It is now firmly established (contrary to the naive Keynesian celebrations of 2008-09) that the crises of neoliberalism are working in favour of their architects, and not against them. The banks are more powerful, three years after their historic suicide attacks, not less. What is now also becoming clear is that the same is true for neoliberalism's preferred mode of sovereign ruler: the technocrat. Both Greece and Italy are to become nations governed not just via economics (as Foucauldian theorists of liberal governmentality have long witnessed) but by economists. Potentially this is a wholly new epoch emerging, in the interplay between the modern state and liberal economics.
This makes Woolfgang Streeck's recent article in The New Left Review all the more prescient. As he argues there:
There are various ways to conceptualize the underlying causes of the friction between capitalism and democracy. For present purposes, I will characterize democratic capitalism as a political economy ruled by two conflicting principles, or regimes, of resource allocation: one operating according to marginal productivity, or what is revealed as merit by a ‘free play of market forces’, and the other based on social need or entitlement, as certified by the collective choices of democratic politics. Under democratic capitalism, governments are theoretically required to honour both principles simultaneously, although substantively the two almost never align...
In the liberal utopia of standard economic theory, the tension in democratic capitalism between its two principles of allocation is overcome by turning the theory into what Marx would have called a material force. In this view, economics as ‘scientific knowledge’ teaches citizens and politicians that true justice is market justice, under which everybody is rewarded according to their contribution, rather than their needs redefined as rights. To the extent that economic theory became accepted as a social theory, it would ‘come true’ in the sense of being performative—thus revealing its essentially rhetorical nature as an instrument of social construction by persuasion. In the real world, however, it did not prove so easy to talk people out of their ‘irrational’ beliefs in social and political rights, as distinct from the law of the market and the right of property. To date, non-market notions of social justice have resisted efforts at economic rationalization, forceful as the latter may have become in the leaden age of advancing neoliberalism.
It is also worth noting that the march of the technocrats in 2011 is (at least on the face of it) just as startling as the onward march of the investment banks in 2010. Wasn't the financial crisis also a vast humiliation for economic expertise? Didn't the risk modelling techniques, the stress tests and the forecasts turn out to be about as 'objective' as a gut feeling about the Grand National? And can't we now accept that any social scientist who projects an arrogant refusal to discuss their methods, their presuppositions and their own perspective, is ultimately more politically dangerous than the apparently 'post-modern' ones who are frank enough to discuss the interplay of power and knowledge?
Under the new circumstances, the description of economics as a 'social science' becomes less tenable. Economics has undergone various mutations in its time (though of course this would be the last thing that would be discussed in an economics class), from a branch of political theory in the mid-18th century, to something approaching economic sociology in the mid-19th century, to a professional academic discipline by the early 20th century, before descending into mathematical formalism by the late 20th century. The new technocrats, on the other hand, do not - and importantly can not - abide by Milton Friedman's Popperian vision of economics, as the generator of falsifiable predictions. In the face of an uncertain future, the technocrats do not use economics to produce models of risk, but to shape and control it via sovereign powers. These are two separate pragmatic responses to uncertainty as identified by Frank Knight - but Knight never foresaw that economics would be used in pursuit of the latter.
Economics and sovereignty are merging. If Prime Ministers Mario Monti or Lucas Papademos ever turn out to be 'wrong' in their economic analysis, this might, from now on, be beside the point.