes itself alongside the revolutionary bourgeois authority.
Its mission is the political and revolutionary education of the proletariat, gradually assuring the
transfer of legal power from the revolutionary bourgeoisie to the revolutionary proletariat.

If one reads The Communist Manifesto carefully one discovers inconsistencies that indicate that
Marx had not reconciled the concepts of catastrophic and of permanent revolution. Moreover,
Marx never analyzed classes as specific groups of people opposing other groups of people.
Depending on the writings and the periods, the number of classes varies; and unfortunately the
pen fell from Marx’s hand at the moment when, in Das Kapital (vol. 3), he was about to take up
the question. Reading Das Kapital, one is furthermore left with an ambiguous impression with
regard to the destruction of capitalism: will it be the result of the “general crisis” that Marx
expects, or of the action of the conscious proletariat, or of both at once?

The contributions of Engels

Friedrich Engels
Engels became a communist in 1842 and discovered the proletariat of England when he took
over the management of the Manchester factory belonging to his father’s cotton firm. In 1844,
the year he began his close association and friendship with Marx, Engels was finishing his
Umrisse zu einer Kritik der Nationalökonomie (Outline of a Critique of Political Economy)—a
critique of Smith, Ricardo, Mill, and J.-B. Say. This remarkable study contained in seminal form
the critique that Marx was to make of bourgeois political economy in Das Kapital. During the
first years of his stay in Manchester, Engels observed carefully the life of the workers of that
great industrial centre and described it in Die Lage der arbeitenden Klassen in England (The
Condition of the Working Class in England), published in 1845 in Leipzig. This work was an
analysis of the evolution of industrial capitalism and its social consequences. He collaborated
with Marx in the writing of The Holy Family, The German Ideology, and The Communist
Manifesto. The correspondence between them is of fundamental importance for the student of
Das Kapital, for it shows how Engels contributed by furnishing Marx with a great amount of
technical and economic data and by criticizing the successive drafts. This collaboration lasted
until Marx’s death and was carried on posthumously with the publication of the manuscripts left
by Marx, which Engels edited, forming volumes 2 and 3 of Das Kapital. He also wrote various
articles on Marx’s work.

In response to criticism of Marx’s ideas by a socialist named Eugen Dühring, Engels published
several articles that were collected under the title Herr Eugen Dührings Umwälzung der
Wissenschaft (1878; Herr Eugen Dühring’s Revolution in Science, better known as Anti-
Dühring), and an unfinished work, Dialektik und Natur (Dialectics of Nature), which he had
begun around 1875–76. The importance of these writings to the subsequent development of
Marxism can be seen from Lenin’s observation that Engels “developed, in a clear and often
polemical style, the most general scientific questions and the different phenomena of the past and
present according to the materialist understanding of history and the economic theory of Karl
Marx.” But Engels was driven to simplify problems with a view to being pedagogical; he tended
to schematize and systematize things as if the fundamental questions were settled. The
connections that he thus established between some of Marx’s governing ideas and some of the
scientific ideas of his age gave rise to the notion that there is a complete Marxist philosophy. The
idea was to play a significant role in the transition of Marxism from a “critique of daily life” to
an integrated doctrine in which philosophy, history, and the sciences are fused.

Anti-Dühring is of fundamental importance for it constitutes the link between Marx and certain
forms of modern Marxism. It contains three parts: Philosophy, Political Economy, and
Socialism. In the first, Engels attempts to establish that the natural sciences and even
mathematics are dialectical, in the sense that observable reality is dialectical: the dialectical
method of analysis and thought is imposed by the material forces with which they deal. It is thus
rightly applied to the study of history and human society. “Motion, in effect, is the mode of
existence of matter,” Engels writes. In using materialistic dialectic to make a critique of
Dühring’s thesis, according to which political forces prevail over all the rest in the molding of
history, Engels provides a good illustration of the materialistic idea of history, which puts the
stress on the prime role of economic factors as driving forces in history. The other chapters of the
section Political Economy form a very readable introduction to the principal economic ideas of
Marx: value (simple and complex), labour, capital, and surplus value. The section Socialism
starts by formulating anew the critique of the capitalist system as it was made in Das Kapital. At
the end of the chapters devoted to production, distribution, the state, the family, and education,
Engels outlines what the socialist society will be like, a society in which the notion of value has
no longer anything to do with the distribution of the goods produced because all labour
“becomes at once and directly social labour,” and the amount of social labour that every product
contains no longer needs to be ascertained by “a detour.” A production plan will coordinate the
economy. The division of labour and the separation of town and country will disappear with the
“suppression of the capitalist character of modern industry.” Thanks to the plan, industry will be
located throughout the country in the collective interest, and thus the opposition between town
and country will disappear—to the profit of both industry and agriculture. Finally, after the
liberation of humanity from the condition of servitude imposed by the capitalist mode of
production, the state will also be abolished and religion will disappear by “natural death.”

One of the most remarkable features of Anti-Dühring is the insistence with which Engels refuses
to base socialism on absolute values. He admits only relative values, linked to historical,
economic, and social conditions. Socialism cannot possibly be based on ethical principles: each
epoch can successfully carry out only that of which it is capable. Marx had written this in his
preface of 1859.

German Marxism after Engels

The work of Kautsky and Bernstein

Karl Kautsky

The theoretical leadership after Engels was taken by Karl Kautsky, editor of the official organ of
the German Social Democratic Party, Die Neue Zeit. He wrote Karl Marx’ ökonomische Lehren
(1887; The Economic Doctrines of Karl Marx), in which the work of Marx is presented as
essentially an economic theory. Kautsky reduced the ideas of Marx and Marxist historical
dialectic to a kind of evolutionism. He laid stress on the increasing pauperization of the working
class and on the increasing degree of capitalist concentration. While opposing all compromise
with the bourgeois state, he accepted the contention that the socialist movement should support
laws benefiting the workers provided that they did not reinforce the power of the state. Rejecting
the idea of an alliance between the working class and the peasantry, he believed that the
overthrow of the capitalist state and the acquisition of political power by the working class could
be realized in a peaceful way, without upsetting the existing structures. As an internationalist he
supported peace, rejecting war and violence. For him, war was a product of capitalism. Such
were the main features of “orthodox” German Marxism at the time when the “revisionist”
theories of Eduard Bernstein appeared.

Bernstein created a great controversy with articles that he wrote in 1896 for Die Neue Zeit,
arguing that Marxism needed to be revised. His divergence widened with the publication in 1899
of Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie (Evolutionary
Socialism), to which rejoinders were made by Kautsky in Bernstein und das Sozialdemokratische
Programm: Eine Antikritik (1899; “Bernstein and the Social Democratic Program”) and the
Polish-born Marxist Rosa Luxemburg in Sozialreform oder Revolution (Reform or Revolution),
both in 1899. Bernstein focused first of all upon the labour theory of value. Along with the
economists of his time he considered it outdated, both in the form expounded by British classical
economists and as set forth in Das Kapital. He argued, moreover, that class struggle was
becoming less rather than more intense, for concentration was not accelerating in industry as
Marx had forecast, and in agriculture it was not increasing at all. Bernstein demonstrated this on
the basis of German, Dutch, and English statistical data. He also argued that cartels and business
syndicates were smoothing the evolution of capitalism, a fact that cast doubt on the validity of
Marx’s theory of capitalistic crises. Arguing that quite a few of Marx’s theories were not
scientifically based, Bernstein blamed the Hegelian and Ricardian structure of Marx’s work for
his failure to take sufficient account of observable reality.

To this, Kautsky replied that, with the development of capitalism, agriculture was becoming a
sector more and more dependent on industry, and that in addition an industrialization of
agriculture was taking place. Luxemburg took the position that the contradictions of capitalism
did not cease to grow with the progress of finance capitalism and the exploitation of the colonies,
and that these contradictions were leading to a war that would give the proletariat its opportunity
to assume power by revolutionary means.

The radicals

One of the most divisive questions was that of war and peace. This was brought to the fore at the
outbreak of World War I, when Social Democratic deputies in the German Reichstag voted for
the financing of the war. Among German Marxists who opposed the war were Karl Liebknecht
and Luxemburg. Liebknecht was imprisoned in 1916 for agitating against the war. On his release
in 1918 he took the leadership of the Spartacus League, which was later to become the
Communist Party of Germany. Luxemburg had also been arrested for her antimilitary activities.
In addition to her articles, signed Junius, in which she debated with Lenin on the subject of
World War I and the attitude of the Marxists toward it (published in 1916 as Die Krise der
Sozialdemokratie [The Crisis in the German Social-Democracy]), she is known for her book Die
Akkumulation des Kapitals (1913; The Accumulation of Capital). In this work she returned to
Marx’s economic analysis of capitalism, in particular the accumulation of capital as expounded
in volume 2 of Das Kapital. There she found a contradiction that had until then been unnoticed:
Marx’s scheme seems to imply that the development of capitalism can be indefinite, though
elsewhere he sees the contradictions of the system as bringing about increasingly violent
economic crises that will inevitably sweep capitalism away. Luxemburg concluded that Marx’s
scheme is oversimplified and assumes a universe made up entirely of capitalists and workers. If
increases in productivity are taken into account, she asserted, balance between the two sectors
becomes impossible; in order to keep expanding, capitalists must find new markets in
noncapitalist spheres, either among peasants and artisans or in colonies and underdeveloped
countries. Capitalism will collapse only when exploitation of the world outside it (the peasantry,
colonies, and so on) has reached a limit. This conclusion has been the subject of passionate
controversies.

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The Austrians

The Austrian school came into being when Austrian socialists started publishing their works
independently of the Germans; it can be dated from either 1904 (beginning of the Marx-Studien
collection) or 1907 (publication of the magazine Der Kampf). The most important members of
the school were Max Adler, Karl Renner, Rudolf Hilferding, Gustav Eckstein, Friedrich Adler,
and Otto Bauer. The most eminent was Bauer, a brilliant theoretician whose Die
Nationalitätenfrage und die Sozialdemokratie (1906; “The Nationalities Question and the Social
Democracy”) was critically reviewed by Lenin. In this work he dealt with the problem of
nationalities in the light of the experience of the Austro-Hungarian Empire. He favoured the self-
determination of peoples and emphasized the cultural elements in the concept of nationhood.
Hilferding was finance minister of the German Republic after World War I in the Cabinets of the
Social Democrats Gustav Stresemann (1923) and Hermann Müller (1928). He is known
especially for his work Das Finanzkapital (1910), in which he maintained that capitalism had
come under the control of banks and industrial monopolies. The growth of national competition
and tariff barriers, he believed, had led to economic warfare abroad. Hilferding’s ideas strongly
influenced Lenin, who analyzed them in Imperializm, kak noveyshy etap kapitalizma (1917;
Imperialism, the Highest Stage of Capitalism).

Russian and Soviet Marxism

Das Kapital was translated into Russian in 1872. Marx kept up more or less steady relations with
the Russian socialists and took an interest in the economic and social conditions of the tsarist
empire. The person who originally introduced Marxism into Russia was Georgy Plekhanov, but
the person who adapted Marxism to Russian conditions was Lenin.

Lenin

Vladimir Lenin

Vladimir Ilich Ulyanov, or Lenin, was born in 1870 at Simbirsk (now Ulyanovsk). He entered
the University of Kazan to study law but was expelled the same year for participating in student
agitation. In 1893 he settled in St. Petersburg and became actively involved with the
revolutionary workers. With his pamphlet Chto delat? (1902; What Is to Be Done?), he specified
the theoretical principles and organization of a Marxist party as he thought it should be
constituted. He took part in the second Congress of the Russian Social-Democratic Workers’
Party, which was held in Brussels and London (1903), and induced the majority of the Congress
members to adopt his views. Two factions formed at the Congress: the Bolshevik (from the
Russian word for “larger”) with Lenin as the leader and the Menshevik (from the Russian word
for “smaller”) with L. Martov at the head. The former wanted a restricted party of militants and
advocated the dictatorship of the proletariat. The latter wanted a wide-open proletarian party,
collaboration with the liberals, and a democratic constitution for Russia. In his pamphlet Shag
vperyod, dva shaga nazad (1904; One Step Forward, Two Steps Back), Lenin compared the
organizational principles of the Bolsheviks to those of the Mensheviks. After the failure of the
Russian Revolution of 1905, he drew positive lessons for the future in Dve taktiki Sotsial-
Demokraty v demokraticheskoy revolyutsi (1905; Two Tactics of Social Democracy in the
Democratic Revolution. He fiercely attacked the influence of Kantian philosophy on German and
Russian Marxism in Materializm i empiriokrititsizm (1908; Materialism and Empirio-criticism
(1908). In 1912 at the Prague Conference the Bolsheviks constituted themselves as an
independent party. During World War I Lenin resided in Switzerland, where he studied Hegel’s
Science of Logic and the development of capitalism and carried on debates with Marxists like
Luxemburg on the meaning of the war and the right of nations to self-determination. In 1915 at
Zimmerwald, and in 1916 at Kiental, he organized two international socialist conferences to fight
against the war. Immediately after the February 1917 revolution he returned to Russia, and in
October the Bolshevik coup brought him to power.

The situation of Russia and the Russian revolutionary movement at the end of the 19th century
and the beginning of the 20th led Lenin to diverge, in the course of his development and his
analyses, from the positions both of “orthodox Marxism” and of “revisionism.” He rediscovered
the original thought of Marx by a careful study of his works, in particular Das Kapital and The
Holy Family. He saw Marxism as a practical affair and tried to go beyond the accepted formulas
to plan political action that would come to grips with the surrounding world.

As early as 1894, in his populist study Chto Takoye “Druzya Naroda,” kak oni voyuyut protiv
Sotsial-Demokratov? (What the “Friends of the People” Are, and How They Fight the Social-
Democrats), Lenin took up Marx’s distinction between “material social relations” and
“ideological social relations.” In Lenin’s eyes the importance of Das Kapital was that “while
explaining the structure and the development of the social formation seen exclusively in terms of
its relations of production, (Marx) has nevertheless everywhere and always analyzed the
superstructure which corresponds to these relations of production.” In Razvitiye kapitalizma v
Rossi (1897–99; The Development of Capitalism in Russia) Lenin sought to apply Marx’s
analysis by showing the growing role of capital, in particular commercial capital, in the
exploitation of the workers in the factories and the large-scale expropriation of the peasants. It
was thus possible to apply to Russia the models developed by Marx for western Europe. At the
same time Lenin did not lose sight of the importance of the peasant in Russian society. Although
a disciple of Marx, he did not believe that he had only to repeat Marx’s conclusions. He wrote:

We do not consider the theory of Marx to be a complete, immutable whole. We think on the
contrary that this theory has only laid the cornerstone of the science, a science which socialists
must further develop in all directions if they do not want to let themselves be overtaken by life.
We think that, for the Russian socialists, an independent elaboration of the theory is particularly
necessary.

Lenin laid great stress upon the dialectical method. In his early writings he defined the dialectic
as “nothing more nor less than the method of sociology, which sees society as a living organism,
in perpetual development (and not as something mechanically assembled and thus allowing all
sorts of arbitrary combinations of the various social elements) . . . ” (Friends of the People).
After having studied Hegel toward the end of 1914, he took a more activist view. Dialectic is not
only evolution; it is praxis, leading from activity to reflection and from reflection to action.

The dictatorship of the proletariat

Lenin also put much emphasis on the leading role of the party. As early as 1902 he was
concerned with the need for a cohesive party with a correct doctrine, adapted to the exigencies of
the period, which would be a motive force among the masses, helping to bring them to an
awareness of their real situation. In What Is To Be Done? he called for a party of professional
revolutionaries, disciplined and directed, capable of defeating the police; its aim should be to
establish the dictatorship of the proletariat. In order to do this, he wrote in Two Tactics of Social-
Democracy in the Democratic Revolution, it was necessary “to subject the insurrection of the
proletarian and non-proletarian masses to our influence, to our direction, to use it in our best
interests.” But this was not possible without a doctrine: “Without revolutionary theory, no
revolutionary movement.” On the eve of the revolution of October 1917, in Gosudarstvo i
revolyutsiya (The State and Revolution), he set forth the conditions for the dictatorship of the
proletariat and the suppression of the capitalist state.

Lenin assigned major importance to the peasantry in formulating his program. It would be a
serious error, he held, for the Russian revolutionary workers’ movement to neglect the peasants.
Even though it was clear that the industrial proletariat constituted the vanguard of the revolution,
the discontent of the peasantry could be oriented in a direction favourable to the revolution by
placing among the goals of the party the seizure of privately owned land. As early as 1903, at the
third congress of the party, he secured a resolution to this effect. Thereafter, the dictatorship of
the proletariat became the dictatorship of the proletariat and the peasantry. In 1917 he
encouraged the peasants to seize land long before the approval of agrarian reform by the
Constituent Assembly.

Among Lenin’s legacies to Soviet Marxism was one that proved to be injurious to the party. This
was the decision taken at his behest by the 10th congress of the party in the spring of 1921, while
the sailors were rebelling at Kronstadt and the peasants were growing restless in the countryside,
to forbid all factions, all factional activity, and all opposition political platforms within the party.
This decision had grave consequences in later years when Stalin used it against his opponents.

Stalin

Joseph Stalin

It is Joseph Stalin who codified the body of ideas that, under the name of Marxism-Leninism,
constituted the official doctrine of the Soviet and eastern European communist parties. Stalin was
a man of action in a slightly different sense than was Lenin. Gradually taking over power after
Lenin’s death in 1924, he pursued the development of the Soviet Union with great vigour. By
practicing Marxism, he assimilated it, at the same time simplifying it. Stalin’s Marxism-
Leninism rests on the dialectic of Hegel, as set forth in Istoriya Vsesoyuznoy Kommunisticheskoy
Partii (Bolshevikov): Kratky kurs (1938; A Short History of the Communist Party of the Soviet
Union), and on a materialism that can be considered roughly identical to that of Feuerbach. His
work Voprosy leninizma (1926; Problems of Leninism), which appeared in 11 editions during his
lifetime, sets forth an ideology of power and activism that rides roughshod over the more
nuanced approach of Lenin.

Soviet dialectical materialism can be reduced to four laws: (1) History is a dialectical
development. It proceeds by successive phases that supersede one another. These phases are not
separate, any more than birth, growth, and death are separate. Though it is true that phase B
necessarily negates phase A, it remains that phase B was already contained in phase A and was
initiated by it. The dialectic does not regard nature as an accidental accumulation of objects, of
isolated and independent phenomena, but as a unified, coherent whole. Furthermore, nature is
perpetually in movement, in a state of unceasing renewal and development, in which there is
always something being born and developing and something disintegrating and disappearing. (2)
Evolution takes place in leaps, not gradually. (3) Contradictions must be made manifest. All
phenomena contain in themselves contradictory elements. “Dialectic starts from the point of
view that objects and natural phenomena imply internal contradictions, because they all have a
positive and a negative side.” These contradictory elements are in perpetual struggle: it is this
struggle that is the “internal content of the process of development,” according to Stalin. (4) The
law of this development is economic. All other contradictions are rooted in the basic economic
relationship. A given epoch is entirely determined by the relations of production. They are social
relations; relations of collaboration or mutual aid, relations of domination or submission; and
finally, transitory relations that characterize a period of passage from one system to another.
“The history of the development of society is, above all, the history of the development of
production, the history of the modes of production which succeed one another through the
centuries.”

From these principles may be drawn the following inferences, essential for penetrating the
workings of Marxist-Leninist thought and its application. No natural phenomenon, no historical
or social situation, no political fact, can be considered independently of the other facts or
phenomena that surround it; it is set within a whole. Since movement is the essential fact, one
must distinguish between what is beginning to decay and what is being born and developing.
Since the process of development takes place by leaps, one passes suddenly from a succession of
slow quantitative changes to a radical qualitative change. In the social or political realm, these
sudden qualitative changes are revolutions, carried out by the oppressed classes. One must
follow a frankly proletarian-class policy that exposes the contradictions of the capitalist system.
A reformist policy makes no sense. Consequently (1) nothing can be judged from the point of
view of “eternal justice” or any other preconceived notion and (2) no social system is immutable.
To be effective, one must not base one’s action on social strata that are no longer developing,
even if they represent for the moment the dominant force, but on those that are developing.

Stalin’s materialist and historical dialectic differs sharply from the perspective of Karl Marx. In
The Communist Manifesto Marx applied the materialist dialectic to the social and political life of
his time. In the chapter entitled “Bourgeois and Proletarians,” he studied the process of the
growth of the revolutionary bourgeoisie within feudal society, then the genesis and the growth of
the proletariat within capitalism, placing the emphasis on the struggle between antagonistic
classes. To be sure, he connected social evolution with the development of the forces of
production. What counted for him, however, was not only the struggle but also the birth of
consciousness among the proletariat. “As to the final victory of the propositions put forth in the
Manifesto, Marx expected it to come primarily from the intellectual development of the working
class, necessarily the result of common action and discussion” (Engels, preface to the
republication of The Communist Manifesto, May 1, 1890).

The result of Stalin’s dialectic, however, was what he called revolution from above, a dictatorial
policy to increase industrialization and collectivize agriculture based upon ruthless repression
and a strong centralization of power. For Stalin what counted was the immediate goal, the
practical result. The move was from a dialectic that emphasized both the objective and the
subjective to one purely objective, or more exactly, objectivist. Human actions are to be judged
not by taking account of the intentions of the actor and their place in a given historical web but
only in terms of what they signify objectively at the end of the period considered.

Trotskyism

Leon Trotsky

Alongside Marxism-Leninism as expounded in the former Soviet Union, there arose another
point of view expressed by Stalin’s opponent Leon Trotsky and his followers (see Trotskyism).
Trotsky played a leading role in both the Russian Revolution of 1905 and that of 1917. After
Lenin’s death he fell out with Stalin. Their conflict turned largely upon questions of policy, both
domestic and foreign. In the realm of ideas, Trotsky held that a revolution in a backward, rural
country could be carried out only by the proletariat. Once in power the proletariat must carry out
agrarian reform and undertake the accelerated development of the economy. The revolution must
be a socialist one, involving the abolition of the private ownership of the means of production, or
else it will fail. But the revolution cannot be carried out in isolation, as Stalin maintained it
could. The capitalist countries will try to destroy it; moreover, to succeed the revolution must be
able to draw upon the industrial techniques of the developed countries. For these reasons the
revolution must be worldwide and permanent, directed against the liberal and nationalist
bourgeoisie of all countries and using local victories to advance the international struggle.

Tactically, Trotsky emphasized the necessity of finding or creating a revolutionary situation, of

educating the working class in order to revolutionize it, of seeing that the party remained open to
the various revolutionary tendencies and avoided becoming bureaucratized, and finally, when the
time for insurrection comes, of organizing it according to a detailed plan.

Variants of Marxism
Maoism

Mao Zedong

When the Chinese communists took power in 1948, they brought with them a new kind of
Marxism that came to be called Maoism after their leader Mao Zedong. The thought of Mao
must always be seen against the changing revolutionary reality of China from 1930 onward. His
thought was complex, a Marxist type of analysis combined with the permanent fundamentals of
Chinese thought and culture.

One of its central elements has to do with the nature and role of contradictions in socialist
society. For Mao, every society, including socialist (communist) society, contained “two
different types of contradictions”: (1) antagonistic contradictions—contradictions between us
(the people) and our enemies (the Chinese bourgeoisie faithful), between the imperialist camp
and the socialist camp, and so forth—which are resolved by revolution, and (2) nonantagonistic
contradictions—between the government and the people under a socialist regime, between two
groups within the Communist Party, between one section of the people and another under a
communist regime, and so forth—which are resolved by vigorous fraternal criticism and self-
criticism.
The notion of contradiction is specific to Mao’s thought in that it differs from the conceptions of
Marx or Lenin. For Mao, in effect, contradictions were at the same time universal and particular.
In their universality, one must seek and discover what constitutes their particularity: every
contradiction displays a particular character, depending on the nature of things and phenomena.
Contradictions have alternating aspects—sometimes strongly marked, sometimes blurred. Some
of these aspects are primary, others secondary. It is important to define them well, for if one fails
to do so, the analysis of the social reality and the actions that follow from it will be mistaken.
This is quite far from Stalinism and dogmatic Marxism-Leninism.

Another essential element of Mao’s thought, which must be seen in the context of revolutionary
China, is the notion of permanent revolution. It is an old idea advocated in different contexts by
Marx, Lenin, and Trotsky but lacking, in Mao’s formulation, the international dimension
espoused by his predecessors. For Mao it followed from his ideas about the struggle of humans
against nature (held from 1938, at least); the campaigns for the rectification of thought (1942,
1951, 1952); and the necessity of struggling against bureaucracy, waste, and corruption in a
country then possessing 600 to 700 million inhabitants, where very old civilizations and cultures
still permeated both the bourgeois classes and the peasantry, where bureaucracy was thoroughly
entrenched, and where the previous society was extremely corrupt. It arose from Mao’s
conviction that the rhythm of the revolution must be accelerated. This conviction appeared in
1957 in his speeches and became manifest in 1958 in the Great Leap Forward, followed in 1966
by the Cultural Revolution.

Mao’s concept of permanent revolution rests upon the existence of nonantagonistic

contradictions in the China of the present and of the future. The people must be mobilized into a
permanent movement in order to carry forward the revolution and to prevent the ruling group
from turning bourgeois (as he perceived it had in the Soviet Union). It is necessary to shape
among the masses a new vision of the world by tearing them from their passivity and their
century-old habits. This is the background of the Cultural Revolution that began in 1966,
following previous campaigns but differing from them in its magnitude and, it would seem, in
the mobilization of youth against the cadres of the party. In these campaigns Mao drew upon his
past as a revolutionary Marxist peasant leader, from his life in the red military and peasant bases
and among the Red Guards of Yen-an, seeking in his past experience ways to mobilize the whole
Chinese population against the dangers—internal and external—that confronted it in the present.

The distinguishing characteristic of Maoism is that it represents a peasant type of Marxism, with
a principally rural and military outlook. While basing himself on Marxism-Leninism, adapted to
Chinese requirements, Mao was rooted in the peasant life from which he himself came, in the
revolts against the warlords and the bureaucrats that have filled the history of China. By
integrating this experience into a universal vision of history, Mao gave it a significance that
flows beyond the provincial limits of China.

In his effort to remain close to the Chinese peasant masses, Mao drew upon an idea of nature and
a symbolism found in popular Chinese Daoism, though transformed by his Marxism. It can be
seen in his many poems, which were written in the classical Chinese style. This idea of nature is
accompanied in his written political works by the Promethean idea of humanity struggling in a
war against nature, a conception in his thought that goes back at least to 1938 and became more
important after 1955 as the rhythm of the revolution accelerated.

Marxism in Cuba

The Marxism of Fidel Castro expressed itself as a rejection of injustice in any form—political,
economic, or social. In this sense it is related to the liberal democracy and Pan-Americanism of
Simón Bolívar in Latin America during the 19th century. In its liberalism, Castro’s early
socialism resembled the various French socialisms of the first half of the 19th century. Only
gradually did Castroism come to identify itself with Marxism-Leninism, although from the very
beginning of the Cuban revolution Castro revealed his attachment to certain of Marx’s ideas.
Castro’s Marxism rejects some of the tenets and practices of official Marxism-Leninism: it is
outspoken against dogmatism, bureaucracy, and sectarianism. In one sense, Castroism is a
Marxist-Leninist “heresy.” It exalts the ethos of guerrilla revolution over party politics. At the
same time it aims to apply a purer Marxism to the conditions of Cuba: alleged American
imperialism, a single-crop economy, a low initial level of political and economic development.
One may call it an attempt to realize a synthesis of Marxist ideas and the ideas of Bolívar.

Marxism in the developing world

The emergence of Marxist variants in the developing world was primarily influenced by the
undeveloped industrial state and the former colonial status of the nations in question. In the
traditional Marxist view, the growth of capitalism is seen as a step necessary for the breakup of
precapitalist peasant society and for the rise of the revolutionary proletariat class. Some theorists
believed, however, that capitalism introduced by imperialist rather than indigenous powers
sustains rather than destroys the feudal structure of peasant society and promotes
underdevelopment because resources and surplus are usurped by the colonial powers.
Furthermore, the revolutionary socialist movement becomes subordinate to that of national
liberation, which violates Marx’s theory of class struggle by uniting all indigenous classes in the
common cause of anti-imperialism. For these reasons, many developing countries chose to
follow the Maoist model, with its emphasis on agrarian revolution against feudalism and
imperialism, rather than the old Soviet one. Another alternative, one specific to the developing
world, bypassed capitalism and depended upon the established strength of other communist
countries for support against imperialism.

Marxism in the West

There are two main forms of Marxism in the West: that of the traditional communist parties and
the more diffuse New Left form, which is also known as Western Marxism. In general, the
success of western European communist parties had been hindered by their perceived allegiance
to the old Soviet authority rather than their own countries; the secretive, bureaucratic form of
organization they inherited from Lenin; the ease with which they became integrated into
capitalist society; and their consequent fear of compromising their principles by sharing power
with bourgeois parties. The Western parties basically adhered to the policies of Soviet Marxism
until the 1970s, when they began to advocate Eurocommunism, a moderate version of
communism that they felt would broaden their base of appeal beyond the working class and thus
improve their chances for political success. As described by Enrico Berlinguer, Georges
Marchais, and Santiago Carrillo, the leaders in the 1970s and ’80s of the Italian, French, and
Spanish communist parties, respectively, Eurocommunism favoured a peaceful, democratic
approach to achieving socialism, encouraged making alliances with other political parties,
guaranteed civil liberties, and renounced the central authority of the Soviet party. By the 1980s,
however, Eurocommunism had largely been abandoned as unsuccessful, and communist parties
in advanced capitalist nations returned to orthodox Marxism-Leninism despite the concomitant
problems.

Western Marxism, however, can be seen as a repudiation of Marxism-Leninism, although, when

it was first formulated in the 1920s, its proponents believed they were loyal to the dominant
Soviet Communist Party. Prominent figures in the evolution of Western Marxism included the
central Europeans György Lukács, Karl Korsch, and Lucien Goldmann; Antonio Gramsci of
Italy; the German theorists who constituted the Frankfurt School, especially Max Horkheimer,
Theodor Adorno, Herbert Marcuse, and Jürgen Habermas; and Henri Lefebvre, Jean-Paul Sartre,
and Maurice Merleau-Ponty of France.

Western Marxism has been shaped primarily by the failure of the socialist revolution in the
Western world. Western Marxists were concerned less with the actual political or economic
practice of Marxism than with its philosophical interpretation, especially in relation to cultural
and historical studies. In order to explain the inarguable success of capitalist society, they felt
they needed to explore and understand non-Marxist approaches and all aspects of bourgeois
culture. Eventually, they came to believe that traditional Marxism was not relevant to the reality
of modern Western society.

Marx had predicted that revolution would succeed in Europe first, but, in fact, the developing
world proved more responsive. Orthodox Marxism also championed the technological
achievements associated with capitalism, viewing them as essential to the progress of socialism.
Experience showed the Western Marxists, however, that technology did not necessarily produce
the crises Marx described and did not lead inevitably to revolution. In particular they disagreed
with the idea, originally emphasized by Engels, that Marxism is an integrated, scientific doctrine
that can be applied universally to nature; they viewed it as a critique of human life, not an
objective, general science. Disillusioned by the terrorism of the Stalin era and the bureaucracy of
the communist party system, they advocated the idea of government by workers’ councils, which
they believed would eliminate professional politicians and would more truly represent the
interests of the working class. Later, when the working class appeared to them to be too well
integrated into the capitalist system, the Western Marxists supported more anarchistic tactics. In
general, their views are more in accord with those found in Marx’s early, humanist writings
rather than with his later, dogmatic interpretations.

Western Marxism has found support primarily among intellectuals rather than the working class,
and orthodox Marxists have judged it impractical. Nevertheless, the Western Marxists’ emphasis
on Marx’s social theory and their critical assessment of Marxist methodology and ideas have
coloured the way even non-Marxists view the world.

6.NEOLIBRALISM:
For many years, the term “neoliberalism” has been in search of a referent. Is neoliberalism an
ideology that fetishizes the market? Or is it a political program aimed at establishing the rule of
the capitalist class? Is neoliberalism the enemy of the state? Or does it favor the state to sustain
the conditions for competitive markets? Rajesh Venugopal (2015: 166) has argued that
neoliberalism

is now widely acknowledged in the literature as a controversial, incoherent, and crisis-ridden

term, even by many of its most influential deployers,

such as Michel Foucault (2004 [2010]). Venugopal’s assessment was arguably apt just ten years
ago.

But several recent book-length treatments of neoliberalism (Burgin 2012; Biebricher 2018;
Slobodian 2018; Whyte 2019) have helped give form to an arguably inchoate political concept.
As Quinn Slobodian argues,

in the last decade, extraordinary efforts have been made to historicize neoliberalism and its
prescriptions for global governance, and to transform the “political swearword” or “anti-liberal
slogan” into a subject of rigorous archival research. (2018: 3)

Along similar lines, Thomas Biebricher (2018: 8–9) argues that neoliberalism no longer faces
greater analytic hurdles than other political positions like conservatism or socialism.

In light of this recent historical work, we are now in a position to understand neoliberalism as a
distinctive political theory. Neoliberalism holds that a society’s political and economic
institutions should be robustly liberal and capitalist, but supplemented by a constitutionally
limited democracy and a modest welfare state. Neoliberals endorse liberal rights and the free-
market economy to protect freedom and promote economic prosperity. Neoliberals are broadly
democratic, but stress the limitations of democracy as much as its necessity. And while
neoliberals typically think government should provide social insurance and public goods, they
are skeptical of the regulatory state, extensive government spending, and government-led
countercyclical policy. Thus, neoliberalism is no mere economic doctrine. According to
Biebricher, neoliberalism

explicitly addresses the noneconomic preconditions of functioning markets and the interactive
effects between markets and their surroundings. (2018: 27)

And neoliberals share

the problem of how to identify the factors indispensable to the maintenance of functioning
markets. (2018: 26)

Slobodian argues that all neoliberals

saw the intellectual project as finding the right state and the right law to serve the market order.
(2018: 87)

Neoliberals thereby offer unique institutional prescriptions on distinctive grounds. Importantly,

then, neoliberalism as a philosophical doctrine is not an attempt to suffuse institutions with the
idea of human agents as homo economicus, (Brown 2019). Instead, following Jessica Whyte
(2019: 8), neoliberalism has a normative dimension that goes beyond the economic, since
neoliberals believed

that a functioning competitive market required an adequate moral and legal foundation,

such that the arguments for neoliberal institutions involved an appeal to normative principles
(2019: 14, 233).

We can helpfully explicate neoliberalism by examining the political concepts, principles, and
policies shared by three twentieth century political economists: F. A. Hayek, Milton Friedman,
and James Buchanan. While they were trained as economists, all three wrote in political theory,
and Hayek and Buchanan did so extensively. Identifying the common themes in their work
provides an accurate and illuminating picture of neoliberalism as a philosophical doctrine.

These figures were selected in response to the aforementioned historical research on

neoliberalism. Biebricher (2018: 2) identifies all three figures as neoliberals, though he also
counts Europe-focused “ordoliberals”, specifically Walter Eucken, Wilhelm Röpke, and
Alexander Rustow, as neoliberals. Slobodian (2018: 268) identifies Friedman, Hayek, and
Buchanan as neoliberals, though he also includes the arguably libertarian Ludwig von Mises,[1]
and a long litany of ordoliberals; he also focuses his analysis on what he calls “Geneva school
neoliberalism”, where a great deal of neoliberal thought about global institutions was focused.[2]
Whyte (2019: 31) focuses more on Hayek and Friedman than Buchanan, but she includes them in
a larger cast of characters. So, while Hayek, Friedman, and Buchanan are not the only
neoliberals, they are central to the new historical analysis. And by focusing on their thought, we
not only ease the burden of analysis, but provide space to focus on neoliberal ideas as crafted by
their most reflective and insightful proponents. Further, other neoliberals said much less about
their philosophical commitments, so we have less material to work with. Perhaps the relative
silence of other neoliberals makes it harder to justify using Hayek, Friedman, and Buchanan to
represent them, but their shared political alliances and policies demonstrate substantial overlap.[3]

This entry’s approach to defining neoliberalism differs from that of Biebricher, Slobodian,
Whyte, and Brown (Brown 2019) in much the same way as political theorists and philosophers
differ from historians, and indeed how philosophers differ from political theorists. Neoliberalism
can be understood as a somewhat static doctrine to provide a basis for evaluation, and that can
later serve to explicate variations on the view. It is perhaps more natural to treat neoliberalism as
a dynamic system of ideas, as historians do, and even some political theorists. Nonetheless, a
review of Hayek, Friedman, and Buchanan reveals a sufficiently static doctrine to count as a kind
of political philosophy.
The use of the term “neoliberalism” in this entry does not fit all uses of the term. Thus, the goal
is less to explain what “neoliberalism” really means in all its uses, but rather to proffer a
meaning based on three criteria. First, the term “neoliberalism” should be used to denote a fairly
coherent set of positions. Second, it should be used to capture the views of those figures most
often associated with the position. Finally, we should focus on capturing the most serious and
even-handed uses of the term, such as by academic historians, rather than more popular and
pejorative uses of “neoliberalism”. This essay’s account of the meaning of the term satisfies all
three criteria. It identifies a coherent doctrine understood in light of the views of its proponents,
and its use of the term overlaps with the more careful uses of the term by recent academic
historians. We pursue all three aims by locating common commitments in the thought of Hayek,
Friedman, and Buchanan.

2. Inadequate Descriptions

If we want to understand neoliberalism in terms of the ideas of those commonly associated with
it, and usages proposed by historians, we should understand neoliberalism as a doctrine about
how politics and the economy should be organized. It is not a theory of justice or legitimacy.
Rather, neoliberals appeal to a plurality of moral considerations to justify their preferred
institutions. We should also avoid defining neoliberalism as fitting within any of the following
four categories. Neoliberalism should therefore not be identified as (§2.1) an ethos or conception
of the good life, (§2.2) a school of thought within utilitarianism, (§2.3) a version of
libertarianism, or (§2.4) an ideal theory.

2.1 Neoliberalism as Ethos

Many think that neoliberal societies put profit ahead of other central values. David Harvey, for
instance, argues that

neoliberalism values market exchange as “an ethic in itself, capable of acting as a guide to all
human action, and substituting for all previously held ethical beliefs”. (2005: 3)

George Monbiot insists that neoliberalism

sees competition as the defining characteristic of human relations. It redefines citizens as

consumers. (2016)

Brown (2019) agrees. Some say that neoliberalism is an ideology where everyone is supposed to
focus on economic prosperity or economic growth. Others say that neoliberalism is an ethos of
the firm that rejects corporate social responsibility, instead recommending that firms focus solely
on their bottom lines (Steger & Roy 2010: 13).

But neoliberals instead advance a view about the design of social institutions, and not a particular
ethos of social life. In fact, they have rather little to say about how to live the good life. Instead,
neoliberals argue that their defense of capitalism does not necessitate profit seeking as a way of
life and that markets do not produce people with such an ethos. It is true that they think certain
attitudes and values, such as an excessive focus on social justice, equality of outcomes, hostility
to all pursuit of profit, can undermine the foundations of a free society. But that does not imply
that they embrace a consumerist ethos.

To illustrate, consider Friedman. Friedman holds that part of the case for freedom is that we
don’t know what persons ought to value because no one really knows what the good life consists
in; a free society is good because it allows people to experiment with different forms of life to
answer those questions for themselves (Friedman 1987 [2017: 185]). And while Friedman
(1962a [2002: 133]) proclaimed that corporations’ first duty is to maximize profits for their
shareholders and that public policy should ensure that the maximization of profit works to the
benefit of all, even he does not advocate a particular account of what persons ought to value.

Hayek and Buchanan are even clearer in denying that the good life consists in economic ends
like wealth maximization. Buchanan (1991: 343) emphasizes personal ethical responsibility,
adhering to social norms forbidding debt (1987: 456, 461), and following “moral-ethical rules or
norms for behavior” (1999: 451). Hayek thinks social life in a free society requires that people
follow an array of rules and norms that have nothing to do with profit seeking, since many of
these rules are below our conscious thought (Hayek 1973). Surprisingly, both Hayek (1988: 135–
142) and G. Brennan and Buchanan (1985: 150) even think that free societies needed people
prepared to act based on fundamentally religious impulses.

Admittedly, Friedman and Buchanan use homo economicus to understand much of human
behavior. But Buchanan (Brennan and Buchanan 1981: 81) understands homo economicus
broadly; it could be “seen to maximize almost anything at all”, and so has no inherent
commitment to, say, wealth maximization.

2.2 Neoliberalism as a School of Thought within Utilitarianism

Some theorists claim that “classical liberalism”, a term often used to refer to our three
neoliberals, is fundamentally utilitarian in its understanding of the basis for social order
(Freeman 2011: 25).[4] However, Buchanan (1975) is an avowed contractarian and rejects
utilitarianism because it requires aggregating personal values in ways Buchanan thinks
impossible or inappropriate. While many characterize Friedman (1974a [2017: 72]) as a
utilitarian, he says that “I myself have never accepted utilitarianism”. Friedman’s defense of the
free market as maximizing utility was never meant to imply that people lacked basic rights that
might forbid utility maximization in some cases. Friedman focuses on utility-based
considerations because he thinks they have universal appeal. Hayek (1988: 69) not only rejects
utilitarianism, he rejects the broader class of consequentialist theories of social order: he rejects
any demand for justification where morality is grounded in its production of some particular
goal, like happiness. Hayek (1978: 132) is better described as a contractarian.

2.3 Neoliberalism as Libertarianism

Neoliberals are much friendlier to the nation-state than libertarians. Second, libertarians often
argue for institutional structures directly from a moral theory and a theory of justice, an approach
taken by Robert Nozick (1974). In contrast, neoliberals seldom appeal to fleshed out theories of
justice, such as a theory of natural rights, even if they appeal to the language of justice at various
point. To focus on the case of natural rights theories of justice, Buchanan does not believe in
them. He begins his treatise on political philosophy, The Limits of Liberty, with the insistence
that there is no morality beyond what we agree to (Buchanan 1975: 1). Hayek barely comments
on natural rights, and Friedman discusses them primarily rhetorically. This is not to say that
neoliberals reject deontic constraints on the use of state power. Hayek and Buchanan’s
contractarianisms forbid pursuing liberty and prosperity in ways that all cannot agree to.
Neoliberals instead focus on the consequence-based arguments for liberalism without adopting
consequentialism. They simply rationalize liberalism in part based on the claim that liberalism
has good consequences.

One is on better ground arguing that neoliberalism is a twentieth century revival of classical
liberal ideas in response to certain unique twentieth century challenges. Neoliberalism arose in
the late 1940s as a response to three twentieth century ideologies that advocated large states:
communism (as the most prominent form of socialism), fascism, and social democracy.
Neoliberals sought to confine state power to a range of functions much more limited than that
undertaken by extensive states of these three varieties. Hayek’s work on informational systems
was a response to communist central planning. Friedman’s monetarism was a response to
Keynesian macroeconomic policy. And Buchanan’s public-choice research program was a
response to the economics of general equilibrium and market failure economics.

2.4 Neoliberalism as Ideal Theory

Philosophers have come to understand ideal theory in a number of ways, but we can follow John
Rawls’s (1971 [1999: 7–8, 215–6, 308–9]) understanding of ideal theory as describing the best
social and political order in light of certain high-minded accounts of human capacities, behavior,
and natural circumstances, in particular a preparedness to comply with institutions that embody
the correct conception of justice. Ideal theories of justice provide accounts of the “realistic
utopia” that citizens should strive for, a society where everyone acts as justice demands by fully
complying with just institutional rules (Rawls 2001: 4, 13).

Neoliberals reject both elements of political theorizing. First, they tend to reject theorizing about
an ideal. This is because neoliberals are often skeptical about our ability acquire moral
knowledge; there is an epistemic barrier to knowing what is truly right and good. Again,
Friedman repeatedly says that the case for a free society is that we don’t know “what sin is” and
Hayek argues that, given the limitations of our knowledge,

It is at least doubtful whether at this stage a detailed blueprint of a desirable internal order of
society would be of much use—or whether anyone is competent to furnish it. (1944 [2007: 237])

Hayek does not think that political philosophers invent societies; rather, neoliberals do not think
they’re in a position to describe how an ideal society would function.

Now, importantly, Buchanan (1975: 91–106) is a philosophical anarchist: “The ideal society is
anarchy, in which no one man or group of men coerces another”. And Friedman (1974a [2017:
87]) thinks that it is “desirable to have a vision of the ideal” and seems to embrace libertarianism
as that ideal. Further, he may think that many of his favored welfare-state policies would not be
part of an ideal social order. Yet both Friedman and Buchanan think attempts to reach the ideal
could backfire and so political economy should focus making marginal improvements to
institutions. In this way, neoliberals sometimes have political ideals, but it is not central to their
politico-economic doctrine, that is, to what they actually advocate.

Second, Hayek (1944 [2007: 157–170]), Friedman (1962b [2017: 23]), and Buchanan (Buchanan
and Tullock 1962) all deny that we should assume that people will tend to comply with what
justice and the law requires. People go wrong, especially when they have too much power. As
Friedman (1962b [2017: 23]) says, “the liberal conceives of men as imperfect beings” and
assumes that organizing society is as much about “preventing ‘bad’ people from doing harm” as
it is about helping others do good. Buchanan’s project is to theorize politics “without romance”
and deny the feasibility of a contractarian agreement on principles of justice. If anything,
compliance is an endogenous variable in their models of social order, where different sets of
social rules will produce different levels of compliance and are to be chosen in part on that basis.
In brief, compliance is never taken for granted. Their non-ideal theory is also associated with
their opposition to socialisms of all kinds: socialism is irresponsible ideal theory whose
purported feasibility rests entirely on the illicit assumption that human nature can be modified to
make persons more rational and altruistic. Society will not work as socialists predict.

3. Liberalism

Hayek, Friedman, and Buchanan see themselves first and foremost as defenders of individual
freedom and the freedom of small groups such as the family. Liberty is usually construed
negatively, as when Hayek says that liberty is when “coercion of some by others is reduced as
much as possible in society” (1960 [2011: 11]). Coercion occurs

when one man’s actions are made to serve another man’s will, not for his own but for the other’s
purpose. (1960 [2011: 133])

We keep coercive power in check by defining a private sphere of individual activity and limiting
state power (Caldwell 2004: 289). Friedman thinks similarly. His liberalism is understood as the
embrace of

a government that is limited primarily to preserving a legal structure that allows people to
cooperate voluntarily in the marketplace, and whose power is dispersed. (Butler 1985: 22)

For Friedman, Liberals

take the freedom of the individual, or perhaps the family, as our ultimate goal in judging social
arrangements. (Friedman 1962b [2017: 22])

And more directly: “I define freedom as the absence of coercion of one person by another” (1987
[2017: 185]).

Neoliberals do not always embrace negative conceptions of liberty alone. Hayek’s (1960 [2011:
11]) conception of freedom can be interpreted as republican, as the view that one is free when
she is free from arbitrary interference, since Hayek repeatedly worries about government
engaging in arbitrary controls that prevent people from developing long-term plans. This partly
explains his insistence that a society can be free only when it is governed by the rule of law,
since while law typically coercively interferes, it interferes in a non-arbitrary, predictable fashion
(1960 [2011: 21, 153]). While Buchanan does not share Hayek’s republican sympathies, he too
agrees that general rules make liberty possible. Critically, none of these three thinkers embrace a
moralized conception of freedom where freedom is the condition of a person whose rights are
respected, in contrast to libertarians like Nozick (1974).

One remarkably strong emphasis among neoliberals, especially Hayek, is the importance of the
rule of law. All persons have a right to be treated as equals by the legal, administrative, and
political institutions in their society. No one is to be favored according to their degree of social
influence or social power or inherited status. When people are not protected by the rule of law,
their freedoms are intolerably restricted because they can be arbitrarily interfered with and
cannot predict how they will fare in the future. This means they cannot make unimpeded use of
the liberties that they currently possess. Neoliberals wield the rule of law against those who favor
more extensive states, including both social-democratic liberals and socialists, on the grounds
that extensive administrative states must violate the rule of law to engage in their characteristic
activities. Hayek argues that absolutism arises from “powerful, centralized administrative
machinery” whose professional administrative class becomes “the main rulers of the people”
(1960 [2011: 193]). Large bureaucracies invariably interfere, and in an arbitrary fashion. This
dangerous logic of bureaucracy was a fundamental feature of Buchanan’s research program, and
the rule of law is his solution, too. For these reasons, neoliberals believe equal treatment before
the law is a central procedural liberty that persons possess not only in court but whenever they
are subject to state coercion. Neoliberals embrace limited government in part because they
believe that equal treatment before the law can be achieved only by limiting government and
embracing capitalist economic liberties like freedom of contract, since both institutional practices
allow others to follow general rules and avoid seeking approval from an arbitrary authority (1960
[2011: 205, 230]).

The most common rationale for freedom in Hayek and Friedman is “ignorance—we cannot be
sure we are right” (Friedman 1987 [2017: 185]). As we have seen, while Friedman says he favors
“a free society because my basic value is freedom itself”, he nonetheless asks, “How do I justify
that preference? … If I really knew what sin is, I could not justify it” (1987 [2017: 185]).
Similarly, Hayek says that the case for individual freedom

rests chiefly on the recognition of the inevitable ignorance of all of us concerning a great many
of the factors on which the achievement of our ends and welfare depends. (1960 [2011: 29];
Caldwell 2004: 347)

And even: “If we knew how freedom would be used the case for it would disappear” (Hayek
1960 [2011: 31]). The purpose of individual freedom is to enable each person to

make the fullest use of his knowledge, especially of his concrete and often unique knowledge of
the particular circumstances of time and place. (1960 [2011: 156–7])
Friedman focuses on ignorance of moral facts, while Hayek focuses on moral ignorance, as well
as ignorance about how to organize people’s lives, but either way, ignorance is the chief
justification for freedom.

A certain kind of epistemic humility, particularly humility about how to organize society and
what the consequences of our preferred policies will be, is essential to neoliberal thought.
However, as we have seen, sometimes neoliberals adopt a broader skepticism that casts our grasp
of moral facts into doubt. We ought to see epistemic humility about a wide range of non-
normative social facts as an essential feature of neoliberal doctrine, whereas humility about
moral facts is less central to understanding what neoliberalism is. Thus, neoliberalism can be
formulated apart from this broader form of moral skepticism.

Neoliberals also stress that freedom allows people with different ends to cooperate and create
peace (Hayek 1978: 111–136). This is an important theme for Buchanan (1975). As a
contractarian, he thinks that the goal of agreement on constitutional rules is to end the Hobbesian
state of war and secure enough peace to establish mutual gains from exchange. Thus, a second
rationale for extensive negative liberties is that they are instrumental for cooperation and peace.

Neoliberals obviously embrace strong rights to private property, rights that apply not only to
goods and services for one’s own consumption but to capital as well (Hayek 1988: 35; 1973:
107). The rationale for private property rights is similar to the general case for liberal liberties
that we have already discussed. Hayek (1988: 35; 1973: 107; 1960 [2011: 35]) and Friedman
(1962a [2002: 8–9]) in particular argue that we can’t fully distinguish economic from other
liberties even conceptually. They both famously argue that political and economic freedom
cannot be separated in practice either. That is part of the point of Capitalism and Freedom and
arguably the central point of The Road to Serfdom. Buchanan (1993: 230) and Hayek (1960
[2011: 141]) also stress that private property rights allow persons to make plans, in part because
private property enables people to save money and thereby become less dependent on employers
and bureaucrats. Private property is further thought to be “an essential condition for the
prevention of coercion” and the wide dispersal of power (Hayek 1960 [2011: 140]). Freedom of
contract is embraced for similar reasons. And to respect these rights, a society will have to
embrace capitalism, since the exercise of these rights inexorably yield capitalist economic
arrangements, where capital is held by both capital owners and workers.

4. Capitalism

We can understand capitalism as an economic system where the range of goods and services on
offer is governed in accord with a strong right to private property and a system in which prices
are set by private organizations. People are free to exchange goods and services under whatever
terms they contract for, with few restrictions. Neoliberals share this understanding, even if they
do not always defend capitalism by name.

In defending capitalism, neoliberals focus on defeating two foes: socialism and Keynesianism,
which they typically consider as offering the most influential alternatives to their preferred
institutions. Socialism, at least the form of socialism targeted by neoliberals, is an economic
system where capital is socially owned, typically by government, and the capital stock is
produced, organized, and its outputs distributed by the central government that is, where the
economy is centrally planned. Neoliberals attack Marxist socialism in the strongest terms, but
Marxists are not their sole targets. Hayek is keen to refute the twentieth century socialist Oskar
Lange (1936), who adopted some aspects of neoclassical economics. Neoliberals also targeted
democratic socialism; for example, Hayek (1944 [2007: 163–4]) targeted Fabian socialists in The
Road to Serfdom.

The neoliberal case against socialism is based on three concerns: inefficiency, conflict, and
power. Socialism is inefficient, generates social conflict, and concentrates power in dangerous
ways. Let’s begin with inefficiency, the familiar argument that socialist economies impoverish
society vis-à-vis capitalism.[5] Hayek’s early claim to fame was his role in what is called the
socialist calculation debate, which concerned how socialist planners can plan the production and
distribution of capital goods without the use of a price system. Socialists argued that planners
should be able to plan by collecting preference and production information from citizens.
Ludwig von Mises (1922 [1936/1951]) began the debate by arguing that, without a price system,
the information required to plan the economy did not exist. Without a price system, there is no
information for planners to collect and compute. Oskar Lange (1936) replied that socialist
managers of firms could mimic market prices. Hayek (1945) disagreed with Lange; even if the
information required to plan the economy existed, it would be too hard to collect and impossible
to compute before the relevant information changed. The problem is that the information
required to plan the economy is not given to anyone. For Hayek, we can plan the economy

if we possess all the relevant information, if we can start out from a given system of preferences,
and if we command complete knowledge of available means.

But that is “emphatically not the economic problem which society faces” (1945: 519). Instead,

the “data” from which the economic calculus starts are never for the whole society “given” to a
single mind which could work out the implications and can never be so given.

In contrast, the market economy can make use of this information through the price system. The
price system can draw on each person’s local and often tacit knowledge to effectively produce
goods and services without collecting that information in one place. The “marvel” of the market
is that, when some raw material is scarce,

tens of thousands of people whose identity could not be ascertained by months of investigations,
are made to use the material or its products more sparingly,

and this occurs

without an order being issued, without more than perhaps a handful of people knowing the cause.
(1945: 527)

Hayek’s analysis of how minds process information (Caldwell 2004: 261–285) and how
commercial society, and systems of cultural and moral rules, evolve is perhaps the principal
focus of his work (2004: 286–321). Friedman (2000 [2012: 234]) and Buchanan (1969: 87–8)
agree with Hayek’s analysis.[6]

Neoliberals appeal to a range of considerations to justify the market besides informational

arguments, such as the creativity of the market mechanism and its capacity to raise living
standards. Eamonn Butler (1985: 22) points out that Friedman’s case for capitalism, as
developed in Capitalism and Freedom, is based on

the diversity, rapid adjustment, innovation and experimentation found in the market.

In Free to Choose, Friedman argues that, when the state attempts to centrally plan, ordinary
citizens “have a low standard of living” (Friedman & Friedman: 54–5). The market, on the other
hand, has “the remarkable power of raising material standards quicker than any other” system,
while preserving freedom (Butler 1985: 197). Hayek (1978: 67) emphasizes that capitalism
preserves competition, which he sees not as a means of reaching a market-clearing price but as a
“discovery procedure” for generating new ideas and innovations. Buchanan tends to focus on the
argument that markets provide people with better incentives than those faced by government
officials. Because

politicians and bureaucrats are seen as ordinary persons much like the rest of us, (Buchanan
1979: B4 [1984: 20])

they lack the motivation to even try to implement a socialist plan. Instead, they will use their
power over the economy at least partly for selfish ends, which would undermine the
effectiveness of socialist government, even if all the informational problems could be solved.

The next set of arguments against socialism is that socialism creates needless conflict. Hayek
writes that socialism

presupposes a much more complete agreement in the relative importance of different social ends
than actually exists

and that, as a result,

the planning authority must impose upon the people the detailed code of values that is lacking.
(1997: 193; also see 1944 [2007: 109, 166])

Friedman argues similarly in saying that

the wider the range of activities covered by the market, the fewer are the issues on which
explicitly political decisions are required and hence on which it is necessary to achieve
agreement. (1962a [2002: 24])

Markets allow people who disagree to benefit one another despite having different values.
Socialism, in contrast, requires a central plan, and so must impose controversial and sectarian
values and ends on everyone. To solve these conflicts and impose a central plan, socialist
governments must concentrate political power.

Socialism excessively concentrates power in other ways, too. Socialists have often argued that
capitalist economic power can be reined in by transferring the means of production to society,
but Hayek (1944 [2007: 165]) replies that socialism does not “extinguish power”, it just
concentrates power in one place. Friedman (1955 [2017: 4]) agrees, arguing that “political power
by its nature tends to be concentrated” whereas economic power “can be highly deconcentrated if
it is organized by means of an impersonal market”. The danger of concentrating power in
political institutions is that “government is more subject to concentrated interest groups”,
whereas markets are altered by the “diffuse pressure of millions of individual consumers”.
Similarly, while governments promote monopolies, “the market breaks them down” (Butler
1985: 223). An advantage of markets is that people can refuse to engage in exchange, whereas
under socialism everyone is caught up in a power struggle. Additionally, Hayek (1978: 99)
argues that under socialism, political power determines the social position of individuals and
groups, an ironic result of a doctrine whose aim is to diffuse power. Buchanan (1993: 246)
agrees, though for somewhat different reasons.

Neoliberals do not defend capitalism on the ground that it gives people what they deserve.
Friedman and Buchanan do not make such arguments, and Hayek argues against such claims.
Hayek (1978: 70) repeatedly says that there’s no particular merit in market outcomes, and so one
cannot say that market income is just or unjust. Hayek, Friedman, and Buchanan understand that
market outcomes are often arbitrary from a moral point of view. Markets make some
undeserving persons rich and some deserving persons poor.

As noted, Keynesianism is neoliberalism’s other great foe. Let us understand Keynesianism as a

series of policy proposals aimed at correcting purported market failures at the macroeconomic
level, and especially as the use of deficit-financed spending to manage the business cycle and
stimulate the economy. These policies were inspired by John Maynard Keynes (1935 [1965:
2011]), even if he did not always consistently adopt them.[7]

All three thinkers take great pains to answer Keynesian arguments for government intervention.
Hayek’s (1941 [2007]) arguments concern how government spending and the monetary
authority’s actions affect the structure of capital goods across the economy. Contra Keynes’s
(1935 [1965: 37–45]) comfort with statistical aggregates in the General Theory, Hayek (1941
[2007]) contends that relying on simple economic aggregates obscures how capital and
investment are structured across the economy. Hayek also thinks the premier cause of recessions
is policy that makes bank credit too easy, which leads to malinvestment that has to be liquidated
in a bust. Importantly Hayek’s critique of Keynes was not influential in the latter half of the
twentieth century. Friedman’s and Buchanan’s ideas, especially Friedman’s, carried more
weight.

Friedman and Buchanan are concerned about Keynesian claims that recessions are due to
declines in aggregate demand and can only be addressed with heavy helpings of debt-financed
fiscal stimulus (even though Keynes himself was not always a fan of debt-financed
countercyclical policy). Friedman (1959) developed the doctrine of monetarism, which holds that
inflation is always and everywhere a monetary phenomenon. Inflation and the business cycle can
be controlled by monetary policy and so do not require a fiscal response. With his co-author,
Anna Schwartz, Friedman (Friedman & Schwartz 1963) argues that the Great Depression was
due not to a fall in aggregate demand but was instead caused by the Federal Reserve System,
ironically created to manage recessions, because the Fed allowed the monetary base to collapse.
Had the Fed ensured the growth of the monetary supply, the Great Depression could have been
avoided. This is central to the case for the market because the Great Depression was widely
blamed on capitalism. If the Depression was a government failure, the result of monetary
mismanagement, then the Depression provides no basis for rejecting capitalism—and may even
provide reason to embrace it.

The central policy response, for Friedman (1959), is to shift the management of the business
cycle from Congress to the Federal Reserve and lock the Federal Reserve into a monetary
expansion rule to prevent it from making major mistakes. Monetary-policy makers are simply
not knowledgeable enough to use monetary policy to manage the business cycle. Instead, they
should be bound to a rule that would lead to gentle inflation, which would both avoid
hyperinflation and prevent cyclical unemployment by mitigating the dislocations caused by
sticky nominal wages, contra Keynes (1935 [1965: 231–7]). Focusing exclusively on growing
the monetary base would also prevent a collapse in the money supply and thereby avoid some
kinds of recession.

Buchanan’s critique of Keynes differs from Friedman’s, though their critiques are mutually
reinforcing. Buchanan (1987, 1999) thinks that even if Keynes’s diagnosis of recessions is
correct, his cure cannot work well so long as governments are staffed with real-world people.
Many politicians and government officials are more concerned about benefiting themselves and
special interest groups than about promoting the common good. So, when a government engages
in debt-financed economic stimulus, the money is more likely to be directed to politicians’
favored groups than to the places the stimulus money is most needed. A central difficulty for
Keynesian fiscal policy is the pervasive risk of government failure caused by the actions of often
self-interested economic actors, a consistent theme of The Calculus of Consent (Buchanan &
Tullock 1962). Likewise, once people develop a taste for direct transfers, they will make it hard
to shrink the deficit when the recession is over, leading to long-term debt and lower economic
prosperity and growth.

5. Democracy

Neoliberals embrace democracy. More specifically, they endorse equal rights to vote and
participate in elections, and they support parliamentary democracy as the means of enacting
legislation. Hayek says,

I profoundly believe in the basic principles of democracy as the only effective method which we
have yet discovered of making peaceful change possible, (1979: xiii)

and he claims to be concerned about disillusionment with democracy “as a desirable method of
government”. For Hayek, the market system must be “embedded in a set of social institutions” if
it is to work, and that includes a “democratic polity subject to the rule of law” (Caldwell 2004:
348). The point of The Road to Serfdom is to argue that liberal democratic socialism is unstable
and that socialism must cease to be democratic or cease being socialism. So any attempt to plan
the economy would not only destroy liberal rights; it would inevitably destroy democracy.

Hayek’s case for democracy tends to be instrumentalist, as he argues that

the true value of democracy is to serve as a sanitary precaution protecting us against an abuse of
power. It enables us to get rid of a government and try to replace it by a better one. (1979: 137)

It is also “one of the most important safeguards of freedom” (1979: 5). And yet Hayek thinks
recognizing that persons are equals requires not only equality before the law but “the demand
that all men should also have the same share in making the law” even if democracy is a “means
rather than an end” that needs limits (1960 [2011: 103, 107–8]).

This commitment was shared by members of the Mont Pelerin Society, which Hayek organized.
Angus Burgin argues that

An assumed relationship between free markets and democratic politics pervaded the society’s
discussions throughout its first decade of existence and provided a foundational premise for
many of the members’ contributions to its debates. (2012: 117)

Friedman routinely defends free markets on the ground that they contribute to political freedom
and democracy; both freedoms are “inseparable” (Butler 1985: 207). Friedman (1962a [2002: 9])
often says that he knows of

no example in time or place of a society that has been marked by a large measure of political
freedom, and that has not also used something comparable to a free market to organize the bulk
of economic activity.

So, he appears to think that democracy is a great good, but we are led to guess the reasons why.
One could argue that Friedman’s case for democracy is largely that it protects liberty and allows
a bad government to be peacefully replaced. But there is little in his corpus that speaks to this
question one way or another.

Buchanan is the most democratic of the three. He agrees that democracy is essential for social
peace and prosperity, but he emphasizes that political equality requires government to be based
on the consent of the people. Democracy is an extension of his individualism:

The approach must be democratic, which in this sense is merely a variant of the definitional
norm for individualism. Each man counts for one, and that is that. (Buchanan 1975: 2).

While Buchanan insists on unanimous consent for constitutional rules (strikingly, among non-
ideal persons), he thinks that constitutions may allow for decision-making rules weaker than
unanimity, such as majority rule. It is true that Buchanan (Buchanan and Tullock 1962: 85–96)
argues that legislative rules should be supermajoritarian rather than majoritarian, but that is still
an embrace of democracy, especially when undergirded by the consent of the people as a whole.
However, unlike many classical and contemporary democratic theorists, neoliberals do not see
democracy as involving a social ethos or national culture, nor do they see democracy as an
expression of freedom in itself. As Hayek (1979: 5) notes, “democracy itself is not freedom”.
Friedman insists that freedom is to be understood negatively, such that the political process is
understood as restricting freedom and perhaps protecting it, but not as embodying it. Buchanan
also criticizes what he regarded as an essentially “romantic” view of democracy according to
which the will of the people is expressed in the actions of a democratic government.

Notably, neoliberals spend far more time arguing for limits on democracy than arguing for
democracy itself. This is partly because, since fascism was defeated, the goodness of democracy
has been taken for granted by both neoliberals and their interlocutors. Hayek, Friedman, and
Buchanan instead focus on criticizing “unlimited” democracy. Hayek (1944 [2007: 111–2]) is
worried that an unlimited democracy could undermine the rule of law and create tyranny. The
powers of any “temporary majority” have to be limited, he says (1960 [2011: 106]). Unlimited
power is “the fatal defect of the prevailing form of democracy” and is based on the erroneous
premise that all law “emanate[s] from legislatures” (1979: 3–4). Another problem for unlimited
democracy is that democratic assemblies will take on more power that they can wield effectively
and so will be forced to

hand [authority] over to the administrators charged with the achievement of particular goals.
(1960 [2011: 116])

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. (1979: 139)

The point of the third volume of Law, Legislation, and Liberty was arguably to restore faith in
democracy by defending limitations upon it.

Friedman (1962b [2017: 26]) echoes many of these points, stressing that political freedom is just
“the absence of coercion of a man by his fellow men” and that the fundamental threat to freedom
“is the power to coerce” whether that power be in the hands of a dictator or of “a momentary
majority”. Friedman also worries that democracy will tend to lead to regulation, inefficiency, and
control if we have “bureaucratic democracy” rather than “participatory democracy”.[8]

Buchanan’s (1962: 131–146) rationale for constitutional constraints on democracy is richer and
more perceptive than Hayek’s or Friedman’s. His contract theory is devoted to arguing that
simple majority rule can lead to a variety of problems, most centrally the risks of shifting
coalitions of voters or legislators redistributing wealth away from one another, leading to Pareto-
inferior outcomes for all. Another problem with unlimited democracy is that

even under the most favorable conditions the operation of the democratic process may generate
budgetary excesses. Democracy may become its own Leviathan unless constitutional limits are
imposed and enforced. (Buchanan 1975: 204–5)
Limitations on democracy are also required by political equality itself, since the “tyranny of the
majority” is a threat to the minority’s equal rights, and can be especially dangerous “because it
feeds on the idealistic illusion that participation is all that matters (Buchanan 1993: 259).
Consequently, Buchanan (1999: 75–88) advocates exit mechanisms, such as federalist
arrangements, that allow people to escape excessive democracy.

Four caveats before the section ends: First, despite their concerns about unlimited democracy,
neoliberals want to protect democratic rights. One problem they have with expansive states is
that large states reduce the effectiveness of each person’s vote. This is because large
governments cannot balance their many tasks and cannot secure agreement on top priorities. The
result, Hayek argues, will be democratic instability, leading to dictatorship. In contrast to more
egalitarian liberals, neoliberals do not attempt to engineer the democratic process through
democratic deliberation. They instead hope to protect democratic rights by adopting
constitutional constraints later in the democratic process, for example by restricting the power to
legislate. Second, while neoliberals support restrictions on democracy, they strongly favor
decentralizing of political power and ensuring that power is held by all and they are committed to
protections from governmental and corporate predation and domination. As Friedman notes,

Business corporations are not a defense of free enterprise. On the contrary, they are one of the
chief sources of danger. (Burgin 2012: 202)

They simply disagree with egalitarian liberals about how to ensure this institutionally. As noted
above, neoliberals stress designing institutions so that corrupt and domineering institutions
cannot form, within or outside government, such as using markets. But they also appeal to
constitutional mechanisms like supermajority rules (Buchanan & Tullock 1962) and federalism
(Feld 2014) to limit oppression and corruption. Thus, neoliberals are deeply concerned that
people be protected from excessive political control, but they do not emphasize public
deliberation is central to securing those ends. We might say they prefer “exit” mechanisms over
“voice” mechanisms for restraining the use of political power (Hirschman 1970). Third,
neoliberals are not alone in advocating constitutional limits on democracy, even though most
democratic theorists on the left place fewer limitations on democracy than neoliberals do.

Finally, historians of political thought have drawn attention to the fact that the neoliberals
discussed here were sometimes associated with the dictatorship of Augusto Pinochet in Chile.
But Buchanan (Farrant & Tarko 2018) and Friedman (Burgin 2012: 205) have at best a scant
connection with that regime and were critical of it. Unfortunately, Hayek is another story. Hayek
had a partial theory of “transitional dictatorship” that allowed a liberal dictator to avoid socialist
outcomes and transition a society into a liberal democracy, and this helps explain some favorable
remarks he made on behalf of the Pinochet regime (Farrant, McPhail, & Berger 2012; Biebricher
2018: 142–7; Slobodian 2018: 277). Hayek’s support for the regime does not undermine the
democratic commitments of neoliberals, but Hayek was arguably too suspicious of democracy.
We can see the dangers in sharply separating liberalism from democracy, which tempts one to
choose liberal dictatorship over democratic socialism.
6. The Welfare State

Neoliberals support modest taxation, the redistribution of wealth, the provision of public goods,
and the implementation of social insurance, embracing a state somewhat more expansive than
one where government protects people from foreign powers and domestic criminals, produces
public goods, and provides limited services for the poor. For instance, Hayek (Caldwell 2004:
291), Friedman (Butler 1985: 206), and Buchanan (1975: 35–52) favor government provision of
public goods because markets will under-produce public goods, and so government should act
even if it will sometimes fail (Butler 1985: 206).

Of course, neoliberals are skeptical of government regulation, largely because they think
regulatory bodies tend to be turned from good purposes to bad ones (2007: 93). This is a
consistent theme of Friedman’s (1962a [2002: 137–160]) work, especially in his criticisms of
occupational licensure. And the analysis of rent-seeking is one of Buchanan’s main ideas, shared
by his long-time co-author Gordon Tullock. Large bureaucracies turn too much power over to
administrators, power that practically begs to be misused by special interests (Butler 1983: 209).
And, of course, neoliberals all oppose Keynesian fiscal policy, especially debt-financed stimulus
(Buchanan 1987: 456; Butler 1985: 186). But these concerns are consistent with embracing the
welfare state.

Hayek is quite friendly to various government interventions. In The Road to Serfdom, Hayek
(1944 [2007]) defends countercyclical monetary policy, government construction of
transportation infrastructure, social insurance for natural disasters, government health insurance,
a basic minimum income, and strict regulations with respect to working hours, health and safety
on the job, poisons, deforestation, harmful agricultural methods, noise, smoke, and the prices of
goods and services that are natural monopolies (1944 [2007: 22, 43–4, 133–5, 217]; Burgin
2012: 90–1). Similarly, The Constitution of Liberty says government should prevent of
depressions and provide pensions, medical care, and money for education in the form of
vouchers (1960 [2011: 264, 276, 286, 294, 379]). Hayek repeatedly stresses that the

old formulae of laissez faire or non-intervention do not provide us with an adequate criterion for
distinguishing between what is and what is not admissible in a free system. (1960 [2011: 231];
also see Hayek 1944 [2007: 71]; 1973: 62; 1979: 41)

Hayek even supports a basic income:

… the assurance of a certain minimum income for everyone … appears not only to be a wholly
legitimate protection against a risk common to all, but a necessary part of the Great Society in
which the individual no longer has specific claims on the members of the particular small groups
into which he was born. (1979: 55)

While Hayek’s use of the term “legitimate” is imprecise and may only somewhat overlap with
the use of the term in contemporary political philosophy, he apparently thinks that governments
are morally required to engage in welfare-state measures. Governments should pursue poverty
relief not only because it is beneficial but because it is the right thing to do. Hayek worries that
social safety nets can get out of control, but he supports them anyway (Caldwell 2004: 291).
While Friedman is the most libertarian of the three (Burgin 2012: 213), he never advocates
abolishing the redistribution of wealth for some purposes, claiming that government ought to
“relieve acute misery and distress” (Friedman 1951 [2012: 7]). Government should

protect members of the community who cannot be regarded as “responsible” individuals,

principally children and the insane. (Butler 1985: 206)

And again,

Government relief of poverty, the liberal will support and welcome, primarily on the explicitly
paternalistic ground of taking care of the irresponsible. (Friedman 1974b [2012: 23])

One of his most famous policy proposals is a negative income tax, where the poor would receive
cash transfers if their incomes were low enough, financed by positive income taxes on the rich
and middle class (Friedman 1962a [2002: 191–4]). Friedman (1960 [2002: 191–2]) thought this
policy was legitimate to reduce poverty because pure private charity may invite free-riding. He
(1962a [2002: 85–107]) is also the inventor of the school-voucher policy, and he (1974b [2012:
20]) supported compulsory education so long as government does not control the schools.[9]
Friedman worried that the welfare state would be too bureaucratic and authoritarian, however,
which is why he favored replacing most welfare-state programs with cash transfers.

Two more points about Friedman on poverty relief. First, Friedman thinks that

[t]here are no natural rules and definitions of property. There is ultimately an essentially arbitrary
element to where we draw the line. (1974a [2017: 86])

This is a point usually stressed by critics of libertarianism on the ground that property rights are
conventional, not natural, and so cannot morally prohibit redistribution (Murphy & Nagel 2002).
This passage suggests that Friedman’s political philosophy does not include a natural right of
private property as an impediment to redistribution. Second, Friedman sees his defense of the
welfare state as a part of his non-ideal theory, not his ideal. He supports vouchers and the
negative income tax

not because these are necessarily part of my ideal utopia[n] society but because they seem to me
the most effective steps, given where we are, in moving toward where we want to go. (Burgin
2012: 175)

In fact, Friedman (1974a [2017: 79]) has sympathies with anarchism, though he thinks it is not “a
feasible social structure”. This is consistent describing neoliberalism as a non-ideal theory. While
in ideal theory, Friedman is a libertarian, or at least more libertarian than most other neoliberals,
his non-ideal theory is neoliberalism.

Buchanan is both the hardest to pin down on the welfare state and the most egalitarian. He has
virtually nothing to say about government poverty relief. Buchanan’s contractarianism
nonetheless embraces some redistribution, as he thinks his social contract would yield
unanimous agreement on having a “productive” state, which provides many tax-financed goods,
and could also provide social insurance (Buchanan 1975: 124). Buchanan also defends a
principle of equal opportunity, which he thinks requires a 100 percent inheritance tax that would
prevent the formation of an aristocracy. Presumably this principle could justify other forms of
redistribution.

Neoliberals stridently reject one of the most common rationales for the welfare state, namely
pursuing an egalitarian conception of social justice. Hayek is clearest on this point, given his
total rejection of the very idea of social justice, which he understands, somewhat peculiarly, as a
set of moral principles that govern the justifiability of specific distributions of economic
resources, though not moral principles that govern the functioning of an economic system as a
whole. Hayek (1978: 78) thinks that the idea of social justice is confused in that justice cannot be
applied to specific market outcomes because they are not the result of direct, conscious choices.
Social justice is an incoherent idea, much like the idea of a “moral stone”. Hayek thinks it
imperative that the state not be used to achieve a precise income distribution (Caldwell 2004:
350):

any policy aiming directly at a substantive ideal of distributive justice must lead to the
destruction of the Rule of Law. (1944 [2007: 79])

Yet Hayek has an idiosyncratic understanding of social justice. He thinks it requires the that
certain specific economic outcomes be imposed, rather than that a society’s moral, legal, and
political rules work to the advantage of all. Hayek supports the latter requirement. Hayek says
that the “most desirable order of society” is

one which we would choose if we knew that our initial position in it would be decided purely by
chance (such as the fact of our being born into a particular family). (1978: 132)

If Hayek sounds like Rawls, it is no coincidence. Hayek’s reading of Rawls’s earlier papers (not
A Theory of Justice) led him to believe he had no quarrel with Rawls, for Rawls

acknowledges that the task of selecting specific systems of distributions of desired things as just
must be abandoned. (1978: 100)[10]

Thus, Hayek seems to share Rawls’s concept of social justice, though not his conception of it.
And this concept of social justice is compatible with liberty. The pursuit of social justice only
implies the destruction of the rule of law if our conception of social justice requires us to tinker
with particular economic outcomes (Hayek 1960 [2011: 85]). These points are by now well-
understood by Hayek’s defenders (Tomasi 2012: 142–150).

Buchanan and Friedman are less focused on rejecting social justice, but their positions resemble
Hayek’s. Buchanan’s contractarianism leads him to hold that a society’s distributions are fair if
they are the product of rules that all agree to, and otherwise not, so if pursuing distributive justice
means breaking the constitutional rules that we have agreed to, it is problematic. But social
contracts may have redistributive rules. If people agree to redistributive rules, then redistribution
is justified. In this way, Buchanan is closer to Rawls than Hayek is.
Friedman has much less to say about social justice. He mostly stresses that only some kinds of
equality are desirable. Friedman (1980 [2017: 144]) often says, for instance, that we should only
seek equality of opportunity, not equality of outcome (Butler 1985: 218). But he also feels the
need to argue that markets do not have an inherent tendency to produce very unequal outcomes.
Friedman (1955 [2017: 14]) says that

the way to reduce inequality … is not by the misleading palliative of sharing the wealth but by
improving the workings of the market, strengthening competition, and widening opportunities
for individuals to make the most of their own qualities.

Differences in economic power do not argue for a redistributive state but for more capitalism:

The virtue of free enterprise capitalism is that it sets one businessman against another and is thus
the most effective device for control. (1974a [2017: 84])

Free markets undermine monopoly economic power, whereas government generates it (Butler
1985: 210).

7. Criticisms of Neoliberalism

This section covers criticisms of neoliberalism, but it leaves out a great many of them. The
reason for this is that many of the most well-known criticisms of neoliberalism are simply
criticisms of capitalism as such. Accordingly, this section focuses on criticisms aimed directly at
neoliberalism.

7.1 Ethos Criticisms

Many criticize neoliberalism for structuring society around the market, commodifying market
relations, and in general manipulating people into serving the ends of what is best for commerce
or economic production. In this way, neoliberalism builds society around a cash nexus. But
unlike full capitalism, neoliberalism does so in a covert way that takes serious scholarly work to
demonstrate. Neoliberalism itself is not an ethos, as noted above, but neoliberalism might be seen
to give rise to an excessively capitalist/transactional relationship between persons. While she
rejects this characterization of neoliberalism, Jessica Whyte argues that it is often characterized
as

an amoral economic ideology that subordinates all values to an economic rationality, (2019: 19)

following a number of others, like Wendy Brown (2015). Here the analysis draws heavily on
Foucault (2010) where neoliberalism is said to reduce practical rationality to economic
considerations, where

there is no difference between the infraction of the highway code and a premeditated murder.
(2015: 253–4)
Indeed, one might make the more worrisome argument that neoliberalism leads not so much to
selfish attitudes but towards bigoted, hierarchical, and traditional ones (Brown 2019: 7, 37).

7.2 Inequality

One central concern about neoliberalism is that, even if it boosts economic growth, it also
increases economic inequality, which is problematic in several ways. Two kinds of inequality
criticisms are generally offered. The more well-known are the empirical criticisms that neoliberal
regimes lead to dangerous inequalities just from the data, such as Thomas Piketty’s book,
Capital (2014), which holds that economic inequality is growing and is a threat to democracy,
much as Martin Gilens’s (2014) work on inequality and the responsiveness of democratic policy-
making to the richest 10%.

The other kind of critique of inequality under neoliberalism is derived from Rawls’s work. As is
well-known, Rawls rejected welfare-state capitalism and a more robust form of capitalism which
he called the system of natural liberty on the grounds that they do not satisfy Rawls’s two
principles of justice (Rawls 2001; O’Neill and Williamson 2014). Rawls argued that even
welfare-state capitalism cannot protect the value of political liberty or realize its priority (Rawls
1993 [2005]) because it allows for the accumulation of capital in too few hands, which leads to
economic domination of politics, and shuts many people out of the goods of owning and
operating at least some of the capital they need to enjoy the worth of their constitutional liberties.

Another kind of inequality that has been raised as a concern for neoliberal societies is the
imbalance of political power within the firm between bosses and workers. Elizabeth Anderson
(2019) has argued, for instance, that this is a form of tyrannical “private government” and that
the institutions defended by neoliberals (though she does not use this term) are insufficient to
equalize the freedoms of capitalists and workers.

7.3 Undermining Democracy

A very common criticism of neoliberalism is that it undermines democracy. This might be

because high economic inequality undermines democracy, as Martin Gilens (2014) argues in
Affluence and Influence and defended by Larry Bartels (2008 [2016]). Another way in which
neoliberalism could undermine democracy is by prioritizing the protection of classical liberal
economic liberties, like the right to private property. These can lead to restrictions on the ability
of democratic citizens to choose to redistribute wealth. This problem is especially acute given
Hayek’s favorable view of the Pinochet regime in Chile. Hayek hoped that Chile would become
a democracy, but he believed that the Pinochet coup had allowed Chile to dodge the bullet of
democratic socialism as advocated by Salvador Allende, Pinochet’s predecessor. There is a
tension between the liberalism and the democratic commitments within neoliberalism that in
practice tends to mean that democracy suffers.

7.4. Economic Irrationality

Neoliberal regimes rely heavily on market mechanisms, and neoliberals claim that markets are
efficient or at least highly economically productive (neoliberals disagree about how to
characterize and explain market productivity and efficiency). But behavioral economists
(Kahneman 2013; Ariely 2010) have identified various biases in human reasoning that
undermine the homo economicus model that neoliberals are said to use to model and predict
economic development (though as shown above, neoliberals have a subtler relationship with
homo economicus). See entry on bounded rationality.

7.5 Keynesian Rebuttals

Neoliberalism, as noted, arose in part in response to the dominance of Keynesian macro-

economic policy. But Keynesians, most notably Paul Krugman (2012), have struck back by
arguing that neoliberal criticisms of Keynesian policy fail. This is especially true because
neoliberals often claimed that fiscal policy is ineffective stimulus vis-à-vis monetary stimulus.
During the Great Recession, Krugman argued that the Federal Reserve had lowered interest rates
so much that further monetary stimulus would fail, and so fiscal policy had to intervene.

Many of the criticisms of neoliberal regimes engaging in “austerity” during the Great Recession
are based in an underlying Keynesian model, as the critics of government spending cuts during
the Great Recession were often based on the idea that they hurt the economic prospects of the
poor, whereas according to neoliberals, shrinking government spending during a recession is not
harmful to the poor for a variety of reasons. See entry on philosophy of economics.

7.6 Trickle-Down Economics

One common charge against neoliberalism is its false promise of “trickle-down” benefits of
economic growth to the poor from the rich (Quiggin 2012). Strictly speaking, trickle-down
economics is not a genuine school of economic thought, nor would Hayek, Friedman, or
Buchanan have accepted that description of their views. They did argue that all would benefit
from the prosperity brought about through the free market, but this was not necessarily because
the rich would benefit first. Hayek (1960 [2011]) argued that there is a kind of trickle-down
effect for the prices of goods and services, where luxuries for the rich become commonalities for
the poor because manufacturers figure out how to lower prices to broaden market penetration
over time. And indeed, it is standard in mainstream economics to hold that as businesses
accumulate capital, they can afford to pay their workers more and so can bid workers away from
other companies. That process often involves increasing wages, so more capital in the hands of
the rich can lead to higher wages for the poor through fairly ordinary causal channels. All the
same, many neoliberal officials promised gains for the poor that did not often materialize.

7.7 Libertarian Criticisms

Neoliberalism and libertarianism are distinct, if related views. And in some respects, the
neoliberals were libertarian under some conditions. Indeed, Buchanan thought anarchy was the
morally best regime, even if it was infeasible in practice. But it is still common for libertarians to
criticize more moderate libertarians for allowing any redistribution of wealth, such as Murray
Rothbard (1973, 1982 [2002]), Robert Nozick (1974), or for prioritizing democracy over more
epistocratic or elite-leaning forms of political decision-making, such as Jason Brennan (2016).
7.8 Colonialist Criticisms

It is common in some circles to argue that neoliberal regimes are colonialist in character, though
in an unusually direct way. The thought is that neoliberalism was adopted by regimes in the
Anglophone world and in much of Western Europe, and that this formed an international elite
consensus about how economies around the world should be run. This led to a “Washington
Consensus” that caused policy interventions that interfered with the democratic governance of
developing nations, increased inequality, and made the poor worse off. For comprehensive
discussion, see Whyte (2019: chapters 3–5).

7.9 Populist/Nationalist Criticisms

It is increasingly common for right-wing populists to criticize neoliberal policy on the grounds
that it emphasizes free trade and free immigration lead to a range of deleterious consequences,
from the shrinking of the industrial base of rich democratic countries like the United States, such
as that advanced by Patrick Deneen (2019). A stronger form of this concern is that allowing
immigrants from different cultures to acquire citizenship within a country will harm or degrade
the culture and politics of that country.

7.10 Feminist Criticisms

Some, like Nancy Fraser (2017), worry that neoliberalism has co-opted feminism by making the
feminist ideal into one that serves as a kind of false market-based meritocracy, where the aim of
feminism is, for instance, that woman who has well-paying career, and at its highest ideal,
female entrepreneurship and becoming CEOs of a company. This left feminism unable to attend
to the needs and interests of women who neoliberalism has harmed. See entry on feminist
perspectives on globalization.

7.11 Remaining Criticisms

Neoliberalism is subject to other objections, but many resemble problems for other liberal
democratic theories, such as the conflict between liberal rights (however understood) and
democracy—the “procedure-substance” dispute in the deliberative democracy literature, as well
as how any sufficiently liberal approach to associational freedom takes the freedom of
marginalized groups seriously given the prospect for local oppression. Neoliberals have diverse
conceptions of freedom, though typically negative, with all the standard criticisms those views
invite. And, then, to the extent that neoliberalism like Hayek and Buchanan adopt a contractarian
framework for justifying institutions, their defenses will inherit all the difficulties with
contractarianism.

8. Summary

This entry is not meant to determine the one true meaning of “neoliberalism”, but rather to
illuminate neoliberalism as a coherent philosophical doctrine embraced by figures commonly
called neoliberals. The entry also prioritizes more even-handed and less pejorative uses of the
term in recent historical research. This is not to discount more historical and dynamic
understandings of neoliberalism. They contain insight. But the goal of this entry has been to
characterize neoliberalism as a philosophical position. If we do so, we can understand
neoliberalism as a politico-economic doctrine that embraces robust liberal capitalism,
constitutional democracy, and a modest welfare state.[11]

7.RATIONAL CHOICE THEORY:

Rational choice theory in social work is an important concept because it helps explain how
individuals make decisions. According to the definition of rational choice theoryExternal
link:open_in_new, every choice that is made is completed by first considering the costs, risks and
benefits of making that decision. Choices that seem irrational to one person may make perfect
sense to another based on the individual’s desires.

Those who are studying for a social work degree will learn a variety of evidence-based theories
to help them inform their work. Learning and understanding the meaning behind rational choice
theory and seeing rational choice theory examples help future social workers characterize,
explain and anticipate social outcomes. That can improve the treatment and services they provide
their clients.

What is Rational Choice Theory?

Rational choice theory can apply to a variety of areas, including economics, psychology and
philosophy. This theory states that individuals use their self-interests to make choices that will
provide them with the greatest benefit. People weigh their options and make the choice they
think will serve them best. 

How individuals decide what will serve them best is dependent on personal preferences. For
example, one individual may decide that abstaining from smoking is best for them because they
want to protect their health. Another individual will decide they want to smoke because it
relieves their stress. Although the choices are opposite, both individuals make these choices to
get the best result for themselves.

Rational choice theory conflicts with some other theories in social work. For example,
psychodynamic theory states that humans seek gratification due to unconscious processes.
Conversely, rational choice theory states that there is always a rational justification for
behaviors. Individuals try to maximize their rewards because they’re worth the cost.

History of rational choice theory

Rational choice theory origins date back centuries. Philosopher Adam Smith is considered the
originator of rational choice theoryExternal link:open_in_new. His essay “An Inquiry into the
Nature and Causes of the Wealth of Nations,” from 1776, proposed human nature’s tendency
toward self-interest resulted in prosperity. Smith’s term “the invisible hand” referred to unseen
forces driving the free market.
Smith used the work of philosopher Thomas Hobbes’ “Leviathan” (1651) to influence his own
work. In “Leviathan,” Hobbes explained that political institution functioning was a result of
individual choices. Philosopher Niccolò Machiavelli, who wrote “The Prince” in 1513, also
introduced ideas related to rational choice theory in his treatise.

Moving from economics to the social sciences, in the 1950s and 1960s, sociologists George C.
Homans, Peter Blau and James Coleman promoted rational choice theory in relation to social
exchange. These social theorists stated that a rational calculation of an exchange of costs and
rewards drives social behavior. 

Rational choice theory in social interactions explains why people enter into or end individual and
group relationships.

Assumptions of rational choice theory

In order to fit the criteria for rational choice theory, the following assumptions are made.

1. All actions are rational and are made due to considering costs and rewards.
2. The reward of a relationship or action must outweigh the cost for the action to be completed.
3. When the value of the reward diminishes below the value of the costs incurred, the person will
stop the action or end the relationship.
4. Individuals will use the resources at their disposal to optimize their rewards.

Rational choice theory expresses that individuals are in control of their decisions. They don’t
make choices because of unconscious drives, tradition or environmental influences. They use
rational considerations to weigh consequences and potential benefits.

Applications of rational choice theory

Rational choice theory has a wide variety of applications in all types of spheres affecting human
populations.

 Economics and business: Rational choice theory can explain individual purchasing behaviors.
 Politics: Rational choice theory can be used to explain voting behaviors, the actions of politicians
and how political issues are handled.
 Sociology: Rational choice theory can explain social phenomena. This is because all social
change and institutions occur because of individual actions.
 Addiction treatment: Rational choice theory can be used to identify addiction motivations and
provide substance alternatives that are equally beneficial to patients.

When there’s a need to describe, predict and explain human behavior, rational choice theory can
be applied.

Strengths and weaknesses of rational choice theory

Rational choice theory can be helpful in understanding individual and collective behaviors. It
helps to pinpoint why people, groups and society as a whole move toward certain choices, based
on specific costs and rewards.

Rational choice theory also helps to explain seemingly “irrational” behavior. Because rational
choice theory states that all behavior is rational, any type of action can be examined for
underlying rational motivations. Rational choice theory can promote inquiry and understanding,
helping differing parties, like a client and a therapist, to recognize the other’s rationale.

A limitation of rational choice theory is that it focuses on individual action. While one could say
that individual action drives large social structures, some rational choice theory critics argue the
theory is too limited in its explanation.

Another weakness of rational choice theory is that it doesn’t account for intuitive reasoning or
instinct. For decisions that must be made in an instant, such as decisions that influence survival,
there may not be time to weigh the costs and benefits.

How Does Rational Choice Theory Apply to Social Work?

In social work, rational choice theory helps social workers understand the motivations of those
they work with. Using rational choice theory, social workers can uncover why their clients do
certain things and have gotten into certain situations, even when they seem unfavorable.

Rational choice theory can also help social workers when they’re designing interventions and
treatments. Knowing that their clients will make decisions based on what benefits them, social
workers can use that understanding to guide their interactions with and recommendations for
their clients.

Social workers can use rational choice theory to:

 Investigate the meaning behind their clients’ relationships, including with friend groups and
romantic partners, including when those relationships are abusive or seem toxic.
 Examine why their clients behave in certain ways, including engaging in self-destructive
behaviors and addictions.
 Understand how family dynamics and social interactions affect their clients.
 Create a better relationship between themselves and their clients, by positioning their work in a
way that benefits the client.
 Promote interventions and create treatments that their clients will want to engage in because
they see the benefits.
 Position resources so that clients understand how those resources will benefit them.

To optimize the use of rational choice theory in social work, social workers will need to create a
thorough assessment that takes into consideration the details of the motivations behind their
clients’ behavior.
Criticism of Rational Choice Theory

One potential issue with rational choice theory (PDF, 287 KB)External link:open_in_new is that
it doesn’t account for non-self-serving behavior, such as philanthropy or helping others when
there’s a cost but no reward to the individual. Rational choice theory also doesn’t take into
consideration how ethics and values might influence decisions.

Another criticism is that rational choice theory doesn’t comment on the influence of social
norms. An argument against rational choice theory is that most people follow social norms, even
when they’re not benefitting from adhering to them.

Also, some critics say that rational choice theory doesn’t account for choices that are made due
to situational factors or that are context-dependent. Factors like emotional state, social context,
environmental factors and the way choices are posed to the individual may result in decisions
that don’t align with rational choice theory assumptions.

Some critics also state that rational choice theory doesn’t account for individuals who make
decisions based on fixed learning rules, in that they do things because that’s the way they’ve
learned to do them—even when the decision has higher costs and fewer benefits.
CHAPTER 3: INDICATION LAID BY WB/IMF/UNSECO/UNDP/ADB

IMF:

Good governance is key to economic success

Governance is a broad concept covering all aspects of how a country is governed, including its
economic policies, regulatory framework, and adherence to rule of law. Poor governance offers
greater incentives and more opportunities for corruption—the abuse of public office for private
gain. Corruption undermines the public’s trust in its government. It also threatens market
integrity, distorts competition, and endangers economic development. Because poor governance
is clearly detrimental to economic activity and welfare, the IMF adopted in 1997 a policy on how
to address economic governance, embodied in the Guidance Note “The Role of the IMF in
Governance Issues." To further strengthen the implementation of this policy, the IMF adopted in
2018 a new Framework for Enhanced Engagement on Governance. The framework aims to
promote more systematic, effective, candid, and evenhanded engagement with member countries
regarding governance vulnerabilities—including corruption—that are critical to macroeconomic
performance.

Promoting good governance

The IMF works with its member countries to promote good governance and combat corruption.
In its surveillance, lending, and technical assistance, the IMF covers economic governance issues
that fall within its mandate and expertise, concentrating on issues likely to have a significant
impact on macroeconomic performance and the country authorities’ ability to pursue sound
economic policies. In doing so, the IMF stresses evenhandedness across its member countries
and collaborates closely with other multilateral institutions.

IMF surveillance involves annual reviews of countries’ economic policies, carried out through
Article IV consultations. In the process, staff may discuss economic consequences arising from
poor governance and advise on reforms to strengthen governance and fight corruption.  

Good governance is also promoted via IMF-supported programs—economic measures and

reforms supported by IMF financial assistance. When warranted, specific measures to strengthen
governance may become part of the program’s conditionality. Many of the structural conditions
in IMF-supported programs focus on improving governance and reducing vulnerabilities to
corruption.  This includes strengthening public expenditure controls; publishing audited accounts
of government agencies, central banks, and state enterprises; making revenue administration less
discretionary; increasing the transparency of natural resource management; enhancing bank
supervision; reforming regulatory frameworks to reduce the scope for bribes; strengthening anti-
money laundering measures; and fortifying anti-corruption legal frameworks, such as asset
declaration requirements for senior government officials.

In all of these areas, the IMF also provides technical assistance to help build effective economic
institutions and advise countries on how policies can be strengthened to improve governance and
reduce vulnerabilities to corruption.
IMF initiatives that promote good governance

The IMF promotes good governance in two main areas: i) the management of public resources
through reforms covering public sector institutions; and ii) the development and maintenance of
a transparent and stable economic and regulatory environment conducive to private sector
activities. Several initiatives involve close collaboration with other international organizations.

 The IMF encourages member countries to improve accountability by enhancing

transparency in the disclosure of documents, in line with its Transparency Policy.
 Together with the World Bank, the IMF assesses member countries’ compliance with
international transparency standards in 12 policy areas in the context of its Standards
and Codes Initiative, covering the government, financial sector, and corporate sector.
 For fiscal policy and monetary and financial policies, the IMF has developed codes that
set out transparency principles. Especially important is the Fiscal Transparencey
Code.     
 For application in natural-resource-rich countries, the Fund issued its Guide on Resource
Revenue Transparency. A multi-donor Topical Trust Fund launched in 2011 has enabled
the IMF to considerably increase technical assistance in the management of natural
resource wealth.
 To improve the transparency, quality, and timeliness of data, the IMF encourages its
members to subscribe to the Special Data Dissemination Standard (SDDS) or participate
in the General Data Dissemination System (GDDS).
 The IMF also emphasizes the need for adequate public financial management. It
partners with other international financial institutions and donors in the Public
Expenditure and Financial Accountability (PEFA) program, which helps countries
measure their performance.
 The IMF contributes to the international efforts to combat money laundering and the
financing of terrorism (AML/CFT). It assesses members' legal and regulatory
frameworks, provides technical assistance on the design and implementation of
AML/CFT frameworks, and conducts policy-oriented research. In 2009, the IMF
established a multi-donor Topical Trust Fund for capacity building on AML/CFT.
 Finally, the IMF contributes to various working groups and international initiatives,
including the Extractive Industries Transparency Initiative, the G20 Anti-Corruption
Working Group, and the Stolen Assets Recovery (StAR) initiative.

Integrity starts at home

As a means of safeguarding its resources , the IMF assesses the governance and transparency
frameworks within central banks of countries to which it lends money. In the process, it
promotes sound oversight, internal control, auditing, and public financial reporting
mechanisms in these critical financial institutions.

To promote good governance within its own organization, the IMF has adopted a number of
integrity measures, including a code of conduct for staff —bolstered by financial certification
and disclosure requirements, and sanctions—a similar code of conduct for members of the
Executive Board , and an integrity hotline offering protection to “whistleblowers.” The IMF
Ethics Office advises the institution and its staff on ethics issues, inquires into alleged violations
of rules and regulations, and oversees the ethics and integrity training program for all staff
members.

VOICE AND ACCOUNTABIITY:

Defining voice, empowerment and accountability

Voice, empowerment and accountability (VEA) is an umbrella term that covers a wide range of
ideas about how citizens can express preferences, secure their rights, make demands on the state
and ultimately achieve better development outcomes. VEA draws attention to the role of
individual agency, power relations, and processes that can enable or constrain citizens’ capacity
to articulate and achieve their individual and collective goals.

Though closely connected, the terms voice, empowerment and accountability are conceptually
distinct, and also widely contested:

 Voice is often understood as the ability of citizens to express their preferences and to be heard
by the state, either through formal or informal channels, in written or oral form (Rocha Menocal
& Sharma, 2008). Citizens’ voices are not homogenous, and sometimes more powerful voices
and opinions can crowd out those of excluded or marginal groups (DFID, 2011).
 Empowerment is a process through which individuals or organised groups increase their power
and autonomy to achieve certain outcomes they need and desire (Eyben, 2011). Empowerment
focuses on supporting disadvantaged people to gain power and exert greater influence over
those who control access to key resources (DFID, 2011).
 Accountability is a process for holding individual actors or organisations to account for their
actions. Accountability requires transparency, answerability, and enforceability between
decision makers and citizens (Rocha Menocal & Sharma, 2008).

For further resources, see conceptualising empowerment and accountability.

Why does VEA matter?

Voice, empowerment and accountability interventions (separately or in combination with each

other) aim to support poor and marginalised people to build the resources, assets, and capabilities
they need to exercise greater choice and control over their own development, and to hold
decision-makers to account. Two main rationales for supporting VEA are present across the
literature. One is that voice, empowerment and accountability have intrinsic value, as objectives
in and of themselves. Empowerment, for example, can improve people’s autonomy and dignity,
whilst enabling them to make valued contributions to family and society (Eyben, 2011).

A second rationale is that VEA is instrumental to the achievement of a broader range of

development goals. For instance, citizen voice is viewed as a precondition for equitable access to
and quality of public goods and services, thereby supporting improved health and education
outcomes (Rocha Menocal & Sharma, 2008). VEA is also considered vital for the development
of inclusive institutions – or institutions that generate equality of opportunity and access to
resources. Increased voice and accountability of marginalised groups is crucial if development is
to fulfil its promise to ‘leave no one behind’, and tackle the underlying causes of poverty and
exclusion (Rocha Menocal & Sharma, 2008). VEA is also associated with the development of
more inclusive political settlements, in which states are responsive to the needs of all groups of
citizens, regardless of ethnicity or social status (DFID, 2011).