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How Neoliberalism Reinvented Democracy

Niklas Olsen

Neoliberalism replaces the citizen with the consumer — pushing people out of political life and into the marketplace.

Visitors walk through the newly opened luxury shopping mall at the Hudson Yards development on the West Side of Midtown Manhattan on March 18 in New York City. Spencer Platt / Getty

Interview by
Daniel Zamora

Since the crisis of 2008, “neoliberalism” has been denounced from all sides — blamed for the explosion of inequality and the crisis itself.

But the idea remains vague and often used at random. Is it just an economic program? Or is it a true political project? Does it aim, as we often hear, to get rid of the state for the benefit of the market? And what is its relationship to democracy?

To answer all these questions, Daniel Zamora recently caught up with the historian Niklas Olsen, who recently published an intellectual history of neoliberalism entitled The Sovereign Consumer.


DZ

How do you define “neoliberalism” and “consumer”?

NO

I proceed from a pragmatic definition. I understand neoliberalism as the ideological product of processes in which self-identified liberals, from the interwar period onwards, have attempted to renew liberalism as an ideology that claims to promote societal orders based on free markets and individual freedom. In other words, neoliberalism refers to efforts to construct new liberalisms.

Many of the neoliberals that I study were related to the Mont Pèlerin Society, and they shared the ambition of rethinking how the functions of the state could be redefined to secure a free market and individual freedom. The positive notion of the state — and other political institutions — as the guarantor of a competitive order is crucial to the way in which these neoliberals sought to distinguish their project from the political economy of so-called classical liberalism.

Finally, its proponents referred to the figure of the sovereign consumer as a tool to salvage and renew liberal ideology. Let me stress that I do not understand the sovereign consumer as a real individual or as a fixed concept but as an analytical umbrella term for a range of ideas asserting that free consumer choice is the defining feature of the market economy. Indeed, the figure has been assigned different meanings and served different purposes across space and time.

DZ

What does it mean for the consumer to be “sovereign”? Was it a way to replace the state sovereignty with a consumer one? You also speak of giving to neoliberalism “a new mode of sovereignty” — what do you mean by that?

NO

The sovereignty aspect is very interesting. Its meaning and significance has to be understood in the contexts in which it emerged. Here we are back in the early 1920s, when Austrian economist Ludwig von Mises invented the notion of the “sovereign consumer.”

In his defense of liberal ideology, Mises was forced to answer those, such as the German jurist and political thinker Carl Schmitt, who criticized liberalism for its lack of a clear source of social order. He did so by coining the figure of the sovereign consumer, effectively investing the liberal order with a new symbol of authority that explains and justifies the particular political organization of liberalism.

This source of authority was supposedly unrestricted by religious or political norms and institutions. It answered only individual desires and the formal freedom of laws and markets. And yes, given that the growing power and authoritarian tendencies of the state were the main concern of neoliberals in the interwar era, the sovereign consumer was put forward to undercut state sovereignty.

Quinn Slobodian also makes this argument in his excellent Globalists: The End of Empire and the Birth of Neoliberalism, which illustrates how neoliberals have directed their efforts toward reconstructing capitalism on a global scale. In Slobodian’s words, consumer sovereignty trumps national sovereignty. Overall, the sovereign consumer denoted an essentially individualist, but well-ordered, efficient, and democratic market society.

DZ

In what sense was this notion of the consumer qualitatively different from former definitions?

NO

The sovereign consumer has always served as a key figure in the legitimation of the neoliberal project. Virtually all proponents of neoliberal ideology, from Ludwig von Mises to Milton Friedman, have portrayed free consumer choice as the defining feature of the desired market economy, and the sovereign consumer as an agent who is capable of dictating economic production and driving political activity.

By making a direct parallel between choice in the marketplace and at the ballot box, neoliberals not only depicted sovereign consumers as the key drivers of capitalism and of liberal democracy, but also described the daily voting on the marketplace as the real driver of individual representation and participation in society. Choosing between available “products” became a central approach to political activity.

Now, you certainly find precursor ideas in liberal political economists such as Adam Smith or Jean-Baptiste Say and in marginal economists such as William Jevons and Carl Menger. However, the neoliberal version differs markedly from earlier definitions. The crucial difference is the strong moral and political implications neoliberals attached to the figure, and the ways it legitimizes the neoliberal political order. This is why I label the sovereign consumer the key actor of neoliberalism.

DZ

You also explain how this figure was used to reinvent the market as the democratic place par excellence — the price system becoming a mechanism to register a “continuous election,” as Mises put it. Reading this history, it’s difficult not to think about Wendy Brown’s argument about how neoliberal rationality undoes democracy, how it transforms democracy into a marketplace.

NO

I think Wendy Brown is right to argue that neoliberalism undoes democracy as we know it by turning it into a marketplace. In this process, neoliberals have obviously contested (and some have outright rejected) traditional meanings of democracy that emphasize public deliberation and majority voting as the primary sources of legitimacy in political decision-making.

But we also need to grasp neoliberalism as a positive program that to a great extent has rallied popular support through appeals to democratic legitimacy. Most importantly, for many neoliberals, the market represents a superior solution to securing the individual citizen’s representation and participation in sociopolitical processes. This is a solution that supposedly allows for individual choice unbound by the will of the majority and eclipses the idea that social movements, unions, and organizations can empower segments of the population to improve their living conditions and promote sociopolitical rights.

Neoliberals wanted to constrain the mechanisms of traditional politics on behalf of market democracy, which is focused on consumer choice and the price mechanism. This ambition is reflected in the building of international institutions that have been immunized against the pressure of mass democracy to protect the market order. William Davies correctly speaks of neoliberalism as “the pursuit of politics by economics.” The point is that neoliberalism rehabilitates and re-enchants the market and its virtues on behalf of traditional sites of democracy and gives primacy to the economic rather than the political.

DZ

Your account gives us a fascinating understanding of why so many neoliberal economists, like Mises or Milton Friedman, supported at different moments in their career authoritarian or even fascist regimes. Preserving the marketplace was more important than preserving democracy, right?

NO

Yes. It’s pretty clear that the democracy of consumers they identified with the market economy often represented an analogy pertaining only to economic processes and not to a political order characterized by traditional democratic institutions and virtues. It’s also pretty clear that the political measures they approved for sustaining a “democratic” economic order often entailed strongly anti-democratic measures and anti-parliamentary approaches to claims to societal and political participation.

German neoliberalism in the 1930s is an obvious case in point. Accommodating to National Socialism, German neoliberals outlined an ideal of consumer sovereignty that was conditioned by the evasion of basic democratic and social rights. In fact, it was primarily concerned with making the population consumers, who were to fulfill government policies through specific modes of behavior in the market, bolstered by state-enforced education and compulsory measures. 

Generally, I think it’s fair to say that prioritizing the marketplace over democracy is a recurring pattern in neoliberal ideology and practice.

DZ

You mention that Mises once wrote that nobody is “spontaneously liberal” unless he’s “forced to.” But how could an order be liberal if people are “forced” to be liberal? What does it mean for Mises? Was it a conception widely shared among neoliberals?

NO

I do think the idea that people have to learn to be a market liberal is widely shared among neoliberal ideologists. Of course, nobody has described this idea better than Michel Foucault. To create a market society, you need to construct, first, a market order, and, second, to teach (or force) people to behave according to the desired principles of this order. Foucault’s cases were German ordoliberalism and Chicago neoliberalism.

Mises precedes both camps and has often been portrayed as being a different species — a non-neoliberal — because of his strong commitments to laissez-faire economics. However, recent research, including my own book, suggests that he was in fact the inventor of the neoliberal political paradigm. Mises did not expect the neoliberal market order to just arise. He found it necessary to convince the population of the blessings of the neoliberal order, and he described the state as an indispensable and powerful tool in the attempt to create and safeguard this order.

Moreover, his visions of laissez faire entailed strong state action and were not inimical to authoritarian politics, as his support of Engelbert Dollfuss’s authoritarian regime in Austria in the 1930s illustrates. Then there’s Mises’s notorious praise of the achievements of Italian fascism in curbing the communist threat to private property in his 1927 book Liberalism.

The rhetoric of choice is often deceptive in neoliberal discourse. While it is virtually impossible to be against the idea of free choice for everyone, in reality most people have very little money to spend and few goods to choose between in an economy dominated by widespread inequality and monopolistic big business. And once we buy into this rhetoric, it erodes our ability to make collective demands for social rights.

DZ

Would you argue that talking about a consumer democracy was a deliberate way to attack socialist ideas? For example, isn’t the notion of consumer democracy an attempt to challenge the socialist notion of democracy? And, likewise, is the notion of consumer sovereignty intended to dismantle the leftist criticism of capitalism as characterized by producer sovereignty?

NO

There is no doubt that the neoliberal sovereign consumer was invented as an attack on socialist thought, and that an attempt to answer the socialist notion of economic democracy was crucial in this endeavor.

To gain the moral high ground, neoliberals presented the notion of consumer democracy as the real economic democracy, which, in contrast to the socialist ideal, effectively ensured that all members of society could hold a share in economic decision-making, power, and wealth. And, obviously, by speaking of consumers as “lords of production,” neoliberals also launched a defense against the Marxist conception of capitalism as a system run by and merely enriching the owners of the means of production.

Neoliberals, from the very beginning, sought to co-opt and re-describe leftist ideals to legitimize their own political projects.

DZ

You also document how this model of the consumer colonized the language of the Left with the rise of the Third Way — redefining the Left’s project as the protection of consumers rather than of the working class and seeing the market as the ideal place where the individual could flourish. How would you explain this conversion?

NO

This conversion is one of the most important political events in the second half of the twentieth century, and some important books have helped us understand how it happened. Daniel T. Rodgers, in Age of Fracture, has provided us with an account of the fragmentation, on both the intellectual right and the intellectual left since the 1960s, of collective notions of society and politics into conceptions of society that stress the many, often-incompatible interests and desires held by autonomous individuals. More recently, Stephanie L. Mudge has in Leftism Reinvented: Western Parties from Socialism to Neoliberalism illuminated how Social Democratic parties in the 1980s and 1990s embraced a neoliberal ideology that elevated markets over politics.

In my perspective, the neoliberal rise to hegemony was closely linked to the fact that center-left parties gradually incorporated the idea of government as unable to respond to individual demands into their political ideology and practice. They began to argue that the individual’s capacity to shape her or his own life and contemporary society was much better fulfilled by market forces than by protections offered by state institutions.

In this context, the argument of the democratic, efficient, and sovereign consumer came to play a crucial role. Center-left parties not only followed in the footsteps of neoliberal ideologists, but also expanded on their ambitions by framing the sovereign consumer as a motive and tool for public sector reforms. We should remember that the new center-left policies were in line with developments in postwar economics, which increasingly questioned the role of the state as a collective decision-maker and social planner and elevated consumer sovereignty into the only norm according to which societal wellbeing could be measured.

DZ

Finally, you also seem to argue that in the 1960s, important figures on the Left adopted this narrative against the state.

NO

Yes, I do think the Left’s critique of the state was crucial to the triumph of neoliberalism. Arguably this criticism contributed to reframing contemporary debates of how to create a fair distribution of wealth and power in society. Instead of focusing mainly on the challenge of capitalism, these debates came to concern the failed promises of the welfare state and question the very idea of the state as being capable of creating the good society. For example, many leftists radically abandoned their belief in the role of the state as a necessary regulator of the market.

One striking example here is consumer advocate Ralph Nader, who was famous for his work in favor of increased regulation of the market. However, in the 1970s, he arrived at a position that was close to that of Milton Friedman. He began to argue that it was necessary to scale back inefficient and self-interested federal agencies and to restore economic efficiency by deregulating the market and liberating the individual as consumer.

Many leftist intellectuals and politicians have followed suit in changing their understandings of the state and the market and of the desired relation between the two. Today, many seem to believe that challenges to the good society are located in the flaws of state institutions and the actions of people in charge of them rather than in capitalism.

This belief is strongly rooted in the idea, prevalent not only in neoliberalism, but also in the discipline of economics more generally, that self-interest is a driving force of human activity. According to this idea, people only enter government institutions to maximize their own utility, not because they are dedicated to ideals of the common good. Against this background, economists and politicians want to push political decisions onto the market, which they portray as a site of social interaction that will bring us what the state cannot deliver — efficiency, freedom, entrepreneurship, and democracy.

End Mark

About the Author

Niklas Olsen is associate professor in history and chair of the Center of Modern European Studies at the University of Copenhagen. He is the author of The Sovereign Consumer. A New Intellectual History of Neoliberalism.

About the Interviewer

Daniel Zamora is a postdoctoral sociologist at the Université Libre de Bruxelles and Cambridge University.

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