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CONSUMPTION AND PUBLIC LIFE

THE SOVEREIGN CONSUMER


A New Intellectual History
of Neoliberalism

NIKLAS OLSEN
Consumption and Public Life

Series Editors
Frank Trentmann
Birkeck College
London WC, UK

Richard Wilk
Indiana University
Bloomington, IN, USA
The series will be a channel and focus for some of the most interesting
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new research agenda. New approaches and public debates around con-
sumption in modern societies will be pursued within media, politics, eth-
ics, sociology, economics, management and cultural studies.

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Niklas Olsen

The Sovereign
Consumer
A New Intellectual History of
Neoliberalism
Niklas Olsen
SAXO-Institute
University of Copenhagen
Copenhagen, Denmark

Consumption and Public Life


ISBN 978-3-319-89583-3    ISBN 978-3-319-89584-0 (eBook)
https://doi.org/10.1007/978-3-319-89584-0

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Acknowledgments

This book was long underway. It has its origins in a project on the politi-
cal roots of the current financial crisis that I initiated in 2010, when I
became a postdoctoral fellow at the University of Copenhagen. Soon this
project led me to explore the history of liberalism and neoliberalism as
political ideologies since the interwar era, which eventually opened my
eyes to the key theme of this book, namely, the role of the figure of the
sovereign consumer in neoliberalism. Although I decided to write a book
on the topic and found my case studies soon after, further conceptualiz-
ing and finalizing the project was no easy task. Indeed, it was only pos-
sible due to the immense support and encouragement that I received
from several institutions, colleagues, and friends.
First, I must thank the two institutions I have been associated with
since 2010—the Saxo-Institute and the Center of Modern European
Studies at the University of Copenhagen—for supporting my research.
Most importantly, many of the ideas in this book derive from courses,
seminars, and talks related to consumers and consumption that I was
given the opportunity to organize within these institutions. Thanks also
to Hagen Schulz-Forberg for inviting me join the project on “The Good
Society,” funded by Velux and based at Aarhus University. I have profited
greatly from presenting different parts of my project to the helpful group
of scholars in this forum.

v
vi  Acknowledgments

I also thank those scholars who kindly invited me to present my work


in their departments and at their workshops, thus enabling exchanges
and dialogues that were vital to authoring this book. Thanks especially to
Duncan Kelly, Balázs Trencsényi, and Milinda Banerjee, who invited me
to give talks at the University of Cambridge, the Central European
University, and the Ludwig-Maximilians-Universität München, respec-
tively, as well as to Mario Wimmer and Christian Fleck, who invited me
to present my research in their workshop at Berkeley, and to Roger
Backhouse and Philippe Fontaine, who invited me to present in their
workshop at the London School of Economics. Moreover, I thank Magrit
Pernau, Jan Ifversen, Jani Marjanen, and Martin J. Burke for the stimu-
lating academic conversations (and social gatherings) we have had each
August in Helsinki, ever since they invited me to co-teach at the
Conceptual History Summer School in 2011. These conversations
undoubtedly contributed to my thinking about how intellectual and
conceptual history might be fruitfully combined.
Moreover, I must acknowledge all the gifted and generous scholars
who provided feedback on chapter drafts, as well as guidance and encour-
agement, during the writing process: Gunvor Simonsen, Jesper Vestermark
Køber, Stefan Schwarzkopf, Haakon Ikonomou, Dieter Plehwe, Eddie
Nik-Khah, David Singh Grewal, Stefan Gaardsmand Jacobsen, Christian
Olaf Christiansen, Joshua Rahtz, Mikkel Thorup, Casper Sylvest, Jeppe
Nevers, Frank Trentmann, Ilya Afanasyev, and Alexander Blake Ewing.
Thanks also to Eduardo F. Canedo and Stephanie L. Mudge for sharing
their unpublished work with me.
I am also grateful to the two (anonymous) peer reviewers from Modern
Intellectual History who provided excellent comments on the article
“From Choice to Welfare: The Concept of the Consumer in the Chicago
School of Economics,” which appeared in the journal (volume 14, issue
2, August 2017, 507–535) and is included in this book. And thanks to
Cambridge University Press for permission to reproduce this article here.
I must also thank Sharon Rhodes for her meticulous copy editing of the
manuscript.
Finally, I express special gratitude to Jacob Jensen, who is currently
completing his PhD dissertation on Visions of Politics as Economics at
Aarhus University. While working on his own project over the past three
 Acknowledgments 
   vii

years, Jacob has acted as a vital intellectual interlocutor through his tire-
less readings of chapter drafts and discussions of interpretations, concep-
tualizations, and questions of detail. Jacob’s input has been a crucial
motor in this project, and I do regard much of the book as a collaborative
effort that emerged out of and was shaped by our ongoing intellectual
dialogs. Needless to say, the responsibility for any errors is entirely my
own.
Finally, and most importantly, I thank the members of our little
consumer-­cooperative on the Northwestern outskirts of Copenhagen:
Nina, Martin, and Simon. About Nina, I can only repeat what I have said
before: In the most convincing of ways, she has at the same time managed
to back up my academic projects and to remind me that the most impor-
tant dimensions of the human Miteinandersein and Miteinandersprechen
lie outside of academia. Martin and Simon: thanks for inhabiting and
expanding our non-academic social space in the most amazing of ways.
Contents

1 Introduction   1

2 The Birth of the Neoliberal Sovereign Consumer  19

3 Liberating the Consumer: Ludwig Erhard and the Making


of the Federal Republic  65

4 From Choice to Welfare: The Concept of the Consumer


in the Chicago School of Economics 105

5 The Emergence of the Sovereign Consumer in Post-war


Economics 141

6 Sovereign Consumers Enter the Scandinavian Welfare


State: The Case of Denmark 185

ix
x  Contents

7 Neoliberalism Without Neoliberals 227

8 Epilogue 259

Bibliography 267

Index 295
1
Introduction

By now, given the lively interest in the topic among scholars across mul-
tiple disciplines in the last 15 years or so, claiming to say anything new
about neoliberalism might seem rather presumptuous. This book, never-
theless, endeavors to offer a new intellectual history of neoliberalism by
arguing that, as an ideology, it is inextricably linked to the invention of a
specific figure: the sovereign consumer. The book understands the neolib-
eral sovereign consumer not as a real individual or as a fixed concept but
as a range of ideas asserting that free consumer choice is the defining
feature of the market economy. Against this background, it argues that
neoliberal thinkers invented the figure of the sovereign consumer in the
interwar period and that the figure has been crucial to the ways in which
neoliberals have constructed and legitimized their visions of modern soci-
ety ever since. The sovereign consumer, so the book asserts, emerged and
continues to function as the key actor in the neoliberal political
paradigm.
In this focus, the ambition of the book is to offer a new and better
understanding of the contemporary neoliberal paradigm by exploring
how the figure of the sovereign consumer has been constructed, dissemi-
nated, and used for governing purposes in the Western world since the

© The Author(s) 2019 1


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_1
2  N. Olsen

interwar era. It portrays how neoliberal thinkers created the idea that
individuals should be understood as critical, independent, and ultimately
sovereign consumers able to dictate economic production and drive
political activity. Special attention is paid to the ways in which neoliberals
conceptualized the sovereign consumer as an agent who guarantees not
only economic efficiency but also democratic institutions wherein choos-
ing between available “products” became a central approach to political
activity. This conceptualization, so the book argues, hinged on the idea of
democracy as a method of choosing and is, accordingly, a re-invention of
the market as the democratic forum par excellence. In other words, the
book portrays neoliberalism as a new political economy of consumer
choice that aims to marketize the political. Moreover, in association with
this, the book demonstrates how the sovereign consumer emerged as a
dominant actor in the paradigm of contemporary neoliberal politics as
political institutions in the Western world began to govern their popula-
tions in ways that claimed to unleash and enhance the societal potential
of this particular figure.
In writing the history of the sovereign consumer as the history of neo-
liberalism, the book illustrates the ways in which the sovereign consumer
has, in different contexts, been assigned different meanings and has served
many different purposes. More specifically, it demonstrates the ways in
which West German neoliberals, American neoliberals, and Scandinavian
neoliberals ascribed divergent degrees of sovereignty and rationality to
the figure and held heterogeneous views concerning the appropriate role
of the state in a consumer-driven economy from the 1930s to the 1980s.
Additionally, the book goes beyond the confined realm of neoliberal
actors and institutions by exploring how the mainstream discipline of
economics and the political center-left contributed to the shaping and
dissemination of the sovereign consumer after 1945.
Overall, the book argues that the idea of the sovereign consumer has
functioned as a major driver in a wide-ranging transformation of political
thinking since the 1960s that subordinates traditional political values to
the narrower pursuit of economic ideals by decoupling visions of effi-
ciency, utility, and growth from the promotion of rights, participation,
and, finally and ironically, choice. In the process, this paradigm has
gained prominence not only among neoliberals but across the political
 Introduction    3

spectrum and especially among center-left politicians and intellectuals. It


draws on a discourse stating that the sovereign consumer is harmed by
state regulations and best protected by individual rationality and the effi-
ciency of the market. Indeed, this paradigm shift pushes a new under-
standing of state institutions, markets, and individuals as well as of the
desired relations between them. As such, it has also discredited and
replaced traditional meanings of democracy that emphasize public delib-
eration and majority voting as the primary sources of legitimacy in politi-
cal decision-making.
The book unfolds this argument in six chapters that include nation-­
specific, comparative, and transnational perspectives, illuminating differ-
ent developmental paths as well as entanglements between North
America, continental Europe, and Scandinavia.
Thereby, the chapters emphasize the local adaptions and negotiations
of a figure that has been imbued with universalist claims concerning its
applicability and superiority as a mode of societal order, regardless of
particular national or regional contexts. Against this background, the
book analyzes the invention of the sovereign consumer framed as a new
intellectual history of neoliberalism and forms a better understanding
of the current, and in many ways problematic, neoliberal political
paradigm.

 efining Neoliberalism: Free Markets, New


D
Liberalisms, and Sovereign Consumers
This book is intended to enter a well-established conversation. Indeed,
the concept of neoliberalism has long been omnipresent in the political
and academic vocabulary. It became widely used in the 1990s to explain
the economic paradigm shift that has taken place in Great Britain and the
United States and is often associated with two political figures: Margaret
Thatcher, who became Prime Minister in 1979, and Ronald Reagan, who
took office in 1981. Their respective rises marked a significant shift in
attitude. Whereas governments in the West had previously aimed to cre-
ate full employment through government intervention in, and distribu-
tion of, the economy, new economic policies responding to the economic
4  N. Olsen

crisis of the 1970s and the so-called breakdown of Keynesianism sought


to enhance the competitiveness of businesses through privatization, out-
sourcing, and deregulation. It was especially in response to these develop-
ments that critics began to speak of neoliberalism as a political ideology.1
Since the 2008 financial crisis, the term has become even more promi-
nent in scholarly research as scholars across disciplines published a wealth
of new writings that explore the nature and dynamics of neoliberalism,
including its role in the recent transformations of financial markets.2
Scholars have offered various definitions of neoliberalism. The most
famous book is David Harvey’s A Brief History of Neoliberalism, published
in 2005, which constructs neoliberalism as a period stretching from the
1970s onwards in which ideas of market exchange became dominant in
political thought and practice throughout the world.3 Harvey’s account
understands neoliberalism in Marxist terms, as a deliberate political proj-
ect aiming to restore the power of the capitalist class after years of decline
in the post-war period. According to Harvey, neoliberal ideas legitimized
political initiatives deemed necessary to achieve the capitalist resurgence
led by national governments and international institutions, such as the
International Monetary Fund and the World Bank. Harvey mainly
focused on economic and political shifts in the United States, Great
Britain, and China in the wake of the economic and political crises of the
1970s. Still, he regards neoliberalism as a global transformation of the
dynamics of class struggle, and a range of other Marxists have followed
Harvey in portraying neoliberalism as the outcome of intended and
planned structural changes in the global economy.4
But this is not the only interpretation. Building on Michel Foucault’s
concept of biopolitics, outlined in the late 1970s, a second strand of

1
 For conceptual histories of the term, see, for example, Rajesh Venugopal, “Neoliberalism as
Concept,” Economy and Society 44, 2 (2015): 1–23; Terry Flew, “Six Theories of Neoliberalism,”
Thesis Eleven, 122, 1 (2014): 49–71; A. Taylor C. Boas and Jordan Gans Morse, “Neoliberalism:
From New Liberal Philosophy to Anti-Liberal Slogan,” Studies in Comparative International
Development 44, 2 (2009): 137–161.
2
 A range of these contributions have been collected in Simon Springer, Kean Birch, and Julie
MacLeavy, eds., The Handbook of Neoliberalism (New York: Routledge, 2016).
3
 David Harvey, A Brief History of Neoliberalism (Oxford: Oxford University Press, 2004).
4
 Gérard Duménil and Dominique Lévy, The Crisis of Neoliberalism (Cambridge, MA: Harvard
University Press, 2011).
 Introduction    5

research has, instead, interpreted neoliberalism as a normative rationality


that compels individuals to think and act according to principles of com-
petition and economic calculation.5 Here the primary focus is on how
human beings are encouraged to transform their private and social lives
according to the ideals of entrepreneurship based on the model of the
firm. Consequently, according to this perspective, neoliberalism is char-
acterized by the dissemination—into all social and cultural spheres—of a
competition ethos aiming to transform us into “entrepreneurs of the self,”
engaged in self-interested conduct as personal investment.6
Meanwhile, a third body of research analyzes neoliberalism less as an
idea and more as a network of scholars, intellectuals, and businessmen
who all had links to the Mont Pèlerin Society, the transnational associa-
tion of economists, intellectuals, and business leaders founded by the
Austrian émigré economist Friedrich Hayek in 1947 with the explicit aim
of renewing liberalism. From its inception, this network was associated
with a range of academic institutions, think tanks, and political parties—
all of which contributed to the global reshaping and diffusion of free
market thought. To its critics, it represented a crucial station on the road
to a so-called neoliberal “hegemony.”7
These are only the three core strands. Neoliberalism has been studied
from many other angles and perspectives. However, many scholars, and
some associated with the above approaches, use the concept rather
5
 Michel Foucault, The Birth of Biopolitics: Lectures at the College de France, 1978–1979, ed., Michel
Senellart, general ed. Francois Ewald and Alessandro Fontana, trans. by Graham Burchell
(Basingstoke: Palgrave Macmillan, 2008 [2004]).
6
 For some recent contributions, see Ulrich Bröckling, The Entrepreneurial Self, Fabricating a New
Kind of Subject (London: Sage, 2016); Wendy Brown, Undoing the Demos: Neoliberalism’s Stealth
Revolution (Cambridge, MA: MIT Press, 2015); Pierre Dardot and Christian Laval, The New Way
of the World: On Neoliberal Society, trans. Gregory Elliott (London: Verso, 2013). William Davies,
The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition (London: Sage,
2014) also examines how a neoliberal idea of competition has permeated modern society, though
not from a Foucauldian perspective.
7
 Bernhard Walpen, Die offenen Feinde und ihre Gesellschaft: Eine hegemonietheoretische Studie zur
Mont Pèlerin Society (Hamburg: VSA Verlag, 2004); Philip Mirowski and Dieter Plehwe, eds., The
Road from Mont Pelerin: The Making of a Neoliberal Thought Collective (Cambridge, MA: Harvard
University Press, 2009); Jamie Peck, Constructions of Neoliberal Reason (Oxford: Oxford University
Press, 2010); Angus Burgin, The Great Persuasion: Reinventing Free Markets since the Great Depression
(Cambridge, MA: Harvard University Press, 2012); Daniel Stedman Jones, Masters of the Universe:
Hayek, Friedman, and the Birth of Neoliberal Politics (Princeton, NJ: Princeton University Press,
2014).
6  N. Olsen

­ nreflectively to criticize a range of highly diffuse societal developments


u
placed under the umbrella of the concept. In reaction, other scholars have
argued that the concept of neoliberalism has become too dilute, broad,
and politically loaded to own any kind of analytical relevance.8
Accordingly, any reference to and use of neoliberalism as an analytical
category demands a clear definition of the term. In this book, I proceed
from a pragmatic, heuristic, and, arguably, unique definition. I under-
stand neoliberalism simply 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 soci-
etal orders based on free markets and individual freedom. In other words,
neoliberalism refers, in what follows, to efforts to construct new liberal-
isms. Thus, it suggests that we see neoliberalism as a heterogeneous and
malleable set of market-oriented ideas advanced by liberal thinkers in
different places and at different times.
That said, three institutional and discursive features unite the protago-
nists featured in the following chapters. First, most neoliberals shared ide-
ational or institutional links with the above-mentioned Mont Pèlerin
Society. Second, by engaging in dialogues with each other’s works (and
often in collaborative efforts), they shared the ambition of rethinking how
the functions of the state could be redefined to secure a free market and
individual freedom. The vital feature underscoring all of these efforts is
the positive notion of the state—and other political institutions—as the
guarantor of a competitive order by which neoliberals sought to distin-
guish their project from the political economy of so-called classical liber-
alism.9 The third connection, and the one which entails the core focus of
this book, is that they mobilized the idea of the sovereign consumer for
8
 See the discussions in Flew, “Six Theories of Neoliberalism” and in Boas and Morse, “Neoliberalism.”
See also the most recent discussion of “the uses and abuses of neoliberalism” in Dissent with contri-
butions by Daniel T. Rodgers, Julia Ott, Mike Konczal, N. D. B. Connolly, and Timothy Shenk—
“Debating the Uses and Abuses of Neoliberalism,” accessed 31 January 2018, https://www.
dissentmagazine.org/online_articles/debating-uses-abuses-neoliberalism-forum
9
 This is in line with the standard definition of neoliberalism, provided by The Routledge Handbook
of Neoliberalism, as “the new political, economic, and social arrangements within society that
emphasize market relations, re-tasking the role of the state, and individual responsibility.” Simon
Springer, Kean Birch, and Julie MacLeavy, “An Introduction to Neoliberalism,” in The Handbook
of Neoliberalism, eds., Simon Springer, Kean Birch, and Julie MacLeavy (New York: Routledge,
2016), 2.
 Introduction    7

this purpose, using the figure as a tool to salvage and renew liberal ideol-
ogy and political practice, the form being one of consumerist choice.
This mobilization of the consumer involved efforts to criticize traditional
institutions of political democracy and to replace them with those pro-
moting the dynamics of market capitalism. In this process, neoliberals
effectively re-enchant the idea of the market as a place that fulfills people’s
dreams.
In sum, the main contribution of this book to the study of neoliberal-
ism is the understanding of the history of neoliberalism as an ongoing
shaping, negotiation, and contestation of the figure of the sovereign
consumer.

 pproach: The Sovereign Consumer as the Key


A
Actor in the Neoliberal Paradigm
This understanding proceeds from an intellectual history approach in so
far as it explores the ideational processes in which the sovereign consumer
was constructed and positioned as the key figure in the neoliberal politi-
cal paradigm. However, the ambition to locate ideology in the semantics
of political thinking derives from conceptual history as associated with
the theories and methods of the German historian Reinhart Koselleck.10
Instead of viewing concepts as given, timeless, and static, this approach
analyzes social-political concepts as reflecting phenomena that are shaped
in historically concrete situations by historical actors who use concepts to
make sense of and order the world, employing them as tools or weapons
to meet their political visions. From this perspective, concepts are part of
the world and the world is accordingly shaped and changed by the use of
concepts. The primary and most innovative contribution of conceptual
history and its investigation of changes in the meanings and uses of con-
cepts over time and across spaces involve relating conceptual changes to
the social-political position and intention of the language user and to the
10
 For a lucid discussion of the promises and pitfalls of conceptual history as intellectual history in
the modern and contemporary period, see Jan-Werner Müller, “On Conceptual History,”
Rethinking Modern European Intellectual History, eds., Darrin M.  McMahon and Samuel Moyn
(Oxford: Oxford University Press, 2014), 74–93.
8  N. Olsen

broader social context. Thus, the overall aim is to use the study of lan-
guage to illuminate larger societal transformations.11 More precisely,
then, this study applies a conceptual historical analysis to the figure of the
sovereign consumer in order to explore the making of a neoliberal politi-
cal paradigm.
In so doing, it contributes to the ongoing updating of this field in
three ways.12 First, instead of exploring the meanings attached to a single
social-political concept put in use by historical actors, such as liberalism,
freedom, or revolution, the book studies the much broader field of
semantic constructions related and referring to the figure of the sovereign
consumer. As mentioned earlier, it therefore treats the figure of the sover-
eign consumer as an analytical umbrella term for a wide range of ideas
asserting that free consumer choice is the defining feature of the market
economy. In other words, this approach involves analyzing how historical
actors have configured the virtues and abilities of the figure of the sover-
eign consumer by connecting the concept of the consumer to a larger
semantic field of value-laden concepts—including those of sovereignty,
freedom, democracy, rationality, efficiency, and welfare.
Second, the book breaks new ground by studying a societal language
that is heavily informed by economic concepts. With the exception of
Keith Tribe’s work, economic language has, arguably, been neglected in
conceptual history.13

11
 Ernst Müller and Falko Schmieder, Begriffsgeschichte und historische Semantik. Ein kritisches
Kompendium (Frankfurt am Main: Suhrkamp Verlag, 2016); Niklas Olsen, History in the Plural: An
Introduction to the Work of Reinhart Koselleck (New York: Berghahn Books, 2012); Melvin Richter:
The History of Political and Social Concepts: A Critical Introduction (Oxford: Oxford University
Press, 1995); Otto Brunner, Werner Conze, and Reinhart Koselleck, eds., Geschichtliche
Grundbegriffe: Historisches Lexikon zur politisch-sozialen Sprache in Deutschland, Bd. I–VIII
(Stuttgart: Klett-Cotta, 1972–1997).
12
 See, for example, Willibald Steinmetz, ed., Political Languages in the Age of Extremes (Oxford:
Oxford University Press, 2011); Jan Werner Müller, Contesting Democracy: Political Ideas in
Twentieth-Century Europe (New Haven: Yale University Press, 2011); Michael Freeden, Ideology: A
Very Short Introduction (Oxford: Oxford University Press, 2003). See also the contributions in
Willibald Steinmetz, Michael Freeden, and Javier Fernández-Sebastian, eds., Conceptual History in
the European Space (New York: Berghahn Books, 2017).
13
 Among Tribe’s excellent books on the topic are The Economy of the Word: Language, History, and
Economics (New York: Oxford University Press, 2015); Governing Economy: the Reformation of
German Economic Discourse, 1750–1840 (Cambridge: Cambridge University Press, 1988);
Genealogies of Capitalism (London: Macmillan, 1981).
 Introduction    9

Third, this analysis goes beyond traditional conceptual history by


exploring how the sovereign consumer was constructed and positioned as
the key actor in the neoliberal political paradigm. Designed for this par-
ticular investigation, this analytical perspective allows us to understand
political paradigms in a new light. It proceeds from the assumption that,
in order to become established and function, any political paradigm
arguably needs to be legitimized with reference to certain key actors
deemed especially vital for society. In the case of the capitalist economy,
for instance, the worker, the industrialist, and the entrepreneur have held
this position.
Key actors are often (though not always) constructed in the realms of
science and politics and in the interaction between scholars and politi-
cians who claim to offer solutions to societal challenges that protect and
benefit these figures and rely on assumptions and arguments concerning
their needs. This discursive practice serves to legitimize specific ways of
setting up economic-political institutions, thus providing these institu-
tions with a shared and integrative set of rationales and practices. As
interpretations of these key actors become more widely diffused in geo-
graphical and institutional settings and deeply integrated in our languages
and practices, we forget that they are discursive constructions that have
been embedded in legal and political institutions and serve particular
societal purposes. Indeed, this has long been the case with the sovereign
consumer.

 ocietal Makings of Consumers and Neoliberal


S
Thought
To examine the making of the sovereign consumer as the key actor in the
neoliberal political paradigm, the book pursues the following three ques-
tions: (1) Which meanings, identities, and capabilities have been attrib-
uted to the figure of the sovereign consumer? (2) How, in which contexts,
and by whom was the figure assigned its meanings, identities, and capa-
bilities? (3) How was the figure used for governing purposes, and what
transformations did the utilizations of this figure bring about?
10  N. Olsen

In doing so, the book contributes to two rapidly growing bodies of


literature. The first deals with neoliberal ideology and practice, the sec-
ond with societal makings of consumers.
Indeed, research in neoliberal ideology and practice has (as mentioned)
boomed in the past decade. This book draws, particularly, on the studies
of how neoliberal thought evolved in relation to the neoliberal networks
associated with the Mont Pèlerin Society. These studies include Phillip
Mirowski and Dieter Plehwe’s The Road from Mont Pelerin: The Making of
the Neoliberal Thought Collective, Jamie Peck’s Constructions of Neoliberal
Reason, Angus Burgin’s The Great Persuasion: Reinventing Free Markets
since the Great Depression, and Daniel Stedman Jones’ Masters of the
Universe: Hayek, Friedman, and the Birth of Neoliberal Politics.14
This book adds to the existing research on neoliberalism in three dis-
tinct ways. First, it widens the analytical scope. Among other things, the
book illuminates a region (Scandinavia), a period (the epoch after 1970),
and a theme (neoliberalism’s entrance into the public sector) that have
rarely been examined in the field. Second, it highlights a topic that has not
been treated systematically in the research, namely the relation between
neoliberalism and democracy. A number of recent articles devoted to this
theme have confirmed in greater detail what most scholars believe, namely
that neoliberal ideology was critical toward and sought to restrict ideas of
democracy as a set of institutions associated with representative democra-
cy.15 This book shares this interpretation. However, it goes beyond the
existing research by documenting how the neoliberal critique and attempt
to curtail traditional notions of democracy went hand in hand with the
14
 Mirowski and Plehwe, The Road from Mont Pelerin; Burgin, The Great Persuasion; Peck,
Constructions of Neoliberal Reason; Jones, Masters of the Universe. The most recent contribution to
this literature is Quinn Slobobian, Globalists: The End of Empire and the Birth of Neoliberalism
(Cambridge, MA: Harvard University Press, 2018), which argues that members of the neoliberal
network from the very beginning directed their efforts toward reconstructing capitalism on a global
scale and set out to develop new ways to organize the world.
15
 For some of the latest contributions to the field, see Sean Irving, “Limiting Democracy and
Framing the Economy: Hayek, Schmitt and Ordoliberalism,” History of European Ideas 44, 1
(2018): 213–227; Lars Cornelissen, “‘How Can the People Be Restricted’? The Mont Pèlerin
Society and the Problem of Democracy, 1947–1998,” History of European Ideas 43, 5 (2017):
507–525; Thomas Biebricher, “Neoliberalism and Democracy,” Constellations 22 (2015): 255–266;
Robert Van Horn and Ross B. Emmett, “Two Trajectories of Democratic Capitalism in the Postwar
Chicago School: Frank Knight versus Aaron Director,” Cambridge Journal of Economics 39, 5
(2015), 1443–1455.
 Introduction    11

invention of a new, positively framed, and supposedly superior notion of


“market democracy,” which drew on the figure of the sovereign consumer
and was crucial to the legitimization of neoliberal ideology.16 Finally, as
mentioned, the book goes beyond the realm of neoliberalism by exploring
the role and status of the neoliberal sovereign consumer in the mainstream
discipline of economics and on the political center-left in the post-war
period. This involves an evaluation of how center-left politicians took up
and embraced the neoliberal sovereign consumer in the 1980s and 1990s.
Having said this, however, the casts of characters in this book are mainly
neoliberal economists, who engaged in public debate to influence popular
opinion and decision-making, and a number of influential politicians.
Some of these neoliberal “ideologists” are frequent characters in the litera-
ture, such as Austrian economist Friedrich Hayek, German economist
Wilhelm Röpke, and American economist Milton Friedman. However,
the analysis shifts focus from some of the better-known ideologists—such
as Hayek and Friedman—to figures like Austrian economist Ludwig von
Mises and American economist George Stigler who have received less
attention but were nevertheless crucial to the making of neoliberalism as
an independent ideology. More specifically, the book considers Mises the
founder of the neoliberal political paradigm and the figure of the sover-
eign consumer, and it highlights Stigler’s key role in the transformations
of the paradigm and the figure that took place beginning in the 1960s.
More importantly, in its focus on the sovereign consumer, the book
addresses a largely unexplored theme in the research. Inspired by the
work of Michel Foucault, most contributions to the field of neoliberalism
stress the role of the entrepreneur in neoliberal thought. By contrast, this
book argues that the sovereign consumer should be regarded as the key
actor in the neoliberal political paradigm.
So far, only one study has explored the role of the consumer in neolib-
eral ideology: Christopher Payne’s The Consumer, Credit and Neoliberalism:
Governing the Modern Economy, published in 2012. Written from a
Foucauldian perspective, as opposed to conceptual history, the book
illustrates how ideas of the sovereign consumer emerged in economic

16
 The excellent analysis in Biebricher, “Neoliberalism and Democracy” in fact points to the co-­
existence of different neoliberal ideas of democracy among which is the idea of substituting tradi-
tional political democracy with a market democracy based on consumer sovereignty.
12  N. Olsen

thought in the first half of the twentieth century, manifested in British


economic and political discourse in the 1960s and 1970s, and contrib-
uted to the financial (debt) crisis beginning in 2008.17 Payne’s book is an
important contribution; however, it has a number of deficiencies. Most
significantly, its account of the emergence of the sovereign consumer is
only vaguely outlined. It contains few perspectives on the Austrian tradi-
tion, as associated with Ludwig von Mises among others, that are high-
lighted in this book; its thematic focus is, exclusively, on the issue of
credit; and its geographic scope is chiefly on Great Britain, albeit with the
exception of the US financial crisis. In light of this, the present book goes
beyond The Consumer, Credit and Neoliberalism by providing a more
detailed and comprehensive account of the emergence of the sovereign
consumer that enlarges the range of actors, themes, contexts, countries,
regions, and transnational perspectives in the scholarly analysis.
Furthermore, the book contributes to the comprehensive research in
societal makings of the consumer that historians have carried out in the
past 15 years.18 For example, Frank Trentmann has shown how the

17
 Christopher Payne, The Consumer, Credit and Neoliberalism: Governing the Modern Economy
(New York: Routledge, 2012). As will be elaborated in Chap. 2, brief, but excellent perspectives on
the invention of the sovereign consumer in the interwar era are also found in Stefan Schwarzkopf,
“The Political Theology of Consumer Sovereignty: Towards an Ontology of Consumer Society,”
Theory, Culture & Society 28, 3 (2011): 106–129; Stefan Schwarzkopf, “The Consumer as ‘Voter’,
‘Judge’ and ‘Jury’: Historical Origins and Political Consequences of a Marketing Myth,” Journal of
Macromarketing 31, 1 (2011): 8–18; and Joseph Persky, “Retrospectives: Consumer Sovereignty,”
Journal of Economic Perspectives 7, 1 (1993): 183–191.
18
 Sociological research has also explored the topic, focusing on issues of governance, power, and
societal institutions. With the aim of addressing long-term shifts in our ways of organizing the
relations between markets, states, and individuals, Wolfgang Streeck has argued that the marketiza-
tion of modern society has been brought about by a transformation of citizens into customers; a
change that has undermined traditional, collective political participation, and responsibility in
favor of individual interests. See Wolfgang Streeck, “Citizens as Customers: Considerations on the
New Politics of Consumption,” New Left Review 76 (2012): 27–47. Similarly, Colin Crouch has
argued that the turn to so-called “privatized Keynesianism” in the 1970s, which transferred the debt
burden from governments to individuals, was spurred by capitalism’s need for new, confident mass
consumers and new markets to ensure the creation of economic growth. See Colin Crouch,
“Privatized Keynesianism: An Unacknowledged Policy Regime,” The British Journal of Politics and
International Relations 11, 3 (2009): 382–399. The sociological studies of the makings of citizens
as consumers, as provided by scholars such as Streeck and Crouch, are in many ways excellent.
However, they pay little attention to historical details and contexts, including the specific semantic
constructions and concrete political uses of the figure of the consumer. Providing these features,
this book adds to and nuances sociological research.
 Introduction    13

c­ onsumer emerged as a figure in social-political discourse in the nine-


teenth century and was pushed to the center of public discourse in the
Western world in the interwar era.19 Lizabeth Cohen has recorded the rise
of the “citizen” consumer in relation to the New Deal in the United States
and its decline in favor of the “purchaser” consumer in post-war America.20
Victoria de Grazia has studied the impact of American consumer-ideals
on Western Europe before and after 1945.21 Moreover, scholars have
explored the construction of consumer figures with a focus on marketing
research and consumer movements in the United States and Europe in
the twentieth century.22 Finally, Daniel Horowitz has, in several bio-
graphically focused monographs, explored how, since the late nineteenth
century, American and European public intellectuals responded to con-
sumer culture through social criticism and academic analysis and thereby
built a wealth of consumer figures.23
However, historical research has offered few perspectives on the figure
of the sovereign consumer. While Payne’s The Consumer, Credit and

19
 Frank Trentmann, “The Modern Genealogy of the Consumer: Meanings, Identities and Political
Synapses,” in Consuming Cultures, Global Perspectives: Historical Trajectories, Transnational
Exchanges, eds., Frank Trentmann and John Brewer (Oxford: Berg, 2006), 19–69. See also Frank
Trentmann, Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to
the Twenty-First (New York: Harper Collins, 2016), which illuminates a wealth of consumer figures
in the Western world and beyond from the fifteenth century until today.
20
 Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America
(New York: Random House, 2003).
21
 Victoria de Grazia, Irresistible Empire: America’s Advance through Twentieth-Century Europe
(Cambridge, MA, Harvard University Press, 2006).
22
 Many of the contributions to these two fields have been collected in Kerstin Brückweh, ed., The
Voice of the Citizen Consumer: A History of Market Research, Consumer Movements, and the Political
Public Sphere (Oxford: Oxford University Press, 2011). For the history of consumer research, see,
for example, also Stefan Schwarzkopf and Rainer Gries, eds., Ernest Dichter and Motivation
Research: New Perspectives on the Making of Post-war Consumer Culture (London: Palgrave
Macmillan, 2010). For the history of consumer movements, see, for example, Matthew Hilton,
Prosperity for All: Consumer Activism in an Era of Globalization (Ithaca: Cornell University Press,
2009), 152–184; Matthew Hilton, Consumerism in Twentieth-Century Britain: The Search for a
Historical Movement (Cambridge: Cambridge University Press, 2003); Lawrence Glickman, Buying
Power: A History of Consumer Activism in Post-War America (Chicago: The University of Chicago
Press, 2009).
23
 Daniel Horowitz, Vance Packard and American Social Criticism (Chapel Hill: The University of
North Carolina Press, 1994); The Anxieties of Affluence: Critiques of American Consumer Culture,
1939–1979 (Amherst: University of Massachusetts Press, 2004); Consuming Pleasures: Intellectuals
and Popular Culture in the Postwar World (Philadelphia: University of Pennsylvania Press, 2012).
14  N. Olsen

Neoliberalism is the only book specifically dedicated to the topic, Noel


Thompson’s Social Opulence and Private Restraint: The Consumer in British
Socialist Thought since 1800, published in 2015, also provides perspec-
tives on the making of the sovereign consumer.24 The book traces the
place of the consumer and consumption in the political economy of
British socialism—from its early-nineteenth-century origins, through
New Times’ Marxism, to the (sovereign) consumer-focused New
Labourism of the 1990s and the new leftist critics of consumerism that
emerged in the late twentieth and early twenty-first centuries.
This book also explores the history of the sovereign consumer in
relation to other consumer ideals, deals with a long time-span, and
makes use of case studies in order to illuminate overall developments
and changes. However, it explores neoliberalism instead of socialism
and covers a wide range of countries and regions. As such, it supple-
ments and enlarges the analysis in Social Opulence and Private
Restraint.25
Additionally, this book merges perspectives from The Consumer,
Credit and Neoliberalism and Social Opulence and Private Restraint,
which illuminate neoliberal and socialist contributions to the making of
the sovereign consumer, respectively. More precisely, it argues that the
past 40 years has seen an ideational convergence between left and right
in thinking about government politics, market dynamics, and individ-
ual behavior. Daniel T.  Rodgers has brilliantly analyzed this conver-
gence in the American context in Age of Fracture.26 This study examines
from a new angle, and in more detail, how it played out in various
national and transnational contexts, with a focus on how politicians and
intellectuals from across the political spectrum have embraced a partic-
ular way of framing the relation between consumers, capitalism, and
democracy.

24
 Noel Thompson, Social Opulence and Private Restraint: The Consumer in British Socialist Thought
since 1800 (Oxford: Oxford University Press, 2015).
25
 The most recent publication in the field is Peter Guerney, The Making of Modern Consumer
Culture in Britain (London: Bloomsbury Publishing PLC, 2017). Exploring the making of con-
sumer culture in Britain since 1800, Guerney occasionally describes constructions of consumer
figures, but not systematically, and only within a British context.
26
 Daniel T. Rodgers, Age of Fracture (Cambridge, MA: Harvard University Press, 2011).
 Introduction    15

Structure of the Book
The book is comprised of six chapters that trace the history of the sover-
eign consumer across time and space from around 1700 until the pres-
ent.27 Each chapter can be read as a separate story of how self-identified
liberals in different contexts and times have attempted to outline new
liberalisms using the sovereign consumer as a crisis management tool.
They are, however, united in showing different stages of the develop-
ments through which the sovereign consumer became a key actor in the
neoliberal political paradigm that subordinates values associated with tra-
ditional political democracy to the pursuit of economic ideals. Three
chapters are focused on specific countries. Nevertheless, every chapter
includes perspectives on transnational connections and exchanges and is
placed within a larger narrative that transcends national borders.
Chapter 2 describes the prehistory of the idea of the neoliberal sover-
eign consumer from 1700 onwards to the emergence of the figure in the
interwar period. The ambition of the chapter is to offer a broad introduc-
tion to some of the themes, arguments, and contexts that are central to
understanding the making of the sovereign consumer and the renegotia-
tions of the figure on which later chapters elaborate. One of the main
purposes of the chapter is to stress the key role played by Austrian econo-
mists, especially by Ludwig von Mises, in inventing and shaping the sov-
ereign consumer and the overall ideational framework within which
neoliberalism has been negotiated ever since. This includes the idea of the
market as the pre-eminent forum for democracy and of the sovereign
consumer as the personification of democratic action.
As the first of three country-specific cases, Chap. 3 explores the neolib-
eral makings of the consumer in Germany from the 1920s to the 1960s,
focusing in particular on how politicians and policy advisors mobilized
the figure of the sovereign consumer in order to construct the Federal
Republic of Germany after 1945. The chapter illustrates how architects
and promoters of the economic order, which came to underpin the new
republic, framed the sovereign consumer as a person exercising free choice

 The investigation is primarily based on published texts: books, articles, reviews, interviews, news-
27

paper articles, and memory pieces.


16  N. Olsen

on the market and as the symbol of the democratic citizen responsible for
rebuilding the German economy and society. By depicting the Federal
Republic as a new societal order that liberated the German people as free
consumers, German neoliberals created the founding myth and legiti-
mating basis of the new West German state. Tracing the birth of the
sovereign consumer to undertakings in German marketing research and
the discipline of economics in the interwar period, the chapter illustrates
how neoliberal ideologists assigned the figure a plurality of meanings and
mobilized it for several projects, including efforts to influence the
National Socialist regime.
Chapter 4 offers another country-specific case, turning to the United
States to provide a fresh perspective on the so-called Chicago School of
Economics by exploring the function of the figure of the consumer in
writings on deregulation authored by members of this school from the
1930s to the 1980s. The chapter not only shows how Chicago School
scholars persistently constructed and legitimized their calls for deregula-
tion (as well as for new modes of regulation) by referring to what they
described as specific consumer interests and habits in the marketplace; it
also argues that the Chicago School’s turn toward deregulation in the
post-war period was made possible by the new figure of the “efficient
consumer,” a figure positioned at the center of ideational structures estab-
lished by the later Chicago School in the 1970s and 1980s. This figure,
so the chapter contends, was merged with the sovereign consumer and
instrumental in making it into a key tool for the aforementioned trans-
formation in our political paradigm that has subordinated traditional
democratic values to the pursuit of narrow economic ideals.
Chapter 5 explores whether, how, and to what extent the mainstream
discipline of economics (in which many neoliberals operated) assigned
the figure of the sovereign consumer a special role in debating its meth-
ods and aims after 1945. Examining the role and status of the figure in
economics textbooks and in the (rational) choice doctrines that emerged
between 1945 and 1970, the chapter argues that a figure similar to the
neoliberal sovereign consumer was elevated into the key actor in econom-
ics during this period. Moreover, it shows how the sovereign consumer
ceased to be a pure neoliberal notion within economics at a time in which
the discipline came to share a new mode of economics analyses. This
 Introduction    17

mode elevated consumer sovereignty into the ultimate social value,


reworked the understanding of political democracy by interpreting it
through market metaphors, and questioned the role of the state as a col-
lective decision-maker and social planner. As such, so the chapter argues,
mainstream economics laid the groundwork for a broader spread and
acceptance of neoliberal ideology and contributed to its new focus on
public sector reforms that manifested from the 1960s onwards.
Focusing on the case of Denmark, Chap. 6 explores how the sovereign
consumer entered political discussions about the Scandinavian welfare
state in the 1970s. It shows how a new generation of politicians in the
Danish liberal party (Venstre) introduced the semantics of neoliberal ide-
ology into national political debates during the contemporary crisis of
the welfare state in an effort to renew the ideological foundation of their
party. By drawing a deeply economized, individualized, and marketized
image of the sovereign consumer, the Danish neoliberals fortified the
trend that their West German and American counterparts had begun in
the post-war period. However, they also added to the figure by relating its
interests and functions mainly to the arena of the public sector in an
attempt to turn the Scandinavian welfare state into a competition state.
This chapter also shows how, as part of a new government committed to
public sector reform, the Danish neoliberals positioned the sovereign
consumer as a concrete policy option in welfare state politics in the 1980s,
when the Danish Social Democratic Party also came to embrace the para-
digm. In line with this, a key argument of the chapter is that leftist econo-
mists and politicians helped shape and disseminate the neoliberal
sovereign consumer in a Danish context. As such, similar to the preced-
ing chapter and anticipating the main theme of the final chapter, it takes
the story of the sovereign consumer beyond the realm of neoliberal ide-
ologists and networks.
The final chapter illustrates how the figure of the sovereign consumer
was elevated into the dominant political paradigm in the West from the
1980s onwards, when politicians and intellectuals across the political
spectrum embraced the sovereign consumer and political institutions
began to govern in its name. The chapter documents this development by
describing how center-left parties in Denmark, Great Britain, and the
United States followed in the footsteps of neoliberal politicians by ­framing
18  N. Olsen

the sovereign consumer as a motive and tool for public sector reforms.
Moreover, the chapter also provides a brief perspective on neoliberalism’s
hegemonic status on international level by describing the rise of the sov-
ereign consumer as a policy tool in the European integration project since
the 1980s. Finally, the chapter outlines some of the problems that, argu-
ably, characterize the neoliberal political paradigm.
2
The Birth of the Neoliberal Sovereign
Consumer

The neoliberal sovereign consumer emerged in the context of multiple


economic and political changes and upheavals in the interwar era.
Further, in creating the figure, its inventors drew on, reworked, and
rejected various languages portraying the consumer as a key actor in
modern society, which economic thinkers and scholars had outlined since
the eighteenth century. These dialogues with earlier and contemporary
consumer-discourses were crucial to the rise of neoliberal ideology.
This chapter describes the prehistory of the idea of the neoliberal sov-
ereign consumer from around 1700 to the rise of the figure in the inter-
war period. Portraying the early history of the figure as part of a broader
history of consumer identities, it opens with an account of how the con-
sumer emerged as a socio-political figure during the nineteenth century
and moved to the center of public debate in Europe and the United States
in the interwar era. The chapter then appraises three specific discursive
developments that were crucial to the making of the neoliberal sovereign
consumer.
First, it portrays precursor ideas that did not elaborate on terms such as
democracy, efficiency, and sovereignty, but nevertheless comprised assump-
tions, which became crucial to the neoliberal sovereign consumer. The focus

© The Author(s) 2019 19


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_2
20  N. Olsen

here is on the idea that consumer preferences determine the production of


goods and services, which liberal political economists developed between
1700 and 1850, and on the conception of the economy as made up of a
collective of choosing individuals that economists outlined during the so-
called marginal revolution in economics in the late nineteenth century.
Second, after a perspective on the critiques that societal debaters launched
at the precursor ideas of the sovereign consumer that had emerged by the
late nineteenth century, the chapter describes the multiple references to the
consumer as a sovereign ruler of the capitalist economy, which liberal think-
ers made in response to the crisis of liberalism in the early twentieth cen-
tury. The focus here is on how the Austrian economist Ludwig von Mises
reacted to this crisis by re-launching liberalism as a positive program that
stressed the powers of the free market and portrayed the sovereign con-
sumer as the nexus of an efficient and democratic liberal society.
Lastly, having shown how a language depicting the consumer as a key
actor in modern society became widespread in the early twentieth cen-
tury, the chapter explores how British economist William H. Hutt for the
first time explicitly named the figure of the sovereign consumer through
the notion of consumer sovereignty in his book Economists and the Public,
published in 1936.1 Assigning the state a key role in the efforts to create
a free market order, which would generate economic efficiency and politi-
cal democracy by responding to free consumer choice, Hutt contributed
vitally to positioning the sovereign consumer as the key actor in the rising
neoliberal paradigm.
The chapter builds on and brings together well-known writings on the
history of the consumer figure and neoliberal ideology. However, it goes
beyond existing research by highlighting the crucial role played by cer-
tain Austrian or Austrian-inspired economists in the making of the neo-
liberal sovereign consumer.2 This includes a long list of characters—Carl

1
 William H.  Hutt, Economists and the Public: A Study of Competition and Opinion (London:
Jonathan Cape, 1936).
2
 Austrian economics is a school of thought that is based on the notion of methodological individu-
alism and rejects economic empiricism in the form of modeling. It originated in late-nineteenth
and early-twentieth-century Vienna with the work of Carl Menger, Eugen Böhm von Bawerk, and
Friedrich von Wieser. For various perspectives on Austrian economics, see Peter Boettke and
Christopher Coyne, eds., The Oxford Handbook of Austrian Economics (New York: Oxford
University Press, 2015).
  The Birth of the Neoliberal Sovereign Consumer    21

Menger, Frank A.  Fetter, Joseph A.  Schumpeter, Ludwig von Mises,
Friedrich Hayek, Lionel Robbins, Wilhelm Röpke, and William
H. Hutt—and the specific argument that the positive program of liber-
alism, first outlined by Ludwig von Mises in the early 1920s, marked the
birth of neoliberalism.
Unfolding as a critique of socialism, Mises’ program provided liberal
capitalism with a new democratic legitimacy by making a direct parallel
between choice in the marketplace and at the ballot box. It also intro-
duced a new symbol of authority, the sovereign consumer, who was
viewed as deciding what is produced through her/his daily voting, on the
market, and thus represented the personification of democratic action.
Against this background, Mises created a new way of thinking about the
relation between capitalism, consumers, and democracy that aimed to
replace the devices of traditional political democracy with the workings
of the market.3
Mises stylized himself as laissez-faire economist, and he is often por-
trayed accordingly in the research on neoliberalism. However, this
chapter does not merely argue that Mises had a huge impact on the
group of neoliberal ideologists who aimed to renew liberalism as an
ideology promoting a social order based on free markets and individ-
ual freedom, with the use of state power. With reference to his thoughts
of the state as a vital tool in any attempt to build a liberal market
order, it also argues that Mises was in this sense a neoliberal himself.
Indeed, it contends that Mises was in fact the inventor of the neolib-
eral political paradigm and the key actor it utilized—the sovereign
consumer.

3
 Excellent perspectives on the contributions of Austrian economists to the invention of the sover-
eign consumer can be found in Stefan Schwarzkopf, “The Consumer as ‘Voter’, ‘Judge’ and ‘Jury’:
Historical Origins and Political Consequences of a Marketing Myth,” Journal of Macromarketing
31, 1 (2011): 8–18, and Stefan Schwarzkopf, “The Political Theology of Consumer Sovereignty:
Towards an Ontology of Consumer Society,” Theory, Culture & Society 28, 3 (2011): 106–129. The
two articles also explore the ways in which Austrian economists reinterpreted notions of democracy
and sovereignty in constructing the figure of the consumer. However, the articles primarily focus
on notions of consumer sovereignty within marketing and in relation to consumer theology and
only cursorily relate the history of the sovereign consumer to the crisis of liberalism and the birth
of the neoliberal political paradigm.
22  N. Olsen

 he Emergence of the Consumer as a 


T
Socio-­political Figure
When neoliberal thinkers created the figure of the sovereign consumer in
the interwar period, they picked up on what was in fact a rather new
habit of speaking of human beings as consumers. As Frank Trentmann
has demonstrated, the consumer was virtually absent from societal dis-
course in most countries until around 1800. Even in the context of what
are today understood as acts of consumerism, few defined themselves or
others as consumers or referred to the concept in societal debates.4
This situation changed during the nineteenth century. Here, the con-
sumer began to be referred to as a persona with legal and personal rights,
for example, when citizens mobilized in the pursuit of collective interests
related to consumption (e.g., the provision of utilities such as water, gas,
and coal). In many countries, such as England, this development, in the
late nineteenth century, linked the consumer to a model of citizenship,
referring to ideals of accountability, representation, and protection, and
saw citizens uniting in organizations such as consumer defense leagues.
Moreover, in a growing number of societal contexts, consumers were
equated with the general public.5
The late nineteenth century also saw the beginning of a broad intel-
lectual search for and debate of the consumer figure, led by public intel-
lectuals, reformers, and academics, who began to ponder what
characterized consumers and their behavior, including how modern soci-
ety could be reformed in ways that protected and enhanced consumer
interests. For example, reformist economists such as J. A. Hobson (Great
Britain), Simon Patten (United States), and Charles Gide (France) made
efforts to theorize and politicize consumer needs within larger debates of
the social, political, and economic organization of society. Some of these
economists were active in political matters related to consumers and

4
 The following draws extensively on Frank Trentmann, “The Modern Genealogy of the Consumer:
Meanings, Identities and Political Synapses,” in Consuming Cultures, Global Perspectives: Historical
Trajectories, Transnational Exchanges, eds., Frank Trentmann and John Brewer (Oxford: Berg,
2006), 19–69 and Frank Trentmann, Empire of Things: How We Became a World of Consumers, from
the Fifteenth Century to the Twenty-First (New York: Harper Collins, 2016).
5
 Trentmann, “The Modern Genealogy,” 26–37.
  The Birth of the Neoliberal Sovereign Consumer    23

c­onsumption. Gide was, for example, deeply involved in attempts to


advance consumer interests through collective action in cooperatives.6
Similarly, at the turn of the twentieth century, governments and civil
society institutions increasingly attempted to construct and instrumen-
talize consumer ideals in the pursuit of larger, national economic-political
aims. For example, in Sweden, the cooperative movement launched,
from the early twentieth century onwards, a large educational campaign
that viewed Swedish women as rational consumers whose correct and
disciplined consumption at home (which involved paying with cash and
not by credit) would raise the moral and economic status of the populace
and make government intervention in the economy superfluous.7 At this
point, civil society and commerce in Great Britain had successfully cre-
ated a new identity of a morally aware and civic-minded consumer to
legitimize the agenda of an open global economy.8
Consumer politics and rhetoric were given a new scale and a more
state-focused dimension during World War I when governments called
on consumers to act in accord with and support of the regulated econo-
mies of the national political communities. However, inflation and scar-
city of products also led to consumer boycotts and demands for
representation in government politics. This was, for example, the case in
Germany where state and civil society intensely debated how consumers
could contribute to a more productive nation, which in turn would allow
for greater public spending.9
In the interwar period, the figure of the consumer was irrevocably
pushed to the center of public and political discourse in countries around
the world. In this process, previously separate discourses of the consumer,
for example, within social politics and economic thought, were joined in
debates over issues such as the nature of human behavior, questions of
citizenship, dynamics of economic growth, and modes of societal organi-
zation. This created a more universal category of the consumer, a figure

6
 Trentmann, “The Modern Genealogy,” 29, and Trentmann, Empire of Things, 155–156.
7
 Peder Alex, Den rationella konsumenten: KF som folkuppfostrare 1899–1939 (Stockholm: Brutus
Östlings bokf Symposion, 1994).
8
 Frank Trentmann, Free Trade Nation: Commerce, Consumption and Civil Society in Modern Britain
(Oxford: Oxford University Press, 2008).
9
 Trentmann, “The Modern Genealogy,” 43, and Trentmann, Empire of Things, 274–276.
24  N. Olsen

now imbued with a plurality of societal practices and virtues and elevated
into a key figure of modern society.10 Moreover, in many countries, con-
sumers organized on a hitherto unmatched scale. For example, the United
States saw the creation of the world’s first consumer protection agency,
Consumers Research Inc., in 1929.11
More generally, from the interwar period onwards, it became impos-
sible for political actors to communicate a societal vision without includ-
ing a vision of the role of consumers and consumption in matters
economic and political. Against this background, and in response to the
turmoil of the time, political regimes sought to legitimize new societal
orders with reference to new consumer-ideals in the interwar period.
These ideals varied according to national traditions and contexts.
To mention some examples: in the United States, the citizen consumer
was launched by New Deal reformers as an ideal that would secure the
rights of individual consumers in the face of unsafe products, unfair pric-
ing, and misleading advertising. The citizen consumer invoked a vision of
the new American democracy as based on the popular mobilization of
consumers in cooperatives and movements, with consumers also repre-
sented in federal advisory boards and agencies and supported by a state-­
regulated welfare economy.12 In Germany, recognizing that consolidating
support for the regime required providing Germans with the products
they desired, National Socialists collaborated with consumer researchers,
business companies, and advertising agencies to construct a community-­
oriented and racist consumer who bought German consumer products
and thereby reinforced the dictatorship and its policies.13 In Russia, com-
munist efforts in the 1920s to create a proletarian individual, who sacri-
ficed personal comfort for the socialist good, were replaced in the 1930s
by attempts to bring about a new consumer who could participate in a

10
 Trentmann, “The Modern Genealogy,” 43–53.
11
 Lawrence Glickmann, Buying Power: A History of Consumer Activism in America (Chicago: The
University of Chicago Press, 2009), 189–218.
12
 Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption in Postwar America
(New York: Random House, 2003), 17–61.
13
 Pamela E. Sweet, Selling under the Swastika: Advertising and Commercial Culture in Nazi Germany
(Palo Alto, CA: Stanford University Press, 2013).
  The Birth of the Neoliberal Sovereign Consumer    25

state-driven politics of productivity and drive communism as a new and


materially superior civilization.14

 onsumers in Liberal Political Economy


C
and in the Marginal Revolution
The neoliberal sovereign consumer was one of the many consumer figures
that was invented in response to the social-political upheavals of the
interwar period. However, it was not a widely disseminated or influential
figure at the time. More generally, according to Frank Trentmann, there
was no strong link between the rise of consumer-languages and the rise of
liberal ideologies based on ideas of markets, exchange, and individualist
consumers. Instead, collective identities, purposes, and practices remained
the central features of the dominant consumer-languages until the inter-
war period.15
Nevertheless, various languages portraying the consumer as a key agent
of the economy, which scholars and intellectuals had articulated in differ-
ent contexts since the eighteenth century, anticipated the neoliberal fig-
ure of the sovereign consumer.
One of the core semantic features of the neoliberal sovereign consumer,
the idea that consumer preferences determine the production of goods
and services, has its roots in writings authored by liberal political econo-
mists such as Adam Smith, Frédéric Bastiat, and Jean Baptiste Say between
1750 and 1850.16 Most famously, in his critique of the mercantilist state’s
restrictions of individual economic freedom in The Wealth of Nations,
Adam Smith defended the functional importance of consumption in the
economy and the interests of the consumer in this context: “Consumption
is the sole end and purpose of all production; and the interest of the

14
 Trentmann, Empire of Things, 292–296.
15
 Trentmann, “The Modern Genealogy,” 28.
16
 See first of all P. Meyer-Dohm, Sozialökonomische Aspekte der Konsumfreiheit (Freiburg im Breisgau:
Verlag Rombach Freiburg, 1965), 40–90; Mary Jean Bowman, “The Consumer in the History of
Economic Doctrine,” The American Economic Review 41, 2 (1951): 1–18; Trentmann, Empire of
Things, 151; Trentmann, “The Modern Genealogy,” 26–31.
26  N. Olsen

producer ought to be attended to, only so far as it may be necessary for


promoting that of the consumer. The maxim is so perfectly self-evident,
that it would be absurd to attempt to prove it.”17
French economist Frédéric Bastiat linked the idea of the consumer as
the driver of production to a more vigorous defense of property rights
and free markets. Supposedly, on his deathbed in 1850, Bastiat stated:
“We must learn to look at everything from the point of view of the
consumer.”18 His compatriot Jean Baptiste Say also gave consumption
special status within arguments for competition, free trade, and lifting
restraints. Say, it has been said, “was probably the first economist to
become an unqualified exponent of the normative position that the satis-
faction of consumer preferences was an end in itself.”19
These iconic examples point to a tradition among liberal political
economists of merging a descriptive practice of stating that all economic
processes are ultimately focused on satisfying the wants of the final con-
sumer with a normative principle of asserting that economic activity
should be evaluated in terms of how well it fulfils consumer wants. This
tradition involved a societal vision that (in different ways and to different
degrees) highlighted individual freedom, free competition, and limits to
state control and regulation of the economy. It also included a critique of
any organization, public or private, that has monopolistic control of an
area of business.
The tradition of portraying the consumer as the pivotal point of the
economy that originated in the work of Smith, Bastiat, and Say became an
important reference point among neoliberal thinkers from the 1930s
onwards. However, its contemporary extent and significance was limited.
Tellingly, besides the passage quoted from The Wealth of Nations above,
Adam Smith had little to say about consumers or consumption in his work
(likewise, the passage only appeared in the third edition of the book).20
17
 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Chicago: The
University of Chicago Press, 1977 [1904 edition]), 877.
18
 Quoted from Trentmann, “The Modern Genealogy,” 64, note 90. See also Meyer-Dohm,
Sozialökonomische Aspekte, 52.
19
 Bowman, “The Consumer,” 9.
20
 Meyer-Dohm, Sozialökonomische Aspekte, 44. One exception is another often-quoted sentence
from Smith, The Wealth of Nations, 184: “The real and effectual discipline which is exercised over a
workman is not that of his corporation, but that of his customers. It is the fear of losing their
employment which restrains his frauds and corrects his negligence.”
  The Birth of the Neoliberal Sovereign Consumer    27

More generally, the idea of the economy as being consumer-driven did


not dominate classical economic theory. Its proponents generally worked
with a conceptualization of the economy as made up by three classes—
capitalists, workers, and landlords—and focused mainly on production
costs as the basic determinant of market decisions. Beyond arguments
stating that unorganized consumers ought to be defended against monop-
oly, this tradition had little positive focus on the role of the consumer or
of consumption in the economy. Indeed, some political economists, such
as John Stuart Mill, even denied that consumption was a worthy subject
for political economists.21
The marginal revolution in the late nineteenth century contributed to
a more decisive shift of focus from production to consumption in think-
ing about the economy. Here, as economics became specialized as a disci-
pline, scholars such as William S. Jevons, Leon Walras, Alfred Marshall,
and Carl Menger began to explain the value of a good in terms of its value
to the consumer instead of in terms of its cost of production.22
This shift involved a new conceptualization of the economy as a collec-
tion of (selfish) individuals rather than as a collection of distinct classes.
It also entailed a new analytical vocabulary designed to explain what
motivates how individuals, understood as consumers, value and choose
between commodities and thus drive the economy. Most importantly,
the concept of utility was used to explain consumer choices, referring to
the satisfaction or benefit derived by consuming a product, and the
notion of marginal utility of a good or service was applied to describe the
change in the utility from an increase in the consumption of that good or
service.
The marginal revolution unfolded to a considerable extent as a scien-
tific quest to settle the laws of value and prices, to determine how and
why consumers choose to use their money. Moreover, some (but not all)
marginalists, such as William S. Jevons, used mathematical methods to
measure the utility of an idealized figure of an economic agent, who acted

21
 Trentmann, “The Modern Genealogy,” 27. For a more detailed analysis of the consumer in clas-
sical economic thought, see Donald Winch, “The Problematic Status of the Consumer in Orthodox
Economic Thought,” in The Making of the Consumer: Knowledge, Power, and Identity in the Modern
World, ed., Frank Trentmann (Oxford: Berg, 2006), 31–51.
22
 Roger E. Backhouse, The Penguin History of Economics (London: Penguin, 2002), 166–184.
28  N. Olsen

with full information, complete rationality and without obstacles in a


market of perfect competition. For Jevons, who was indebted to Jeremy
Bentham, utility referred to a calculus of pleasure and pain; to maximize
happiness by purchasing pleasure at the lowest cost of pain. Against this
background, Jevons contributed to the creation of a one-dimensional and
mechanical consumer, stripped of epistemological, psychological, and
social complexities, which came to inform so-called neoclassical econom-
ics. This consumer ideal was largely confined as an object of study to the
laboratory of economists and detached from real-life observations.23
Also aiming to construct a scientific, mathematically based economics,
Leon Walras came to many of the same results as Jevons concerning con-
sumer behavior and determination of prices in competitive markets.
However, Walras went one step further with his attempt to describe an
entire economy in which all individual parts were connected with each
other. In this process, he outlined what is today known as general equi-
librium theory, a theory of a whole economy in which the balance
between consumers and producers within a competitive market society
reaches an equilibrium. According to Walras, this was a situation in which
nobody could be better off.24
The relation between ethics and economics held an ambiguous posi-
tion in the work of these scholars. On the one hand, they saw the two
phenomena as being closely related, and they were not merely advocates
of individual freedom and free markets.25 In Jevons’ work, the goal of
maximizing pleasure was balanced with a Unitarian commitment to do
good, and he was in favor of a large range of public goods and supported
industrial co-partnership as a solution to industrial strife.26 And Walras
was socially minded, suspicious of big business, and sympathetic to trade
unions.27
23
 Christopher Payne, The Consumer, Credit and Neoliberalism: Governing the Modern Economy
(New York: Routledge, 2012), 20–32; and Mary S. Morgan, “Economic Man as Model Man: Ideal
Types, Idealization and Caricatures,” Journal of the History of Economic Thought 28, 1 (2006): 1–27.
See also Winch, “The Problematic Status,” 38–47 and Backhouse, The Penguin History, 167–173.
Chapter 4 discusses the notion of neoclassical economics in more detail.
24
 Backhouse, The Penguin History, 170–173; Edmund Fawcett, Liberalism—the Life of an Idea
(Princeton, NJ: Princeton University Press, 2014), 173–177.
25
 Winch, “The Problematic Status,” 39; Trentmann, Empire of Things, 151.
26
 Winch, “The Problematic Status,” 41–42; Trentmann, Empire of Things, 151–152.
27
 Fawcett, Liberalism, 173–180; Backhouse, The Penguin History, 171–172.
  The Birth of the Neoliberal Sovereign Consumer    29

Alfred Marshall, who sought to develop and systematize Jevons’


analyses, was less opposed to the possibilities of interpersonal compari-
son than the latter. According to Marshall, income distribution must
always be considered alongside economic efficiency when making wel-
fare judgments. Likewise, his analytical notion of consumer surplus
(describing the difference between the price that “one is willing to pay”
and “the price one actually pays” for a product) aimed to articulate the
interests of the silent many (increase in consumer’s surplus was consid-
ered an indicator of the increase in social welfare). Moreover, unhappy
with the hedonistic implications of Jevons’ work and critical toward
what he thought of as misuse of wealth by consumers, Marshall hoped
that a more civilized character-formation would take place through
consumption.28
On the other hand, marginal analysis was, by most of its practitioners,
understood as a pure science, aspiring to political neutrality. Their ana-
lytical focus was on developing economic theories, tools, and formal defi-
nitions to explain individual behavior vis-à-vis spending patterns and
wealth-seeking activities rather than on creating methods and concepts to
probe and advise on ethical or political aspects of the economy. Even if
they found it legitimate to address issues such as poverty and inequality,
such problems were located outside the remit of economic science—a
science that they sought to ground through scientific examinations of
consumer behavior.29
It should be stressed that the marginal revolution had many varieties.30
For example, Carl Menger—who was a contemporary of William
S. Jevons and is known as the father of so-called Austrian economics—
discussed individual evaluation without the mathematical tools, the utili-
tarian calculus, or the notion of rationality found in Jevons’ work. In fact,
seeing human rationality as severely limited, he sought to analyze subjec-
tive behavior through problems of uncertainty, imperfect knowledge, and
the open-endedness of the world, as well as to relate these phenomena to
discussions of economic growth and innovation. For him, markets were

28
 Winch, “The Problematic Status,” 40–42.
29
 See also Payne, The Consumer, 23.
30
 Backhouse, The Penguin History, 167–181.
30  N. Olsen

never in equilibrium but characterized by competition between dynamic,


entrepreneurial, and profit-seeking individuals.31
While Menger diverged from the marginalist calculus by including the
possibility of error in individual decision-making, he held that societal
progress would enable individuals to better understand what their own
needs actually are.32 Moreover, he argued that goods are arranged in a
hierarchy and that value can be defined as the importance of goods in
satisfying needs. As such, citing Mary S.  Morgan, Menger’s economic
man “is an economizer rather than a maximizer: given his particular situ-
ation, he satisfies different needs with different goods by choosing them
in such a way as to satisfy those needs in a particular order (with necessi-
ties first, luxuries second, etc.).”33
In other words, the Austrian marginalist tradition started by Menger
(and others) concerned a mode of economic analysis that sought to
understand how subjective choices are made to satisfy different needs in
the context of limited resources. Along with the idea of the consumer as
an entrepreneurial figure, and the aim to analyze consumer behavior sci-
entifically, this mode of analysis was among the features of marginal eco-
nomics on which neoliberal thinkers picked up and, in different ways,
elaborated.

Contesting the Sovereign Consumer


From the late nineteenth century onwards, the ideas of the sovereign
consumer that classical political economists and marginal economists
had outlined came to co-exist and were often referred to in academic and
political vocabularies and debates. However, many contemporary schol-
ars and societal debaters were critical of these ideas.
For example, the above-mentioned French economist Charles Gide,
who was a proponent of a historical approach to economics and supported

31
 Bruce Caldwell, Hayek’s Challenge: An Intellectual Biography of F.A.  Hayek (Chicago: The
University of Chicago Press, 2004), 30–35; Backhouse, The Penguin History, 174–177.
32
 Caldwell, Hayek’s Challenge, 33.
33
 Morgan, “Economic Man,” 19.
  The Birth of the Neoliberal Sovereign Consumer    31

the cooperative movement, frequently scorned the idea championed by


Frédéric Bastiat and other liberal economists that free competition would
automatically serve the consumer. “Very good!” Gide stated in an 1898
article on the role of co-operations in economic life:

[B]ut as a matter of fact we know that in the existing economic organiza-


tion the consumer is really a poor sort of creature, entirely ignorant of his
own pressing interests, exploited, bamboozled, poisoned by producers and
tradesmen, and considered as playing in this world the one part of enabling
others to live and affording them an opening.

For Gide, co-operations were needed to protect consumer interests: “it is


the co-operation that will transfer the sovereign power into the hands of
the consumer.”34
The Norwegian-American economist and sociologist Thorstein Veblen
offered another powerful critique of the discursive features of the sover-
eign consumer that gained prominence around 1900. It was as a part of
this critique, which was aimed at both classical political economy associ-
ated with Adam Smith and the analytical framework constructed during
the marginal revolution, that Veblen coined the term “neoclassical” eco-
nomics. His criticism of neoclassical economics was partly directed toward
its assumption of harmony in the system; the idea that the economy would
always reach a form of equilibrium that was socially beneficial. Against
this assumption, Veblen claimed that capitalism’s self-interested striving
for profits had harmful effects on the economy and society. More exactly,
he described the capitalist economy as defined by large corporations that
did not aim to increase efficiency or the common good but to maximize
profits, which meant striving for monopoly power and spending large
amounts of money on advertising, at the expense of the community.35
Against this background, Veblen developed his famous notion of
conspicuous consumption in his book The Theory of the Leisure Class

34
 Charles Gide, “Has Co-operation Introduced a New Principle into Economics?,” The Economic
Journal 8, 32 (1898), 499. Interestingly, in the article, Gide coined the concept of neoliberalism for
the first time. However, using it to describe a “return” to the classical liberalism of Adam Smith, he
defined it differently than it is customarily used today.
35
 Backhouse, The Penguin History, 195–198.
32  N. Olsen

published in 1899.36 With this notion, Veblen took issue with the
assumption that human beings are merely driven by the desire to maxi-
mize pleasure and minimize pain found in the work of prominent mar-
ginal economists. Instead, he argued that people as consumers bought
expensive items to display wealth and income, seeking to emulate the
behavior of other classes and gain a higher social status, rather than to
cover their real needs. As such, he portrayed modern consumer society
as characterized by a waste of time and money.
Likewise, in the 1920s, Hazel Kyrk, a home economist at the University
of Chicago, criticized William S. Jevons’ view of economics as based on a
notion of rational individuals exercising their free choices on the market-
place. In A Theory of Consumption from 1923, Kyrk argued that many
contexts influence consumer behavior, including social environments,
industrial organization, income distribution, and cultural norms.
Rejecting the idea that consumers are sovereign by nature, Kyrk also con-
tended that individuals had to be educated to form their own judgments
and desires as a way to secure higher levels of safety and comfort and to
develop higher ideals and purposes.37
To educate consumers was also the ambition of Stuart Chase,
the American economist and consumer activist, who, together with
Frederick J. Schlink, created Consumers Research, Inc., the world’s first
consumer-­protection organization. This initiative followed their joint
publication Your Money’s Worth from 1927, which attacked what they
described as false and misleading advertising and unreasonable pricing
by ­manufacturers of consumer products.38 Consumers Research, Inc.
advocated a form of technocratic individualism, which saw consump-
tion as a personal matter (and not a tool for, e.g., class politics) and
sought to counter what was considered the individual consumer’s lack of
wisdom through education and product testing. These efforts, it should
36
 Thorstein Veblen, The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions
(London: Macmillan, 1899).
37
 Through her work for government agencies, and as chief economist of the Bureau of Home
Economics, Kyrk linked her scholarly analysis to political work in the 1930s and 1940s. Robert
A. Dimand and Richard Lobwell, “Kyrk, Hazel, 1886–1957,” in The New Palgrave Dictionary of
Economics, eds., Steven N. Durlauf and Lawrence E. Blume (London: Palgrave, 2008, 2nd ed.),
776. See also Trentmann, “The Modern Genealogy,” 48–49.
38
 Stuart Chase and Frederick J. Schlink, Your Money’s Worth: A Study in the Waste of the Consumer’s
Dollar (London: Macmillan, 1927).
  The Birth of the Neoliberal Sovereign Consumer    33

be emphasized, did not entail a critique of capitalism. In fact, the direc-


tors of Consumers Research, Inc. found capitalism indispensable to
secure the production of a variety of high-quality goods for consumers
to choose between. Moreover, they considered capitalism and consumer-
ism as being linked to democracy.39
More often, in the interwar United States and interwar Great Britain,
it was common to portray the consumer as an agent capable of ensuring
and enhancing economic growth and political democracy. However, the
issue of how consumers could best contribute to economic growth and
democratic development within society was strongly contested. The con-
testation to a great extent concerned the question of whether consumers
tended to thrive within free markets, or benefit from a regulatory frame-
work aimed at protecting the consumer from market forces. This question
was also crucial to the ongoing discussion of the so-called crisis of liberal-
ism, which culminated in the first decades of the twentieth century during
which liberalism had acquired a severely bad reputation in public-­political
discourse. As we will see, this crisis constituted another important devel-
opment toward the construction of the neoliberal sovereign consumer.

The Crisis of Liberalism


Liberalism’s flawed reputation had its roots in the late nineteenth century.
Here, the ideology had gradually been associated with negative develop-
ments and values, such as the exploitation of the working classes, monop-
olism, elitism, anti-democratic sentiments, and, after World War I, with
economic crisis as well. The criticism intensified in the interwar years,
when intellectuals and politicians often described liberalism as a fragile
project that was unable to sustain a legitimate political order and effec-
tively respond to the many challenges posed by the modern world. In
reaction, liberal ideology was in many contexts modified and entirely
abandoned in self-declared liberal milieus.40

 Glickmann, Buying Power, 189–218.


39

 Fawcett, Liberalism, 137–274; Jan-Werner Müller, Contesting Democracy: Political Ideas in


40

Twentieth Century Europe (New Haven: Yale University Press, 2011), 7–48; Michael Freeden,
Liberalism Divided: A Study in British Political Thought 1914–1939 (Oxford: Clarendon, 1986);
Arthur Arblaster, The Rise and Decline of Western Liberalism (Oxford: Blackwell, 1984), 284–308.
34  N. Olsen

One break with “classic liberalism” was voiced as ideas of a “new” and
more “social” liberalism, which became widespread beginning in the late
nineteenth century and later came to provide the foundation for practical
politics. Through a reconciliation with the new socialistic and democratic
forces—and based on the belief that the state should provide its citizens
with equal opportunities by offering social services in areas of health,
education, welfare, and unemployment—social liberalism aimed to cre-
ate a society in which the individual could unfold within and contribute
to the community.41
The figure of the consumer and the act of consumption was important
for this new liberal language. For example, John A.  Hobson became
(notoriously) famous for his theory of under-consumption, which antici-
pated key elements in John Maynard Keynes’ The General Theory by argu-
ing that the automatic savings for the rich, caused by the great disparity
of income between rich and poor, was the source of economic crisis.42
Moreover, Hobson criticized economics for neglecting the human ele-
ment, especially the economist’s tendency to focus primarily on consumer
satisfaction and the efficiency of competition on behalf of meaningless
and degrading work. In his nevertheless optimistic view, he positioned
the figure of an active and critical consumer, capable of expressing her/his
individual needs on the market, as the driver of the social liberal project.
Seeing consumption as a liberating activity through which people satisfy
their desires, he anticipated a future elevation of individual needs and
tastes for which production would have to account. At the same time, he
argued in favor of social provision for a wide range of goods and services
and found state intervention in the economy necessary to protect and
liberate the consumer on the marketplace.43
Similarly, Leonard T. Hobhouse, a leading advocate of new liberalism,
spoke in his famed book Liberalism from 1911 of the consumer as the
41
 For the emergence of “new” liberalisms in Great Britain and the United States, see, respectively,
Michael Freeden, The New Liberalism: An Ideology of Social Reform (Oxford: Clarendon, 1978) and
Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War (New York: Random
House, 1995).
42
 As Hobson’s theory did not match mainstream economic thought, he was sidelined in the
profession.
43
 Thompson, Social Opulence, 60–62, 88–92, 200–201; Michael Freeden, “J.A. Hobson as a New
Liberal Theorist: Some Aspects of his Social Thought until 1914,” Journal of the History of Ideas 34,
3 (1973): 421–443.
  The Birth of the Neoliberal Sovereign Consumer    35

victim of an economy entirely controlled by industrial companies on pri-


vate hands: “They [the companies] will profit by monopoly at the expense
of the general consumer, and the remedy is public control or public
ownership.”44 More generally, social liberal thinkers thought of consum-
ers as being in need of state protection from market forces. Moreover,
they promoted measures of redistribution of income and wealth in pur-
suit of societal equality.
Free market thinkers reacted differently to the crisis of liberalism: They
sought to redraw (rather than to radically reformulate) the principles
informing classic liberalism. In this process, they explicated the virtues of
liberalism and the market vis-à-vis socialism and planned economy, and
they did so by referring to the key role played by the consumer in the
liberal order, a consumer that diverged decidedly from the vulnerable
figures to which social liberal intellectuals and scholars referred.
When American and European free market thinkers began to portray
the consumer as a key agent in the economy, they both relied on and
departed from the neoclassical agents shaped by the marginal revolution.
To begin with, these free market thinkers did not ascribe the same perfect
rationality and predictability to consumers as William S.  Jevons had
done; instead they interpreted individual behavior through a perspective
that was much closer to Carl Menger’s. In this perspective, even if they
acted rationally based on the available information, few individuals knew
exactly what they wanted in the future and how to get it. Instead, con-
sumers expressed many and changing wants, and pursued them in differ-
ent ways. Still, or rather because of this, the free market thinkers under
discussion viewed an economy that forced producers to invent new and
better things to keep up with consumer favor as an effective, prosperous,
and, as such, rational system.
Moreover, free market thinkers took the consumer out of the labora-
tory and into the real world, as they began to portray the figure as the key
driver of capitalism and liberal democracy. In this process, using the con-
sumer to describe and legitimize a particular societal order, they deeply
44
 Leonard T. Hobhouse, Liberalism (Oxford: Oxford University Press, 1964 [1911]), 53. For con-
sumer discussions among American social liberals in the first decades of the twentieth century, see
Kathleen G.  Donahue, Freedom from Want: American Liberalism and the Idea of the Consumer
(Baltimore, MD: John Hopkins University Press, 2003).
36  N. Olsen

moralized the figure of the consumer. The Austrian-inspired American


economist Frank A. Fetter was the first free market thinker in the twenti-
eth century to directly connect consumers, capitalism, and liberal democ-
racy. In his book The Principles of Economics from 1905, Fetter stated that
the “consumers of products are the true purchasers of labor, materials,
and uses of agents” and moreover made an analogy between the market
and the democratic form of government:

Every buyer determines in some degree the direction of industry. The mar-
ket is a democracy where every penny gives a right of vote (…). Every
individual may organize a consumer’s league, leaguing himself with the
powers of righteousness. Will he read a yellow journal or a pink or a white
one? A nickel or two will buy either. He has a dollar; will he go to the
theatre or buy ten dishes of ice-cream? (…) Every purchase has far-reach-
ing consequences. You may spend your monthly allowance as an agent of
iniquity or of truth. You cannot escape a choice even by burying the
money, for that is either a demand for gold or a gift to the issuer of paper
currency.45

Fetter elaborated on his notion of market democracy by couching it in


marginalist language and juxtaposing it with economies, in which a
higher authority controlled the means of production and distribution: “It
is the democracy of valuation, while the method of authority is an
­oligarchy or monarchy.”46 This juxtaposition was linked to a critique of
socialism. According to Fetter, by promoting the abolition of private
property and the centralizing of all wealth under the control of the state,
socialism pursued “the method of distributing by authority [in] that one
individual (or group of individuals) judges of the deserts or duties of oth-
ers, decides what others must get or must pay, not what he himself is
willing to pay.”47 In his view, these features made socialism economically
irrational and inefficient, and politically repressive and unjust.48

45
 Frank A. Fetter, The Principles of Economics: With Application to Practical Problems (New York: The
Century Co, 1905), 154 and 212.
46
 Fetter, The Principles of Economics, 376, 212, 212.
47
 Fetter, The Principles of Economics, 410.
48
 Fetter, The Principles of Economics, 376 and 410.
  The Birth of the Neoliberal Sovereign Consumer    37

L udwig von Mises’ Positive Program


of Liberalism
Fetters’ staging of consumers as key agents in the capitalist economy, his
argument concerning the effective, democratic, and just nature of market
economy, and his juxtaposition of the liberal to the socialist market order,
was picked up by other free market thinkers, who reacted to the crisis of
liberalism in the early twentieth century.49
Crucial in this respect was the work of Austrian economist Ludwig von
Mises. Mises studied law and economics at the University of Vienna,
receiving his doctorate in 1906.50 From 1913 to 1934, he was an unpaid
professor at his alma mater. He also worked as an economist for the
Vienna Chamber of Commerce, thus acting as the principal economic
adviser to the Austrian government. Following World War I, Mises also
worked for the International Chamber of Commerce that sought to pro-
mote ideas of a free market world economy and cooperated with various
institutions with the League of Nations. Moreover, in collaboration with
the International Chamber of Commerce, in 1927, he founded the
Business Cycle Institute in Vienna of which Friedrich Hayek became the
director. Along with other soon-to-be key neoliberal ideologists, such as
Gottfried Harbeler and Fritz Machlup, Hayek also participated in the
private seminars that Mises held in his office at the Chamber of Commerce
in the 1920s; a seminar, through which many participants strengthened
their belief in, or converted to, the teachings of free market liberalism.
To escape the increasing influence of National Socialism in Austria,
Mises left in 1934 for Geneva, where he was a professor at the Graduate
Institute of International Studies; a contemporary hub for neoliberal
intellectuals. In 1940, he immigrated to the United States. There, he was
a visiting professor at New York University from 1945 until he retired in
1969; a period in which he collaborated with and was funded by a range
of American neoliberal free market organizations. Mises died in 1973.

49
 Perspectives on the invention of the sovereign consumer among Austrian free market economists
can be found in Schwarzkopf, “The Consumer as ‘Voter’, ‘Judge’ and ‘Jury’.”
50
 Details about Mises’ life and work can be found in the “insider” biography—Jörg Guido
Hülsmann, Mises: The Last Knight of Liberalism (Auburn: Ludwig von Mises Institute, 2007). See
also the detailed accounts in Slobodian, Globalists.
38  N. Olsen

Mises occupies a complex place in the field of neoliberalism research.


On the one hand, he is often portrayed as a classical liberal rather than
neoliberal with reference to his strong commitment to laissez-faire eco-
nomics. In line with this, to signal their ideological differences with his
work, members of the neoliberal network labelled Mises “paleo-liberal.”
Moreover, he remained to great extent an outsider to this network.51
On the other hand, scholars have recently begun to portray Mises as a
key figure in the emergence of early neoliberal thought, due to his influ-
ence on several key neoliberal thinkers from the 1920s onwards.52
According to Nicholas Gane, Mises was first of all important for setting
“an agenda that was primarily economic rather than political in basis.”
Gane adds: “This new or ‘neo’-liberalism was, in its earliest form, both a
defensive project that sought to conserve principles of individual freedom
that had been central to classical forms of liberalism, and a positive
­program that emphasized the powers of the free market and the impor-
tance of economic choice.”53
Elaborating on Gane’s comments, I argue that Mises’ program, which
stressed the powers of the free market and the significance of economic
choice, was closely linked to the invention of the sovereign consumer as
the key actor in the liberal order. I also argue that this aspect of Mises’
program became key in the birth of neoliberalism and the wider semantic
field in which it was rooted. In fact, toward the end of the chapter, I sug-
gest that Mises should in fact be considered a neoliberal tout court, with
reference to his conception of the state in the liberal market order he
envisioned.
Mises first important book Theorie des Geldes und der Umlaufsmittel
(Theory of Money and Credit), which appeared in 1912, extended Austrian

51
 It was the German neoliberal Alexander Rüstow who initially labeled Mises a “paleo-liberal.”
52
 See firstly Nicholas Gane, “The Emergence of Neoliberalism: Thinking Through and Beyond
Michel Foucault’s Lectures on Biopolitics,” Theory, Culture and Society 31, 4 (2014): 3–27; Pierre
Dardot and Christian Laval, The New Way of the World: On Neoliberal Society, trans. Gregory Elliott
(London: Verso, 2013); Jamie Peck, Constructions of Neoliberal Reason (Oxford: Oxford University
Press, 2010); Jamie Peck, “Remaking Laissez-Faire,” Progress in Human Geography 32, 3 (2008):
3–43. Quinn Slobobian, Globalists: The End of Empire and the Birth of Neoliberalism (Cambridge,
MA: Harvard University Press, 2018) also assigns Mises a key role in the development of early
neoliberalism.
53
 Gane, “The Emergence of Neoliberalism,” 6.
  The Birth of the Neoliberal Sovereign Consumer    39

marginal utility theory to money by the argument that money is required


for its usefulness in purchasing other goods.54 In the book, Mises also
argued that business cycles are caused by uncontrolled expansions of
bank credit. While continuing his research into business cycles, a range of
economic-political developments made Mises turn his attention to criti-
cal analyses of socialist economies. Among these developments, which
were observed with concern by the Austrian advocate of free markets,
were the regulated economies of World War I, the Russian Revolution,
and the making of Red Vienna after 1918 (when Social Democrats won
the majority in the city and responded to current social and political chal-
lenges through social housing programs, the redistribution of wealth and
alleviation of unemployment by public programs, while workers orga-
nized councils modeled on the Russian Revolution and the Council
Republics in Germany and Hungary).
Alongside these developments, a scientific debate had begun about
whether a socialist government with control over the means of produc-
tion and distribution could do as good as, or even better, than a capitalist
one, with respect to allocating goods in an efficient and equitable man-
ner. Mises rejected such ideas in a series of fierce critiques of socialism,
which he first stated in the article “Die Wirtschaftsrechnung im
Sozialistichen Gemeinwesen” (Economic Calculation in the Socialist
Commonwealth) and the book Die Gemeinwirtschaft (Socialism) from
1920 and 1922, respectively.55 In both texts, Mises argued that socialist
systems had a calculation problem due to their inability to determine
prices, resulting from the fact that production is directed by a central
authority and not by consumer demand. He also contended that the
absence of the law of value, money, financial prices for capital goods,
private ownership of the means of production, and free consumer choice,
made socialist planning for the allocation of the means of production
inferior to liberal capitalism in terms of efficiency and productivity.
Moreover, in Die Gemeinwirtschaft, referring to Fetter’s The Principles of

54
 Ludwig von Mises, Theorie des Geldes und der Umlaufsmittel (München-Leipzig: Duncker &
Humblot, 1912).
55
 Ludwig von Mises, “Die Wirtschaftsrechnung im Sozialistischen Gemeinwesen,” Archiv für
Sozialwissenschaft und Sozialpolitik 47, 1 (1920): 86–121; Die Gemeinwirtschaft. Untersuchungen
über den Sozialismus (Jena: Gustav Fischer, 1922).
40  N. Olsen

Economics, Mises argued that “the lord of production is the consumer”


and that “all production must bend to the will of the consumer” in
capitalism.56
With statements such as these, Mises effectively answered those who
criticized liberalism for its lack of a clear source of societal order by invest-
ing the liberal order with a new symbol of authority, namely, the sover-
eign consumer. More precisely, by referring to the general public as
sovereign consumers, he invested liberalism with a particular notion of
popular sovereignty. To appeal to popular sovereignty had become a
necessity in the age of mass democracy, where the idea that the authority
of a state and its government must be created and sustained by the con-
sent of its people had gained prominence.57 At the same time, a debate
concerning the capacity of liberal democracy to guarantee popular con-
sensus was raging in the early decades of the twentieth century. Sociologist
Max Weber, who argued that democratic politics is ultimately about the
dynamics of popular rule, left unexplained how democracy best served
the common interest. Similar to Weber, legal scholars such as Hans
Kelsen and Carl Schmitt saw the political party as the prime instrument
of popular government in the age of mass democracy, even if rival parties
embodied competing societal interests. But whereas Kelsen believed that
this situation might create the ideal of compromise in democracy, Schmitt
argued that parliamentarianism could not bring about a stable represen-
tation of the people.58 In Schmitt’s interpretation, while believed to be a
forum for the liberal ideal of government by discussion, parliament func-
tioned, in reality, as a site where political parties pursued their own agen-
das and compromises between interest groups were hammered out. As

56
 Mises, Die Gemeinwirtschaft, 435. Mises also referred to a section in the book Theorie der
wirtschaftlichen Entwicklung (Leipzig: Duncker & Humblot, 1912), in which Austrian economist
Joseph A. Schumpeter argued that the consumer directs the production (32). The argument ran
counter to the famous critique that Schumpeter began to launch at the neoclassical emphasis on the
demand side, arguing instead that forces in the productive apparatus primarily prompt change and
innovation in the economy. Nathan Rosenberg, “Joseph Schumpeter: Radical Economist,” in
Schumpeter in the History of Ideas, eds., Yuichi Shionoya and Mark Perlman (Ann Arbor: University
of Michigan Press, 1994), 41–58.
57
 Müller, Contesting Democracy.
58
 Timothy Stanton, “Popular Sovereignty in the Age of Mass Democracy: Politics, Parliament and
Parties in Weber, Kelsen, Schmitt and Beyond,” in Popular Sovereignty in Historical Perspective, eds.,
Richard Bourke and Quentin Skinner (Cambridge: Cambridge University Press, 2016), 320–358.
  The Birth of the Neoliberal Sovereign Consumer    41

such, parliamentarianism revealed that liberalism was a fundamentally


individualist and pluralist ideology in search of a clear symbol of unity
and popular sovereignty that could describe and legitimize the political
organization of liberalism.59
By coining the figure of the sovereign consumer, Mises responded to
the same problem addressed by Schmitt with respect to determining a
symbol of popular sovereignty that explains and justifies the particular
political organization of liberalism. While Mises did not refer to the
actual concept of “sovereignty,” he nevertheless outlined a sovereignty
semantics with multiple roots and meanings. Two moves were particu-
larly important for the making of this particular image of sovereignty.
First, as pointed out by Stefan Schwarzkopf, Mises contributed to a
development that began with medieval political theology and through
which the status of sovereign existence as a legitimate source of power was
transferred “from deity to monarch, to state, to the people and, finally, to
the individual as subject.”60 Like earlier kings, the authority associated
with Mises’ sovereign consumer connoted a clear hierarchy between the
ruler and the ruled, independence of external domination, and
­decision-­making processes that lead to a final choice that all members of
the political community must obey.
Second, moving the social reality of this particular personification of
sovereignty into the realm of capitalism, Mises created a symbol of
authority with new features. To begin with, it was entirely unrestricted by
religious or political norms. Moreover, as it operated beyond the premises
of the state, its parliament, and political parties, this sovereign was funda-
mentally incorruptible. It answered not to any higher authority or influ-
ence but only to individual desires and to the formal freedom of laws and
markets. In line with this, endowed with a freedom to choice, which was
unrestrained by the will of the majority, the sovereign consumer personified
an essentially individualist society.
Finally, in exercising its sovereignty on the market, the actions of the
sovereign consumer were incalculable and indeterminable, that is, they
could not be foreseen or predicted. With one crucial exception: According

59
 Carl Schmitt, The Crisis of Parliamentary Democracy [1923] (Cambridge, MA: MIT Press, 1988).
60
 Schwarzkopf, “The Political Theology of Consumer Sovereignty.”
42  N. Olsen

to Mises, the only certain result of a regime run by sovereign consumers


was an efficient and democratic societal order.
Indeed, in addition to providing liberalism with a new mode of sover-
eignty, Mises also infused it with a new mode of democratic legitimacy.
Besides rebutting the Marxist critique of capitalism as a system only run
by, and only enriching, the owners of the means of production, Mises
aimed to counter the broader criticism of liberalism as an elitist project,
which sought to defend its values from the influence of the masses by
insulating them from the democratic process. He did so by arguing, with
reference to Fettter’s voting analogy, that the market provided a superior
solution to securing the individual citizen’s representation and participa-
tion in socio-political processes. He wrote: “From this point of view the
capitalist society is a democracy in which every penny represents a ballot
paper. It is a democracy with an imperative and immediately revocable
mandate to its deputies. It is a consumers’ democracy.”61 Likewise, Mises
justified liberal capitalism by contrasting it with the socialist market
order: he argued that in socialist planning the government would be a
dictatorship in which those in power pursued their own interests and
repressed desires held by the rest of the population. Altogether, Mises
defended and legitimized liberal capitalism by re-describing it as a well-­
ordered, rational, and democratic system, driven by the wants of ordinary
people.
Mises’ re-description of liberalism involved a rebuttal of a range of
other specific points that critics often raised at the liberal market order in
the early twentieth century. Among other things, Mises denied that busi-
ness monopoly was a problem for a competitive economy. Monopolism
created by market dynamics, he argued, was a limited and transitory phe-
nomenon that new competitors entering the field would always keep in
check. In his view, monopolism was primarily a problem, when govern-
ments created conditions in which it could thrive, for example, by grant-
ing special legal privileges.62
Likewise, Mises rejected the idea that capitalism’s drift toward inequal-
ity posed a problem for modern society. Instead, in his view, inequality

 Mises, Die Gemeinwirtschaft, 436.


61

 Mises, Die Gemeinwirtschaft, 374–382.


62
  The Birth of the Neoliberal Sovereign Consumer    43

constituted a natural and necessary feature of an efficient and just societal


order. According to Mises, market dynamics, which made some people
rich and others poor, constituted the force spurring growth by forcing
entrepreneurs to compete in an effort to invent goods that satisfy con-
sumer wants. Moreover, he argued that these dynamics were nothing but
fair because they represented the result of choices made by ordinary peo-
ple in their capacity as consumers. In contrast, he depicted economic
redistribution as a road leading to unfair and inefficient societal orders. It
served, he wrote, “to reward frivolity and waste – in short every form of
uneconomic behavior.”63
Mises also denied that capitalism created consumer wants in order to
satisfy them, and that government should help consumers make better
choices on the marketplace and safeguard them from dangerous prod-
ucts. According to Mises, consumers generally bought goods because
they truly wanted them, and entrepreneurs were ultimately unable to
prevail in the change of demand. Moreover, he advocated that it should
be up to the individual consumer, and no one else, to decide what she/he
chose to spend her/his money on, even if it entailed harmful products
such as alcohol or nicotine. From his origins in Austrian marginal
­economics, he argued that seemingly irrational action is always rational
in that has an aim, namely the pursuit of individual happiness. For Mises,
the self-identified liberal, this pursuit constituted the ultimate societal
norm: “It is his valuation that counts, not mine or other people’s.” He
added: “One certainly could not call this violation of the individual will
‘economic democracy’.”64
Mises’ analyses of monopolism, inequality, and choice formation on
the marketplace bolstered his argument against state intervention in the
economy in the positive program of liberalism that he launched in the
early 1920s. Ultimately, all the discursive features of Mises’ program were
connected to his attempt to counter the idea of liberalism as an elitist and
anti-democratic project. Crucial here was the analogy he made between
the market and democratic politics. In reconciling liberalism and democ-
racy, the analogy reinterpreted the very meaning of democracy by shifting

63
 Mises, Die Gemeinwirtschaft, 258.
64
 Mises, Die Gemeinwirtschaft, 440.
44  N. Olsen

it from the political to the economic realm. According to Mises, markets


simply manage to express the popular will more articulately and mean-
ingfully than do mere elections.65
This is not to say that Mises rejected the ideal of parliamentary democ-
racy. However, he argued that institutions such as elections were “merely
technical tools of democracy” that “eliminated those dangers to peaceful
social development which might result from any clash between the will of
the rulers and public opinion.” In other words, according to Mises, tradi-
tional democratic institutions served mainly to “make peace.”66 In con-
trast, he portrayed the daily voting on the marketplace as the real driver
of individual representation and participation in society. As such, Mises
also sought to reclaim and move forward the liberal agenda on political
grounds, but he did so in a way that rehabilitated the market on behalf of
traditional sites of democracy and gave primacy to the economic rather
than the political.67 Against this background, if (as William Davies has
argued) “neoliberalism is the pursuit of the disenchantment of politics by
economics,” Mises was a crucial forerunner of this ideological tradition.68
To this we can add that this disenchantment of politics by economics was
carried out through a determined and energetic re-enchantment of the
market and its virtues.

 he Sovereign Consumer in the Socialist


T
Calculation Debate
Mises elaborated on his liberal program in the many books and articles
that he published in the wake of “Die Wirtschaftsrechnung im
Sozialistichen Gemeinwesen” and Die Gemeinwirtschaft. In doing so, he

65
 As such, Mises was an early advocate of what Thomas Frank has termed “market populism” to
describe the mode of support for the free market manifesting in the United States in the 1990s. See
Thomas Frank, One market under God, extreme capitalism, market populism, and the end of economic
democracy (London: Vintage, 2000).
66
 Mises, Die Gemeinwirtschaft, 434.
67
 See also the comments in Gane, “The Emergence of Neoliberalism,” 10.
68
 William Davies, The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition
(London: Sage, 2014), 4.
  The Birth of the Neoliberal Sovereign Consumer    45

continued to legitimize liberalism with reference to how the key figure of


the liberal order, the sovereign consumer, produced economic efficiency
and political democracy through her/his dynamic rule on a market in
which transactions between private parties are free from government
intervention.69
In the 1920s, Mises’ writings formed part of a wave of literature in
which free market thinkers from various countries sought to outline new
and market-oriented liberalisms in response to the crisis of liberalism.
Similar to Mises, these free market thinkers propagated doctrines of com-
petition and entrepreneurship, criticized advancing socialist ideas, and
viewed the functions of the state in mostly negative ways.70 However,
none of them placed the sovereign consumer at the center of their work
or managed to influence ongoing debates on liberal ideology to the same
extent as Mises.71
In the 1930s, Mises’ writings reached a wider audience during the so-­
called socialist calculation debate (which Mises’ critique of socialism from
the 1920s in fact ignited). The debate pitted Austrian economists, repre-
sented first of all by Mises and Friedrich Hayek, who argued that social-
ism was unfeasible, against Marxist economists such as Oscar Lange,

69
 Mises first justified the liberal order through the argument that it promotes the interests of indi-
viduals as consumers in Ludwig von Mises, Nation, Staat und Wirtschaft, Beiträge zur Politik und
Geschichte der Zeit (Wien: Manzsche Verlags- und Universitäts-Buchhandlung, 1919), 163. Mises’
justification reached a climax in his magnum opus Human Action, a Treatise on Economics (New
Haven: Yale University Press, 1949) to which we will return toward the end of the chapter.
70
 Dieter Plehwe, “Introduction,” in The Road from Mont Pelerin: The Making of the Neoliberal
Thought Collective, eds., Phillip Mirowski and Dieter Plehwe (Cambridge: Cambridge University
Press 2009), 10–11; Bernard Walpen, Die offenen Feinde und ihre Gesellschaft: eine hegemonietheo-
retische Studie zur Mont Pèlerin Society (Hamburg: VSA Verlag, 2004), 66–73.
71
 It should be mentioned that in his The Case for Capitalism (New York: E. P. Dutton & Co., 1920),
chief editor of The Economist, British Financial journalist Hartley Withers, launched a criticism of
socialism and defence of capitalism that was identical to Mises’. “Capitalism,” Withers stated, “puts
the real power in the hands of the average consumer, and so suffers from and rejoices in all the
weakness and force, all the hopefulness and despair, that are associated with democracy.” He added:
“With regard to the consumer’s freedom, it [capitalism] beats State Socialism and Guild Socialism
so hollow that they are hardly to be seen on the course.” Withers, The Case for Capitalism, 40–41,
42, and 244. It is thus fitting that, in the English translation of the second edition of Die
Gemeinwirtschaft from 1932 Mises inserted a sentence referring the reader to the “striking remarks
in Withers’, The Case for Capitalism” next to his reference to Fetter’s The Principles of Economics.
Ludwig von Mises: Socialism: An Economic and Sociological Analysis (London: Jonathan Cape,
1932), 442, note 1.
46  N. Olsen

Abba Lerner, and Maurice Dobb, who argued that socialism was feasible
and superior to capitalism (although these scholars held different views
regarding the utilization of markets and money in a socialist system).
In their contributions to the debate, the Austrian economists habitu-
ally portrayed the free consumer as the key agent of capitalism and liberal
democracy in attempts to defend liberalism and attack socialism.72
Moreover, they judged the validity of economic orders according to their
capacity to fulfill consumer wants.
As we will return to in Chap. 5, some of the Marxists participating in
the debate also referred to the sovereign consumer as a means of discuss-
ing whether individual preferences constituted an appropriate ethical
basis for a modern socialist society. However, most Marxists invoked the
figure as an analytical category in making arguments concerning the pos-
sibilities of achieving so-called Pareto-efficiency (a state in which it is
impossible to make one individual better off without making at least one
individual worse off).73 And, more generally, those defending the price
mechanism put greater stress on political and normative arguments for
giving consumers sovereignty in the economy and offered a much more
dynamic image of the market.74
The normative take on the sovereign consumer was also central to the
1935 volume Collectivist Economic Planning, edited by Friedrich Hayek.75
The book contained a number of interventions in the debate made by
“non-planners,” including a translation of Mises’ 1920 essay on economic
calculation. In his afterword to the book, Hayek labeled a section discuss-
ing the nature of socialist calculation “Abrogation of the Sovereignty of
the Consumer.” Hayek asserted that consumer sovereignty was an ideal
72
 Lawrence H. White, The Clash of Economic Ideas: The Great Policy Debates and Experiments of the
Last Hundred Years (Cambridge: Cambridge University Press, 2012), 32–67; Sonja M. Amadae,
Rationalizing Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism (Chicago:
The University of Chicago Press, 2003), 88–100; Joseph Persky, “Consumer Sovereignty and the
Discipline of the Market,” Revue européenne des sciences sociales 96 (1993): 13–28; Don Lavoie,
Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (Cambridge: Cambridge
University Press, 1985).
73
 The concept is named after the Italian economist Vilfredo Pareto (1848–1923), who coined the
concept in his studies of economic efficiency and income distribution.
74
 See Persky, “Consumer Sovereignty,” 13.
75
 Friedrich A.  Hayek, ed., Collectivist Economic Planning: Critical Studies on the Possibilities of
Socialism (London: George Routledge and Sons, 1935).
  The Birth of the Neoliberal Sovereign Consumer    47

“which few who realized what it meant would readily abandon.”76


Moreover, he argued that any change in price, effected by consumer
demand, would entail the adjustment of hundreds of other prices, and
that information needed to make these adjustments would simply be
impossible to collect and act upon by a central planning board. Hayek
concluded:

In view of these difficulties, it is not surprising that practically all, who have
really tried to think through the problem of central planning, have
despaired of the possibility of solving it in a world in which every passing
whim of the consumer is likely to upset completely the carefully worked
out plans. It is more or less agreed now that free choice of the consumer
(…) and planning from the centre are incompatible aims.77

Hayek’s work exemplifies the importance of Mises’ work for the attempts
to renew liberalism that began in the interwar period. Hayek, who later
emerged as the leader of the neoliberal movement, had as mentioned
above been a regular participant in Mises’ private seminars in the 1920s
and was allegedly converted from socialism to liberalism by reading Die
Gemeinwirtshaft. He subsequently based his scholarly analysis and ideo-
logical writings on Mises’ definitions of and distinctions between the lib-
eral and the socialist order.
During the 1930s, Hayek changed his focus from technical economic
analyses of business cycles to social theoretical studies of social behavior,
information, and societal organization. In this process, he developed
Mises’ argument of the impossibility of socialist planning into a larger
interpretive framework regarding human knowledge that expanded on
the Austrian tradition going back to Carl Menger of approaching human
behavior through notions of uncertainty, imperfect knowledge, and the
open-endedness of the world. This framework was based on the idea of a
world in which different agents have access to different bits of knowledge

76
 Friedrich A.  Hayek, “The Present State of the Debate,” Friedrich A.  Hayek, ed., Collectivist
Economic Planning: Critical Studies on the Possibilities of Socialism (London: George Routledge and
Sons, 1935), 214 and 219.
77
 Hayek, “The Present State of the Debate,” 214.
48  N. Olsen

so that adjustment to new information is constantly occurring and


impedes central planning by a single authority.78
British economist Lionel Robbins shared this framework. Similar to
Hayek, Robbins had participated in Mises’ private seminars in Vienna
and abandoned his socialist leanings after reading Die Gemeinwirtschaft.
Due to the deep inspiration he found in Austrian economics, especially
in Mises, he brought Hayek to the London School of Economics in
1932.79 At this point, Robbins had begun to model his work on accounts
of the liberal and socialist economic order as conceptualized by Mises.
For example, in his 1934 book The Great Depression, ascribing the severe
economic crisis to interventionary policies, Robbins called for a free mar-
ket economy based on the rule of sovereign consumers. In doing so, he
argued that the market was the best mechanism “available for ascertain-
ing the complex and changing tastes of the millions of different individu-
als constituting the community” and that a democratic community
would “attempt to organise production to meet the preferences of
­consumers.” Echoing Fetter and Mises, Robbins also stated that the mar-
ket “may be compared to a continuous election with proportional repre-
sentation. Every shilling spent is a vote for a particular commodity. The
system of prices as a whole is the register of such an election.”80
German neoliberal economist Wilhelm Röpke, who likewise found
great inspiration in Die Gemeinwirtschaft, used a language similar to
Lionel Robbins’ in an attempt to outline the foundation for a new liberal
order in the 1930s. Röpke was forced to resign from his professoriate in
Marburg and left Germany a few weeks after Hitler’s rise to power. After
teaching for a few years in Istanbul, he joined Mises as a teacher at the
Institute of International Studies in Geneva, Switzerland, in 1937. At this
point, Röpke began to describe the liberal order as a “democracy of

78
 Caldwell, Hayek’s Challenge, 205–231. See also Andrew Gamble, “Hayek on knowledge, econom-
ics, and society,” in The Cambridge Companion to Hayek, ed. Edward Feser (Cambridge: Cambridge
University Press, 2006), 111–131.
79
 For Robbins’ relations to and reception of Mises and Hayek, see Susan Howson, Lionel Robbins
(Cambridge: Cambridge University Press, 2012).
80
 Lionel Robbins, The Great Depression (London: Macmillan, 1934), 148. In the accompanying
footnote, Robbins specified that his argument owed much to Mises’ Die Gemeinwirtschaft. See also
the comments on Robbins’ book in Angus Burgin, The Great Persuasion: Reinventing Free Markets
since the Depression (Cambridge, MA: Harvard University Press, 2012), 26–27.
  The Birth of the Neoliberal Sovereign Consumer    49

consumers” and to liken capitalism “to a continuing plebiscite in which


each piece of currency represents a ballot and in which the consumers, via
their demands, are constantly voting to decide what types and amounts
of goods shall be produced.”81 Additionally, Röpke’s fellow German neo-
liberals, including Walter Eucken, Franz Böhm, and Alfred Müller-­
Armack arrived at their critiques of socialist planning and embraces of
the liberal order by reading Mises.82
The intention here is not to provide a full reception history of the work
of Mises among liberal thinkers. It is rather to offer a few (of many)
examples of the importance of Mises for the emergence of a language
depicting the sovereign consumer as the key agent of capitalism and lib-
eral democracy in the interwar era and, in particular, in the context of the
socialist calculation debate. As indicated above, his work was especially
important for many of those ideologists who were to become key players
in the neoliberal network, including Hayek, Robbins, and Röpke.
Although they would eventually all stress the necessity of government
involvement in the attempts to construct a liberal society, they remained
greatly inspired by Mises’ ideas and notions.

Neoliberal Mobilization
Austrian-inspired free market thinkers were not alone in embracing the
sovereign consumer in the interwar era. In marketing, which had its epi-
center in the United States, the figure was often portrayed as “Voter,”
“Judge,” and “Jury,” dictating what is produced on the market by her/his
choices.83 American businesses also advocated this ideal.84
Still, few outside the circles of free market thinkers and the realm
of advertisement and business embraced the ideal of the sovereign
consumer. In addition, the onset of the Great Depression rapidly

81
 Wilhelm Röpke, “Fascist Economics,” Economica 2, 5 (1935), 93, and Wilhelm Röpke, Die Lehre
von der Wirtschaft (Wien: J. Springer, 1937), 167.
82
 German neoliberalism is the topic of the following chapter.
83
 Schwarzkopf, “The Consumer as ‘Voter’.”
84
 Cohen, A Consumers’ Republic, 56–61.
50  N. Olsen

undermined the remaining popular support for free markets. Even


many of the economists that had been staunch supporters of laissez
faire began to believe that a market economy based on free consumer
choice was infeasible.85 Against this background, a group of self-iden-
tified liberals (many of which were introduced above) began to discuss
whether laissez faire had to be abandoned if liberalism was to be saved
from its current crisis. In a European context, this crisis was deepened
by the surge of Communism and Fascism, which offered very differ-
ent ideas of how to incorporate the “masses” into a legitimate and
stable political system, and what role the state and the individual
should play in modern society.86
In 1938, 23 liberal thinkers from several countries met at the so-
called Colloque Walter Lippmann in Paris to discuss the challenges to
liberalism through a debate of the recently published book The Good
Society by American journalist and intellectual Walter Lippmann.87
Besides Lippmann, the participants included, among others, Ludwig
von Mises and Friedrich Hayek, the economists Wilhelm Röpke and
Alexander Rüstow from Germany, and the philosophers Raymond
Aron and Louis Rougier from France. At the meeting they outlined an
agenda they labeled neoliberal, which concerned ideological principles
and organizational activities aimed at creating liberal societal orders
based on individual freedom and a free market economy. The agenda
came to a halt with the outbreak of World War II. However, some of
the neoliberals, who had met in Paris in 1938, resumed their ideologi-
cal and institutional labor within the framework of the Mont Pèlerin
Society.88

85
 Burgin, The Great Persuasion, 4, 8, 9, 13–4, 16, 103, 106.
86
 Müller, Contesting Democracy, 49–90.
87
 Walter Lippmann, An Inquiry into the Principles of the Good Society (Boston: Little Brown and
Co., 1937). For the Colloque Walter Lipmann, see François Denord, “Aux origines du néo-­
libéralisme en France. Louis Rougier et le Colloque Walter Lippmann de 1938,” Le Mouvement
Social 195, 2 (2001): 9–34.
88
 Walpen, Die offenen Feinde; Phillip Mirowski and Dieter Plehwe, eds., The Road from Mont
Pelerin: The Making of the Neoliberal Thought Collective (Cambridge: Cambridge University Press,
2009); Peck, Constructions of Neoliberal Reason; Burgin, The Great Persuasion; Daniel Steadman
Jones, Masters of the Universe. Hayek, Friedman, and the Birth of Neoliberal Politics (Princeton, NJ:
Princeton University, 2014).
  The Birth of the Neoliberal Sovereign Consumer    51

In the period from the 1930s to the 1950s, neoliberalism was “any-
thing but a succinct, clearly defined political philosophy.”89 Even if the
members of the neoliberal network agreed on the overall aim of develop-
ing a liberal ideology based on a free market economy and individual
freedom, they embraced different strands of liberalism. At one end of the
spectrum, Ludwig von Mises argued that a liberal order based on indi-
vidual property rights, free markets, and limited government interven-
tion would lead to a peaceful, prosperous, and just society. At the other
end, figures such as the philosopher Karl Popper embraced a more social
liberal discourse, viewing state regulation and distribution of the econ-
omy as essential to a liberal society.
In fact, in the 1930s and 1940s, many members of the neoliberal net-
work were deeply suspicious of nineteenth-century capitalism, associat-
ing unregulated markets with two problems. Firstly, recent developments
had shown that capitalism brought about not only prosperity and free-
dom but also inequality and widespread poverty. In this respect, aiming
to enhance societal justice, equality, and security, these liberals endorsed
various degrees of governmental economic regulation and wealth re-­
distribution. However, they did not intend to embark on a system of
socialist planning, as they held a free market system to be vital for a just
and productive society.90
Secondly, the liberals under discussion had come to believe that mar-
kets did not emerge naturally, but had to be created and maintained,
since history had shown that unregulated markets invariably led to the
rise of monopolies and the misuse of human and environmental resources.
In other words, they were convinced that strong systemic frames were
needed to secure the workings of the price mechanism and the ability of
the market to bring about growth, freedom, and justice. They therefore
called upon the state to create and maintain the free market. The key
question was how to define the state’s positive functions: How extensive
should they be, and should they mainly focus on creating an effective
market or on mitigating its negative consequences?

 Plehwe, “Introduction,” 1.
89

 Ben Jackson, “At the Origins of Neo-Liberalism: The Free Economy and the Strong State,
90

1930–1947,” The Historical Journal 53, 1 (2010): 129–151.


52  N. Olsen

 illiam H. Hutt’s Notion of Consumer


W
Sovereignty
It was in an effort to answer the question of how to re-conceptualize lib-
eral society that, with the notion of consumer sovereignty in mind,
British economist William H. Hutt elaborated on and, for the first time,
explicitly named figure of the sovereign consumer in his 1936 book
Economists and the Public.91
Born in 1899 to a working-class family in London, Hutt studied at the
London School of Economics and graduated in 1924. Staying in touch
with the academic milieu, he worked for a publishing house from 1924
to 1928, when he accepted a teaching position at the University of Cape
Town in South Africa. Although based in Cape Town, Hutt remained in
contact with members of the neoliberal networks during the 1930s, and
his work formed part of the attempt to ponder how liberalism might be
salvaged by means of reordering the relationship between the market and
the state. Accordingly, Hutt became a member of the Mont Pèlerin
Society in the late 1940s.92
In his work, Hutt drew on and identified to great extent with the clas-
sical liberal tradition as represented by Smith and Bastiat and the Austrian
tradition as associated with Mises and Hayek (whom he knew from

91
 Hutt’s notion of consumer sovereignty has been given little attention in the historical research on
the idea of the sovereign consumer. Most importantly, it is absent from Payne, The Consumer and
only briefly mentioned in Schwarzkopf, “The Consumer as ‘Voter’ ” and in Schwarzkopf, “The
Political Theology of Consumer Sovereignty.” For brief but very insightful comments on Hutt’s
notion, see Joseph Persky, “Retrospectives: Consumer Sovereignty,” Journal of Economic Perspectives
7, 1 (1993): 183–191, and Trentmann, “The Modern Genealogy,” 44–45.
92
 Hutt did not attend the founding meeting of the Mont Pèlerin Society but joined at the 1949
meeting in Seelisberg and remained an enthusiastic contributor to the proceedings of the Society.
For Hutt’s contributions to the meetings, see “Mont Pèlerin Society (1947–…): Inventory of the
General Meeting Files (1947–1998),” Liberaal Archief, accessed 1 January 2018, http://www.liber-
aalarchief.be/MPS2005.pdf. In 1965, Hutt moved to the United States, where he first served as
visiting professor at various universities and spent the last 16 years of his career at the University of
Dallas. Hutt was never a widely famous scholar. Today, he is primarily remembered as a critic of
Keynes and of strike-enforced collective bargaining as well as for having invented the notion of
consumer sovereignty. For details on Hutt’s life and work, see his unpublished autobiography The
Autobiography of an Economist (1984, Hoover Institution Archives, Box 70, Folder 6) and Morgan
O. Reynolds, ed., W. H. Hutt: An Economist for the Long Run (Washington DC: Regnery Gateway,
1986).
  The Birth of the Neoliberal Sovereign Consumer    53

LSE).93 However, he habitually pursued themes and arguments beyond


these two traditions. This was also the case in Economists and the Public,
which contained many (at times conflicting) messages.
In the first part of the book, Hutt made a vigorous case for re-­
habilitating “orthodox economics” by restoring the authority that its pro-
ponents had allegedly once enjoyed in the public debate.94 According to
Hutt, these economists had contributed to their own downfall because
they had abandoned economic truth (i.e., free market doctrines) in the
pursuit of personal interests and political ambitions. His solution for the
incompetence of the economic discipline was to form an “Association of
Pure Economists,” whose members should focus only on making objec-
tive statements and forsaking all connections to politics and business.
Their task was to explicate and defend the market system, so that the
public would understand its rationality and virtues.
In the second part of the book, Hutt went on to clarify and legitimize
the market order. It was in this context that, in a chapter with the same
title, he presented the notion of consumer sovereignty. “The consumer,”
Hutt wrote, “is sovereign when, in his role of citizen, he has not delegated
to political institutions for authoritarian use the power which he can
exercise socially through his power to demand (or refrain from
demanding).”95 The power assigned to the consumer, he added, is to be
viewed as an expression of democratic values in achieving “the social con-
trol which maximizes liberty and justice.”96 As such, he made it clear that,
next to making a case for market efficiency, his notion of consumer sov-
ereignty involved a set of social norms and political ideas that were cen-
tral to liberal society. In fact, according to Hutt, if free market economics
93
 For Hutt’s friendship with Hayek, see Hutt, The Autobiography, 85. Here, Hutt also talks of
Hayek’s “long and fruitful influence on the form of my intellectual development.”
94
 Hayek also pondered this theme in his contributions to the calculation debate. See Friedrich
A.  Hayek, “The Nature and History of the Problem,” in Collectivist Economic Planning, ed.,
Friedrich A. Hayek (London: George Routledge and Sons, 1935), 8–11.
95
 Hutt, Economists and the Public, 257. Careful not to claim credit for the notion of consumer
sovereignty, in a later article, Hutt pointed to earlier uses of the notion among other free market
economists and in marketing literature. About his own initial use of the notion, he wrote: “I first
used the term in its present sense in an unpublished article which I circulated in 1931. It first
appeared in print, I believe, in an article which I published in March 1934.” William H. Hutt, “The
Concept of Consumers’ Sovereignty,” The Economic Journal 50, 197 (1940), 66, note 2.
96
 Hutt, Economists and the Public, 257.
54  N. Olsen

was to regain public authority, it was crucial to outline a new social con-
tract that drew its legitimacy from notions of democracy, freedom, and
liberty.
What, in his perspective, made the norm of consumer sovereignty a
suitable basis for such an order was above all its “superior ethical signifi-
cance in liberty and freedom of choice,”97 meaning that it gave consumers
the choice to accept or reject a market-offering, and thus formed an open
system that reflected people’s preferences.98
In this context, echoing the parallel between consumer choice and the
ballot box first outlined by Frank A. Fetter, Hutt extended the mecha-
nisms of liberal democracy to the market, ascribing the same measure of
social validity and a similar rationality “on the part of voters in an elec-
tion and consumers in a marketplace.”99 Adding that “consumers in the
marketplace are incomparably more rational and less seriously misled by
propaganda than voters under representative government,” he moreover
portrayed market democracy as superior to parliamentary democracy and
thus joined “the pursuit of the disenchantment of politics through eco-
nomics” alongside Mises.
More generally, in Economists and the Public, Hutt tapped deeply into
the consumer language that free market thinkers such as Fetter, Hayek,
and Mises had outlined since the early twentieth century. Tellingly, in
placing his project vis-à-vis recent analyses of the economic-political situ-
ation, he referred to the “opportune” publication in English of Mises’ Die
Gemeinwirtschaft.100 He also placed his project within the tradition of
advocating a consumer-driven economy associated with liberal political
economists. He referred to Smith in defining consumer sovereignty in
technical terms as the stimulus to which productive effort is a response
and to Bastiat in arguing that competition in a market based on private
property supposedly enhances liberty and efficiency for the individual
and for society more generally.101

97
 Hutt, Economists and the Public, 270.
98
 As phrased by Schwarzkopf, “The Consumer as ‘Voter’,” 12.
99
 Hutt, Economists and the Public, 262.
100
 Hutt, Economists and the Public, 9.
101
 Hutt, Economists and the Public, 216 and 270.
  The Birth of the Neoliberal Sovereign Consumer    55

However, Hutt went beyond these two traditions by offering a more


detailed explication and legitimization of an economy driven by con-
sumer choice. This involved outlining a “thicker” description of the con-
sumer that defined the meaning of consumer sovereignty to all members
of society. This description took the theme in new directions through a
strong focus on ideals of political consent and social harmony and by
assigning a central role to the state in creating a consumer-driven liberal
society.
Hutt began his account of consumer sovereignty by breaking with the
tendency in Austrian economics to relate consumer sovereignty to the
attempt to create conditions in which entrepreneurs are free to pro-
duce.102 In Hutt’s societal order, the consumer took center stage—not the
producer. However, he argued that the case for consumer sovereignty also
relied on the consent of producers. According to Hutt, they ought to
view a societal order based on consumer sovereignty as far more attractive
than the current alternatives, since, in a market society, producers are
dependent on the many and divergent choices of the consumer and not
on a web of constraints posed by the state or by the often unidentifiable
networks of power in a totalitarian system.103
Hutt justified the supremacy of the consumer over the producer on the
grounds “that every individual is, after all, not only a producer but a con-
sumer  – that every individual is not only subject but sovereign.” He
added: “As a ‘consumer’, each directs. As a ‘producer’, each obeys.”104
Moreover, Hutt offered a novel philosophical justification of the social
coercion informing the principle of consumer sovereignty. Drawing on
British economist Philip Wicksteed, this justification was rooted in the
belief that complete freedom in modern society is both undesirable and
utopian, and that restraints are legitimate if they are “inevitable,” “impar-
tial,” and “impersonal” in nature.105

102
 Dardot and Laval, The New Way of the World, 101–120.
103
 See the comments in Trentmann, “The Modern Genealogy,” 44.
104
 Hutt, Economists and the Public, 262 and 258.
105
 Hutt, Economists and the Public, 252–253. A philosopher, theologian, and economist, Wicksteed
wrote on economic method and the theory of marginal productivity, emphasizing the subjectivism
of costs. He influenced several twentieth-century economists, particularly those working in the
Austrian tradition, including Ludwig von Mises and Lionel Robbins.
56  N. Olsen

Focusing on political values, rather than on economic ideals, Hutt


aimed at a societal order that leaves the individual free to adjust “his con-
duct in the way he thinks will bring him the maximum of satisfaction of
all kinds he can take from society.”106 In other words, for Hutt, consumer
sovereignty not only concerned freedom with respect to buying and sell-
ing but also to how people choose to live their lives outside the market-
place. In this respect, he scorned marginal economists such as William
S. Jevons, who defined individual self-interest and hedonism as the only
drivers of human behavior.107 Citing Chicago economist Frank Knight,
Hutt wrote: “The ultimate motives and interests must be referred to by
such terms as exploration, problem-solving, fellowship, power, beauty,
rightness, etc., which are not descriptive in an objective sense.”108
However, Hutt was pessimistic regarding the capabilities of individuals
to exercise their freedom of choice in modern society. For example, in his
discussion of consumer preference formation, he expressed doubts about
the ability of consumers to know what was in their own best interest. In
Hutt’s view, instead of reflecting the unique being of every individual,
“[o]ur tastes and desires have after all been almost wholly imposed upon
us by the teachings, the tastes and the standards of those among whom
we live.”109
By identifying a lack of wisdom and self-knowledge among consum-
ers, Hutt echoed a theme that was not only associated with critics such as
Thorstein Veblen but had been voiced by many economists of different
orientation, including Philip Wicksteed and Frank Knight and Austrian
economists such as Carl Menger, Frank A.  Fetter, and Ludwig von
Mises.110 Like Menger, Hutt believed that social progress and experience
from individual errors on the marketplace would result in increased con-
sumer intelligence and a more “rational” capitalist system. Moreover, in
line with Mises, he argued that the supreme norm of freedom outweighed
this deficiency of consumer sovereignty, that is, that individuals should

106
 Hutt, Economists and the Public, 265.
107
 Hutt, Economists and the Public, 305–306.
108
 Hutt, Economists and the Public, 264–265.
109
 Hutt, Economists and the Public, 282–283.
110
 Persky, “Retrospectives,” 188.
  The Birth of the Neoliberal Sovereign Consumer    57

be free to choose, regardless of the quality of their choices. In this con-


text, rejecting the idea that society has standards to agree on which pat-
terns of consumption are better than others, he criticized Veblen’s
“snobbish” ridicule of the emulative habits of middle-class consumers in
search for a social position. Against this background, and in line with the
Austrian tradition, Hutt concluded that society should generally not
interfere with individual choice of consumption.111
However, Hutt’s arguments of non-interference with consumer sover-
eignty centered primarily on the role of the notion in promoting political
and social stability than in furthering individual choice of consumption
on the market per se. He thus stated that consumer sovereignty ulti-
mately necessitated a willingness to tolerate the choices of other individu-
als in order to create a basis for peaceful co-existence and defuse the
potential for conflict. “The case for competition rests on this tolerance,”
he wrote, referring again to Philip Wicksteed’s work and calling upon a
classical liberal virtue that was under increasing pressure in the 1930s.112
Indeed, by merging notions of liberty, individualism, and tolerance
with ideas of legitimacy, sovereignty, and power, Hutt was updating lib-
eralism to the age of ideologies.113 In doing so, he evidently assigned
greater value and trust to the mechanisms of capitalism and liberal
democracy than Communist and Fascist ideologies did. Both of these
ideologies sought to deal with the “the rise of the masses” by creating a
supposedly democratic unity of the people both by means of and within
a total state.114 Launching consumer sovereignty as part of the current
battle about the meaning of democracy, Hutt sought to portray the mar-
ket—and liberal society—as much more democratic than the so-called
people’s democracies proposed by Communists and Fascists. This
involved an attempt to turn the masses into sovereign consumers who
dictated a well-ordered, efficient, and legitimate liberal-capitalist system.
However, while Hutt’s updating of liberalism was deeply steeped in
Austrian free market thought, it utilized a different language, which

111
 Hutt, Economists and the Public, 273–281.
112
 Hutt, Economists and the Public, 293.
113
 Trentmann, “The Modern Genealogy,” 45.
114
 Müller, Contesting Democracy, 91–124.
58  N. Olsen

focused on ideals of social harmony and political consent and drew on a


view of the nature and dynamics of markets and consumers that was
more pessimistic than that of Mises. It also involved markedly different
understandings of notions such as sovereignty and democracy. In line
with this, Hutt did not seek to redraw but to reformulate classical liberal-
ism. In this pursuit, he assigned the state a key role and that placed firm
limits on the disenchantment of politics and re-enchantment of the mar-
ket economy that Mises had infused into liberal ideology in his writings
on the socialist economy in the early 1920s.
More specifically, Hutt identified three deficiencies of the liberating
and democratic potential of free markets and the notion of consumers’
sovereignty that he believed urged state intervention in economic and
social life. These deficiencies were (1) that votes in the marketplace are
not evenly distributed among the population, due to the huge inequali-
ties of income and wealth in modern society; (2) that unregulated com-
petition creates conditions in which the price mechanism is undercut and
resources are exploited in undesirable ways by business monopolies and
other kinds of vested interests; and, as already touched upon; (3) the lack
of consumer rationality in the marketplace.
In order to level out the democratic playing field and remedy the flaws
of unregulated competition, Hutt offered a rather far-reaching govern-
mental program. Besides public education to “protect the individual from
the unforeseeable results of his voluntary acts,”115 it involved a minimiza-
tion of the inequalities of wealth through the drastic restriction of private
inheritance, steeply progressive taxation, and the removal of the sources of
special privilege, including labor unions and monopolies.116 Hutt’s aim
was evidently to make liberal society acceptable and attractive not only
for those already in possession of wealth and freedom but also for those
who wanted to have a share in these resources. About the prospects of
restoring liberalism’s public authority through a societal order based on
consumer sovereignty, he wrote: “It rests on a common-sense view of his-
tory, which suggests that people will consent to be ruled only in a regime
which can be seen to give them equal rights and equality of opportunity.”117

115
 Hutt, Economists and the Public, 275.
116
 Hutt, Economists and the Public, 273–370.
117
 Hutt, Economists and the Public, 298.
  The Birth of the Neoliberal Sovereign Consumer    59

Neoliberalism in the Plural
The achievement of William H. Hutt was to name and describe in detail
the figure of the sovereign consumer that had emerged since the eigh-
teenth century and which became inextricably tied to the defense of lib-
eralism spearheaded by Ludwig von Mises in the interwar period. Hutt
connected the figure to an emerging neoliberal program that assigned the
state an important role in creating a liberal society based on free markets
and individual freedom. More exactly, he assigned the state a vital role in
creating an efficient market by enforcing a framework for effective com-
petition and mitigating its allegedly negative effects through economic
regulation and redistribution.
For the publication of Economists and the Public, Hutt (or his pub-
lisher) managed to secure favorable “opinions” of the book from ideologi-
cal comrades in arms, such as Lionel Robbins and Wilhelm Röpke.118
These blurbs served to indicate that Hutt’s visions of a neoliberal society
were widely shared among free market thinkers.
Many neoliberals surely shared the idea that significant state regulation
and redistribution was essential to the maintenance of a free society.
However, there were strong disagreements about how the liberal order
should be designed. In particular, neoliberals held very different ideas of
how to define the state’s positive functions in this order. They also dis-
agreed on how to understand several other issues related to the economic
organization of modern society, such as the nature of markets, democ-
racy, equality, sovereignty, freedom, individual rationality, and monopo-
lism. Some neoliberals approached these issues in a way similar to Hutt,
whose ideals of a market economy under the guidance of state power was
merged with a belief in ideals such as political participation, social rights,
and morality. Although they had abandoned the idea of laissez faire, oth-
ers were more in line with Mises, who stressed ideals of economic effi-
ciency, utility, and growth as the aim of liberal society and saw the state
as a purely political body that should never touch the economy in which
the consumer was to be the sovereign but instead the state should only
provide the protection of private property and competitive markets.

 Along with extracts from reviews of the book, these “opinions” appear on promotional material
118

enclosed in the copy of Hutt, Economists and the Public that I have bought second-hand.
60  N. Olsen

However, it should be added that, in theorizing about how to empower


consumers as sovereigns of liberal society, the self-styled laissez-faire
economist Mises not only portrayed the state as nothing but a necessary
nuisance that could easily be exploited for totalitarian purposes. He also
described it as an indispensable and powerful tool in the attempt to create
and safeguard the liberal market order. In fact, his visions of laissez faire
entailed strong state action and were not entirely inimical to authoritar-
ian politics.
This is, for example, indicated in his book Liberalismus (Liberalism),
published in 1927. Here, Mises remarked that the state “must not only
be able to protect private property; it must also be so constituted that the
smooth and peaceful course of its development is never interrupted by
civil wars, revolutions or insurrections.”119 He also stated, that “if judi-
cious men see their nation (…) on the road to destruction (…) they may
be inclined to think it only fair and just to resort to any means whatever
(…) in order to save everyone from disaster.”120 Moreover, while criticiz-
ing its interventionist and repressive features, Mises praised the achieve-
ments of Italian Fascism in curbing the communist threat to private
property: “It cannot be denied that Fascism and similar movements aim-
ing at the establishment of dictatorship are full of the best intentions and
that their intervention has for the moment, saved European civilization.”121
Mises’ role as a close advisor of Engelbert Dollfuss, who became
Chancellor of Austria in 1932, shows more directly how his vision of
economic liberalism was compatible with strong state action and authori-
tarian politics. In March 1933, in reaction to the political turmoil in the
Austrian parliament, Dollfuss abolished the parliamentary republic and
established an authoritarian regime on the basis of an emergency law
passed in 1917. In the next months, he formed an alliance with Fascist
Italy, banned the Communist Party and the Austrian branch of the Nazi
Party, and founded a Fascist political front named the Vaterländische
Front (Patriotic Front) in support of the Austrian State. Mises, who
became a member of the Vaterländische Front in March 1934, approved

119
 Ludwig von Mises, Liberalismus (Jena: Gustav Fischer Verlag, 1927), 35.
120
 Mises, Liberalismus, 40.
121
 Mises, Liberalismus, 45.
  The Birth of the Neoliberal Sovereign Consumer    61

Dollfuss’ crushing of labor and democratic forces. He moved to Geneva


shortly after, when the Dollfuss regime ended, and the new Chancellor
Kurt Schussnigg created a slightly milder rule. However, he continued to
work for the Austrian Chamber of Commerce and did not flee Austria
permanently until shortly before the Nazi takeover in 1938. His view of
the Dollfuss dictatorship was instrumental and benign. In the words of
his biographer: “Dollfuss’s authoritarian policies were in his view only a
quick fix to safeguard Austria’s independence  – unsuitable in the long
run, especially if the general political mentality did not change.”122
After 1945, Mises kept stressing the need to use state violence to crush
social forces, resisting the market order. One example is found in his
magnum opus Human Action from 1949 that offered a case for laissez-­
faire capitalism based on rational investigations of human decision-­
making that proceeded from the notion of consumer sovereignty.
Stressing that the liberal state does not interfere with the market or with
citizens’ activities in the market, Mises added: “[The State] employs its
power to beat people into submission solely for the prevention of actions
destructive to the preservation and the smooth operation of the market
economy (…). Thus the state creates and preserves the environment in
which the market economy can safely operate.”123
Two insights can be drawn from this excursus into Mises’ thoughts on
the role of the state in liberal society. The first is that the democracy of
consumers, which he identified with the market economy, represented an
analogy pertaining only to economic processes and not to a properly
political order. Evidently, the political measures that Mises approved for
sustaining a “democratic” economic order were often deeply anti-­
democratic. Like other liberals, he saw a great challenge in winning over

122
 Jörg Guido Hülsmann, Mises: The Last Knight of Liberalism (Ludwig von Mises Institute:
Auburn, 2007), 684. For more critical accounts of Mises’ political attitudes and commitments, see
Claus-Dieter Krohn, Intellectuals in Exile: Refugee Scholars and the New School for Social Research
(Amherst, MA: University of Massachusetts Press, 1993), 46–48; Claus-Dieter Krohn,
Wirtschaftstheorien als politische Interessen: Die akademische Nationalökonomien in Deutschland
1918–1933 (Frankfurt am Main: Campus Verlag, 1981), 33–38 and 111–117; Perry Andersson,
Spectrum: From Right to Left in the World of Ideas (Verso: London, 2005), 13. For a sympathetic
analysis (and defense) of Mises’ attitudes toward Fascism, see Ralph Raico, “Mises on Fascism,
Democracy, and Other Questions,” Journal of Libertarian Studies 12, 1 (1996): 1–27.
123
 Mises, Human Action, 258.
62  N. Olsen

the masses in democratic societies for the idea of the free market econ-
omy. In his view, as he wrote in Human Action, people are “never sponta-
neously liberal,” but become liberal only “when forced to.”124 Accordingly,
Mises deemed it legitimate to curb or remove democratic institutions
such as political parties or labor unions by which the populace threatened
to undercut the market order. Likewise, as he had already stated in Die
Gemeinwirtschaft, Mises did not see private property as natural or sacred
but as a human invention that must be protected by laws whose “origin
lies beyond the legal sphere.”125 Following from this (almost Schmittian)
idea of the extra-legal origins of law was clearly the belief that the legal
system should be immunized against those forces in the age of democracy
that were hostile toward it. Altogether, these examples show how Mises’
idea of the sovereignty of consumers applied to markets only, not to
politics.
The second point is that, in light of the above account, it is difficult
not to view Mises as a genuine neoliberal, at least when measured against
the definition used in this book. In fact, all three criteria are fulfilled: the
association with the Mont Pèlerin Society, the ambition to use state power
to establish a liberal order based on free markets and individual freedom,
and the reference to sovereign consumers. As such, though Mises stylized
himself as a laissez-faire economist and postulated a great divide between
his classical liberalism and neoliberalism, he was arguably an exponent of
neoliberalism himself. Or more precisely: he was the creator of a particu-
lar neoliberal ideological tradition. Alongside calling upon the state to
guarantee the market order, this tradition invested liberalism with a new
democratic legitimacy and authority through the figure of the sovereign
consumer and framed the liberal order in opposition to socialism.
This is not to say that Ludwig von Mises was neoliberal in the same
sense as, for example, William H. Hutt. The comparison of their works
rather illustrates that neoliberalism emerged from a comprehensive
semantic field of concepts and notions that could be defined in different
ways and attain several meanings through the specific ways in which they
were linked to each other. In other words, it illustrates that neoliberalism

 Mises, Human Action, 321.


124

 Mises, Die Gemeinwirtschaft, 24.


125
  The Birth of the Neoliberal Sovereign Consumer    63

was, from the outset, a flexible project that could be taken in a plurality
of directions and used to justify a wealth of different political regimes and
experiments.126
Such ideological flexibility also characterized the sovereign consumer,
which was being positioned as the key actor in neoliberalism in the
1930s. As we will see in the following chapters, neoliberal thinkers asso-
ciated many different things with the figure and mobilized it for many
different ideological projects. This mobilization was carried with much
greater self-confidence after World War II. In spite of their keen labor,
the prospects of neoliberalism did not seem very promising in the eyes of
its advocates in the late 1930s. At this time, many neoliberals saw in
National Socialism, Fascism, Communism, New Deal reformism, and
Keynesianism a collectivist tide, which would overshadow ideas of orders
based on free markets and individual freedom for a long time to come.
Of course, they were not entirely wrong. The strong focus, in the many
competing programs, on the interest of the political community as a
group were surely more in tune with the Zeitgeist than were ideas associ-
ated with an ideology advocating that individual interests held priority
over the state and social groups.
The economic theories, political ideologies, and social-political pro-
grams overshadowing neoliberalism in the 1930s and 1940s all drew on
distinct consumer figures. Next to the racist consumer of National

126
 In line with this, the tensions of Hutt’s ideological visions, with its passionate plea for laissez faire
and demand of a thorough revision of laissez faire, was pointed out in the review of Economists and
the Public authored by Chicago-economist Jacob Viner, “W. H. Hutt, Economists and the Public:
A Study of Competition and Opinion,” Journal of Political Economy 46, 4 (1938): 571–575. The
book also received a number of more positive reviews. See, for example, G. W. Daniels, “Economists
and the Public: A Study of Competition and Opinion by W. H. Hutt,” Economica 4, 13 (1937):
93–96. See also the enthusiastic comment “Dictatorship of the Proletariat or Consumers’
Sovereignty?” and review “Economic Harmonies” authored by Arthur Slaberdain and Brinley
Thomas, respectively, in the London School of Economics student paper, Claire Market Review
XXXIII, 2 (1938) 32–35 and 38–39. Slaberdain, who studied at the London School of Economics
in the 1930s, changed his surname to Seldon in 1939 and became famous for his role in setting up
and directing the British Institute of Economic Affairs. Brinley Thomas was a lecturer at the
London School of Economics between 1931 and 1939 and was appointed to the chair of Economics
at University College Cardiff in 1946, where he remained until 1973. Professor of Political
Economy at Aberdeen University, L.  M. Fraser discussed Hutt’s use of the notion of consumer
sovereignty in more detail in a review essay that he authored in the late 1930s. L. M. Fraser, “The
Doctrine of Consumers’ Sovereignty,” Economic Journal 49, 195 (1939): 544–548. We will return
to the reviews of Hutt’s book in Chap. 5.
64  N. Olsen

Socialism, the citizen consumer of New Deal reformism and the produc-
tive consumer of communism, Keynesianism used specific consumer-­
ideals to legitimize a managed economy that endorsed higher government
expenditures and lower taxes to stimulate demand and pull the global
economy out of the Great Depression. More exactly, referring to a
“worker-saver” as way to describe the psychological propensities of indi-
vidual human agents in the economy, John Maynard Keynes identified
the insufficiency of the propensity to consume as the cause of the evils of
unemployment. Moreover, he argued that the “worker-saver” spent more
of any extra income they received on immediate consumption rather
than savings, and that government should accordingly aim to stimulate
popular demand by boosting the overall economic activity. On that
premise, Keynes made a key contribution to the positioning of consum-
ers and consumption at the crux of economic-political thought.127
William H. Hutt soon emerged as a staunch critic of Keynes, arguing
that, in the attempt to aid the economy, government intervention only
further distorted the system.128 However, from the 1930s to the 1950s, it
was neoliberalism, and not Keynesianism, that was on the defensive. In
this situation, neoliberal ideologists sought not only to demolish and
replace prevalent ideas of consumption and consumers in various national
and international contexts. They also sought to influence and transform
these ideas by offering theoretical advice and policy suggestions to gov-
ernments and regimes by molding the sovereign consumer in ways that
could serve a variety of purposes. In these efforts, neoliberal ideologists
elaborated on the figure of the free consumer as a key actor in the econ-
omy that had been thematized on a variety of economic-political lan-
guages from Adam Smith onwards. Moreover, they sought to counter old
and new criticisms of market orders based on free consumer choice by
reshuffling the flexible semantic field of neoliberalism that had been cre-
ated by the interwar period and thereby take the ideological project in
new directions. How these efforts played out in different countries and
societal contexts is the subject of the following chapters.
127
 The above builds on Payne, The Consumer, 21–43 and Peter Guerney, The Making of Modern
Consumer Culture in Modern Britain (London: Bloomsbury Publishing PLC, 2017), 155.
128
 As illustrated by Quinn Slobodian, Hutt also emerged as an apartheid apologist by proposing to
weigh franchise according to income so as to avoid the transfer of power to a black parliamentary
majority. See Slobodian, Globalists, 172–178.
3
Liberating the Consumer: Ludwig
Erhard and the Making of the Federal
Republic

Soziale Marktwirtschaft (social market economy) is known as the model


behind the quick and successful reconstruction of the West German
economy that began with the currency reform in 1948 and culminated in
the so-called Wirtschaftswunder (economic miracle) taking place in the
1950s. Researchers have shown how a group of German neoliberals was
influential in shaping and implementing the West German social market
economy under the auspices of Ludwig Erhard, who served as Minister of
Economics in a government led by Chancellor Konrad Adenauer from
Christian Democratic Union (CDU) from 1949 until 1963.1 Indeed,
Erhard was himself a member of the international neoliberal network

1
 The literature on German neoliberalism is vast. Ralf Ptak, Vom Ordoliberalismus zur Sozialen
Marktwirtschaft: Stationen des Neoliberalismus in Deutschland (Wiesbaden: Springer Fachmedien,
2004) remains authoritative as does Dieter Haselbach, Autoritärer Liberalismus und soziale
Marktwirtschaft. Gesellschaft und Politik im Ordoliberalismus (Baden-Baden: Nomos Verlag, 1991).
The most recent contribution to the field is Werner Bonefeld, The Strong State and the Free Economy
(London: Rowman & Littlefield, 2017). German neoliberalism is often labeled ordoliberalism, due
to its association with the journal Ordo that was established by leading German neoliberals in 1948.
However, in the following, neoliberalism will be used to characterize the ideological labor carried
out by the thinkers under consideration.

© The Author(s) 2019 65


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_3
66  N. Olsen

associated with the Mont Pèlerin Society, where he gave a number of


speeches and papers in the 1950s and 1960s.2
This chapter adds to existing research on German neoliberalism by
showing how the sovereign consumer served as a pivot of social market
economy and as a legitimizing figure in the making of the Federal
Republic. More precisely, it shows how promoters of social market econ-
omy portrayed the sovereign consumer: as a person exercising free choice
in the market and as the symbol of the democratic citizen responsible for
rebuilding the German economy and society. In fact, as we will see, pol-
icy makers, headed by Ludwig Erhard, justified the making of the Federal
Republic by depicting it as a new societal order that liberated the German
people as free consumers.3
Exploring the first neoliberal attempt to organize a socio-political
order around the figure of the sovereign consumer, this chapter proceeds
in three sections. These sections illuminate (1) the historical roots of the
sovereign consumer in social market economy, (2) the key features of the
figure, and (3) the contestations of and limits to implement a social-­
political order around the sovereign consumer in the early Federal
Republic.
Against this background, addressing the issue of break and continuity in
German history, the chapter shows how promoters of social market econ-
omy found inspiration in the German past to chart their nation’s future,

2
 For Erhard’s activities in the Mont Pèlerin Society, see “Mont Pèlerin Society (1947–…): Inventory
of the General Meeting Files (1947–1998),” Liberaal Archief, accessed 1 January 2018, http://
www.liberaalarchief.be/MPS2005.pdf.
3
 While this is arguably the first piece entirely devoted to exploring the role of the consumer in the
social market economy, several studies provide excellent perspectives on the issue. See, for example,
Jan Logemann, Trams or Tailfins? Public and Private Prosperity in Postwar West Germany and the
United States (Chicago: The University of Chicago Press, 2012); Claudius Torp, Wachstum,
Sicherheit, Moral. Politische Legitimationen des Konsums im 20. Jahrhundert (Göttingen: Wallstein
Verlag, 2012); Alfred C. Mierzejewski, Ludwig Erhard: A Biography (Chapel Hill: The University of
North Carolina Press, 2004); Erica Carter, How German Is She? Postwar West German Reconstruction
and the Consuming Woman (Ann Arbor: The University of Michigan Press, 1997); Harm Schröter,
“Konsumpolitik und ‘Soziale Marktwirtschaft’: Die Koexistenz liberalisierter und regulierter
Verbrauchsgütermärke in der Bundesrepublik der 1950er Jahre,” in Konsumpolitik: die Regulierung
des Privaten Verbrauchs im 20. Jahrhundert, ed., Hartmut Berghoff (Göttingen: Vandenhoeck und
Ruprecht, 1999), 113–134; Horst Friedrich Wünsche, Ludwig Erhards Gesellschafts- und
Wirtschaftskonzeption: Soziale Marktwirtschaft als politische Ökonomie (Stuttgart: Bonn Aktuel,
1986).
  Liberating the Consumer: Ludwig Erhard and the Making…    67

even if they embedded their agenda in a language of historical discontinu-


ity. More exactly, it shows how they updated and merged ideas that mar-
keting scholars and neoliberal economists had been advancing since the
interwar years in order to meet challenges specific to the post-­war period.
Moreover, the chapter argues that the German neoliberals under dis-
cussion developed the figure of the sovereign consumer in social market
economy in three phases. In the first phase, running from the mid-1930s
to around 1940, the sovereign consumer was not a shared reference point
among German neoliberals. Some of them did refer to the figure of the
sovereign consumer and to the notion of consumer democracy in this
phase, but they did so mainly as a symbol of the allocative efficiency of
the market order and as an analogy pertaining only to the market and not
to a proper political order. In fact, they aimed to shield the market order
from democratic politics. In the second phase, from the early to the late
1940s, German neoliberals began to refer more systematically to the sov-
ereign consumer not only as a symbol of allocative efficiency but also as a
figure imbued with ideals of rights, freedom, and democracy, which the
market order was to protect. However, they did not elaborate on the
political implications of these ideals. In the third phase, running from the
late 1940s onwards, Ludwig Erhard radicalized the tendencies from the
second period, as he portrayed the sovereign consumer as the undisputed
key actor in the market order sustaining the new and democratic German
Federal Republic. While fully committed to the political aspects of liberal
democracy, Erhard especially stressed what he saw as the close connection
between democracy, competition, and consumer choice in the free mar-
ket order. As such, he continued the neoliberal re-enchantment of the
market that Ludwig von Mises had begun in the 1920s.
Furthermore, exploring the relations between ideological intentions
and political practice, the chapter highlights the critiques of and limita-
tions to the efforts made by Ludwig Erhard and his associates to organize
a socio-political order around the sovereign consumer in post-war
Germany. More precisely, it shows the ways in which scholars and intel-
lectuals criticized the idea of the sovereign consumer and of modern con-
sumer society, and how economic and political interest groups restrained
the contemporary attempts to liberalize the German economy with refer-
ence to the figure.
68  N. Olsen

More generally, placing the West German case within the larger story
of how the sovereign consumer became the dominant paradigm of poli-
tics in the Western world, the chapter points to certain ideological limits
characterizing the efforts made by Ludwig Erhard and his associates to
create a consumer-driven societal order. Among other things, their calls
for deregulation in the name of the sovereign consumer were less ample
than those made by American neoliberals in the 1960s. Likewise, in con-
trast to Scandinavian neoliberals in the 1970s, they sought to unleash
only the dynamics of the sovereign consumer on the market—and not
within the state. Altogether, the story told below concerns an early and
different version of the political paradigm that neoliberals developed in
other contexts and countries from the 1960s onwards.

 he Free Market Consumer in Interwar


T
German Market Research
In the immediate post-war period, the vast majority of Germans were
deeply affected and disoriented by the events of the recent past, and,
while living in material hardship, they felt confused, uncertain, and pes-
simistic about what the future might bring.4 The challenge facing German
politicians in the post-war period was how to design an attractive and
legitimate socio-political order, including symbols that could provide the
Germans with a new identity. It was in response to this situation that
Ludwig Erhard put forward the concept of social market economy and a
particular ideal of the consumer.
In the late 1940s and early 1950s, it was critical to Ludwig Erhard and
his advisors to present the consumer-driven social market economy as a
complete break with the German past. Among other efforts, Erhard
expressed the idea of a historical break in a speech that he gave to his fel-
low party members in the CDU in 1951, two years after the transition
from a wartime economy to a new civilian economic system. Here,
Erhard optimistically declared the making of a new Germany through

 See, for example, Konrad Jarausch, After Hitler: Recivilizing Germans, 1945–1995 (New York:
4

Oxford University Press, 2006), 111–120.


  Liberating the Consumer: Ludwig Erhard and the Making…    69

social market economy a success and presented the consumer as the inno-
vative feature of this economic order:

We have liberated the German people through our economic politics; we


have made free citizens out of subjects, and consumers with free choice of
consumption out of average consumers, and we have released the German
people from the suppression of an unrestrained planning bureaucracy.5

However, although Erhard portrayed the social market economy as a


clean break with the past, key features of his post-war political program
had strong roots in scientific and political agendas developed in the pre-
ceding decades. In particular, several of the ideas and techniques involved
in the attempt to liberate the German people as consumers drew on dis-
coveries made in marketing research and in the discipline of economics
from the 1920s onwards. The work conducted in these spheres was char-
acterized by similar aims and underwent parallel developments during
the National Socialist regime. Most importantly, scholars in these spheres
shared the desire to place the free consumer at the center of economic
thought and practice, an ambition which was in theory at odds with the
aims of National Socialism but ended up serving the regime’s efforts to
mobilize the German people as consumers in support of its political
agenda.
Ludwig Erhard was trained as an economist in the early 1920s and
subsequently embarked on a career in marketing research. He was, to a
great extent, shaped by, and helped to shape, the focus on consumers and
consumption that characterized economics and marketing research in the

5
 Ludwig Erhard, “Lodern wie die Fackeln [Rede beim 2. Bundesparteitag der CDU, Karlsruhe, 20.
Oktober 1951],” Ludwig Erhard, Gedanken aus fünf Jahrzehnten. Reden und Schriften. Herausgegeben
von Karl Hohmann (Düsseldorf: ECON Verlag, 1988), 296. For Erhard, average consumers
(Normalverbrauchern) denoted the many Germans whose personal consumption had been con-
trolled and limited by the National Socialist regime. The notion “Otto Normalverbraucher”
became famous in post-war Germany due to the German movie Berliner Ballade (1948) by the
same name. At this point, market researchers began to speak of average consumers in their classifi-
cations of different consumer types. According to Götz Aly, the concept of the sovereign consumer
can be dated back to the time around the German invasion of Poland in September 1939, when the
German government issued a system of food ration cards that referred to the average consumer as
one of its recipient categories. Götz Aly, Hitlers Volksstaat  – Raub, Rassenkrieg und nationaler
Sozialismus (Frankfurt am Main: Fischer Verlag, 2005), 196–197.
70  N. Olsen

interwar period. Among other things, having thematized the role of the
consumer in the economy since the 1920s, Erhard began to offer a set of
more systematic reflections on the topic in the 1930s. In 1937, drawing
on these reflections, Erhard praised what he labeled “the rediscovery of
the consumer.”6 His allusion to the “rediscovery of the consumer” referred
to an article by economist and author Wilhelm Vershofen, which carried
that very title and had appeared two years earlier.7 Vershofen was the
intellectual force behind German consumer research from the 1920s to
the 1960s. Among other things, he was instrumental in founding the
Gesellschaft für Konsumforschung (Society for Consumer Research) in 1934.
The declared aim of the Society for Consumer Research was to dis-
cover “the voice of the consumer.”8 By conducting product interviews
with consumers, which a related institute would turn into reports and
make available to companies, the Society for Consumer Research served
private economic interests. It was founded in response to the key role
assigned to advertisement in the quest opened up by mass consumption
to understand how and why consumers bought their goods and how they
could be influenced in their choices. In this context, similar to and par-
tially inspired by developments in the United States, German marketing
activities expanded. Additionally, universities and business schools began
to conduct research on consumer behavior.
Spurred by the ambitions of Wilhelm Vershofen, the Society for
Consumer Research also strove to understand in intellectual terms what
drove the human being as a consumer: how its desires and needs were
shaped. Alongside nurturing a deep interest in and respect for the nature
of individual human beings, Vershofen argued that the market embodied
social relations and that it would be possible to illuminate larger social
and economic trends of society by studying what people sold and bought.

6
 Ludwig Erhard, “Verbrauchsforschung, ihr ökonomischer Ort, ihre wissenschaftliche Begründung
und ihre wirtschaftspolitische Zielsetzung,” Absatzforschung und Absatzpraxis in Deutschland 2
(1937), 126.
7
 Wilhelm Vershofen, “Verbraucherlenkung und die Wiederentdeckung des Verbrauchers,” Die
deutsche Fertigware 6, A (1935): 105–110.
8
 The following is based on S.  Jonathan Wiesen, Creating the Nazi Marketplace: Commerce and
Consumption in the Third Reich (Cambridge: Cambridge University Press, 2010), 153–190.
  Liberating the Consumer: Ludwig Erhard and the Making…    71

Therefore, he regarded the consumer as the most important socio-­


economic figure of modern society.9
Erhard worked closely with Vershofen. In 1925, three years after
defending his dissertation in economics at the University of Frankfurt, he
became a research assistant at the Institut für Wirtschaftsbeobachtung der
deutschen Fertigwaren (Institute for Economic Observation of the German
Finished Goods Industry) in Nuremberg; a research institute, founded by
Vershofen. There, Erhard came to preside over a series of courses on con-
sumer economics and consumer demands. In 1929, he assisted Vershofen
in founding the journal The Finished-Goods Market (Der Markt der
Fertigware), and he joined the board of directors of the Institute in 1931.
He later helped found and joined the organizational leadership at the
Society of Consumer Research.10
A series of articles that Erhard authored for various market-oriented
journals in the 1930s illustrates how he came to share Vershofen’s per-
spective on the consumer as the key actor in the economy.11 For example,
in the above-cited article from 1937, in which Erhard spoke of “the redis-
covery of the consumer,” he lamented: “[the] liberal economy has never
regarded consumption, and even less the consumer, as a relevant factor.”
In line with this, he advocated a model of consumer research that avoided
the fictions that allegedly dominated the economic discipline. His aim
was to study the actions of real people in the marketplace instead of rely-
ing on theoretical notions of consumer behavior: “This teaching places
the consumer in the center of all economic activity and turns once again
the human being into the measure of all things, without working with
unrealistic abstractions.”12 Obviously, Erhard’s critique addressed the
ways in which marginal economists theorized and analyzed consumer
behavior.
While Erhard shared Vershofen’s ambition of focusing on the eco-
nomic role of the consumer to understand what motivates people’s actions
on the market, he diverged from the latter’s views regarding the virtues of

9
 Wiesen, Creating the Nazi Marketplace, 158.
10
 Wiesen, Creating the Nazi Marketplace, 161–163.
11
 References to many of these articles are found in Mierzejewski, Ludwig Erhard.
12
 Erhard, “Verbrauchsforschung,” 124 and 130.
72  N. Olsen

the market.13 Whereas Vershofen equated markets with chaos, Erhard’s


answer to what he labeled the “problem of market order” was a system
based on consumption.14 Already in his Habilitation in the early 1930s,
Erhard stated that the contemporary problem of unemployment resulted
from an imbalance between production output and consumer demand,
which stemmed from concentration of capital and increased technologi-
cal efficiency in companies, causing overproduction. Erhard’s solution
was to break up cartels and monopolies that had created overcapitaliza-
tion. The government, on the other hand, needed to support industries
that would produce consumer goods, he argued. In line with this, in vari-
ous articles written in the late 1930s, Erhard elaborated on his argument
that the overall aim of the German economy should be to increase the
production of consumer goods.

 he Free Market Consumer in German


T
Neoliberalism in the 1930s
In the late 1930s, Erhard found inspiration for his economic thought in
the work of a group of German economists who aimed to rescue liberal-
ism from its current crisis and became part of the international neoliberal
network.15 These economists included Wilhelm Röpke, Alexander
Rüstow, Walter Eucken, Franz Böhm, Leonard Miksch, and Alfred
Müller-Armack. Mobilizing in wake of the world economic crisis unfold-
ing between 1929 and 1932, they sought “to grant the visibly strong state
a much more prominent role in establishing and securing the capitalist
market economy.”16

13
 Mierzejewski, Ludwig Erhard, 1–26.
14
 Erhard, “Verbrauchsforschung,” 124.
15
 Educated in law and political science, Böhm was an economic thinker rather than an
economist.
16
 Ralf Ptak, “Neoliberalism in Germany: Revisiting the Ordoliberal Foundations of the Social
Market Economy,” in The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective,
eds., Philip Mirowski and Dieter Plehwe (Cambridge, MA: Harvard University Press, 2009), 101.
The following relies on Bonefeld, The Strong State; Ptak, Vom Ordoliberalismus; Haselbach,
Autoritärer Liberalismus.
  Liberating the Consumer: Ludwig Erhard and the Making…    73

German neoliberals shared the idea that special interest groups such as
political parties, business companies, and labor unions had, to a significant
extent, caused the crisis, since in search of benefits and privileged treatment,
they had managed to influence government policy and undermine the prin-
ciples of competition. Hence, they were convinced that capitalism could
not be left to organize itself but needs a strong state that can secure competi-
tion through the price mechanism without yielding to special interest
groups. For this purpose, they coined terms such as “liberal intervention-
ism” (Rüstow) and “policy of order” (Böhm). Particularly central for the
German neoliberals was a vigorous anti-trust agenda, aimed at using state
power to regulate the conduct and organization of business corporations as
a way to promote fair and efficient competition. This included the ambition
to abolish economic concentrations of power, such as monopolies and car-
tels, which threatened to undercut the price mechanism.
The German neoliberals also intended to address the social question as
one of their main ambitions. Recognizing that capitalism had caused
miserable social conditions and spurred class conflict, they sought to
build a socially embedded market order. However, they did not address
the social question through elaborate or unified visions of social policies,
even if at times they referred to measures such as housing programs,
spending for the poor, and minimum income. In their eyes, redistribu-
tion through collective forms of social provision would result in eco-
nomic inefficiency by substituting the price mechanism with economic
decisions made by a state-wide apparatus, which would eventually suc-
cumb to pressure groups undermining competition and creating a social
welfare structure that encouraged people to stay on benefits rather than
work. Therefore, they mainly addressed social policies within the project
of securing a market order based on competition and entrepreneurship.
According to these neoliberals, a non-partisan and transparent market
order that allowed and encouraged individuals to compete on equal
terms, and thus move up the social ladder, offered the most optimal and
fair solution to the redistribution of income and wealth.17
17
 The neoliberal answer to the social question also entailed a strong moral and religious element.
For a recent study of how German neoliberalism was also an ethical theory with roots in protestant
social thought, and for further references to this theme, see Josef Hein, “The Religious Foundations
of the European Crisis,” Journal of Common Market Studies (online version): 1–20.
74  N. Olsen

Moreover, German neoliberals took a strongly anti-democratic and


anti-parliamentary approach to the claims to societal and political par-
ticipation raised by what they regarded as the largely irrational and dan-
gerous mass of people in the early twentieth century. In fact, they viewed
the contemporary economic crisis as an outcome of the democratic
experiments of the Weimar Republic. In response, to free the competitive
order from potentially destructive interests, German neoliberals were
ready to restrain public opinion formation and reduce societal participa-
tion in decision-making to affirming decisions taken on behalf of the
public. They also proposed various commanding and authoritarian mea-
sures when it came to actually integrating the population into the com-
petitive order. It is no co-incidence that Dieter Haselbach titled his
much-cited book on the topic Autoritärer Liberalismus (Authoritarian
Liberalism).
The free consumer did not appear as a central and integrating figure in
early German neoliberalism. To be sure, inspired by liberal political econ-
omists and the Austrian contributions to the marginal revolution, there
was a strong focus on consumption in thinking about the economy
among German neoliberals. Moreover, they believed that the protection
of economic freedom to buy and sell on the market would lead to tech-
nological progress and allocative efficiency. They often contrasted their
vision of a market order, based on private property, individual freedom,
and competition, with a coerced, centralized, and planned economy run
by a dictator. The German neoliberals were, in this respect, greatly
inspired by Ludwig von Mises’ critiques of socialism that appeared in the
early 1920s.18 But whereas they often referred to the entrepreneur as a key
economic subject of the market economy, in the 1930s, only Wilhelm
Röpke and Franz Böhm followed Mises in describing and legitimizing
the workings of competitive market orders through referring to the figure
of the free consumer.

18
 Stefan Kolev, “Ordoliberalism and the Austrian School,” in The Oxford Handbook of Austrian
Economics, eds., Christopher J. Coyne and Peter J. Boettke (New York: Oxford University Press,
2015), 419–444 and Stefan Kolev, “Ludwig von Mises and the ‘Ordo-interventionists’ – more than
just aggression and contempt?,” Working Paper. Center for the History of Political Economy 35
(2016): 1–41.
  Liberating the Consumer: Ludwig Erhard and the Making…    75

Wilhelm Röpke offered the most systematic treatment of consumer


sovereignty in early German neoliberalism. One of the few non-socialist
intellectuals to openly criticize National Socialism, Röpke was forced to
resign from his professoriate in Marburg and decided to leave Germany a
few weeks after Hitler’s rise to power. After spending a few years in
Istanbul, he was appointed to a professorship at the Graduate School of
International Studies in Geneva in 1937; a contemporary stronghold of
the international network of neoliberals of which Röpke became a prom-
inent member.19
From the time Röpke left Germany in 1933 until he arrived in Geneva
in 1937, he developed a distinctly neoliberal vision of a consumer-driven
society. It was neoliberal in the sense that it assigned the state a key role
in creating and preserving a capitalist market economy based on free con-
sumer choice. Röpke had already articulated the idea that free consumer
choice is a trademark of capitalism in his work on business cycle theory
in the early 1920s.20 Ludwig von Mises, among others, inspired this
work.21 Röpke’s early writings also entertained the idea that state action
can account for the flaws of the free market.22 However, it was only in the
early 1930s that Röpke directly connected and elaborated on the two
ideas in his attempt to outline a neoliberal agenda. This agenda was
increasingly influenced by and came in many aspects to converge with
those of Alexander Rüstow, Walter Eucken, and Franz Böhm.
Central to Röpke’s neoliberal agenda was a normative link between the
market, democracy, and free consumers, inspired by the work of Ludwig
von Mises and Friedrich Hayek. This link served to clarify what he
depicted as the virtues of the liberal market order vis-à-vis societal orders
19
 Jean Solchany, “Wilhelm Röpke as a Key Actor of Transnational Liberalism,” in Re-inventing
Western Civilisation: Transnational Reconstructions of Liberalism in Europe in the Twentieth Century,
eds., Niklas Olsen and Hagen Schulz-Forberg (Newcastle upon Tyne: Cambridge Scholars Press,
2014), 95–116.
20
 See, for example, Wilhelm Röpke, Die Konjunktur: Ein systematischer Versuch als Beitrag zur
Morphologie der Verkehrswirtschaft (Jena: Gustav Fischer, 1922), 59 and 51, where he listed free
consumer choice among the features of the capitalist economy that he believed contributed posi-
tively to business cycles.
21
 Samuel Gregg, Wilhelm Röpke’s Political Economy (Cheltenham: Edward Elgar, 2010), 90–116;
Kolev, “Ordoliberalism and the Austrian School”; Kolev, “Ludwig von Mises and the ‘Ordo-­
interventionists’ – more than just aggression and contempt?”
22
 Solchany, “Wilhelm Röpke as a Key Actor,” 98–99.
76  N. Olsen

based on central planning. This was, for example, the case in his 1937
book Die Lehre von der Wirtschaft (What We Can Learn from the
Economy).23 Here, Röpke stated that in a free price system “it is the con-
sumers who decide what and how much shall be produced.”24 Moreover,
he likened capitalism “to a continuing plebiscite in which each piece of
currency represents a ballot and in which the consumers, via their
demands, are constantly voting to decide what types and amounts of
goods shall be produced (…)” and described the communist alternative
as one in which the freedom to consume is undercut by dictatorship.25
Finally, Röpke wrote that competition is identical to “the sovereignty of the
consumer.”26
Röpke made the same point in a 1937 article on “Fascist Economics,”
which he scorned as “economic dadaism” with a “lack of rational cohe-
sion” and contrasted to what he labeled the liberal “democracy of
consumers.”27 Moreover, he explicated in greater detail the link he saw
between markets, consumer choice, and democracy in the book
International Economic Integration that appeared in 1942 and which drew
on a series of talks and writings that Röpke had given and published in
Geneva beginning in the mid-1930s:

The economic process based on the competitive market is, so to speak, a


“plebiscite de tous les jour” in which every shilling spent by the consumer
represents a ballot-paper (…) [and has] the great advantage of securing
complete proportional representation. The minority is not eliminated,
each voting paper retaining its value. A socialist planned economy means
nothing other than that the democracy of the consumers is done away with
and replaced by command from above.28
23
 Wilhelm Röpke, Die Lehre von der Wirtschaft (Wien: J. Springer, 1937). The book was reprinted
nine times in the following fifteen years.
24
 Röpke, Die Lehre von der Wirtschaft, 32.
25
 Röpke, Die Lehre von der Wirtschaft, 167 and 184–186. Although without referring to the con-
sumer, Röpke already in 1923 spoke of the market as an “economic democracy” in which “every
penny represents a ballot paper.” Wilhelm Röpke, “Wirtschaftlicher Liberalismus und Staatsgedanke
[1923],” in Gegen die Brandung, Zeugnisses eines Gelehrtenlebens unserer Zeit, ed., Albert Hunold
(Erlenbach-Zürich: Eugen Rentsch, 1959), 43.
26
 Röpke, Die Lehre von der Wirtschaft, 184.
27
 Wilhelm Röpke, “Fascist Economics,” Economica 2, 5 (1935), 93.
28
 Wilhelm Röpke, International Economic Integration (London: W. Hodge and Company, 1942), 253.
  Liberating the Consumer: Ludwig Erhard and the Making…    77

The citations show how deeply Mises and Hayek inspired the consumer
language that Röpke employed from the mid-1930s onwards. Like them,
Röpke portrayed the free consumer as the economic subject driving and
profiting from the liberal market order; obstructions of the price mecha-
nism were obstructions to the economic efficiency and to the democracy
exercised by the daily votes cast by sovereign consumers.
However, in contrast to Mises and (the early) Hayek, Röpke did not
stylize himself as a laissez-faire economist but assigned, in very explicit
terms, the state a critical role in assuring a capitalist market order. Not
only did he talk of the competitive system “as a production plan [that]
originates with an agent, namely the consumer, whose right cannot be
lightly dismissed (…)”, thereby indicating that it would be a political
decision to base the plan of production on the demands of consumers.29
He also stated that disturbances to the capitalist order were not only
cyclical but also rooted in inadequacies in the order itself. These inade-
quacies, Röpke added, had to be addressed through laws and institutions
that could restore and stabilize the competitive system.30
Die Lehre von der Wirtschaft was lacking in specific policy proposals.
However, inspired by Walter Eucken, Röpke began to prioritize the fight
against monopoly and the idea of the state as an institution that should
protect market institutions from special interest groups in the early
1940s.31 This ambition overlapped with the visions of other contempo-
rary neoliberals, such as William H. Hutt and Henry C. Simons (whom
we will meet in the next chapter). Both Hutt and Simons problematized
the monopolism and interventionism derived from the exploitation of
state power from sectional interest not only because these features under-
mined the economic efficiency of consumer sovereignty but also because
they exploited consumers. In other words, they described consumers as
victims of forces undermining the price mechanism.
However, it was only in the 1940s that Röpke began to legitimize crack-
ing down on monopolism and interventionism with specific reference to

29
 Röpke, Die Lehre von der Wirtschaft, 185.
30
 See the excellent comments on these issues in Keith Tribe, Strategies of Economic Order: German
Economic Discourses, 1750–1950 (Cambridge: Cambridge University Press, 1995), 213–214.
31
 Solchany, “Wilhelm Röpke as a Key Actor,” 111.
78  N. Olsen

consumer interests. This idea was, in fact, not articulated in his work dur-
ing the 1930s.32 Moreover, Röpke generally approached the demands for
societal equality and justice raised in the interwar period very differently
from Hutt and Simons. Röpke did acknowledge that votes in the market-
place are not evenly distributed among the population, and he did not
exclude the possibility of “correcting these results by taxing the rich and
spending for the poor” or through measures such as housing programs.33
However, he did not propose a government program aiming to minimize
the inequalities of wealth through, for example, the restriction of private
inheritance, steeply progressive taxation, and redistribution of income.
Assuming that poverty primarily derived from failed economic policies, he
instead argued that setting up an effective competitive order, which
encouraged entrepreneurship and free consumption, constituted the most
appropriate measure to address inequalities in the distribution of wealth
and dissolve class tensions in society.34
In fact, rather than a properly political order, as was the case in the
work of Ludwig von Mises, Röpke’s “democracy of consumers” appeared
more as an analogy pertaining only to economic processes. Indeed, Röpke
was often quite insistent on the rigorous separation of economic and
political spheres, and the political measures that he suggested for sustain-
ing a “democratic” or consumer-driven economic order were often deeply
anti-democratic. This was not only the case in his writings in the interwar
period; it continued in his interventions during the post-war period. For

32
 Tellingly, the 1937 edition of his Die Lehre von der Wirtschaft contained a short section on
monopoly, which only briefly refers to the role of consumers in the economy toward the end. Here,
stating that prices were nothing but the result of consumer decisions over the allocation of produc-
tive resources, Röpke concluded: “It stands to reason that the less prices are manipulated through
monopoly power or state intervention prices the better they fulfill this function.” Röpke, Die Lehre
der Wirtschaft, 136. In contrast, in later editions of the book, he added a long passage to the section
on monopoly where he linked consumer interests, monopoly, and interventionism in a much more
direct and systematic manner. Not only did Röpke define “monopoly as that market form which
frees the producer (to the extent he controls supply) from the influence of the consumer over the
use of the productive forces.” He described monopoly as the “possibility of exploitation of consum-
ers and the disruption of the just relationship between performance and reward (business princi-
ple), so that the monopoly price lacks the note of the ‘just price’ peculiar to a competitive price.”
Cited from the English translation of the ninth German edition from 1961. Wilhelm Röpke,
Economics of the Free Society (Chicago: H. Regnery Co., 1963), 163.
33
 See Röpke, Die Lehre von der Wirtschaft, 170 and Röpke, International Economic Integration, 253.
34
 See, for example, Röpke, Die Lehre von der Wirtschaft, 153–177.
  Liberating the Consumer: Ludwig Erhard and the Making…    79

example, in his 1957 book Jenseits Angebote und Nachfrage (Beyond Supply
and Demand), Röpke insisted that elaborate measures must be taken to
ensure that central banks are immunized against democratic pressure in
“the age of mass democracy” and compared democratic influence on cen-
tral banks to the storming of the Bastille.35
Franz Böhm also embedded his references to free consumer choice in
an agenda that focused more on setting up a framework for competition
than on meeting demands for justice, equality, and participation raised
by the masses in modern society through social provision and the mecha-
nism of representative democracy. Likewise, anti-democratic features also
characterized his framework for competition.
Having published his first piece on the problems of monopoly in the
late 1920s, Böhm turned to write a Habilitation on the work of Adam
Smith, which led to his famous book Wettbewerb und Monopolkampf
(Competition and the Struggle against Monopolism) that appeared in 1933.36
In 1937, Böhm published Die Ordnung der Wirtschaft als geschichtliche
Aufgabe und rechtsschöpferische Leistung (The Ordering of the Economy as a
Historical Challenge and as a Legal-Creating Achievement), which boosted
his fame as a theoretician of what he called an “economic constitution,”
referring to a legal-institutional framework that was to secure a well-func-
tioning, competitive market order.37 Both books included substantial dis-
cussions of, and suggestions for, the National Socialist market order.38
In both Wettbewerb und Monopolkampf and in Die Ordnung der
Wirtschaft, Böhm portrayed the freedom to consume as pivotal in com-
petitive markets and the ability of producers to respond to consumer
demand as the key to their success.39 In Die Ordnung der Wirtschaft, he

35
 Wilhelm Röpke, Jenseits von Angebot und Nachfrage (Erlenbach-Zürich-Stuttgart: Eugen Rentsch,
1958), 261. For Röpke’s ambivalent view of democracy, see also Bonefeld, The Strong State, 47–69;
Ptak, Vom Ordoliberalismus, 38–44; Haselbach, Autoritärer Liberalismus, 162–183.
36
 Franz Böhm, Wettbewerb und Monopolkampf (Berlin: Heymann, 1933).
37
 Franz Böhm, Die Ordnung der Wirtschaft als geschichtliche Aufgabe und rechtsschöpferische Leistung
(Stuttgart-Berlin: W. Kohlhammer, 1937).
38
 After he opposed the regimes’ racial policies, Böhm was eventually deprived of his teaching
privileges.
39
 Böhm, Die Ordnung der Wirtschaft, 109 and Böhm, Wettbewerb und Monopolkampf, 101–102
and 237, where he speaks of “customer” instead of “consumer” and quotes the famous passage from
Smith’s The Wealth of Nations about consumption as the sole end of production.
80  N. Olsen

further explained: “The freedom to consume thus entails an authority –


i.e. an autonomous right to determination: The consumption decides
over the function and structure of the economic system of production
and distribution.”40
However, in contrast to Röpke, Böhm did not outline a vision of a
societal order run by sovereign consumers by relating the principle of
consumer sovereignty to notions such as consumer democracy. Nor did
he portray consumers as victims of forces undermining the price mecha-
nism. Rather than defending consumer interests in the marketplace, and
in modern society more generally, Böhm aimed to uphold consumer sov-
ereignty for reasons of economic effectiveness and to adapt individual
consumption to the economic order, which the strong state was to guar-
antee, thereby creating a particular kind of socio-political participation
involving the German population.
It would be wrong, Böhm stated, for the political regime to allow too
much freedom of consumption. The problem with free consumption, he
specified, was that individual wants were often at odds with the con-
sumption pattern desired by the “Volksgemeinschaft.”41 For example,
according to Böhm, it was in the interest of the Volksgemeinschaft that
people saved most of their money instead of using it on consumption and
that money spent on consumption contributed to the “enhancement of
life and strength of the entire community.”42 Doubting that people would
voluntarily act to further these higher interests, he argued that the “politi-
cal leadership” must “exert influence on the ways in which income is
spent.”43 This influence could take many forms, from “the compulsion to
consume [particular goods and products] or save” to “the direct psycho-
logical education in respect to consumption.” “This education,” Böhm
added, “is identical with the political education to the Volksgemeinschaft.
Its aim is a refinement of wants through the active participation of those
who are led.”44
40
 Böhm, Die Ordnung der Wirtschaft, 109.
41
 Böhm, Die Ordnung der Wirtschaft, 111. Volksgemeinschaft was a term that Böhm often referred
to.
42
 Böhm, Die Ordnung der Wirtschaft, 111.
43
 Böhm, Die Ordnung der Wirtschaft, 112.
44
 Böhm, Die Ordnung der Wirtschaft. 113.
  Liberating the Consumer: Ludwig Erhard and the Making…    81

Böhm’s aim in the quoted passages was clearly to mold a particular


type of consumer and enforce a pattern of consumption that served the
higher economic-political visions of the political regime. Indeed, the pas-
sages mentioned above illustrate how the idea of free consumer choice,
which later became a neoliberal postulate for democracy in the Federal
Republic, was here conceptualized in an authoritarian variant in support
of National Socialism.45
Moreover, in designing the economic constitution of the regime,
Böhm had little to say about how to deal with the demands for improved
social conditions, justice, and equality raised by the broad masses in
modern society. While he warned that huge inequalities of income might
lead to “class alienation and social unrest” and threaten the market order,
his most substantial solution to the problem was to allow all individuals
to compete in a fair and efficient market as a means to improve their
social conditions.46
Similar to Röpke, Böhm saw social policies and redistributive mea-
sures as harmful to the market order. While both saw a need to incorpo-
rate the masses into the market order in order to ensure societal stability,
they detected a serious challenge to this order in the claims to democratic
participation and rights raised by the broad population. In fact, like
nineteenth-­century liberals such as John Stuart Mill, they anticipated a
real conflict between freedom and democracy.47 Like Böhm, Röpke’s dis-
trust of the behavior of masses in society was also related to their
­consumption choices; a point that Röpke elaborated in more detail in the
early 1940s, when he began to lament what he spoke of as the hollow-
ness, emptiness, and conformity of modern consumer society.48
Overall, Röpke and Böhm’s work from the 1930s coined the idea of
using state authority to create a competitive economy based on free con-
sumer choice, signifying an ideal that preserves individual freedom on the
market and thereby ensures allocative efficiency. For Röpke, it also denoted

45
 As noted by Ptak, Vom Ordoliberalismus, 104, which offers a penetrating analysis of the book.
46
 Böhm, Die Ordnung der Wirtschaft, 114.
47
 For Röpke’s conception of the masses and his social and cultural critique of modern society more
generally, see Solchany, “Wilhelm Röpke as a Key Actor”; Bonefeld, The Strong State, 47–69; Ptak,
Vom Ordoliberalismus, 38–44; Haselbach, Autoritärer Liberalismus, 184–224.
48
 We shall return to Röpke’s critique of consumer society later in this chapter.
82  N. Olsen

ideals of a market democracy through the analogy between voting through


the market and through the ballot box. However, neither Röpke nor
Böhm viewed the making of a market order through curbing monopoly
and interventionism as a task that specifically aimed to enhance consumer
interests or political democracy. In fact, they only referred to consumer
democracy as an analogy referring to economic processes because they
wanted to shield the economic order from democratic politics.
The constraints on the ideal of free consumer choice outlined by
German neoliberals in the 1930s are most clearly visible in Böhm’s work,
which revised the ideal to fit the National Socialist regime. Within this
context, the ideal was conditioned by the evasion of democratic rights
(e.g., the ability of citizens to participate in government and to have their
concerns recognized and acted upon) and social rights (e.g., to adequate
income and a certain standard of living) that were depicted as threats to
the desired market order. The “democratic” and “social” dimensions of
early German neoliberalism instead concerned the making of a popula-
tion of consumers, who were to fulfill government policies through spe-
cific modes of behavior in the market, bolstered by state-enforced
educational and compulsory measures. However, at this point, the free
consumer was not a shared reference point in the societal visions sketched
by German neoliberals.

 eoliberal Ideologists and Marketing


N
Researchers During National Socialism
Research has shown in more detail how, in spite of their liberal self-­
identification, Franz Böhm and other German neoliberals not only
addressed the economic challenges of the National Socialist regime, they
also designed their theories to be implemented under the auspices of the
regime. Moreover, offering their services to state and government agen-
cies, they became, in different ways and to different degrees, entangled in
and contributors to National Socialist policies of expansion during the
1930s and 1940s.49

 Most elaborate is Ptak, Vom Ordoliberalismus, 62–132.


49
  Liberating the Consumer: Ludwig Erhard and the Making…    83

The realm of market research also underwent a politicization process


during the era of National Socialism. Among other things, during the
1930s, the work of Ludwig Erhard and the Society of Consumer Research
came to be increasingly coordinated with the politics of the National
Socialist regime. The relations between the Society and the regime were
complex. On the one hand, the Society’s desire to illuminate and acknowl-
edge the demands and desires of German individuals was at odds with
the National Socialist regime of production that sought to homogenize
its population with radical measures.50 On the other hand, similar to the
Society, the National Socialists assigned great importance to consump-
tion, as they recognized that consolidating support for the regime required
providing Germans with the products they desired.
Worrying about the degrading cultural effects of mass consumption
and its association with supposedly Jewish interests, the regime placed
the advertising industry under Joseph Goebbels’ Reichsministerium
für Volksaufklärung und Propaganda (Reich Ministry for National
Enlightenment and Propaganda), which founded the Werberat der
deutschen Wirtschaft (Advertisement Council for the German Economy)
to monitor commercial activities and the advertising industry. The
Council had considerable bureaucratic autonomy and saw itself as a lob-
bying organ for the business community rather than as a censorship
office. It hoped that advertising could help advance National Socialist
ideology by legitimizing a certain freedom to buy and sell and thus instate
business and advertising as pillars of the regime.51 In this context, there
was a high level of commercial activity on the National Socialist market
in the 1930s, when companies addressed Germans as consumers and
sought to sell them their products. The regime especially targeted German
women in the role of housewife-consumers, regarding their consumption
patterns as vital for the national economy.52
While the business of selling and advertising enjoyed relative auton-
omy in the early years of the regime, the connection between advertising

50
 Wiesen, Creating the Nazi Market Place.
51
 Pamela E. Sweet, Selling under the Swastika: Advertising and Commercial Culture in Nazi Germany
(Palo Alto, CA: Stanford University Press, 2013).
52
 Sweet, Selling under the Swastika, 136–139.
84  N. Olsen

and National Socialist ideology gradually grew closer. In this process,


many of those in the private sector who strove to place advertising at the
center of National Socialism increasingly linked everyday material life
with its ideology and myths, thus contributing to the reinforcement of
the dictatorship and its policies. The Society for Consumer Research was
no exception. On the one hand, none of its primary leaders were dedi-
cated National Socialists, and through, their inquiries into consumer
motivations, they entered into transnational intellectual dialogues and
refrained from using racist language. On the other hand, the Society
eventually converged with the regime in the celebration of community-­
oriented consumption and the rejection of individual materialism.
Moreover, the Society nurtured formal links with the National Socialist
party, and, due to cash shortage, it took up war-related projects and
developed into a state-sponsored market research organization that
worked in accordance with the needs of party and government. This
involved conducting studies in relation to the National Socialist policy
plans for Eastern Europe.53
Likewise, Ludwig Erhard came to work closely with the National
Socialist regime. After he fell out with Wilhelm Vershofen and left the
Society for Consumer Research in the late 1930s, he founded his own
institute, the Institut für Industrieforschung (Institute for Industrial
Research) that also worked for the regime and took on war-related
­projects. By the late 1930s, Erhard had already become the personal assis-
tant of the regional National Socialist leader in Vienna, and, as late as
1944, he was working with an SS-Standardenführer on matters related to
post-­war planning.54
Erhard nevertheless continued to embrace the economically liberal
positions that he had outlined since the late 1920s. In the introduction
to his work on post-war planning, he stated: “I was and am of the opin-
ion that the best method to satisfy public needs remains a competitive
market.”55 He further proposed the gradual elimination of state controls
and the establishment of a free market economy, which should focus on

53
 Wiesen, Creating the Nazi Market Place, 219–230.
54
 Mierzejewski, Ludwig Erhard, 20–22 and Ptak, Vom Ordoliberalismus, 62–132.
55
 Mierzejewski, Ludwig Erhard, 20.
  Liberating the Consumer: Ludwig Erhard and the Making…    85

producing goods to satisfy the needs of consumers. Erhard’s argument


that the state was responsible for securing a competitive economy over-
lapped with, and became increasingly inspired by, the work of Wilhelm
Röpke, Walter Eucken, Alexander Rüstow, and Alfred Müller-Armack in
the 1940s.
Moreover, the neoliberal economists under discussion began to refer to
free consumer choice in debates on the market order. For example, in his
1940 textbook Die Grundlagen der Wirtschaft (The Foundations of
Economics), Eucken identified two typologies of economic orders—the
market order and the centrally managed economy—and referred to free
consumer choice in order to distinguish between them. Moreover, he
discerned between different typologies of centrally managed economies
according to the degree of choice granted to consumers.56 It is worth not-
ing that Eucken did not aim primarily to illustrate the deficiencies of the
socialist economy but to open up a discussion of the possibilities of estab-
lishing centrally managed economies with private property, free move-
ment of labor, and free consumer choice. In other words, Eucken sought
to foster debate about the National Socialist economy without making
enemies with the regime.57
In the early 1940s, Eucken shifted his attention from the National
Socialist to the post-war economy. In doing so, he continued to refer to
free consumer choice in framing economic orders, but no longer consid-
ered the possibility of merging features from the competitive system with
a centrally managed economy. In his opinion, the post-war economy
would require a far greater supply of consumer goods that were heteroge-
neous by nature and unpredictable for a central authority.58 His aim was,
therefore, to set up a free market economy based on the price mechanism.
In keeping with this, and as part of the Arbeitsgemeinschaft Erwin von
Beckerath (The Erwin von Beckerath Working Group), in September 1943,
Eucken contributed to the composition of a memorandum that recom-
mended ending the planned economy and instating the laws of supply

56
 Walter Eucken, Die Grundlagen der Nationalökonomie (Jena: Gustav Fischer, 1940), 96–103.
57
 I am here echoing the excellent observations made by Tribe, Strategies of Economic Order,
215–218.
58
 Tribe, Strategies of Economic Order, 225.
86  N. Olsen

and demand once the war was over. This included the “reinstatement of
the dethroned consumer in his sovereign rights.”59
To talk of consumer rights as the memorandum to which Eucken con-
tributed was certainly a new feature of German ordoliberalism. And, as
we will see, Müller-Armack also added a new feature to his work by refer-
ring to the free consumer in his writings on the post-war economy, con-
necting the figure to notions of democracy among other things. Even if
they did not elaborate on the political implications of these ideals, these
neoliberal economists were creating common ground with Erhard by
conceptualizing the post-war economy as a state-governed competitive
economy that responded to the demands, served the interests, and pro-
tected the rights of sovereign consumers.

L udwig Erhard’s Social Market Economy


and Its Free Consumer
After the war, Ludwig Erhard worked as an economic consultant. After
being charged with the restoration of industry in the Nuremberg-Fürth
area by the post-war allied occupation authorities, he became Minister of
Economics in the Bavarian state government in 1945. In 1947, the
British and American occupation authorities assigned Erhard a key posi-
tion in the Advisory Committee for Money and Credit (Sonderstelle Geld
und Kredit) that was set up to coordinate economic activities in their
zones. In 1948, he became director of the Economic Council for the joint
Anglo-American occupation zone. Finally, in September 1949, Erhard
became Minister of Economics in the new Federal Republic of Germany
under Chancellor Konrad Adenauer.

59
 Cited from A. J. Nicholls, Freedom with Responsibility: The Social Market Economy in Germany,
1918–1963 (Oxford: Clarendon, 1994), 112. Arbeitsgemeinschaft Erwin von Beckerath was named
after economist Erwin von Beckerath who had been appointed by the Nazi Academy of German
Law to set up an inquiry into the German economy. He gathered a number of distinguished econo-
mists to help in this enterprise (including neoliberal ideologists such as Walter Eucken and Franz
Böhm) many of whom were critical of the National Socialist regime. After the working group was
officially dissolved in 1943, its members continued to meet in order to discuss and draft plan for
the post-war economy.
  Liberating the Consumer: Ludwig Erhard and the Making…    87

Ludwig Erhard brought the concept of social market economy to the


public in a speech at the Bizonal Economic Council on 21 April 1948 (he
was elected as director of the council on 2 March 1948). Shortly after,
Erhard executed a swift transition from a wartime economy to a new
civilian economic system by announcing the Leitsätzegesetz (Guiding
Principles Law), which entailed currency reform (into D-Mark), abolition
of command economy, and the end of wartime price controls.60
Many Germans were initially unsure of what to expect from social
market economy and skeptical of the vast economic changes announced
in its name. In this context, it became not only Ludwig Erhard’s task to
politically implement social market economy but also to communicate
what the socio-economic program was all about—a task that included
generating public trust in, and identification with, social market econ-
omy. Erhard was in many ways suited for the task. He was an energetic
communicator, who understood his public talks and publications as a
means of promulgating and enacting his economic policies; he was well
connected in the media generally and well known among journalists; and
he managed to establish an effective press office for his administration to
orchestrate public relations campaigns and ensure that his statements
reached radio broadcasts, newspapers, and journals. Moreover, when
communicating to the public, Erhard appeared as a powerful, charis-
matic, and convincing politician, and people came to view him as the
patron of the economic program intended to reconstruct Germany.
Additionally, Erhard had the support of the old elites, including politi-
cians, scholars, and business representatives, many of whom had been
involved with the National Socialist regime.61
Overall, Erhard was obviously in tune with the political agenda out-
lined by Adenauer. The latter believed that the Federal Republic should
restyle itself as a democracy tied to the West; Adenauer also criticized the
campaign of Kurt Schumacher of the Social Democratic Party (SPD),
who embraced the idea of a united Germany based on socialist principles.

60
 The law was drafted in close collaboration with Leonard Miksch.
61
 Christian L. Glossner, The Making of the German Postwar Economy: Political Communication and
Public Reception of the Social Market Economy after World War II (London: I.  B. Tauris, 2010),
44–60 and Bernhard Löffler, “Öffentliches Wirken und Öffentliche Wirkung Ludwig Erhards,”
Jahrbuch des Historischen Kollegs (2003): 121–161.
88  N. Olsen

However, politically and personally, there were many tensions between


Adenauer and Erhard. Essentially, Erhard was a maverick, non-­conformist
politician who wanted to inject his own ideas and visions into the rebuild-
ing of Germany.62 Above all, he did so through the notion of social mar-
ket economy.
It was Alfred Müller-Armack, who originally coined the concept of
social market economy in his book Wirtschaftslenkung und Marktwirtschaft
(Planned Economy and Market Economy) from 1946; this was a text that
reflected and enhanced the tendency among German neoliberals in the
1940s to refer more systematically to free consumer choice and consumer
interests as the foundation and objective of the desired order.63
Müller-Armack, it should be added, emerged not only as a vital propo-
nent of social market economy but also as a key political advisor to Erhard
in the post-war era. Along with Leonard Miksch and Walter Eucken, he
was invited to join the Advisory Committee for Money and Credit in
order to produce proposals for a currency reform. All three economists
also joined the advisory board of the Economic Council. In 1952, Müller-­
Armack became section chief of the policy department that had been
founded in Erhard’s Ministry of Economics to further develop and imple-
ment social market economy.
In Wirtschaftslenkung und Marktwirtschaft, Müller-Armack broadly
conceived of social market economy as an economic order built on the
idea of free competition and a concern for social welfare.64 In doing so,

62
 See Mierzejewski, Ludwig Erhard; Volker Hentschel, Ludwig Erhard. Ein Politikerleben (München,
Landsberg am Lech: Olzog, 1996); Volker Laitenberger, Ludwig Erhard. Der Nationalökonom als
Politiker (Göttingen-Zürich: Müster-Schmidt, 1986).
63
 Müller-Armack’s book only appeared in 1947—Alfred Müller-Armack, Wirtschaftslenkung und
Marktwirtschaft (Hamburg: Verlag für Wirtschaft und Sozialpolitik, 1947). Together with
Alexander Rüstow and Wilhelm Röpke, Müller-Armack had since the early 1930s contributed to
developing German neoliberalism from a sociological and cultural angle, considering among other
things the role of religion in modern society. His 1933 book Staatsidee und Wirtschaftsordnung in
Neuen Reich (Berlin: Junker und Dünnhaupt, 1933) expressed praise of the National Socialist
regime, and he later worked as an advisor to the regime and the German army. He later joined the
debates about the post-war economic order. In 1946, Müller-Armack became a member of the
Christian Democratic Union. For Müller-Armack’s contribution to German neoliberalism, see
Ptak, Vom Ordoliberalismus.
64
 On the history of the concept, see Glossner, The Making of the German Postwar Economy and
Mark Spoerer, “Wohlstand für Alle? Soziale Marktwirtschaft,” in Modell Deutschland:
Erfolgsgeschichte oder Illusion, eds., Thomas Hertfelder and Andreas Rödder (Göttingen:
Vandenhoeck und Ruprecht, 2007), 28–34.
  Liberating the Consumer: Ludwig Erhard and the Making…    89

he presented free consumption as the key feature distinguishing social


market economy from planned economy. More exactly, in a five-page
section titled “The Consumer,” which cited Ludwig von Mises’ critique
of socialist planning, Müller-Armack criticized those who portrayed
planned economy as an economic order serving consumer interests
through fixed prices and public provision of goods.65 According to
Müller-Armack, the opposite was true. First, planned economy “was
incompatible with the freedom of consumers”—it created a system in
which “the autonomy of the consumer is defeated.”66 Second, the rejec-
tion of free consumer choice emptied the system of “any kind of criterion
for bringing demand and supply into accordance with each other.” In
other words, planned economy was an inefficient and repressive eco-
nomic system, which diluted individual freedom and was unable to pro-
vide consumers with the goods they desired. Müller-Armack concluded:
“From its general economic-political aims, planned economy necessarily
leads to a deterioration of the position of the consumer.”67
At the same time that he was portraying social market economy as a
system that enhanced the economic and political interests of consumers
by guaranteeing efficiency, prosperity, and freedom, Müller-Armack also
spoke of the market order as representing a “real market democracy” that
is run by consumer demand in his post-war writings.68 As such, his con-
tribution to positioning the sovereign consumer as the key figure of social
market economy referred to the idea launched by Mises that markets
express the popular will in a more articulate and democratic manner than
do elections and parliamentary democracy.
However, the free consumer was only one of many semantic features
making up Müller-Armack’s social market economy. Among other things,
he often stressed the ideal of social welfare more than the principle of
competition. Moreover, in presenting the social program of the market

65
 In his post-war writings, Müller-Armack often referred to Mises in his critique of planned
economies.
66
 Müller-Armack, Wirtschaftslenkung und Marktwirtschaft, 21 and 20.
67
 Müller-Armack, Wirtschaftslenkung und Marktwirtschaft, 22.
68
 Alfred Müller-Armack, “Vorschläge zur Verwirklichung der Sozialen Marktwirtschaft [1948],”
Alfred Müller-Armack, Genealogie der Sozialen Marktwirtschaft, Frühschriften und weiterführende
Konzepte (Bern/Stuttgart: Haupt, 1974), 99.
90  N. Olsen

order, he spoke of economic redistribution as a means of upholding


decent standards of living and preventing high levels of inequality.69
Likewise, in contrast to Mises, Müller-Armack called upon the state to
create this order.
Similar to Müller-Armack, Ludwig Erhard placed the figure of the free
consumer alongside the notions of competition and social welfare at the
core of his concept of social market economy. More specifically, four fea-
tures characterized Erhard’s concept of social market economy. As dis-
cussed below, these features drew on, merged, and added to scholarly and
political ideas and practices that he had encountered in the realm of mar-
keting and in the work of German neoliberal economists in the preceding
decades. In particular, Erhard radicalized the new trend in the work of
Müller-Armack and other neoliberal economists toward linking the
­sovereign consumer to allocative efficiency and political ideals of democ-
racy and freedom.

 he Four Features of Ludwig Erhard’s Social


T
Market Economy
The first feature of Erhard’s social market economy was a focus on compe-
tition and consumer choice, including the ambition to oppose market
forces that strived to undermine these principles. This focus was
announced in, among other contexts, the so-called Düsseldorfer Leitsätze
(Guidelines) of 15 July 1949.70 The Leitsätze signaled the re-orientation
of the CDU from Christian Socialism to market economy; this re-­
orientation emanated principally from Erhard and his advisors.
Emphasizing economic reform as the pillar of social order, the Leitsätze
stated that the price mechanism was to be “the motor and control mecha-
nism of the market economy.”71

69
 Still, according to Ptak, Vom Ordoliberalismus zum Sozialen Marktwirtschaft, 46, Müller-Armack
primarily addressed the social component of social market economy to ensure an effective market
order based on competition.
70
 “Düsseldorfer Leitsätze vom 15. Juli 1949,” in Dokumente zur parteipolitischen Entwicklung in
Deutschland seit 1945. Zweiter Band. Programmik der deutschen Parteien. Erster Teil, ed., Ossip
K. Flechtheim (Berlin: Dokumenten-Verlag H. Wendler, 1963), 58–75.
71
 “Düsseldorfer Leitsätze,” 59.
  Liberating the Consumer: Ludwig Erhard and the Making…    91

Moreover, the Leitsätze outlined a socio-political order that positioned


consumers as free and sovereign into an economy based on real competi-
tion. This included eliminating cartels and monopolies as well as govern-
ment regulations: “In this way, the consumers decide what is to be
consumed and is at the same time able to freely dispose of their income.”72
Tellingly, Erhard later spoke of the determination to eradicate what he
labeled “the enemies of the consumer” as a key feature of social market
economy.73
Obviously, Erhard’s focus on competition and consumer choice relied
on the portrayal of the sovereign consumer as the supreme economic
subject actor in the market order. In his 1957 book Wohlstand für Alle
(Prosperity for all), Erhard stated: “Our economic politics serve the
­consumer; he alone is the yardstick and judge of all economic activity.”74
With slight semantic variations, this sentence served as a mantra in
Erhard’s public communications about his economic program. This is
seen in a speech that he gave in Antwerp in May 1954 on the key prin-
ciples of the post-war German economy: “I have time and again stated
that there is only one measure of judgment in my concept [Bild] of the
economy, and this is the consumer: there is only one judge over good and
evil in the economy, over the useful and the useless: the consumer.”75
Moreover, Erhard did not stop at depicting the sovereign consumer as
the motor of the efficient market order; he painted the sovereign con-
sumer as the embodiment of the new German democratic citizen, who
contributed to creating the new German state and nation through her/his
participation on the marketplace. Erhard described this participation as a
fundamental and inviolable right. He repeatedly claimed that the “free
choice of consumption (…) must be considered inviolable freedoms of
human beings” and spoke of “the basic democratic right of consumer
freedom.”76 Indeed, in Erhard’s view, it was impossible to talk of democ-
racy without freedom of consumer choice: “The demand for democratic
72
 “Düsseldorfer Leitsätze,” 60.
73
 Ludwig Erhard, Wohlstand für Alle (Düsseldorf: ECON Verlag, 1957), 164.
74
 See, for example, Erhard, Wohlstand für Alle, 67.
75
 Ludwig Erhard, “Die Prinzipien der deutschen Wirtschaftspolitik [Auszüge aus einem Vortrag
vor der Deutsch-Belgisch-Luxemburgischen Handelskammer am 31. Mai 1954 in Antwerpen],”
Orienterierungen zur Wirtschafts- und Gesellschaftspolitik 104, 2 (2005), 17.
76
 Erhard, “Die Prinzipien der deutschen Wirtschaftspolitik.”
92  N. Olsen

freedom will remain an empty formula as long as the basic human rights
of free choice of occupation and consumption are not recognized as being
inalienable and untouchable. This and nothing else is the deepest mean-
ing of the social market order.”77
Clearly, Erhard’s focus on competition and consumer choice echoed
many of the ideas and concepts outlined by his fellow neoliberal econo-
mists in the 1930s and 1940s. However, Erhard accentuated certain fea-
tures and added new ones. Most importantly, he was much more
systematic in positioning the sovereign consumer as the key actor of
social market economy, in presenting consumer interests as the ultimate
objective of this economic order, and in associating the sovereign con-
sumer with economic efficiency and political ideals. Even if Alfred
Müller-Armack, Wilhelm Röpke, and (now even) Franz Böhm also spoke
of market order as a “consumer democracy,”78 no other German neolib-
eral economist followed Erhard in depicting the virtues of human rights,
democracy, and freedom as intrinsic to the sovereign consumer or relat-
ing it so systematically to the new German economic and political order.
Erhard thereby brought the German neoliberal construction of the figure
into a new phase. However, as we will explore further below, while being
committed to and supporting the institutions of representative democ-
racy, he mainly focused on the dynamics and virtues of market
democracy.
The second feature of Erhard’s social market economy was its juxtaposi-
tion of the two concepts of “market economy” and “planned economy.”
Similar to German neoliberals such as Wilhelm Röpke, he portrayed
planned economy as a phenomenon based on idolization of state power,
narrow class interests, and utopian thought, which would inevitably lead
to the loss of individual freedom and a crisis-ridden economy. More spe-
cifically, in basically all of his post-war interventions, Erhard spoke of

77
 Ludwig Erhard, “Zur Kritik an der neuen Ordnung [Rundfunkansprache, 6 August 1948],”
Ludwig Erhard, Gedanken aus fünf Jahrzehnten. Reden und Schriften. Herausgegeben von Karl
Hohmann (Düsseldorf: ECON Verlag, 1988), 133.
78
 For example, in a 1950 text on “Wirtschaftsordnung und Staatsverfassung,” Böhm spoke of the
market mechanism as “the most ideal form of democracy,” manifesting in “a daily and hourly”
unfolding of “plebesitarian democra[tic] market decisions.” Franz Böhm, “Wirtschaftsordnung
und Staatsverfassung [1950],” Franz Böhm, Freiheit und Ordnung in der Marktwirtschaft (Baden-­
Baden: Nomos Verlag, 1980), 89.
  Liberating the Consumer: Ludwig Erhard and the Making…    93

Germany’s future as depending on a choice between “market” or


“planned” economy, describing ideas of more state-regulated economies
as remnants of a dangerous past and the consumer-driven social market
economy as a historical renewal. In the words of Erhard, the market order
represented “[t]he determination to create something entirely new.”79
Erhard’s social market economy further advanced the argument,
embraced by all German neoliberal economists, that the market econ-
omy, if allowed to function without distortions, was far more socially just
than any system of planning. “The freer an economy is the more social it
is,” he often announced.80 More generally, he spoke of social market
economy as a force that ensured both wealth and social leveling for all
members of society through the price mechanism: “Competition alone
secures that all human beings profit from economic progress, in particu-
lar as consumers, and that all advantages that are not the result of a higher
performance are eliminated.”81
According to Erhard, it was the common person as consumer, who
benefited from competition—not special interest groups such as business
associations. This feature, he argued, distinguished not only social market
economy from socialist planning but also laissez-faire liberalism.82 Rather
than embracing a night watchman state that leaves the market unpro-
tected from special interest groups, or a state that makes individuals reli-
ant on government welfare, social market economy sought to use state
power to establish a competitive order in which consumers depended
only on themselves: “The attitude of the consumer towards our economic
order will become increasingly more favorable if the citizen can be certain
that through a free market he can be master of his fate.”83
Overall, the sematic features involved in Erhard’s juxtaposition of
“market economy” and “planned economy” did not add significantly to

79
 Erhard, Wohlstand für Alle, 1957, 22. In addition to serving to criticize the socialist economies in
Germany and in the Soviet Union and other European countries in the past, social market econ-
omy was also positioned as a counterbalance to the planned economies of the Eastern Bloc in the
Cold War.
80
 See, for example, Erhard, Wohlstand für Alle, 1957, 67.
81
 Erhard, Wohlstand für Alle, 7–8.
82
 See, for example, Erhard, Wohlstand für Alle, 240.
83
 Erhard, Wohlstand für Alle, 178–89.
94  N. Olsen

the ideas outlined by German neoliberals in the 1930s. However, as


Erhard related these features to the post-war political situation, he pre-
sented them in a more self-confident and optimistic manner and tied
them more explicitly to the theme of consumer interests and rights.
The third feature of Erhard’s social market economy was profound opti-
mism with respect to consumption. Among other things, Erhard often
promoted the material advantages of consumer society. For example, he
pointed to the access to material goods, such as washing machines, refrig-
erators, and cars, which he believed would make life much more com-
fortable for the Germans, who had recently experienced the shortage of
basic products and goods. In this sense, he re-enchanted the idea of the
market as a place that can fulfill peoples’ wishes and demands, thereby
offering them a better life.
Moreover, Erhard placed faith in consumer rationality by holding that
individuals were able to obtain satisfaction when making purchases. To
be sure, he agreed that consumers were weak in the sense that they some-
times bought things they did not want or need or which seemed to be of
low cultural value. However, he regarded free consumption as an act that
allowed people to develop their personalities and as a human right deserv-
ing of respect. Moreover, like a number of other liberals, he believed that
improved material conditions would lead to more ethical consumption,
and that lessons made via mistakes in the market place would result in
increased consumer intelligence.84 With this in mind, Erhard declared
that the state should refrain from interfering with individual consumer
choice: “I am of the opinion that it is no concern of the state how the citi-
zen should spend his or her money, that the state in this way should be
no teacher of moral.”85 Rather than making it a state obligation to edu-
cate and protect the consumer, Erhard merely recommended an increased
level of product information to assist consumers in making the right
choices on the marketplace.
As we will further consider late, not only did Erhard’s non-­
interventionist stance on consumption differ markedly from the position
taken by neoliberal economists such as Böhm in the 1930s; his optimism

 Erhard, Wohlstand für Alle, 185, 233–235, 237–238.


84

 Erhard, Wohlstand für Alle, 74.


85
  Liberating the Consumer: Ludwig Erhard and the Making…    95

concerning consumer society also diverged markedly from the attitude


expressed by many of his fellow neoliberals, such as Röpke, who voiced a
conservative and elitist criticism of modern society and its dimensions of
mass consumption. Such a criticism was not part of Erhard’s political
agenda, which relied significantly on a positive conception of modern
mass consumer society, and aimed to disarm the considerable skepticism
toward materialism that was still widespread in German politics and
social debate more generally in the 1950s.
The fourth feature of Erhard’s social market economy ran counter to the
non-interventionist stance described above. Continuing an ambition of
marketing scholars and neoliberal economists in the 1930s, it concerned
the idea of using state power to motivate and activate the German popu-
lation to act in accordance with the desired market order. This included
depicting the act of consumption as a collective and national duty that
served to create and fortify the new German nation and demanded popu-
lar motivation and will. According to Erhard, “Wille zum Verbrauch” (the
will to consume) and “Mut zum Verbrauch” (the courage to consume) was
needed to secure permanent pressure on the production side and keep the
economy going.86
Moreover, to fuel consumption by producing a certain type of con-
sumer citizen, Erhard encouraged companies, marketing experts, and
consumer researchers to target individuals as consumers who are obli-
gated to spend in order to keep the economy running. Collaborating
closely with the marketing sector, Erhard also spoke at exhibitions for
consumer products and launched a range of other initiatives that aimed
to “sell” the economic miracle through consumer displays and advertis-
ing.87 For example, he proclaimed 1953 to be the “year of the consumer,”
thus encouraging people to think of themselves as consumers and to
spend their money on consumption.88
86
 Erhard, Wohlstand für Alle, 233 and 75.
87
 For a thorough analysis of how the marketing of the economic miracle through consumer dis-
plays and advertising, see S.  Jonathan Wiesen, “Miracles for Sale: Consumer Displays and
Advertising in Postwar West Germany,” in Consuming Germany in the Cold War: Consumption and
National Identity in East and West Germany, 1949–1989, ed., David F. Crew (Oxford and New York,
2003), 151–178.
88
 Erhard, Wohlstand für Alle, 69 and Logemann, Trams or Tailfins?, 51–52. See also Torp, Wachstum,
Sicherheit, Moral, 92–100.
96  N. Olsen

In particular, Erhard placed demands on housewife-consumers to par-


ticipate in the creation of wealth and the making of democracy, staging
them at the center of his visions of how to fuel consumption after the
currency reform.89 Among other things, to ensure the desired pattern of
consumption among this target group, Erhard’s governing bodies called
on housewife’s organizations for advice and information.90 Moreover,
Erhard addressed women directly to convince them of their crucial func-
tion as heads of family consumption. This function allegedly required not
only that housewives acquired household commodities but also that they
used their critical judgment to buy the right things at the right price, thus
forcing firms to fabricate cheaper, better, and new goods, and thereby
stimulating the German economy. “And not least,” Erhard wrote in the
mid-1950s, looking back at his economic reforms, “I have addressed the
consumers, especially women, to make sure that they are conscious of
their power as buyers, since their performance on the market is a first
order price stabilizing factor.”91
Overall, the four features that characterize Ludwig Erhard’s project of
using the state to create a consumer-driven market economy speak to the
issue of break and continuity in German history. On the one hand,
Erhard’s ambition to create a German state and nation by turning the
population into consumers differed critically from the ideas and projects
developed and pursued by marketing scholars and neoliberal economists,
including those of Erhard himself, in the 1930s and early 1940s. Most
importantly, social market economy obviously complied with the basic
features of a modern liberal democratic system, characterized as it was by
its commitment to the principles of human rights, parliamentarianism,
the separation of powers into different branches of government, and a
free press. Moreover, social market economy realized to a much greater
extent the idea of an open, competitive, and market-based order that
89
 As described in Carter, How German Is She?, and Katherine Pence, “Labours of consumption:
gendered consumers in postwar East and West German reconstruction,” in Gender Relations in
German History: Power, agency and experience from the sixteenth to the twentieth century, eds., Lynn
Abrams and Elisabeth Harvey (Durham: Duke University Press, 1996), 211–238.
90
 Erica Carter, “Alice in Consumer Wonderland: West German Case Studies in Gender and
Consumption,” in West Germany under Construction: Politics, Society and Culture in the Adenauer
Era, ed., Robert G. Moeller (Ann Arbor: The University of Michigan Press, 1997), 355–356.
91
 Ludwig Erhard, Deutsche Wirtschaftspolitik (Düsseldorf: ECON Verlag, 1962), 293.
  Liberating the Consumer: Ludwig Erhard and the Making…    97

reflects people’s preferences so that they can choose and reject its offerings
at will. Finally, the new socio-economic model placed much greater trust
in the rationality of individual consumers, and it was characterized by a
profound optimism concerning the value and future of mass consumer
society.
On the other hand, the transition to the post-war market economy was
affected by the authoritative use of state power to set up a competitive
order and shape a specific consumer citizen and collective consumption
pattern. In this process, social market economy, to a certain extent, repro-
duced the contradiction between the roles assigned to the ­authoritative
state and the free consumer that characterized early German neoliberal-
ism. This involved using community-oriented, existential, and activist
notions such as “will,” “courage,” and “battle” that had been central to
National Socialist language. More generally, to provide a level of societal
stability and material comfort that secured support for the political sys-
tem, the consumption politics of the new German state sought to neutral-
ize class conflict, de-politicize the population, and minimize its role in
decision-making processes. Indeed, the efforts to mobilize the Germans as
“democratic” citizens in the market far overshadowed the attempt to acti-
vate them via the channels of traditional democratic institutions. These
features were key to what was, overall, a deeply technocratic and paternal-
istic attempt to modernize German society that took place in association
with the founding of the German Federal Republic in 1949.92
Against this backdrop, rather than the product of a complete Stunde
Null (Ground Zero), social market economy was characterized by certain
lines of continuity from the German past in terms of its overall aims,
discursive features, and political practices. To this we might add that,
while West Germany’s post-war political economy certainly included ele-
ments of social market economy, the socio-economic agenda outlined by
Ludwig Erhard and his fellow neoliberal economists was far from fully
realized. Indeed, as we will see below, the attempt to implement the
agenda was in many ways compromised and left the initially enthusiastic
Ludwig Erhard profoundly disappointed.

 See, for example, Jan-Werner Müller, Contesting Democracy: Political Ideas in Twentieth Century
92

Europe (New Haven: Yale University Press, 2011), 145.


98  N. Olsen

Contestations of and Limitations
to the Liberation of the Consumer
Even though Ludwig Erhard was already speaking of social market econ-
omy as a success in the 1950s, his attempt to promote and implement the
program was deeply contested. Moreover, it resulted in several outcomes
its creators neither anticipated nor desired.
Among other things, during most of his time as Minister of Economics,
both left- and right-wing scholars and politicians offered cultural, politi-
cal, and scholarly views on consumers and on consumer society that were
fundamentally at odds with Erhard’s. Even if only some of them directly
attacked Erhard’s socio-economic agenda, they clearly feared the current
attempts to liberate individuals as consumers on the market and the kind
of society that might emerge from this experiment.
To begin with, the ongoing efforts to turn people into consumers were
criticized within Erhard’s own ideological camp, particularly by Wilhelm
Röpke. On the one hand, Röpke continued to describe consumer-driven
societal orders through terms like “economic democracy” and began
more explicitly legitimizing the use of state power to organize free com-
petition with reference to consumer interests.93 On the other hand, he
began to lament what he portrayed as the conformity, superficiality, and
standardization of modern consumer society, as well as the loss of indi-
viduality and freedom it would inevitably involve, during the 1940s. As
part of his increasingly pessimistic view of modern society, Röpke criti-
cized the bureaucratic welfare state and the deceitful marketing practices
that allegedly underpinned the current consumption regime. Moreover,
in his 1957 book Jenseits Angebote und Nachfrage, he referenced a new
species of human beings that he labeled “homo sapiens consumens”:
“Homo sapiens consumens loses sight of everything that goes to make up
human happiness apart from his money income and its transformation
into goods.” Those who fell into the “keeping up with the Joneses” life-
style, he argued further, “lack the genuine and essentially non-material

93
 For a list of the many notions Röpke used to equate free-market orders with consumer democra-
cies, see Dietmar Jeschke, Konsumentensouveränitet in der Marktwirtschaft – Idee, Kritik, Realität
(Berlin: Duncker & Humblot, 1975), 27.
  Liberating the Consumer: Ludwig Erhard and the Making…    99

conditions of simple human happiness. Their existence is empty, and


they try to fill this existence somehow.”94
Rather than embracing individualism, Röpke sought larger moral
frameworks, values, and institutions—such as family, church, communi-
ties, and tradition—in which the free market economy could be rooted.
Similar stances were also held by Alfred Müller-Armack and by Alexander
Rüstow, who envisioned Christianity as the only moral force that could
compensate for the loss of traditional values in modern consumer
society.95
Conservative sociologists, such as Helmut Schelsky, Arnold Gehlen,
and Hans Freyer, voiced similar criticisms. In their eyes, the “freedom” of
choice offered by modern consumerism — and the increasing bureaucra-
tization, institutionalization, and centralization of the welfare state  —
drained individuals of their personality, destroyed their social relations,
and alienated them from authentic modes of existence.
Scholars from the opposite side of the political spectrum agreed with
this interpretation, among them advocates of the Frankfurt School. Most
famously, by the 1944 publication of their Dialektik der Aufklärung
(Dialectics of the Enlightenment), Theodor Adorno and Max Horkheimer
had argued that cultural goods, shaped by popular culture and made avail-
able by mass media, were used to manipulate individuals into passivity.96
The widespread criticism of consumer society unfolding in Germany
in the 1950s and 1960s overlapped with and drew upon writings by soci-
etal debaters in other countries who likewise criticized the current con-
sumer culture for being individualistic, socially divisive, and wasteful and
claimed that consumer opinion was heavily manipulated by the power of
advertising. Accordingly, it was not a purely German phenomenon.97

94
 Röpke, Jenseits von Angebot und Nachfrage, 143 and 142.
95
 Eucken and Müller-Armack had thematized the issue already in the 1920s and 1930s,
respectively.
96
 For examples of—and overlaps between—the criticism of the consumer and of consumption
launched by scholars and intellectuals from the left and right wing, see Andreas Wirsching, “From
Work to Consumption: Transatlantic Visions of Individuality in Modern Society,” Contemporary
European History 20, 1 (2011): 1–26. See also Nepomuk Gasteiger, Der Konsument: Verbraucherbilder
in Werbung, Konsumkritik und Verbraucherschutz, 1945–1989 (Frankfurt am Main: Campus Verlag,
2010).
97
 We shall elaborate on this topic in Chap. 4.
100  N. Olsen

Some of Ludwig Erhard’s associates in market research also questioned


his optimistic faith in consumer rationality. One example is found in the
article “Vom Verbraucher” that Karl Christian Behrens, a professor of
business and market research at the Free University of Berlin and one of
the pioneers of German market research, wrote a contribution to a
Festschrift published on Erhard’s 60th birthday in 1957. Behrens began
his piece as follows: “The female consumer, a hitherto unknown being,
has in the course of our century been awakened from her beauty sleep
and declared to be a critical partner on the market, where she is to rule
the economy with her demands.” He added: “The charming prince, who
discovered and awoke the female consumer, is the homo oeconomicus, the
model figure of the classical national economists” (by which Behrens
referred to a fully rational consumer, who always pursued her/his subjec-
tively defined ends optimally). But, Behrens asked, “does the current con-
sumer actually act in this manner?”98
Ludwig Erhard’s focus on competition and consumer choice was also
criticized in the realm of politics. It was especially contested by the SPD,
which pursued a societal order with a much more state-controlled and
regulated economy than envisioned by Erhard. Yet, from the late 1940s
onwards, leading Social Democratic politicians began to discuss whether
consumer choice might also be a legitimate object for the SPD, if com-
bined with full employment and a share of the profits to the worker.99 In
particular, Karl Schiller, who became Minister of Economics in the so-­
called Grand Coalition comprised by the CDU and the SPD in 1966,
sought to introduce changes in his party’s economic thought from plan-
ning to competition and consumer choice. “Nobody has a greater interest
in free competition between business firms,” Schiller said to his fellow
party members in 1952, “than the German worker in his capacity as a
consumer.”100 Moreover, in 1954, he was active in producing a Social
Democratic statement that outlined a harmonious mixture of planning

98
 Karl Christian Behrens, “Vom Verbraucher,” Wirtschaftsfragen der freien Welt. Festschrift fiir
Bundeswirtschaftsminister Ludwig Erhard, eds., Erwin von Beckerath, Fritz W Meyer, and Alfred
Müller-Armack (Frankfurt am Main: Fritz Knap, 1957), 209.
99
 The following is based on Nicholls, Freedom with Responsibility, 248–322.
100
 Nicholls, Freedom with Responsibility, 304.
  Liberating the Consumer: Ludwig Erhard and the Making…    101

and market economy, which was committed to the economic liberation


of the individual and approved of consumer choice.101
These changes within the SPD were partly spurred by an attempt to
compete with the CDU by adopting part of their political visions.
However, they also illustrate how—similar to other Social Democratic
politicians and thinkers across Europe and the United States—the SPD
began to view the dynamics of the market, including mass consumption,
in a more positive light in the 1960s.102 In this period, many intellectuals
from North America (such as Tom Wolfe, Marshall McLuhan, and Susan
Sontag) and Europe (such as Jürgen Habermas, Roland Barthes, and
Umberto Eco) likewise broke with a long tradition of worrying about the
deleterious effects of consumption. Instead, they began to emphasize the
elements of pleasure, playfulness, and symbolic exchange as the essence of
a vibrant and potentially liberating and individualizing consumer cul-
ture.103 More generally, consumer culture began to be viewed in a more
positive light across ideological divides from the 1960s onwards.
Social market economy and its promises of the advantages of con-
sumer society also became increasingly popular among the German pub-
lic in the 1950s. One of the developments that made the program
appealing was the experience of the socialist economy of the German
Democratic Republic, which had been unable to deliver the economic
growth and material affluence that characterized everyday life in the
Federal Republic. This development surely pleased proponents of social
market economy who positioned their agenda as an answer to, and
weapon against, the socialist economies established in the Soviet Union
and Eastern Europe during the Cold War.104
Still, Ludwig Erhard’s attempt to reconstruct the German economy
was in many ways constrained. To begin with, the SPD was unwilling to

101
 Nicholls, Freedom with Responsibility, 317.
102
 For how the attitude of British social democratic intellectuals toward consumers gradually
changed in this period, see Noel Thompson, “Conceptualizing the Consumer: British Socialist
Democratic Political Economy in the Golden Age of Capitalism,” Contemporary British History 25,
2 (2011): 297–321.
103
 Daniel Horowitz, Consuming Pleasures: Intellectuals and Popular Culture in the Postwar Period
(Philadelphia: University of Pennsylvania Press, 2012).
104
 Tribe, Strategies of Economic Order, 206.
102  N. Olsen

support the execution of a full-blown free market based on consumer


choice. In contrast, the SPD’s demands for public consumption in the
form of social spending and public provisioning of goods restrained the
efforts made to liberalize the economy through increased private con-
sumption. Key representatives of the government support base, such as
the conservative industrial sector, which aimed to preserve established
parts of the industrial structure from economic liberalization, imposed
further restraints on Erhard’s agenda. Moreover, Federal economic policy
often subordinated domestic private consumption to other economic
goals such as the promotion of industrial exports or the building of capi-
tal assets.105
In general, due to political interests and historical traditions, the
Federal Republic remained committed to high levels of public spending,
welfare payments, and other government transfers, and it continued to
respect the protectionist interests of business elites.106 Moreover, due to a
perceived need among scholars and politicians to protect the rights of
consumers on the market, the Federal Republic oversaw the founding of
institutions to deal with consumer protection in the 1950s and 1960s.107
These developments resulted in a more tightly regulated market, a lower
degree of private consumption, and a higher level of public spending
than Ludwig Erhard had hoped for.
In 1963, Ludwig Erhard succeeded Konrad Adenauer as Chancellor,
but left office again in 1966, feeling disappointed by his brief stint in
power. At this time, having relentlessly championed the figure of the con-
sumer and the ideal of consumption, Erhard occasionally bemoaned the
growing materialism and selfishness of his compatriots and expressed
concern that the technological conditions of mass consumption might
lead to individual and social uniformity.108 Furthermore, he launched the

105
 Logemann, Trams or Tailfins?, 42–43.
106
 Logemann, Trams or Tailfins?, 38–55.
107
 Christian Kleinschmidt, “Konsumgesellschaft, Verbraucherschutz und Soziale Marktwirtschaft.
Verbraucherpolitische Aspekte des ‘Modell Deutschland’ (1947–1975),” Jahrbuch für
Wirtschaftsgeschichte 47, 1 (2006): 13–28.
108
 See, for example, Mierzejewski, Ludwig Erhard, 153 and Ludwig Erhard, “Europäische
Zwischenbilanz [Rede vor der Gesellschaft für auswertige Politik und der Österreichischen
Industriellen-Vereinigung am 8. Februar 1961 in Wien],” Ludwig Erhard, Deutsche Wirtschaftspolitik
(Düsseldorf: ECON Verlag, 1962), 543–558.
  Liberating the Consumer: Ludwig Erhard and the Making…    103

concept of Formierte Gesellschaft (Formed Society) that connoted a soci-


ety in which different groups must work together to further the interests
of the community rather than merely pursuing individual aims.109
However, there was no going back for Ludwig Erhard. When Germans
during the 1950s began to think of themselves as free consumers and to
embrace the act of consumption, the Federal Republic had, in fact,
entered a new historical epoch, associated with the so-called economic
miracle.110 The economic miracle was in part inspired by, but not merely
the product of, the socio-economic program drafted by German neolib-
eral economists under the label of social market economy. While much of
the program failed to materialize, the idea of social market economy nev-
ertheless—as stated by Dieter Haselbach—created the founding myth
and legitimating basis of the new West German state.111 To this, we can
add that the liberation of the German people as free consumers consti-
tuted the core symbol of this foundational myth.

Concluding Remarks
Representing the first neoliberal attempt to organize a socio-political
order around the figure of the sovereign consumer, the West German case
is, in several ways, important for our attempt to understand the contexts

109
 The concept of Formierte Gesellschaft was heavily contested, as political opponents believed that
it had strong similarities to authoritarian concepts launched by the National Socialist regime.
Historian Eckart Conze argues that the concept was modern rather than reactionary in that it could
be compared to other contemporary attempts—such as in the United States, where Lyndon
B. Johnson spoke of the Great Society—to adapt the societal order to current social, political, and
cultural developments. See Eckart Conze, Die Suche nach Sicherheit: Eine Geschichte der
Bundesrepublik Deutschland von 1949 bis in die Gegenwart (München: Siedler, 2009), 282–285.
110
 See, for example, Konrad H. Jarausch and Michael Geyer, Shattered Past: Reconstructing German
Histories (Princeton, NJ: Princeton University Press, 2003), 269–316. See also Arnold Sywottek,
“From Starvation to Excess? Trends in the Consumer Society from the 1940s to the 1970s,” in The
Miracle Years: A Cultural History of West Germany, 1949–1968, ed., Hanna Schissler (Princeton and
Oxford: Princeton University Press, 2001), 341–358, which argues that a West German consumer
society was realized during the years from 1957 to 1967.
111
 Dieter Haselbach, “‘Sozialer Marktwirtschaft’ als Gründungmythos. Zur identitätsbildung im
Nachkriegsdeutschland,” Zwischen Traum und Trauma  – die Nation: transatlantische Perspektiven
zur Geschichte eines Problems, ed., Claudia Mayer-Iswandym (Tübingen: Stauffenberg, Verlag,
1994), 255–266.
104  N. Olsen

and dynamics through which the sovereign consumer became the domi-
nant paradigm of politics in the Western world.
First, the West German case reminds us that that post-war configura-
tions of the sovereign consumer relied significantly on ideas and argu-
ments that had their roots in the interwar era. Second, the case illustrates
the flexible nature and applicability of the sovereign consumer, that is,
how neoliberal ideologists have assigned the figure a plurality of mean-
ings and mobilized it for many different projects. Third, it shows how, in
providing the sovereign consumer with new meanings and mobilizing it
for changing political agendas, these ideologists have focused on redefin-
ing and rebalancing the economic and political ideals that have been
associated with the figure since the 1930s.
More generally, the West German case represents a crucial step on the
journey by which the sovereign consumer became the dominant para-
digm of politics. Key to this journey was a re-invention of the market as
the democratic forum par excellence through its association with the
freely choosing consumer. The attempt to liberate this consumer in the
market went hand in hand with, and also overshadowed, the attempt to
activate the German citizens via traditional democratic institutions. The
German neoliberal consumer shares this trait with many other consumer
figures that neoliberals invented in other contexts and at other times.
However, the specific figure outlined by Ludwig Erhard and his associ-
ates is not identical to the one that came to function as a major driver in
the wide-ranging transformation that took place in our political para-
digm from the 1970s onwards. More specifically, from the 1950s (when
social market economy was fully developed) to the 1970s, neoliberal ide-
ologists in other locales did not merely assign the sovereign figure a vari-
ety of new meanings. They also referred to the figure in new societal
contexts and for new political purposes. Most importantly, neoliberal
ideologists used the figure as a crisis management tool in order to reform
and transform the post-war welfare state order. As we will see, they did so
by calling for a sweeping deregulation of the market economy, and of the
public sector, in the name of the sovereign consumer.
4
From Choice to Welfare: The Concept
of the Consumer in the Chicago School
of Economics

The road to the economic crisis of the past decade was paved with the
slippery stones of deregulation. Recent research on the Chicago School of
Economics (henceforth the Chicago School) has demonstrated that its
members provided key intellectual inspiration for the policy shift toward
deregulation that began as early as the 1970s and 1980s.1 First coined in
the 1950s, the term “Chicago School” is habitually used to refer to prom-
inent scholars associated with the Law School and the Department of

1
 See first of all Robert Van Horn, Phillip Mirowski, and Thomas A.  Stapleford, eds., Building
Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics Program
(Cambridge: Cambridge University Press, 2011); Ross B. Emmett, ed., The Elgar Companion to the
Chicago School of Economics (Cheltenham: Edward Elgar, 2010); Johan Van Overtfeldt, The Chicago
School: How the University of Chicago Assembled the Thinkers Who Revolutionized Economics and
Business (Chicago: Agate 2007); Robert Leeson, The Eclipse of Keynesianism: The Political Economy
of the Chicago Counter-Revolution (Basingstoke: Palgrave, 2000) and the relevant chapters in
William Davies, The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition
(London: Sage, 2014); Angus Burgin, The Great Persuasion: Reinventing Free Markets since the
Depression (Cambridge, MA: Harvard University Press, 2012); Christopher Payne, The Consumer,
Credit and Neoliberalism: Governing the Modern Economy (New York: Routledge, 2012); Colin
Crouch, The Strange Non-Death of Neoliberalism (Cambridge: Polity Press, 2011); Jamie Peck,
Constructions of Neoliberal Reason (Oxford: Oxford University Press, 2010); Phillip Mirowski and
Dieter Plehwe, eds., The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective
(Cambridge: Cambridge University Press 2009); Eduardo F. Canedo, The Rise of the Deregulation
Movement in Modern America, 1957–1980 (PhD diss., Columbia University, 2008).

© The Author(s) 2019 105


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_4
106  N. Olsen

Economics at the University of Chicago from the 1920s onwards. Among


these scholars are Frank H. Knight, Jacob Viner, Henry C. Simons, Aaron
Director, Milton Friedman, George Stigler, Gary Becker, Richard Posner,
and Robert H.  Bork. While there have been attempts to frame the
Chicago School around many different features, including methodologi-
cal inclinations and institutional practices, the common trait among this
otherwise diverse group of scholars is often identified as the advocacy of
a market economy and limited government.2
Yet, recent scholarship on what is often regarded as the most important
school of economic thought in post-war America has corrected a number of
widespread misunderstandings of its origins and development.3 Among
other things, it has demonstrated that there was no Chicago School in the
current sense of the word before the late 1940s and that the label was self-­
consciously created by a group of its leading members, including Milton
Friedman, George Stigler, and Aaron Director. Research has further revealed
that the work of these scholars was distinct from that of a previous generation
at Chicago, which included Frank Knight, Jacob Viner, and Henry Simons.
Most importantly, the later generation launched a shift in how to think about
the appropriate role of the state in the economy. Whereas Knight, Viner, and
Simons favored particular forms of economic regulation, Friedman, Stigler,
and Director began to embrace deregulation more decidedly.
Scholars have further illustrated that the Chicago School aimed not
only to eliminate regulation but also to control it by developing a set of
economic guides for regulators. Thus, it was through a multifaceted body

2
 For an early attempt to define the Chicago School with reference to some of the scholars men-
tioned above and their advocacy of free markets and limited government, see H. Laurence Miller,
Jr., “On the ‘Chicago School of Economics’,” Journal of Political Economy 70, 1 (1962): 64–69.
Since the 1970s, the terms “Chicago School of Economics,” “Chicago School of Law and
Economics,” and “Chicago School” have been used interchangeably. For recent discussions of the
challenges involved in defining the term, see Roger E.  Backhouse, “Book Review: The Elgar
Companion to the Chicago School of Economics / Building Chicago Economics: New Perspectives
on the History of America’s Most Powerful Economics Program,” History of Political Economy 45,
2 (2013): 345–349 and Steven G. Medema, “Identifying a ‘Chicago School’ of Economics: On the
Origins, Diffusion, and Evolving Meanings of a Famous Brand Name,” https://bfi.uchicago.edu/
sites/default/files/research/Medema_Identifying_a__Chicago_School_-Sept_2015.pdf, accessed
10 December 2017.
3
 See also Edward Nik-Khah and Robert Van Horn, “The Ascendancy of Chicago Neoliberalism,”
in The Routledge Handbook of Neoliberalism, eds., Simon Springer, Kean Birch, and Julie MacLeavy
(New York: Routledge, 2016), 13–24.
  From Choice to Welfare: The Concept of the Consumer…    107

of deregulation ideas that the Chicago School came to exert a major


influence on social science and public policy in post-war America and
inspired academic and political changes in other countries, such as Chile
and Great Britain. Finally, research has shown that the Chicago School
was not a purely American invention; rather, it formed part of the larger
transnational institutional project related to the neoliberal network the
Mont Pèlerin Society. It was also as members of this association that
Chicago School scholars made key contributions to the global reshaping
and diffusion of free market thought after 1945.4
This chapter aims to shed new light on the Chicago School’s ideas of
deregulation, focusing in particular on the shift to a more hardline stance
toward deregulation in the post-war period. In part, my analysis builds on
the writings of scholars such as Robert Van Horn and Philip Mirowski, who
have demonstrated how the changing views on regulation among Chicago
School scholars were accompanied by a more positive vision of the work-
ings of free markets, including a more benign view of business monopoly.5
However, the present investigation goes beyond existing research by
analyzing how Chicago School scholars legitimized their stance on dereg-
ulation in more detail. In so doing, it addresses a hitherto unexplored
theme in research on the Chicago School, namely, the function of the
figure of the consumer in the writings on regulation authored by its mem-
bers (here broadly understood as scholars associated with the Law School
and Department of Economics at Chicago) from the 1930s to the 1980s.6

4
 Besides Henry Simons, who died shortly before the Mont Pèlerin Society was founded, only Jacob
Viner and Robert H. Bork, among the above-mentioned Chicago School Scholars, were not
members.
5
 Robert Van Horn, “Jacob Viner’s Critique of Chicago Neoliberalism,” in Building Chicago
Economics: New Perspectives on the History of America’s Most Powerful Economics Program, eds.,
Robert Van Horn, Phillip Mirowski, and Thomas A. Stapleford (Cambridge: Cambridge University
Press, 2011) 279–300; Robert Van Horn, “Reinventing Monopoly and the Role of Corporations:
The Roots of Chicago Law and Economics,” in The Road from Mont Pelerin: The Making of the
Neoliberal Thought Collective, eds., Phillip Mirowski and Dieter Plehwe (Cambridge: Cambridge
University Press 2009), 204–237; Robert Van Horn and Phillip Mirowski, “The Rise of the
Chicago School of Economics and the Birth of Neoliberalism,” in The Road from Mont Pelerin: The
Making of the Neoliberal Thought Collective, eds., Phillip Mirowski and Dieter Plehwe (Cambridge:
Cambridge University Press 2009), 139–180.
6
 In his account of how ideas of the so-called sovereign consumer emerged in economic thought in
the first half of the twentieth century and manifested in British economic–political discourse in the
1960s, Payne, The Consumer cites Chicago School scholars at certain junctures but does not provide
a detailed analysis of their work.
108  N. Olsen

This last decade was the period during which their understanding of
deregulation narrowed and solidified.7
This chapter makes three arguments concerning the figure of the con-
sumer and the Chicago School. The first is that Chicago School scholars
consistently constructed and legitimized their calls for deregulation (as
well as for certain modes of regulation) by referring to what they described
as specific consumer interests and habits in the marketplace. More spe-
cifically, the analysis demonstrates how writings on deregulation emanat-
ing from the Chicago School, from the 1930s onwards, repeatedly
claimed to offer market solutions that protected and benefitted the con-
sumer. These solutions also relied on certain assumptions and arguments
concerning consumer behavior and needs in the market.
The second argument is that the Chicago School’s turn toward deregu-
lation in the post-war period was made possible by a new figure of the
“efficient consumer,” a figure that is positioned at the center of ideational
structures established by the later School in the 1970s and 1980s.
Emerging as early as the 1950s, the figure of the efficient consumer was
central to, and allowed for, a new understanding of the marketplace, one
that uncoupled ideals of economic efficiency, utility, and growth from the
promotion of democracy and moral behavior. As Chicago School scholars
launched this new ideal of the consumer, they also elevated the figure into
the key actor in the marketplace and mobilized it in discussions of effi-
ciency in other societal contexts such as the public sector. Altogether, these
moves served to energize and expand the deregulation discourse. As such,
the efficient consumer came to function as a key dimension in—as well as
a driver of—a large, complex, and multi-dimensional shift in thinking
about political economy. This shift derived from the Chicago School.
The third argument is that this shift in thinking about political econ-
omy was embedded in a wider change in focus, from choice to welfare,
that was unfolding within the Chicago School during the post-war
period. Early Chicago School scholars described consumers as individual
agents, capable of ensuring democracy and freedom in modern society
by expressing their free choices in the market. At the same time, they

7
 See Canedo, The Rise of the Deregulation Movement, which describes how Chicago School scholars
formed part of a larger American deregulation movement that mobilized from the 1950s onwards.
  From Choice to Welfare: The Concept of the Consumer…    109

conceptualized consumers as vulnerable and susceptible beings who had


to be protected from market forces by the state. This conception was
compatible with a definition of consumer citizenship that entailed
notions of socio-political rights and participation. In contrast, later
Chicago School scholars depicted consumers as rational economic agents
who were best protected by their own diligence and by the efficiency of
the market. Moreover, they portrayed consumers as a coherent, homog-
enous, and predictable mass, acting on a deregulated market and serving
merely as a tool of narrow consumer welfare, which was understood as
economic efficiency and aggregate wealth. Altogether, these changes
devolved agency in the marketplace from the individual to the firm, and
it dethroned consumer choice as the core principle of the deregulating
ideas emerging from the Chicago School.
The figure of the efficient consumer, I argue—and the ways in which
it diverged from earlier consumer ideals—can best be understood as an
outgrowth of intellectual developments taking place within the Chicago
School from the 1930s to the 1980s. More specifically, dividing the anal-
ysis into three periods (the 1930s–1940s, the 1950s–1970s, and the
1970s–1980s), the study explores and compares the work of the above-­
mentioned Chicago School scholars, all of whom thematized the concept
of the consumer within a broader language of regulation that addressed
the economic organization of society. Against the backdrop of the better-­
known story of the School from the 1920s to 1950s, I aim particularly at
disaggregating the contributions by figures such as Milton Friedman,
George Stigler, and Robert H. Bork, in order to unfold the shifting views
on deregulation, from choice to welfare, outlined by Chicago School
scholars in the 1960s and 1970s.8 In turn, these shifts are used to ­illustrate
overall changes in neoliberal ideology and practice that took place in this
period.

8
 Several contributions to the research field have tended to focus primarily on Friedman, arguing
that he was the key figure for the development of the later Chicago School (and for the revival of
American free market thought since the 1960s more generally). One recent example is Burgin, The
Great Persuasion. For critiques of Burgin’s strong focus on Friedman, see Timothy Shenk, “The
Long Shadow of Mont Pèlerin,” Dissent (Fall 2013) and Joshua Rathz, “Laissez-Faire’s Reinventions,”
New Left Review 89 (2014): 137–146. In reaction, in portraying the main discursive features, the
unifying patterns, and the divergent aspects of the Chicago School’s deregulation discourse, the
analysis that follows takes into account a plurality of actors.
110  N. Olsen

 rotecting and Educating the Consumer,


P
1930s–1940s
As described in Chap. 2, the concept of the consumer was pushed to the
center of public and political discourse in the United States in the inter-
war years. In this process, previously separate discourses of the consumer,
for example, within social politics and economic thought, were com-
bined. This created a more universal category of the consumer, a figure
now imbued with a plurality of societal practices and virtues. Elevating
this figure into a political and economic key figure of modern society,
most politicians, scholars, and intellectuals described the consumer as an
agent, capable of ensuring and enhancing economic growth and political
democracy. More specifically, they portrayed consumer choice and rights,
as well as the act of consumption, as features that were necessary to boost
the American economy and to strengthen the country’s democracy against
the threats of fascism and communism.
However, the issue of how consumers could best contribute to eco-
nomic growth and democratic development within society was strongly
contested. The disagreement, to a large extent, concerned the question of
whether consumers tend to thrive within free markets or to benefit from
a regulatory framework aimed at protecting the consumer from market
forces. The issue of regulation and the nature and capability of consumers
were thus deeply contested and related to heated debates on how modern
society and its economic, political, and social institutions should be
ordered.
Regulation and consumers had been central issues in American politi-
cal debate since the late nineteenth century, when government consumer
protection had been enacted in reaction to what were perceived as monop-
olistic tendencies in American business. Accordingly, it was due to fears
that monopolies had made price control, concentration of wealth, and
diminished individual initiative into defining characteristics of America’s
market economy that Congress had passed the Sherman Antitrust Act in
1890. By limiting and preventing the formation of cartels and monopo-
lies, the act aimed to improve the conditions of competition so as to
provide consumers with real choices and fair prices in the marketplace.
  From Choice to Welfare: The Concept of the Consumer…    111

The early twentieth century saw further consumer-­protection measures,


such as the Pure Food and Drug Act and the Meat Inspection Act—both
of 1906 and both passed to set minimum standards for the safety and
quality of goods—and the Federal Trade Commission Act of 1914, which
sought to promote consumer protection and eliminate anticompetitive
practices. Moreover, from the 1890s onwards, a number of consumer
leagues had emerged, seeking to strengthen the socio-political rights and
responsibilities of consumers in American society.9
By the 1930s, the ongoing discussions concerning regulation and con-
sumers were linked to the broader debate over social, political, and eco-
nomic reforms associated with what became known as the New Deal. In
this debate, at least three different consumer figures were launched,
namely the “citizen,” the “purchaser,” and the “sovereign” consumer.10
Steeped in the American traditions of consumer activism and govern-
ment consumer-protection regulation, the citizen consumer was launched
by New Deal reformers as a vision that would secure the rights of indi-
vidual consumers in the face of unsafe products, unfair pricing, and mis-
leading advertising. The citizen consumer invoked a vision of the new
American democracy as based on the popular mobilization of consumers
in cooperatives and movements, with consumers also represented in fed-
eral advisory boards and agencies and supported by a state-regulated wel-
fare economy.
Portraying the citizen consumer as part of a collective concept embody-
ing shared ethical and political rights and responsibilities, New Deal
reformers relied on a notion of the individual consumer as vulnerable,
susceptible, and in need of protection from a malfunctioning market-
place and manipulative advertising. This notion was not found in the

9
 Tony Freyer, Regulating Big Business: Antitrust in Great Britain and America, 1880–1990
(Cambridge: Cambridge University Press, 1992); Martin J.  Sklar, The Corporate Construction of
American Capitalism, 1890–1916: The Market, the Law, and Politics (Cambridge: Cambridge
University Press, 1988); Thomas E. McCraw, Prophets of Regulation: Charles Francis Adams, Louis
D.  Brandeis, James M.  Landis, and Alfred E.  Kahn (Cambridge, MA: Harvard University Press,
1984).
10
 What follows is based on Lizabeth Cohen, A Consumers’ Republic: The Politics of Mass Consumption
in Postwar America (New York: Random House, 2003), 17–61. Here, the term “sovereign con-
sumer” replaces what Cohen labels “the business view of consumers,” a perspective defined mainly
through attempts by business to counter the “citizen consumer” ideal.
112  N. Olsen

ideal of the purchaser consumer, which arose alongside the citizen con-
sumer during the New Deal. The purchaser consumer was viewed as con-
tributing to society by exercising purchasing power rather than political
activism and self-assertion. Moreover, this ideal was linked to the convic-
tion that what mattered most was consumers’ purchasing power, not
their right to be protected in the marketplace or heard in government
chambers. Still, the purchaser consumer was informed by an increasingly
dominant Keynesian logic, the argument being that private investment
and self-regulation alone could not remedy America’s economy: these
instruments had to be aided and restrained by government spending
aimed at fueling aggregate demand.
The purchaser consumer diverged in these respects from the third con-
sumer ideal that emerged during the New Deal, that of the sovereign con-
sumer. As we have seen in Chap. 2, this ideal was launched from the realm
of marketing and by free market thinkers who spoke of “consumer sover-
eignty” as a way of arguing that all economic processes were ultimately
directed toward satisfying consumer demand. The market was compared
to the democratic mode of government, for example, by stating that the
market “is a democracy where every penny gives a right to vote.”11 Here
consumers were portrayed as sovereign agents, whose dynamic role in the
market ensured economic efficiency, wealth, and entrepreneurship, but
also such values as democracy, freedom, and individuality. Moreover,
these thinkers voiced great concern over the regulatory visions of pro-
grams like the New Deal, arguing that it diluted the economic and demo-
cratic potential of the free market.
The debate over the regulatory visions of the New Deal was also joined
by representatives of the discipline of economics, which, in the interwar
period, was characterized by pluralism with respect to methodology and
research interests, theoretical and ideological assumptions, and,
accordingly, policy advice.12 This pluralism was also evident at the
­
Department of Economics at the University of Chicago, whose many
scholars during the 1920s and 1930s included Frank H. Knight, Jacob
11
 For the emerging figure of the sovereign consumer in the interwar period, see Chap. 2.
12
 Mary S.  Morgan and Malcolm Rutherford, “The Character of the Transformation,” in From
Interwar Pluralism to Postwar Neoclassicism, eds., Mary S.  Morgan and Malcolm Rutherford
(Durham, NC: Duke University Press, 1998), 1–28.
  From Choice to Welfare: The Concept of the Consumer…    113

Viner, and Henry C. Simons. Usually considered the founding fathers of


the Chicago School, Knight, Viner, and Simons all favored market-based
solutions to the issue of economic order, but they were also critical of
entirely unregulated markets. Moreover, as they bridged several scholarly
traditions—and pursued diverse themes, approaches, and theories—
these three scholars were, to a significant extent, exponents of the inter-
war pluralism within economics.13
I focus here on Henry C. Simons’ 1934 essay, “A Positive Program for
Laissez-Faire,” which the chief architects of the Chicago School all read
and appreciated, but ultimately rejected. It was the first text emanating
from the Department of Economics at Chicago that thematized the con-
cept of the consumer within a broader language of regulation, directly
addressing the economic organization of society.14 The essay sought to
provide a theoretical explanation of the Depression and proposed that
large sectors of the American economy should be reorganized in order to
preserve both political liberty and the dynamics of competition. In so
doing, Simons warned against New Deal visions of economic regulation,
but also argued that it would be necessary to implement a set of policies
to preserve laissez-faire.
In his view on laissez-faire, Simons was in line with many of those
liberal economists and intellectuals who, in the 1930s, had mobilized
with the aim of creating a new political order based on individual free-
dom and free market economy, and who continued later in this pursuit
within the Mont Pèlerin Society. Deeply suspicious of nineteenth-­century
laissez-faire, these liberals associated unregulated capitalism with prob-
lems such as inequality and widespread poverty and forces such as
monopolism that undermined the price mechanism. In this context, as
explained in Chap. 2, they began to discuss how and to what extent the

13
 For accounts of the Chicago School in the interwar period, see the references in note 1.
14
 Henry C. Simons, “A Positive Program for Laissez-faire: Some proposals for a Liberal Economic
Policy [1934],” in Henry C. Simons, Economic Policy for a Free Society (Chicago: The University of
Chicago Press, 1948), 40–77. For an introduction to Simons and to the essay at issue, see Sherryl
D. Kasper, “Henry C. Simons,” in The Elgar Companion to the Chicago School of Economics, ed.,
Ross B. Emmett (Cheltenham: Edward Elgar, 2010), 331–336. Neither Knight nor Viner wrote a
text, which, like “A Positive Program for Laissez-faire,” outlined political visions of how modern
society and its economy should be organized. For how both these scholars sought to separate scien-
tific analysis and political visions in their work, see Burgin, The Great Persuasion, 167.
114  N. Olsen

powers of the state might be utilized to create an effective market and


mitigate its negative consequences.15
In Simons’ “A Positive Program for Laissez-Faire,” the scope for state
action within the economy appeared unquestionable and extensive, both
in respect to creating an effective market and in providing social welfare.
More concretely, Simons recommended numerous initiatives including
public works projects, progressive taxation, and social insurance, as well
as forceful competition policies (also known as antitrust law). In his view,
laissez-faire was defunct first of all because it had given rise to a monopo-
list structure within American business that undermined basic demo-
cratic virtues relating to free competition, political liberty, and social
equality in terms of power and income: “Thus, the great enemy of democ-
racy is monopoly, in all its forms: gigantic corporations, trade associations
and other agencies for price control, trade-unions—or in general, organi-
zation and concentration of power within functional classes.”16
Simons’ proposal to restructure the US economy by breaking up and
limiting the size of giant corporations (and other economic interest
groups) was in large part launched to improve the consumer’s position
within society. Indeed, much of his critique of large corporations con-
cerned their power to “exploit (…) consumers” through fixed prices and
market control.17 In line with this, Simons portrayed consumers in mod-
ern society as deeply heterogeneous and vulnerable. Unlike producers, he
wrote, “[p]eople as consumers are unorganized and inarticulate” and
prone to be harmed by monopolism.18
Simons clearly detected a problem in how the monopolistic market
structure allegedly forced consumers to overpay for goods and reduced
their choices in the marketplace. Moreover, he also worried that the
enormous sums spent by corporations on advertising would manipulate
vulnerable and susceptible consumers into buying things they neither
wanted nor needed: “Profits may be obtained either by producing what
consumers want or by making consumers want what one is actually

15
 See the description of the emergence of neoliberalism in Chap. 2.
16
 Simons, “A Positive Program,” 43.
17
 Simons, “A Positive Program,” 47.
18
 Simons, “A Positive Program,” 50.
  From Choice to Welfare: The Concept of the Consumer…    115

producing. The possibility of profitably utilizing resources to manipu-


late demand is, perhaps, the greatest source of diseconomy under the
existing system.”19
Consequently, in order to establish a market order that protected, pro-
moted, and responded to the free choice of sovereign consumers, Simons
called for a substantial reconstruction of the American economy. Above
all, he argued for strong antitrust policies that would position the Federal
Trade Commission as “perhaps the most powerful of our governmental
agencies,” and he proposed limits upon what he called “the squandering
of our resources in advertising and selling activities.”20
Moreover, Simons encouraged improving the societal position, wel-
fare, and rights of consumers through extensive private and public insti-
tutional mobilization. In addition to advocating that labor unions should
promote “consumer co-operation with respect to both commodities and
the various forms of social insurance,” he described the world’s first con-
sumer rights and protection organization, Consumers’ Research, Inc.
(founded 1929), as “an almost revolutionary development” and expressed
hope “that such undertakings may flourish.”21 Along with the “substan-
tial development of consumer cooperatives for collective research and
consumer education,” he also urged the labeling of goods “on the basis of
Bureau of Standards specification, so that consumers may know (and
insist on knowing) which brands of goods meet requirements for govern-
ment purchase.”22 Altogether, these initiatives were intended to arm con-
sumers with information that would offset the attempts made by business
to manipulate demand.
In sum, Simons aimed to establish a market economy based on free
prices and competition and directed toward satisfying consumer choice.
However, he argued that markets and consumers were vulnerable and
susceptible beings that must be regulated and protected, respectively.
The state was assigned a substantial role in this context. By breaking up
monopolies, restricting advertisement activity, and ensuring a range of

19
 Simons, “A Positive Program,” 71.
20
 Simons, “A Positive Program,” 58 and 57.
21
 Simons, “A Positive Program,” 73.
22
 Simons, “A Positive Program,” 73.
116  N. Olsen

social welfare activities, the state was to guarantee free and fair competition
as well as basic economic, political, and social consumer rights. Moreover,
Simons viewed consumers as forming part of a collective, based on shared
societal interests and responsibilities, which ought to be advanced and pro-
tected by both private and public institutions. As such, “A Positive Program
for Laissez-Faire” combined features from the figures of the sovereign and
the citizen consumer, even if its visions of government spending and social
policies were not as ample as those of the New Deal reformers.
As it turned out, it was the citizen consumer who became central to
the socially embedded, managed capitalism and substantial regulatory
framework that were the outcome of the New Deal programs enacted
between 1933 and 1938.
Still, the main positions outlined in “A Positive Program for Laissez-­
Faire” were to a large extent shared by Chicago School scholars in the
1930s and 1940s. Most importantly, in their critique of laissez-faire,
Jacob Viner and the younger students at the Department of Economics—
Aaron Director, Milton Friedman, and George Stigler—all criticized
concentrations of business power during this period.23 Simons’ mentor,
the always critical and often contrarian Frank Knight, was to some extent
an exception. Although he recognized monopoly as both a “major
mechanical weakness” and “a real evil in many cases,” he did not consider
it to be a force that undermined political freedom. Moreover, he held that
“most monopolies are in fact temporary.”24
However, Knight often pointed to a range of other features of unregu-
lated capitalism that he considered problematic. This was the case in his
famous essay of 1923, “The Ethics of Competition,” which served as a
vital source of inspiration for Simons. Here, Knight rejected the idea that
individuals were able to act with perfect rationality in the marketplace,
arguing that cultural factors played a large role in determining individual
needs. “In fact,” he wrote, “human activity is largely impulsive, a relatively
unthinking and undetermined response to stimulus and suggestion.”25

23
 Van Horn, “Jacob Viner’s Critique”; Van Horn, “Reinventing Monopoly.”
24
 Cited from Van Horn, “Jacob Viner’s Critique,” 281 note 6.
25
 Frank H.  Knight, “The Ethics of Competition,” Quarterly Journal of Economics 37, 4 (1923):
579–624, at 590. For Knight’s skeptical position on all issues related to economics and society, see
Angus Burgin, “The Radical Conservatism of Frank Knight,” Modern Intellectual History 6, 3
(2009): 513–538.
  From Choice to Welfare: The Concept of the Consumer…    117

Echoing Knight’s concern about consumer susceptibility and Viner’s


opposition to the concentration of power in business monopolies,
Simons’ essay made a deep impression on the younger generation of
Chicago School scholars such as Friedman and Stigler. With reference to
the visions first outlined by Simons in the essay, Aaron Director later
wrote that Simons was, by the early 1940s, “slowly establishing himself as
the head of a ‘school’” at the University of Chicago.26

 he Rational and Unprotected Consumer,


T
1950s–1970s
Between the 1950s and the 1970s, Chicago School scholars came to fun-
damentally reinterpret key themes and concerns outlined in Simons’
essay, including his concerns about monopolies and consumers. As part
of a larger attempt to develop free market doctrines, this reinterpretation
grew in reaction to the ways in which regulation was being theorized and
practiced in post-war America. It unfolded against the background of the
profound transformation of the discipline of economics that was taking
place in the 1950s and 1960s; it was also shaped by new political contexts
such as the Cold War.
The post-war American political economy was characterized by rein-
forcement of the socially embedded managed capitalism and the
regulatory framework created in the 1930s. More specifically, in the
1950s and 1960s, this regulatory framework developed into a compre-
hensive system of independent federal commissions and agencies that
oversaw the nation’s crucial infrastructure industries and set price, qual-
ity, and quantity standards, thus determining which firms could enter
or leave a market, what goods and services could be offered, and how
those goods and services were to be sold. These institutions, together
with other industry-­specific and economy-wide agencies, amounted to
a far-reaching regulatory system that imposed conditions on market

 Aaron Director, “foreword,” in Henry C. Simons, Economic Policy for a Free Society (Chicago: The
26

University of Chicago Press, 1948), v–vii at v.


118  N. Olsen

transactions between producers and consumers and between firms and


workers.27
The scope of the American regulatory system peaked in the 1960s and
early 1970s, aided by consumer advocates such as Ralph Nader, who
became famous for demanding aggressive state intervention to protect
Americans from unsafe consumer products.28
Like the New Deal reformers, consumer advocates such as Ralph
Nader and the supporters of the regulatory framework conceptualized a
highly vulnerable and susceptible consumer, trapped within a malfunc-
tioning, manipulative, and repressive capitalist system. A similar con-
sumer figure was portrayed in the flood of literature on consumption
appearing in the post-war period. This heavily criticized the contempo-
rary purchaser-consumerist culture for being individualistic, socially divi-
sive, and wasteful, and claimed that consumer choice was in fact deeply
manipulated by the power of advertising. Some of the best-known con-
tributions came from social critics such as journalist Vance Packard and
economist John Kenneth Galbraith, both of whom sounded an alarm at
post-war consumption culture and politics in their books, The Hidden
Persuaders (1957) and The Affluent Society (1958). Both argued that cer-
tain actors in the market (consumer research and advertising) were
attempting to manipulate consumer desires and needs; Galbraith also
contended that the new demands created by advertising were leading to
exuberance in private production and to consumption that was pushing
out public spending and investment. The result, according to Galbraith,
would be private affluence and public poverty. Along with government
protection for the consumer, he therefore called for economic regulation
and redistribution.29
While Galbraith represented mainstream views of markets and con-
sumers in the political realm, he found himself increasingly at odds with
the views of many of his colleagues in the economics departments of
American universities, departments that in the 1950s and 1960s under-
27
 Canedo, The Rise of the Deregulation Movement, 1–2.
28
 Canedo, The Rise of the Deregulation Movement, 134–156.
29
 Daniel Horowitz, Vance Packard and American Social Criticism (Chapel Hill: The University of
North Carolina Press 1994) and The Anxieties of Affluence: Critiques of American Consumer Culture,
1939–1979 (Amherst: University of Massachusetts Press, 2004).
  From Choice to Welfare: The Concept of the Consumer…    119

went a profound transformation. In a nutshell, neoclassicism had emerged


as the dominant framework characterizing the discipline of economics,
replacing the plurality of approaches that had characterized the interwar
years.30 Three changes were vital in this transformation from pluralism to
neoclassicism. First, the economics discipline came to be informed by the
notion that objectivity could be vested in a distinct set of mathematical
and statistical methods—a notion which, furthermore, cast the econo-
mist in the role of the non-ideological, scientific observer capable of
offering value-free advice on economic policy. Second, the discipline
came to be informed by a focus on the utility-maximizing economic
agent. Many economists thus worked with an idealized figure of the eco-
nomic agent who would act with full information and complete rational-
ity so as to maximize individual utility in a market of perfect competition.31
Third, while the most highly mathematical economists during the 1950s
and 1960s were in favor of economic planning, many mainstream econo-
mists had, by the 1980s, developed a critical attitude toward the market.
At the same time, they now argued for the primacy of economic e­ fficiency
as the guiding value, as well as for the possibility of separating economic
values from other concerns.
Such scholars from the Chicago School as Milton Friedman and
George Stigler were key figures in the transformation of the American
economics discipline from interwar pluralism to post-war neoclassicism.
They also played a vital role in changing the Mont Pèlerin Society in the
1950s and 1960s. Originally a heterogeneous group of intellectuals, phi-
losophers, and economists studying the relations between market and
state from many different angles and embracing various visions of liberal

30
 Neoclassicism is a widely contested concept, which has been assigned a plurality of meanings. See
Tony Lawson, “What Is This ‘School’ Called Neoclassical Economics?,” Cambridge Journal of
Economics 37, 5 (2013): 947–983. My definition of neoclassicism follows Morgan and Rutherford,
“The Character of the Transformation.” See also Roger E. Backhouse, “Economics,” in The History
of the Social Sciences since 1945, eds., Roger E.  Backhouse and Philippe Fontaine (Cambridge:
Cambridge University Press, 2010), 38–70, which likewise argues that the American economics
profession underwent a change from pluralism to neoclassicism in the post-war period, but it pro-
vides a more comprehensive and detailed account that also illuminates disciplinary developments
in other countries.
31
 For how this figure was born during the marginal revolution in the late nineteenth century, see
Chap. 2.
120  N. Olsen

society, the Mont Pèlerin Society became, under their leadership, an asso-
ciation of mainly free market–oriented economists.32
During the 1950s—after their introduction to new strands of free mar-
ket thought at Chicago and in the Mont Pèlerin Society—both Milton
Friedman and George Stigler began to embrace deregulation.33 In so
doing, they elevated the consumer to the key actor in the marketplace,
introducing the figure of the consumer into new societal contexts and
thus energizing and expanding the deregulation discourse associated with
the Chicago School. They also turned key assumptions of Simons’ laissez-­
faire paper upside down, including the idea that markets and consumers
must be created and protected by the state. More specifically, they
expressed a high degree of trust in the efficiency and self-protective mech-
anisms of markets and of consumers, who they saw as sovereign, rational,
and utility-maximizing agents. Moreover, they expressed deep skepticism
toward governmental regulation, claiming that business monopoly was no
real problem for a competitive economy. These arguments were launched
in direct opposition to the views on regulation and consumers associated
with figures such as John Kenneth Galbraith and Ralph Nader.34
It was above all in his writings as a public intellectual that Friedman
mobilized the consumer. Most important here were his books Capitalism
and Freedom and Free to Choose, published respectively in 1962 and
1980 (co-authored with his wife, Rose Friedman, Free to Choose sum-
marized in popular fashion the arguments for deregulation that Milton
Friedman had promoted since the early 1960s).35 Aiming to convince
32
 Friedman and Stigler acted as Presidents for the society from 1970 to 1972 and from 1976 to
1978, respectively. For accounts of the institutional roles played by Friedman and Stigler at Chicago
and in the Mont Pèlerin Society, see Burgin, The Great Persuasion, 152–185, and Edward Nik-­
Khah, “George Stigler, the Graduate School of Business, and the Pillars of the Chicago School,” in
Building Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics
Program, eds., Robert Van Horn, Phillip Mirowski, and Thomas A.  Stapleford (Cambridge:
Cambridge University Press, 2011), 116–150.
33
 Van Horn, “Reinventing Monopoly”; Van Horn, “Jacob Viner’s Critique”; Van Horn and
Mirowski, “The Rise of the Chicago School.”
34
 Even if Ralph Nader later emerged as an advocate for deregulation, Chicago School scholars
continued to consider him an opponent. See Canedo, The Rise of the Deregulation Movement,
134–156.
35
 Milton Friedman, Capitalism and Freedom (Chicago: The University of Chicago Press, 1962);
Milton Friedman and Rose Friedman, Free to Choose: A Personal Statement (Harmondsworth:
Penguin, 1980).
  From Choice to Welfare: The Concept of the Consumer…    121

both decision-­makers and the public of the virtues of a free market


economy, these books portrayed consumers as the key drivers of capital-
ism and of liberal democracy, in line with the figure of the sovereign
consumer launched in the interwar period. One example is found in a
passage in the opening chapter of Capitalism and Freedom. This describes
the market as an open, competitive, and democratic order that reflects
people’s preferences because consumers can choose to accept and reject
its offerings:

The consumer is protected from coercion by the seller because of the pres-
ence of other sellers with whom he can deal. The seller is protected from
coercion by the consumer because of other consumers to whom he can sell.
The employee is protected from coercion by the employer because of other
employers for whom he can work, and so on. And the market does this
impersonally and without centralized authority. Indeed, a major source of
objection to a free economy is precisely that it does this task so well. It gives
people what they want instead of what a particular group thinks they ought
to want. Underlying most arguments against the free market is a lack of
belief in freedom itself.36

Arguing that consumers’ freedom to choose was fully protected by mar-


ket efficiency, Friedman saw no need to constrain this freedom through
paternalistic state regulation. Instead, he proposed letting consumers
constrain the state by subjecting the public sector to their demands. The
logic was as follows: if consumers were allowed to decide for what pur-
poses funds should be spent, the public sector would be infused with
competition and would be forced to produce new and better goods. The
result would be a more efficient, more productive, and more innovative
system. Most famously, Friedman sought to introduce a system of vouch-
ers for school education so as to enable parents to choose freely between
public and private schools, thus forcing the schools to compete for stu-
dents: “Here, as in other fields, competitive enterprise is likely to be far
more efficient in meeting consumer demand than either nationalized
enterprises or enterprises run to serve other purposes.”37
36
 Friedman, Capitalism and Freedom, 14–15.
37
 Friedman, Capitalism and Freedom, 91.
122  N. Olsen

In line with this, Friedman portrayed government intervention in the


economy as ineffective and inferior to the dynamics of consumer choice
on the free market. As well as being inefficient, he claimed, state interven-
tion paved the way for a system in which power- and profit-seeking
bureaucrats and vested interests might dominate and suppress individuals
economically as well as politically. Indeed, once in control of the system,
these forces would use it as a means to their own ends, heedless or igno-
rant of the costs of such actions for other members of society. “Regulation
of the railroads to protect the consumer,” Friedman exemplified in
Capitalism and Freedom, “quickly became an instrument whereby the
railroads could protect themselves from the competition of newly emerg-
ing rivals—at the expense, of course, of the consumer.”38
In chapter seven of Free to Choose, “Who Protects the Consumer?,”
Friedman took his critique of the regulatory system a step further: he
argued that regulation had dangerous, even criminal side-effects. The
context was a discussion of the “burst of moral righteousness” that had
led to the prohibition of alcohol at the end of World War I. Prohibition,
Friedman explained, gave rise to illegal bars in which “the older gangsters
of the day sat […] planning the exploits that made them so notorious;
murder, extortion, hijacking, bootlegging,” and which forced “otherwise
law-obedient citizens” to break the law to get a drink. Regulation, he
concluded, “did suppress many of the disciplinary forces of the market
that ordinarily protect the consumer from shoddy, adulterated, and dan-
gerous products. It did corrupt the minions of the law and create a deca-
dent moral climate. It did not stop the consumption of alcohol.”39
Evidently, Friedman did not see consumers as agents always making
the right choices for themselves. However, he expressed sympathy for
their choices and argued that they generally act wisely based on the avail-
able information and are quick to learn from their mistakes. And while
he linked a system of state regulation to economic stagnation, political
suppression, and exploitation, he viewed an economy in which the many
and changing wants of consumers continuously force producers to invent
new and better things as a free, efficient, entrepreneurial, and, as such,
rational system. Moreover, Friedman suggested that the free market is

 Friedman, Capitalism and Freedom, 197.


38

 Friedman and Friedman, Free to Choose, 227.


39
  From Choice to Welfare: The Concept of the Consumer…    123

more democratic than any traditional political institutions, when it


comes to expressing the true will of the people and promoting individual
wants and demands in modern society.
Friedman’s critique of regulation in Capitalism and Freedom and Free to
Choose involved long discussions of monopoly. In contrast to his views in
the 1930s and 1940s, he now stated that the extent of monopoly was not
a serious problem for the American economy. More specifically, he argued
that the importance of monopolies had been greatly overestimated because
competition rendered them minor and transitory. Debating the issue of
monopoly in Capitalism and Freedom, he emphatically stated: “[A]s I have
studied economic activities in the United States, I have become increas-
ingly impressed with how wide is the range of problems and industries for
which it is appropriate to treat the economy as if it were competitive.”40
In Free to Choose, Friedman therefore summarized his view of the rela-
tionship between regulation, markets, and consumers as follows: “[O]n
the whole market competition, when it is permitted to work, protects the
consumer better than do the alternative government mechanisms that
have been increasingly superimposed on the market.”41
Friedman’s defense of the free market economy was strikingly similar
to the positive program of liberalism that Ludwig von Mises had outlined
in the early 1920s. Like Mises, Friedman sought to salvage the principles
of individual freedom that had been central to classical liberalism; he
emphasized the powers of the free market and the importance of eco-
nomic choice; he reinterpreted democracy by shifting it from the political
to the economic realm; and he placed the figure of the sovereign con-
sumer at the center of his efforts. Indeed, as an echo of Mises, he directly
referred to the voting analogy in his popular writings. This was, for exam-
ple, the case in the book The Tyranny of the Status Quo that he co-authored
with his wife Rose Friedman and which appeared in 1980. Disenchanting
the political through economics, and re-enchanting the market through
the rhetoric of democracy, freedom, and individuality, he wrote:

When you vote daily in the supermarket, you get precisely what you voted
for, and so does everyone else. The ballot box produces conformity without

40
 Friedman, Capitalism and Democracy, 120. See also Van Horn, “Jacob Viner’s Critique,” 295–297.
41
 Friedman and Friedman, Free to Choose, 264.
124  N. Olsen

unanimity; the marketplace, unanimity without conformity. That is why it


is desirable to use the ballot box, so far as possible, only for those decisions
where conformity is essential.42

While, similar to Mises, Friedman saw democracy primarily in functional


terms as a way to provide peace; he was more vocal than Mises about the
need to assign a crucial role to the state in liberal society. Alongside advo-
cating a role for government in setting up and controlling the economy—
for example, through ideas of monetary policies, taxation systems, and
decentralization of decision-making and accountability—he identified a
new political arena in the state itself. By suggesting the introduction of
market mechanisms such as free consumer choice in the allocation of
resources in order to make the public sector more efficient and demo-
cratic, he added a new feature to the neoliberal agenda.
Obviously, the regulatory system and the welfare state developments in
post-war America offered the specific contexts that prompted Friedman to
renew neoliberalism by directing the dynamics of the sovereign ­consumer
toward the state itself. Moreover, the political context of the Cold War was
key to Friedman’s particular portrayal of the consumer as the agent of
capitalism and democracy. More specifically, his portrayal was predicated
on a worldview infused with Cold War dualisms and embedded in a
dichotomist, linear, and irreversible notion of historical development as
an existential struggle between the opposed forces of socialism and free
market liberalism, leading either to decay and destruction or to a perfect
world.43 In this worldview, the discourse of choice was linked to the strug-
gle for democratic over totalitarian values; the consumer emerged as the
paradigmatic actor who was to be given priority over other actors in the
marketplace.44 This discourse included a reconfiguration of the worker

42
 Milton Friedman and Rose Friedman, Tyranny of the Status Quo (New York and London:
Hartcourt Brace Jovanovich), 1970, 66.
43
 See also Burgin, The Great Persuasion, 156.
44
 For perspectives on the contemporary connections made between liberal democracy, the dis-
course of choice, and the Cold War, see Hunter Heyck, “Producing Reason,” in Cold War Social
Science: Knowledge Production, Liberal Democracy, and Human Nature, eds., Mark Solovey and
Hamilton Cravens (Basingstoke: Palgrave, 2012), 99–116, and Sonja M. Amadea, Rationalizing
Capitalist Democracy: The Cold War Origins of Rational Choice Liberalism (Chicago: The University
of Chicago Press, 2003).
  From Choice to Welfare: The Concept of the Consumer…    125

into a consumer and was silent on issues like right-to-work laws because
of a focus on consumption rights that seemed palatable in light of the
economic and political contest of the age with the Eastern Bloc. The Cold
War context thus meant that contemporary economic debates came to be
about much more than just theoretical discussion; they gave birth to a
bold, hardened, narrower understanding of liberal democracy that
revolved around the idea of consumer choice.
Cold War dualisms were also found in Stigler’s take on the consumer,
which had many overlaps with Friedman’s. This can be seen in Stigler’s
work on deregulation from the 1950s onwards, collected in The Citizen
and the State: Essays on Regulation in 1975.45 The essays in this collection
each express a firm belief in the efficiency and self-protective mechanisms
of markets and consumers, as well as deep skepticism toward governmen-
tal regulation. Stigler’s opposition to regulatory consumer protection was
forcefully stated in the essay “Can Regulatory Agencies Protect the
Consumer?” which he first presented in a debate with Manuel Cohen,
former member of the US Securities and Exchange Commission, at the
American Enterprise Institute in 1971. Opening his talk with the com-
ment: “I somehow associate the word protection with the mafia,” Stigler’s
answer to the question posed by his essay title was a clear “No.”46 He
concluded the published version of his talk stating that “public regulation
weakens the defenses the consumer has in the market and often imposes
new burdens upon him, without conferring corresponding protections.”47
Yet there were also crucial differences in Stigler and Friedman’s visions
of the consumer and languages of deregulation. Most importantly, the
two had very different ideas about consumer behavior, the relationship
between capitalism and democracy, how regulation could be achieved,
and who should be enrolled for the purpose.
45
 George Stigler, The Citizen and the State: Essays on Regulation (Chicago: The University of Chicago
Press, 1975). For a detailed account of Stigler’s views on deregulation, see Canedo, The Rise of the
Deregulation Movement, 98–133.
46
 See the video footage “Can Regulatory Agencies Protect the Consumer?,” http://sechistorical.org/
museum/film-radio-television/videoplayer.php?vid=1400835813001&title=%22Can%20
Regulatory%20Agencies%20Protect%20the%20Consumer?%22 (1971, accessed 10 December
2017).
47
 George Stigler, “Can Regulatory Agencies Protect the Consumer?,” George Stigler, The Citizen
and the State: Essays on Regulation (Chicago: The University of Chicago Press, 1975), 178–188, at
181.
126  N. Olsen

Stigler’s views on consumer behavior were rooted in a strong belief in


the utility-maximizing nature of individuals.48 In his work on deregula-
tion, this belief unfolded as a rational choice theory, holding that those
who stand to profit from regulation would always desire regulation.
Applying his theory to analyze the concrete dynamics at play in regula-
tory processes, in the essay “The Theory of Economic Regulation,” Stigler
coined the notion of “regulatory capture”—a term that describes the pro-
cess by which regulatory agencies would eventually come to be domi-
nated by the very industries they were charged with regulating, thus
acting against the public interest.49
Consequently, in contrast to Friedman, Stigler believed that all
attempts to persuade consumers and politicians of the value of deregula-
tion would be in vain as they are interested only in maximizing their own
utility (which might, Stigler argued, at times be achieved by regulation).
Stigler’s work instead addressed the business community and scholars in
other fields of social science. Advising business representatives on how to
achieve deregulation, he suggested that the focus should be on achieving
changes in legal thought and practice rather than in public and political
opinion. To his fellow scholars, he presented the idea of the utility-­
maximizing consumer as a unified framework that could be applied to
human behavior in many, if not all, parts of society.50
Stigler had, as we will see below, a huge impact on the way deregula-
tion was theorized in and beyond the discipline of economics from the
1960s onwards. Friedman, on the other hand, was important above all
for the popular revival of free market thought in post-war America.
Friedman’s call for deregulation also treated utility-maximizing self-­
interest as a driving force of human behavior, but less stringently than
Stigler’s.51 Aiming to build a reasoned consensus in the population at

48
 Steven G. Medema, “Chicago Price Theory and Chicago Law and Economics: A Tale of Two
Transitions,” in Building Chicago Economics: New Perspectives on the History of America’s Most
Powerful Economics Program, eds., Robert Van Horn, Phillip Mirowski, and Thomas A. Stapleford
(Cambridge: Cambridge University Press, 2011), 151–179.
49
 George Stigler, “The Theory of Economic Regulation,” in George Stigler, The Citizen and the
State: Essays on Regulation (Chicago: The University of Chicago Press, 1975), 114–141.
50
 Nik-Khah, “George Stigler.”
51
 This also applies to Friedman’s more scientific work, which was not grounded in any underlying
theory of human behavior. See Medema, “Chicago Price Theory.”
  From Choice to Welfare: The Concept of the Consumer…    127

large, Friedman sought to convince people that their own values are best
met through the realization of the policies he promoted. He thus described
the market as a progressive order fostering such virtues as self-reliance,
responsibility, and commitment, and ensuring the best possible outcome
for society’s uneducated, poor, and average individuals. Likewise,
Friedman sided with consumers against an “elite” that he depicted as
paternalistic and repressive. “[W]hat the critics really complain about,”
he said in a 1973 interview with Playboy, “[is] that under capitalism,
consumers get what they want rather than what the critics think they
should want.”52 More generally, he portrayed consumers as agents of
inherent good, whose rule over the market ensured economic efficiency,
growth, and entrepreneurship, as well as ethical values such as freedom,
democracy, and individuality.
The philosophical opening essays of Stigler’s Citizens and the State also
link consumers, capitalism, and democracy. But these issues are not
addressed in the book’s empirical studies, which explore the effects of
regulation with a focus on “The Criteria of Market Efficiency,” referring
to levels of prices and investment.53 While these levels determine what
consumers have to pay for their goods and the variety of choice on the
market, Stigler generally portrayed deregulation as desirable in his case
studies on the grounds that it creates lower prices and growth, rather than
because it protects and disseminates ethical dimensions of consumer
choice in society.
More specifically, nowhere did Stigler express sympathy for consumer
choice, or belief in the market’s potential to generate virtuous behavior,
as Friedman did. In fact, he expected individuals always to maximize
their own utility, working from the assumption that they generate more
efficiency and wealth as consumers in the market than as agents entering
and capturing regulatory systems for individual utility. For this reason,
Stigler used a new figure of the efficient consumer to shape and justify his
call for deregulation. In other words, Stigler treated consumers as tools to
bring about economic efficiency rather than vehicles for enhancing
52
 Cited from Burgin, The Great Persuasion, 193, on which my account of Friedman’s attitude to
consumers draws.
53
 George Stigler, “Public Regulation of the Securities Market,” in George Stigler, The Citizen and
the State: Essays on Regulation (Chicago: The University of Chicago Press, 1975), 78–102, at 88.
128  N. Olsen

democracy and freedom. Consumers were portrayed as a homogenous,


mechanical, and predictable mass, rather than a heterogeneous group of
individuals with divergent qualities and preferences.
But how did Stigler justify the pursuit of efficiency as an aim wholly
separate from ethics? And what were the deeper philosophical, method-
ological, or ideological underpinnings of this pursuit? To begin with,
Stigler’s project relied on the redefinition of economics—and of welfare
economics—which had been launched in the 1932 essay “An Essay on
the Nature and Significance of Economic Science” by the British free
market economist Lionel Robbins.54 In that essay, in the face of a plural-
ity of coexisting definitions of economics, Robbins simply defined the
subject of economics as dealing with the relationship between ends and
scarce means. This definition involved a strict analytical focus, first, on
how individuals’ preferences play out in their choices between scarce
means, and second, on outlining the principles that most effectively gov-
ern the allocation of scarce means between competing ends. The defini-
tion also saw distributional issues as falling beyond the category of
economic analysis. Challenging standard positions within welfare eco-
nomics, Robbins argued that it was scientifically impossible to arrive at
interpersonal comparisons of individual preferences and utility that could
form the basis of overall social welfare distribution. His separation of
ethical and distributional concerns from the science of economics con-
solidated within Anglo-American economics a new and narrower defini-
tion of utility, adapted from continental economists such as Vilfredo
Pareto and Ludwig von Mises and inextricably linked to individuals and
their choices as well as notions of economic efficiency.
Robbins’ reformulation of economics came to be generally accepted
in the context of the “new welfare economics” of the 1930s and 1940s
(and in the economics discipline more generally in the 1960s).55 Stigler

54
 Lionel Robbins, An Essay on the Nature and Significance of Economic Science (London: Macmillan,
1933). For an account of the reception of Robbins’ essay in the discipline, see Roger E. Backhouse
and Steven G.  Medema, “Defying Economics: The Long Road to Acceptance of the Robbins
Definition,” Economica 76, 1 (2009): 805–820. For an account of the disciplinary discussions of
welfare economics taking place in the wake of Robbins’ essay, see Amadae, Rationalizing Capitalist
Democracy, 88–102.
55
 We will elaborate on these contexts in the following chapter.
  From Choice to Welfare: The Concept of the Consumer…    129

followed this movement in his 1942 textbook, The Theory of Competitive


Price.56 In his work, applying the scarcity-based definition of economics
outlined in Robbins’ essay, Stigler was thus armed with a set of philo-
sophical and methodological premises that allowed him to place distribu-
tional concerns outside the realm of economics, and accordingly to
operate with a narrow definition of consumer utility that was bound up
with the scientific search for economic efficiency.
Ideological motives presumably also played a crucial role in Stigler’s
separation of ethics—and particularly of democratic concerns—from
economic analyses. These motives concern what has been described as
Stigler’s fundamental doubt about the workings of democracy.57 This
doubt involved the belief that decisions to expand government regulation
were a product of the poor instincts possessed by the vast majority of
people. Accordingly, Stigler argued that government policy should be
immunized from the public and that the conduct of politics should be
entrusted to the elites whose instincts for higher standards he wished to
promote. His argument about the mass of people making the wrong
choices also applied to the “marketplace of ideas.” For example, Stigler
opposed student choice in the realm of higher education, arguing that it
would lead to the production of the wrong kind of knowledge. Instead,
he wanted the marketplace of ideas to be governed by elites, most notably
business representatives, whose task it was to curtail and limit consumers’
choices.58 In general, Stigler nurtured a deeply negative view of demo-
cratic processes involving ordinary people, and this view unquestionably
motivated his disregard for democratic concerns in economic analysis.
Altogether, Friedman and Stigler departed radically from the views of
Henry C.  Simons. They exhibited a very strong degree of trust in the
efficiency and the self-protective, rational dynamics of markets and con-
sumers; they deemed the existence of monopolies to be compatible with

56
 George Stigler, The Theory of Price (New York: Macmillan, 1942). See also Backhouse and
Medema, “Defying Economics,” 811.
57
 Nik-Khah, “George Stigler,” 140–141, and Canedo, The Rise of the Deregulation Movement,
110–111.
58
 Edward Nik-Khah, “What Is ‘Freedom’ in the Marketplace of Ideas?,” in Neoliberalism and the
Crisis of Public Institutions. Working Papers in the Human Rights and Public Life Program,
Whitlam Institute within Western Sydney University, ed., Anna Yeatman, 2 (2015), 56–69.
130  N. Olsen

competition; and they opposed any type of legal and public institution
devoted to consumer protection.59 Tellingly, Stigler later joked that
Simons “was the man who said that the Federal Trade Commission
should be the most important agency in government, a phrase that should
be on no man’s tombstone.” Friedman, in turn, reported how, re-reading
Simons’ text, he “had been astounded […] to think that I thought at the
time that it was strongly free market in orientation.”60
However, Friedman and Stigler also outlined divergent concepts of the
consumer, and they utilized these for different purposes. Like Simons,
Friedman linked capitalism inextricably to consumer choice, as well as
expressing concern about the well-being of the poor and a wish for broad-­
based prosperity. But he broke with Simons by arguing that free markets
are capable of ensuring free choice, as well as basic political, social, and
economic consumer rights in modern society, and by taking a more criti-
cal stance toward government intervention. And even if he believed that
the public could be convinced to support and vote for free markets,
Friedman was persistently skeptical about democratic politics in situa-
tions in which the resulting policies might displace market prerogatives.
In other words, similar to Ludwig von Mises, his was inclined to grant
choice in the marketplace primacy over choice in the political sphere.61
Stigler’s views on consumers and markets differed from Friedman’s in
that his call to liberate consumers in the market was shaped by economic
argument rather than democratic ideals. More precisely, he drew on a new
idea of the efficient consumer, together with a new language of deregula-
tion that decoupled capitalism from issues of freedom and democracy. His
rational choice analysis saw consumers as a homogenous mass of efficiency
maximizers rather than as unique individuals. This view was antithetical to
the notion of free individual agency, as it curtailed free consumer choice in

59
 Stigler also outlined an approach that portrayed advertising (which Simons had criticized for
manipulating consumer wants) as an “extremely efficient method” of conveying information to the
consumer. This approach was linked to the argument that consumers do not organize politically
because the costs compared to the benefits of doing so are high. Nik-Khah, “George Stigler,” 127
and Canedo, The Rise of the Deregulation Movement, 105–106.
60
 Edmund W.  Kitch, “The Fire of Truth: A Remembrance of Law and Economics at Chicago,
1932–1970,” Journal of Law and Economics 66, 1 (1983): 163–234, at 178.
61
 Burgin, The Great Persuasion, 152–213; Nik-Khah and Van Horn, “The Ascendancy of Chicago
Neoliberalism.”
  From Choice to Welfare: The Concept of the Consumer…    131

all matters political and economic. In this sense, Stigler’s work foreshad-
owed a way of conceptualizing the consumer and of legitimizing deregula-
tion that was to become a trademark of the Chicago School. Friedman, on
the other hand, invested the demands for deregulation advocated from
Chicago with a certain popular aura and appeal.

 onsumer Welfare in Antitrust Law,


C
1970s–1980s
In the 1970s and 1980s, the features that had characterized George
Stigler’s work became prominent in the writings on deregulation emanat-
ing from the Chicago School. They also influenced the ways in which
deregulation began to be theorized and practiced more generally in
America in this period. Four developments were important for the align-
ment that took place between the Chicago School and mainstream views
on deregulation.
The first was the waning of the regulation movement and of the insti-
tutional framework that had dominated the American political economy
in the post-war period, concurrent with the ascendancy in the 1970s of
the movement whose agenda was to roll back the state. This deregulation
movement involved business groups, free market think tanks, and con-
servative politicians, and it was connected to the academic work and
institutional activities of Chicago School scholars such as George Stigler.
But it also included consumer advocates and New Left intellectuals, who
now likewise argued that it was necessary to scale back supposedly inef-
ficient and repressive federal agencies, to restrain allegedly self-interested
corporate powers, and to restore economic efficiency by deregulating the
market and liberating the consumer. As this unusual coalition gained
momentum, the views of members of the Chicago School on deregula-
tion became more accepted, if not mainstream, in American public
debate during the late 1970s and early 1980s.62
 Canedo, The Rise of the Deregulation Movement; Matthew Hilton, Prosperity for All: Consumer
62

Activism in an Era of Globalization (Ithaca: Cornell University Press, 2009), 152–184; Lawrence
Glickman, Buying Power: A History of Consumer Activism in Post-War America (Chicago: The
University of Chicago Press, 2009), 275–302.
132  N. Olsen

The second development was the decline of the figure of the citizen
consumer and the rise in its stead of the “combined consumer/citizen/
taxpayer/voter whose greatest concern is, ‘Am I getting my money’s
worth?’”63 The increased tendency of American consumer language to
appeal to individual economic self-interest coincided with a new ten-
dency among left-wing politicians and intellectuals across Europe and the
United States to view the dynamics of the market, including mass con-
sumption, in a more positive light.64 Rather than worrying about the
deleterious effects of consumption or about consumer vulnerability, they
began to emphasize individual consumers’ capacity for rationality and
autonomy, as well as to emphasize elements of pleasure, playfulness, and
symbolic exchange as the essence of a vibrant and potentially liberating
and individualizing consumer culture. The changed position toward
­consumer culture on the Left made the argument launched by scholars
such as Milton Friedman that consumers would see lower prices and
more product choice if markets were deregulated seem less bellicose.65
The third key development in this context was the breakdown of
Keynesianism in the 1970s. The inability of Keynesian theory to explain
stagflation (the combination of stagnation and inflation) led to bewilder-
ment not only among Keynesian economists but also among policy mak-
ers, for whom the Chicago School’s theories favoring deregulation now
appeared as a possible solution to current economic problems. In this situ-
ation, Chicago School scholars sought to make their voices heard in vari-
ous ways. While Friedman addressed the public and sought to advise
politicians, Stigler addressed the business community and his fellow schol-
ars. Stigler’s success in disseminating his theories of deregulation and the
utility-maximizing consumer to his audience made him one of the most
important Chicago School scholars of the deregulation movement.66

63
 Cohen, A Consumers’ Republic, 397.
64
 Noel Thompson, Social Opulence and Private Restraint: The Consumer in British Socialist Thought
since 1800 (Oxford: Oxford University Press, 2015) and Daniel Horowitz, Consuming Pleasures:
Intellectuals and Popular Culture in the Postwar World (Philadelphia: University of Pennsylvania
Press, 2012).
65
 On the convergence in the societal–political thinking on the left and right wing in this period,
see Daniel T. Rodgers, The Age of Fracture (Cambridge, MA: Harvard University Press, 2011).
66
 Canedo, The Deregulation Movement, 98–132.
  From Choice to Welfare: The Concept of the Consumer…    133

This brings us to the fourth important development in the process of


alignment between the Chicago School and mainstream views of deregu-
lation: namely, the reinforcement of neoclassical doctrines in the disci-
pline of US economics and the colonization of other social science
disciplines through a widened application of the idea of utility maximiza-
tion in the 1970s and 1980s.67
Chicago School scholars such as George Stigler spearheaded these aca-
demic developments.68 Most famous became the contribution of econo-
mist Gary Becker, who began to apply rational choice theory to explain
human behavior within areas that had traditionally belonged to the dis-
cipline of sociology, such as racial discrimination, criminality, family
organization, and drug addiction.69 A merger was also taking place
between law and economics, one that aimed to refocus the discipline of
law according to neoclassical economic doctrines. One outcome of this
fusion was a reshaping of antitrust thought, brought about by Chicago
legal scholars such as Robert H. Bork and Richard Posner and culminat-
ing in the late 1970s.
Assumptions about consumer behavior and needs in the marketplace
were central to this colonization of other disciplines by neoclassical eco-
nomic thought. While Becker offered a “new theory of consumer
behavior,”70 Bork and Posner continued a tradition reaching back to the
1930s of thematizing the concept of the consumer within a language of
regulation addressing the economic organization of society. In doing so,
they constructed a pro-market and largely anti-interventionist vision of
antitrust that had overlaps with Friedman’s and Stigler’s work on regula-
tion, but which was more directly inspired by the efforts launched by
Aaron Director in the 1950s to rethink the field of antitrust from the
perspective of neoclassical notions of economic efficiency.

67
 Rodgers, The Age of Fracture, 41–66; Backhouse, “Economics.”
68
 Edward Nik-Khah and Robert Van Horn, “Inland Empire: Economics Imperialism as an
Imperative of Chicago Neoliberalism,” Journal of Economic Methodology 19, 3 (2012): 251–274.
69
 Gary Becker, it should be added, acted as President of the Mont Pèlerin Society from 1990 to
1992.
70
 Robert T. Michael and Gary Becker, “On the New Theory of Consumer Behavior,” The Swedish
Journal of Economics 75, 4 (1973), 378–96.
134  N. Olsen

Aaron Director was one of the first members of the Chicago School to
embrace the neoclassical paradigm and an extremely influential figure at
Chicago in the post-war period.71 It is well documented how, in various
academic settings, he convinced a number of economists and legal schol-
ars of the validity and usability of his economic theories.72 Director played
a particularly important role in fusing the fields of law and economics at
Chicago in the 1950s and 1960s. Already in 1933, he and Henry
C. Simons had offered courses in economics at the Law School, where
Simons was employed from 1939 until his death in 1946. Like many of
the scholars who mobilized to renew free market liberalism in the 1930s
and 1940s, Simons and Director were convinced that instituting a well-­
functioning legal system and regulatory apparatus was the key to the cre-
ation of liberal societies based on market economy and individual
freedom.
However, in Chicago, the fusion of law and economics was first effected
in the post-war period. A decisive step in this direction was taken in
1946, when Director began teaching classes on microeconomic price
theory and antitrust at the Law School with legal scholar Edward Levi.
Director also led the Chicago Antitrust Project (1953–1957), which
gathered a number of students, researchers, and visiting scholars in the
task of exploring areas of antitrust law from an economics perspective.
Additionally, he set up the nation’s first law and economics program at
the Law School. Finally, in 1958 he founded the Journal of Law and
Economics, which he co-edited with Chicago School economist Ronald
Coase.73
One outcome of this merger of law and economics at the University of
Chicago was a distinctive economic approach to legal thought, and espe-
cially to the analysis of monopolies and antitrust, building on arguments

71
 For an account of Director’s life and work, see Robert Van Horn, “Aaron Director,” in The Elgar
Companion to the Chicago School of Economics, ed., Ross B. Emmett (Cheltenham: Edward Elgar,
2010), 265–269.
72
 See also Kitch, “The Fire of Truth.”
73
 Steven G.  Medema, “Chicago Law and Economics,” in The Elgar Companion to the Chicago
School of Economics, ed., Ross B. Emmett (Cheltenham: Edward Elgar, 2010), 160–164. For an
account of the American law and economics movement that arose from the 1960s onwards, see
Steven Teles, The Rise of the Conservative Law and Economics Movement: The Battle for Control of the
Law (Princeton, NJ: Princeton University Press, 2008).
  From Choice to Welfare: The Concept of the Consumer…    135

that Director had developed in his seminar on antitrust with Edward


Levi. In the seminar, Director claimed (as had Friedman and Stigler from
the 1950s onwards) that monopolies were often products of natural
developments and, as competition rendered them minor and transitory,
were not a real problem for the American economy. Moreover, he ques-
tioned the dominant legal thought and practice with respect to antitrust
at the time, which held that the presence of many competitors in the
market would ensure fair competition and efficiency.74
According to Director, who was a firm believer in the positive forces of
competition and adhered to the neoclassical idea of efficiency as the key
value of economic activity, monopolistic practices were often more effi-
cient than markets of ten or more competing producers in terms of mea-
sured output, low prices, and the creation of societal wealth. Against this
background, he recommended a relaxed attitude toward monopolies and
large corporations, allowing markets to be dominated by only a few firms,
and he launched a language of cost and efficiency in the field of antitrust
that placed economic concerns above ethical notions of democracy, par-
ticipation, and choice.75
Director’s ideas served as a great source of inspiration to many of the law
students who took his seminar. Among these was legal scholar (and later
Supreme Court nominee) Robert H. Bork, who would later describe his
meeting with Director as a “religious conversion.”76 Together with Richard
Posner, who became a professor at the Law School at Chicago in 1969 (and
served as Chief Judge of the US Court of Appeals for the Seventh Circuit
from 1993 until 2000),77 Bork eventually developed a more unified and
sustained critique of antitrust law, revolving around a new concept with a
strong rhetorical and analytical power: that of “consumer welfare.”78

74
 Van Horn, “Reinventing Monopoly” and Van Horn, “Jacob Viner’s Critique.” In common with
Friedman and Stigler, Director was critical of monopolies until the early 1950s.
75
 For how Director prioritized the efficiency of the competitive order over what he regarded as
inherently irrational and disputatious democratic action, see Robert Van Horn and Ross B. Emmett,
“Two Trajectories of Democratic Capitalism in the Postwar Chicago School: Frank Knight Versus
Aaron Director,” Cambridge Journal of Economics 39, 5 (2015): 1443–1455.
76
 Kitch, “The Fire of Truth,” 83.
77
 Posner had served as judge of the Court from 1981 to 1993.
78
 The literature (authored by legal scholars) on Bork’s writings on consumer welfare is extensive.
For some appraisals, ranging from high praise to fierce criticism, see Kenneth Heyer, “Consumer
Welfare and the Legacy of Robert Bork,” Journal of Law and Economics 57, 3 (2014): 19–32;
136  N. Olsen

The concept of consumer welfare was popularized with the publication


of Bork’s enormously influential book The Antitrust Paradox in 1978.
This synthesized the work in the field that he and Posner had developed
since the 1960s. In a much-quoted sentence in the introduction of the
book, Bork famously stated: “the only legitimate goal of antitrust is the
maximization of consumer welfare.”79
By positioning consumer welfare as the guiding principle of antitrust
analysis, Bork continued the tradition of portraying consumer needs and
benefits as the key object of regulation. But his use of the concept was
arguably confusing, since what he saw as consumer welfare was in fact
total welfare, which is the same as economic efficiency. More exactly, with
consumer welfare, Bork aimed at a model of practicing antitrust law that
focused on distinguishing between efficient and inefficient markets. In
other words, this model sought to maximize efficiency and aggregate
wealth in society—or as Bork termed it, alluding to Adam Smith, “the
wealth of the nation.”80
In line with this, while positioning consumer needs as the object of
regulation, The Antitrust Paradox referred neither to choice nor to broad-­
based prosperity as desired outcomes of deregulation, as Milton Friedman’s
work had done. Bork’s aim was not a system in which consumers might
choose freely between different goods in the market, or influence what
kinds of products were available in the first place. In the same vein, he did
not portray consumers as oppressed individuals who, if only allowed
freely to express their choices in a competitive market based on the price
mechanism, would emerge as democratic reformers and champions of
freedom, working for the benefit of all members of society. On the con-
trary, like George Stigler but more forcefully, he separated the spheres of
capitalism and democracy entirely. In line with the scarcity-based defini-
tion of economics first outlined by Lionel Robbins, he thus emphasized

Herbert J. Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice, 4th ed.
(West: St. Paul, 2011); Barak Y. Orbach, “The Antitrust Consumer Welfare Paradox,” Journal of
Competition Law & Economics 7, 1 (2010): 133–164; and George L. Priest, “The Abiding Influence
of The Antitrust Paradox: An Essay in the Honor of Robert H. Bork,” Faculty Scholarship Series.
Yale Law School 643 (2008): 455–463. See also Davies, The Limits of Neoliberalism and Crouch,
The Strange Non-Death.
79
 Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (New York: Basic Books, 1978), 7.
80
 Bork, The Antitrust Paradox, 90.
  From Choice to Welfare: The Concept of the Consumer…    137

that antitrust as consumer welfare “has nothing to say about the ways in
which prosperity is distributed or used […] and no sumptuary or ethical
component.”81
The roles assigned by The Antitrust Paradox to antitrust law and con-
sumers in the economic organization of society were narrow and limited.
The role of antitrust law was exclusively to “preserve, improve, and rein-
state the powerful economic mechanisms that compel businesses to
respond to consumers.” The role of consumers was “to define by their
expression of wants in the marketplace what things they regard as
wealth.”82 While these standards allowed few and powerful firms to dom-
inate the market (given that they provided lawful products and increased
aggregate wealth), they limited and instrumentalized consumer action to
that of reacting to price signals in the market, thus maximizing the value
of the goods produced and securing efficiency and growth.83
As Stigler had seen them, but in clearer fashion, consumers in The
Antitrust Paradox were described as tools for bringing about economic
efficiency, as an abstract, uniform, and mechanical mass that constituted
merely one among several digits making up the marketplace. Likewise,
The Antitrust Paradox stated more unambiguously than The Citizen and
the State that it aimed to create a market in which the mass of consumers
would rule with the sole purpose of creating efficiency, without regard to
what others saw as the basic economic, social, and political rights of indi-
vidual consumers.84
In line with this, the twin concepts of consumer and efficiency inform-
ing Bork’s analytical framework were firmly grounded in neoclassical
price theory. He thus described, in a narrow sense, consumers as agents,
whose actions are “primarily directed toward the maximization of profit,”
and he enlarged this perspective to describe all economic behavior in soci-
ety as either “primarily efficiency creating, primarily output restricting, or
neutral in its consumer welfare impact.”85 Against this background, Bork
81
 Bork, The Antitrust Paradox, 90.
82
 Bork, The Antitrust Paradox, 91 and 90.
83
 See also Crouch, The Strange Non-Death, 55–57.
84
 See also the discussion of the normative implications of The Antitrust Paradox in Davies, The
Limits of Neoliberalism, 70–107.
85
 Bork, The Antitrust Paradox, 116.
138  N. Olsen

argued that antitrust law should support only those actions that do not
restrict efficiency.
Bork’s reliance on neoclassical reasoning in The Antitrust Paradox was
deeply inspired by his encounters with Chicago School economists.
“Much of what is said here” he stated in the preface, “derives from the
work of Aaron Director.”86 However, his work stands out for using the
inspiration drawn from Director to center antitrust law on one standard.
In addition to portraying consumer welfare as being desirable due to its
positive effects on the economy, Bork argued that it “makes the law effi-
cient in achieving its goals, renders the law internally consistent, and
makes for ease of judicial administration.”87 In other words, consumer
welfare, understood as efficient markets, provided a single measure to
antitrust law. This measure, it should be added, became extremely influ-
ential not only within academia but also in legal practice, as the US
Supreme Court referred to and applied it in its rulings from the 1980s
onwards.88
More generally, by the 1980s the expansion of regulatory bodies had
come to a halt, and Congress had begun to pass legislation introducing
deregulation in many sectors of the American economy. This broad dis-
mantling of the post-war consensus in respect of regulation theory and
practice was influenced by the earlier mentioned deregulation movement,
which gained momentum in American politics during the 1970s, aided
by the work and activities of Chicago School scholars. While their dereg-
ulation agenda was extended into new areas of economic and social life in
the 1990s, they did not subject their theoretical and ideological program
to major change after the late 1970s.

Conclusion and Perspectives
As witnessed in The Antitrust Paradox, the revolving point of the most
recent work on deregulation authored by Chicago School scholars was a
new consumer ideal that was used to shape and justify their call for
86
 Bork, The Antitrust Paradox, ix.
87
 Bork, The Antitrust Paradox, 69.
88
 See the references in note 77.
  From Choice to Welfare: The Concept of the Consumer…    139

deregulation. This ideal diverged from the citizen consumer (it did not
refer to a social definition of citizenship with notions of rights and par-
ticipation), the purchaser consumer (it was devoid of Keynesian ideas of
aiding and restraining the economy), and the sovereign consumer (it did
not portray consumers as sovereign agents of the economy). Most impor-
tantly, in line with the work of Chicago economists such as George
Stigler, The Antitrust Paradox decoupled the links between capitalism and
democracy informing these consumer ideals (i.e., the idea of the con-
sumer as an agent capable of enhancing capitalism and democracy). In so
doing, the book ultimately dethroned consumer choice as the guiding
principle of the market economy—a principle that had informed con-
sumer concepts and deregulation language at Chicago from Henry
C. Simons to Milton Friedman.
Transposing neoclassical ideas of individuals as utility-maximizing
agents operating in well-functioning markets (as outlined by George
Stigler) into the area of antitrust (as outlined by Aaron Director), The
Antitrust Paradox cemented the ideal of an efficient consumer, operating in
a bound market in which agency, initiative, and freedom are handed over
to very few and powerful firms. This efficient consumer was not an indi-
vidual with social, political, and economic rights, but part of a mechani-
cal, abstract mass. Moreover, the role of this consumer was economized,
instrumentalized, and limited to the action of buying the available goods
on the market at the cheapest price possible in order to secure efficiency
and growth. These features were at the core of the vital shift from choice
to welfare that took place in the writings on deregulation authored by
Chicago School scholars from the 1930s to the 1980s.
In a broader perspective, the efficient consumer emanating from
Chicago also inspired academic and political change in many countries
beyond the United States. In so doing, the work of Milton Friedman—
and his figure of the sovereign consumer—was crucial in endowing the
demands for change with popular aura and appeal. For example,
Friedman’s populist version of neoliberalism was important for the suc-
cessful efforts made by British think tanks (such as the Institute of
Economic Affairs and Center for Political Studies) and politicians to for-
mulate and implement an economic policy based on free market ideas
and values from the 1960s onwards. These efforts entailed using the
140  N. Olsen

figure of the sovereign consumer, as developed by Friedman among oth-


ers, to dismantle the conventional Keynesian approach to the economy,
as embedded in its specific ideas of the “worker-saver,” “economic secu-
rity,” and “the state.” They also included shaping a government policy
that secured consumer access to credit in order to enhance individual
participation on the market and limit funding to those organs in the
public sector that aimed to boost the economy through government
investment.89
Friedman’s suggestion to reform the public sector by introducing mar-
ket mechanisms such as free consumer choice was also picked up in coun-
tries outside the United States, even as far away as the Scandinavian
country of Denmark. At the same time, with reference to the sanctity of
consumer preferences, mainstream economics began to discuss the legiti-
macy of the state as a social planner and collective decision-maker. The
following two chapters will illuminate how scholarly and political devel-
opments in economics and in Denmark contributed to the acceptance,
spread, and elaboration of the neoliberal political paradigm and the sov-
ereign consumer.

 See the excellent analysis in Payne, The Consumer, to which we will return in Chap. 7.
89
5
The Emergence of the Sovereign
Consumer in Post-war Economics

This chapter will make an excursus from the hitherto strong focus on
neoliberal ideologists to the analysis of how the sovereign consumer
became the dominating paradigm of politics. In order to clarify in which
arenas and by whom the figure was constructed and disseminated, the
chapter zooms in on the discipline of economics. More exactly, it explores
whether and how mainstream economics thematized the sovereign con-
sumer in defining its themes, methods, and aims in the post-war period.
This exploration is motivated by the observation that many of the ideolo-
gists, who shaped the neoliberal figure of the sovereign consumer, did it in
their capacity as economists, through their scholarly work, and in dialogue
with and opposition to established positions in the field. Still, we know little
about the extent to which mainstream post-war economics reacted to and
discussed the sovereign consumer and whether it contributed to or restrained
the advent of the figure. Neither the comprehensive literature on the making
of the consumer as a societal category nor the growing research on the history
of economic thought has much to say about the topic.1
1
 An exception in the literature on the making of the consumer as a societal category is the brief
perspective on post-war economics textbooks in Noel Thompson, Social Opulence and Private
Restraint: The Consumer in British Socialist Thought since 1800 (Oxford: Oxford University Press,
2015), 112–113.

© The Author(s) 2019 141


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_5
142  N. Olsen

To be sure, in exploring the aforementioned transformation from


interwar pluralism to post-war neoclassicism in economics, scholars of
economic thought have illuminated several themes closely related to the
topic at hand. Among other things, they have shown how this transfor-
mation entailed an increased focus on the individual, commonly concep-
tualized as a consumer, as the key unit of economic analysis. This focus
unfolded, for example, through research on price and demand theory,
and through the acceptance of the Robbins’ definition of economics that
placed individual choice at the center of economic analysis.2 Scholars
have not only documented how these developments reinforced the notion
of the utility-maximizing economic agent that had been invented in the
marginal revolution3 but also pointed to the ways in which this agent was
invested with political values. In particular, the accounts of how econo-
mists linked microeconomic theories relying on notions of a rational and
freely choosing individual to ideals of capitalism and democracy in the
Cold War can be read as histories of how the discipline of economics
embraced a figure resembling the sovereign consumer.4 In line with this,
Avner Offer might be right in asserting that the recasting of British
2
 Phillip Mirowski and D. Wade Hands, eds., “Agreement on Demand: Consumer Theory in the
Twentieth Century Price Theory,” History of Political Economy 38, suppl. 1 (2006); Steven
G. Medema, “Chicago Price Theory and Chicago Law and Economics: A Tale of Two Transitions,”
in Building Chicago Economics: New Perspectives on the History of America’s Most Powerful Economics
Program, eds., Robert Van Horn, Phillip Mirowski, and Thomas A.  Stapleford (Cambridge:
Cambridge University Press, 2011, 151–179); Steven G. Medema, “Defying Economics: The Long
Road to Acceptance of the Robbins Definition,” Economica 76, 1 (2009): 805–820.
3
 For one example of how economists created new notions of individual rationality after 1945, see
Nicola Giocoli, Modeling Rational Agents: From Interwar Economics to Early Modern Game Theory
(Cheltenham: Edward Elgar Publishing, 2003). Although it focuses mainly on the period from
1960s onwards, Daniel T. Rodgers, The Age of Fracture (Cambridge, MA: Harvard University Press,
2011), 40–76, offers a trenchant analysis of the coinage of new notions of rational economic agents
in post-war economics. For how the period also gave birth to ideas of human behaviour that
stressed the bounded rationality and malleable nature of individuals as formulated, for example, by
Herbert Simons and John Kenneth Galbraith, see Hunter Crowther-Heyck, Herbert A. Simon: The
Bounds of Reason in Modern America (Baltimore: The John Hopkins University Press, 2005); David
A. Reisman, Galbraith and Market Capitalism (New York: New York University Press, 1980).
4
 Hunter Heyck, “Producing Reason,” Cold War Social Science: Knowledge Production, Liberal
Democracy, and Human Nature, eds., Mark Solovey and Hamilton Cravens (New York: Palgrave
Macmillan 2012), 99–116; Sonja M. Amadae, Rationalizing Capitalist Democracy: The Cold War
Origins of Rational Choice Liberalism (Chicago: The University of Chicago Press, 2003); Sonja
M.  Amadae, Prisoners of Reasons and Neoliberal Political Economy (Cambridge: Cambridge
University Press, 2015).
  The Emergence of the Sovereign Consumer in Post-war…    143

­ orkers as (more or less) sovereign consumers from the 1960s onwards


w
reflected ideological changes toward market liberalism and was related to
“the emergence of choice doctrines, rational choice, social choice, public
choice, with their strong norm of methodological individualism.”5
However, no study has explored whether and how economics actually
assigned the figure of the sovereign consumer a special role in debating its
methods and objectives after 1945.
Aiming to enrich our understanding of the rise of the sovereign con-
sumer and of the transition to post-war neoclassicism, this chapter
addresses this lacuna. It specifically examines the role and status of the
figure in economics textbooks and in the choice doctrines that emerged
between 1945 and 1970.6 According to Thomas Kuhn, as a genre, text-
books “address themselves to an already accepted body of problems, data,
and theory, most often to the particular set of paradigms to which the
scientific community is committed at the time they are written.”7 The rise
of new subfields, then, arguably indicates a pressing need to debate new
themes, methods, and assumptions or to outline new approaches to old
problems within the discipline. As such, the advance of and changes
within subfields might express overall disciplinary transformations.8
5
 Avner Offer, “British Manual Workers: From Producers to Consumers, c. 1950–2000,” Discussion
Papers in Economic and Social History. University of Oxford 74 (2008), 12. Offer does not specifi-
cally talk about the sovereign consumer but describes the construction of a figure that largely cor-
responds to the one investigated in this book.
6
 Since Chap. 3 included a discussion of rational choice, focus in this chapter will primarily be on
social choice and public choice. Research for this chapter has also included the analysis of econom-
ics dictionaries and of two sessions about the consumer that took place at the annual meetings at
the American Economic Association: the session in 1951 on “The Role and the Interests of the
Consumer” and the session in 1961 on “Reappraisal of the Doctrine of Consumer Sovereignty”.
The papers and comments given at the sessions are published in The American Economic Review 41,
2 (1951), and 52, 2 (1962), respectively. Since it would prolong an already lengthy chapter without
adding significantly to the basic arguments presented below, the analysis of this material has been
omitted.
7
 Kuhn is cited from Arjo Klamer, “The Textbook Presentation of Economic Discourse,” in
Economics as Discourse: An Analysis of the Language of Economists, ed., Warren J. Samuels (Boston:
Kluwer Academic, 1990), 131, which offers a number of other lucid observations about textbooks
as a genre. See also the observations in P. W. Zuidhof, Imagining Markets: the Discursive Politics of
Neoliberalism (PhD dissertation, Erasmus Universiteit, 2012), 64–117. While these two studies
and Rodgers, The Age of Fracture, 40–47, provide excellent perspectives on changes in economics
textbooks in the post-war period, they do not touch upon the role and status of the figure of the
sovereign consumer in these textbooks.
8
 This is arguably also the premise of Cherrier and Fleury’s excellent study of the changing ways of
approaching collective decision mechanisms in post-war economics. Beatrice Cherrier and Jean-­
144  N. Olsen

The two sections of the chapter are uneven in that the first examines a
wealth of textbooks, while the second concentrates on a few canonical
works associated with the choice doctrines under discussion. However,
the sections are united through a focus on the specific semantic field
related to the sovereign consumer and through an overall storyline con-
cerning the role of the status of the figure in post-war economics.
The chapter shows how a figure similar to the neoliberal sovereign con-
sumer gradually gained ground in post-war economics. More exactly,
defining the themes, approaches, and aims of their discipline with refer-
ence to the sovereign consumer, economists elevated the figure into the
key actor of economics. In this process, they launched many different
(and often conflicting) definitions of the sovereign consumer and utilized
the figure for several analytical and political purposes. As such, the sover-
eign consumer ceased to be a pure neoliberal notion within economics
(in fact, one of the most famous neoliberal economists of the era outright
rejected this notion).
In the early post-war period, economics textbooks embraced and
rejected a figure similar to the neoliberal sovereign consumer as a descrip-
tive and normative ideal of the capitalist economy. In most textbooks, we
find two consumers. The first is the sovereign neoclassical consumer that
has stable preferences, full information, and complete rationality; this
consumer drives a market economy in perfect competition. The second is
the “real” consumer that is unpredictable, weak, and susceptible vis-à-vis
advertisement and capitalism’s monopolist structure. This second con-
sumer required a second sovereign, namely, the state, to create an econ-
omy that responded to the free choices of consumers, thus securing an
efficient and democratic economic order. As such, most textbooks distin-
guished between a normative ideal and a descriptive reality in describing
the role of the sovereign consumer in capitalism.
However, some textbooks began to launch a simpler, more robust, and
positive version of the (neoclassical) sovereign consumer, and conse-
quently they paid less attention to the role of state in describing capital-
ism. In addition, neoliberal scholars offered accounts of the capitalist
order that disenchanted the political (i.e., government politics) on behalf
Baptiste Fleury, “Economists’ interest in collective decision after World War II: A history,” Public
Choice 172, 1–2 (2017): 23–44.
  The Emergence of the Sovereign Consumer in Post-war…    145

of the economic (i.e., free markets) with reference to the sovereign


consumer.
At the same time, across ideological divides, the emerging choice doc-
trines introduced a new mode of economics that gained its analytical
force by relying on the notion of a utility-maximizing, rational, and sov-
ereign consumer, who chooses the alternative that she/he most prefers
from a transparent set of options. These choice doctrines elevated con-
sumer sovereignty into the only norm according to which societal well-­
being can be measured. In so doing, they reworked the ideal of traditional
political democracy by interpreting it through market metaphors and
questioned the role of the state as a collective decision-maker and social
planner. Reflecting major academic and societal changes of the time, this
new mode of analysis was compatible with neoliberal dogmas and paved
the way for a broader spread and acceptance of the ideology.

 he Sovereign Consumer in Economics


T
Textbooks Before 1945
Before moving to the post-war period, it should be mentioned that the
sovereign consumer was explicitly named and discussed in at least two
textbooks that appeared before 1945. These two instances do not clearly
indicate a widespread reception of the figure in mainstream economics at
the time. However, they show that it was on the radar of some of scholars
who set out to help students understand the principles of economics. In
so doing, they anticipated many of the discursive features and dilemmas
that also characterized the debates of the sovereign consumer in text-
books after 1945.
The first economics textbook that thematized the sovereign consumer
appeared already in the late 1930s, shortly after the publication of William
H. Hutt’s Economists and the Public. The book was titled Economics and
authored by Frederic Benham, who had studied at London School of
Economics in the 1920s and taught at the institution between 1931 and
1942. As such, Benham’s reference to and take on the sovereign consumer
in Economics is to be understood within the dynamics of the reception of
Austrian economics at London School of Economics in the interwar period.
146  N. Olsen

Similar to Hutt, Benham devoted a chapter of his book to describe


“The Sovereignty of the Consumer” as the distinguishing feature of capi-
talism (along with private property and free enterprise).9 However, in
contrast with Hutt, Benham stressed that Economics did not “discuss
whether capitalism is better or worse than other economic systems, such
as communism, or what types of economic and social reform are
desirable.”10 He also emphasized that “[t]he question of whether the sov-
ereignty of the consumer is desirable falls outside the scope of economic
science.”11 In other words, his account of the role of sovereign consumer
in capitalism aimed to be descriptive rather than normative.
However, echoing a central topoi in the work of Austrian free market
economists, Benham juxtaposed the capitalist system as based on sover-
eign consumers with central planning in which production is dictated by
a “dictator.”12 He also described consumer sovereignty using a language
and a set of analogies that had been invented and shaped by Austrian
economists such as Frank A. Fetter and Ludwig von Mises. Most notably,
he spoke of the sovereign consumer as the “monarch,” “final arbiter,” and
“king” of capitalism.13 Moreover, and in contrast to Hutt, Benham took
for granted that, under capitalism, the consumer is actually sovereign. To
be sure, he spoke of “limitations upon the powers of consumers to deter-
mine what shall be produced” and discussed the possible limitations on
choice imposed by monopolism, state intervention, and advertisement.14
However, he saw none of these features as serious obstacles to the
­sovereignty of consumers in capitalism. For example, in debating the
power of advertisement, he wrote that the sovereign is still sovereign even
if, at times, he is “advised and cajoled” by his subjects.15
Summed up: like the first textbook, which spoke of sovereign consum-
ers as a distinguishing feature of capitalism, Benham’s Economics did not
advance a neoliberal agenda but instead drew heavily on normative
9
 Frederic Benham, Economics: A General Textbook for Students (London: Sir Isaac Pitman, 1938).
10
 Benham, Economics, 14.
11
 Benham, Economics, 161.
12
 Benham, Economics, 11.
13
 Benham, Economics, 158–161.
14
 Benham, Economics, 159.
15
 Benham, Economics, 160.
  The Emergence of the Sovereign Consumer in Post-war…    147

notions from the free market tradition in Austrian economics. In fact,


these features were at the core of Economics, which became a widely used
textbook and appeared in several reprints in the post-war period.
The references to the sovereign consumer in Benham’s Economics (and
in William H.  Hutt’s Economists and the Public) did not, nevertheless,
indicate that it had become habitual among economists to define capital-
ism with reference to sovereign consumers in the late 1930s, regardless of
whether it was done descriptively or normatively. Professor of Political
Economy at Aberdeen University, L. M. Fraser, who happened to review
both Economists and the Public and Economics, found the simultaneous
references to the notion of consumer sovereignty in the two books note-
worthy, but also confusing and ambivalent. In a separate essay, offering a
set of more systematic reflections on the meaning and role of the notion
in the books, he argued that the ideas of consumers’ preferences as being
autonomous and as constituting the ultimate ideal of capitalism required
further clarification before it was incorporated into the vocabulary of eco-
nomic theory.16 Likewise, in his review of Economists and the Public,
Chicago economist Jacob Viner expressed familiarity with the notion of
consumer sovereignty, but he also found Hutt’s use of the notion unclear
and questioned whether the notion was adequate to address the full scope
of the individuals’ activities in modern society.17
Many of Fraser’s and Viner’s colleagues seemingly shared their doubts
concerning the usability of the notion of consumer sovereignty as an eco-
nomic category. Hence, the notion was rarely referred to in economics
textbooks during World War II, even if many of these were couched in
the neoclassical language of supply and demand, discussed below. Besides
the confusion concerning the specific meaning of the term, this had per-
haps also, as suggested by Peter Guerney, to do with the fact that the war
“rendered the notion of ‘consumer sovereignty’ irrelevant if not decidedly
unpatriotic,” due to its emphasis on the individual instead of the eco-
nomic and political community.18
16
 L. M. Fraser, “The Doctrine of Consumers’ Sovereignty,” Economic Journal 99, 195 (1939), 548.
17
 Jacob Viner, “W. H. Hutt, Economists and the Public: A Study of Competition and Opinion,”
Journal of Political Economy 46, 4 (1938), 575.
18
 Peter Gurney, The Making of Consumer Culture in Modern Britain (London: Bloomsbury
Publishing, 2017), 155.
148  N. Olsen

The political atmosphere might explain why, apparently, the only other
textbook that directly discussed the notion of consumer sovereignty
before 1945 also referred to the notion of “citizen sovereignty,” under-
stood as the role of the citizen in influencing the allocation of resources
in the economy through political voting. This book, Economic Analysis
and Public Policy (1942), became a widely used college textbook in the
United States in the 1940s and 1950s. It was authored by Mary Jean
Bowman and George Leland Bach, who were colleagues at Iowa State
University.19
Economic Analysis and Public Policy aimed to bridge an institutional
and neoclassical approach to economics, stressing, respectively, the role of
history and institutions and the dynamics of supply and demand in shap-
ing the economy. While the consumer played a prominent role in most
chapters, the specific notions of consumer sovereignty and citizen sover-
eignty were presented in a chapter on “The Public Economy.” Proceeding
from the Robbins’ definition of economics, Bowman and Bach here
define consumer sovereignty as the principle according to which resources
are most effectively allocated in the economy. They added that there were
many interferences with this principle, one of them being related to gov-
ernment activity as producer of goods and services. Regarding those cases
wherein governments produced goods and services without taking into
account expressions of consumer preferences, they wrote: “Where the
dollar votes are absent as guides, the allocation of resources in the public
economy of a democratic country is, ideally, primarily carried out through
a process of political voting.”20 It was this process of voting for representa-
tives and policies that Bowman and Bach labeled citizen sovereignty.
According to Bowman and Bach, citizen sovereignty in the political sys-
tem resembled consumer sovereignty in the private economy. However, they
identified two major differences between the two principles of allocating soci-
etal resources. The first was that, in contrast to the “one-dollar-­one-vote basis”
19
 Mary Jean Bowman and George Leland Bach, Economic Analysis and Public Policy (New York:
Prentice Hall Inc., 1942). Bowman received her PhD in economics from Harvard University in
1938 before she became assistant professor at Iowa State University; Bach received his PhD in
economics from the University of Chicago in 1940 and briefly worked as an assistant professor at
Iowa State University before moving on to a new job as special assistant at the Federal Reserve in
Washington.
20
 Bowman and Bach, Economic Analysis and Public Policy, 717.
  The Emergence of the Sovereign Consumer in Post-war…    149

in the public economy, the “one-dollar-one-vote basis” in the private econ-


omy gave more power to the rich man, causing situations in which “yachts
and caviar are produced while millions go ill-fed and clothed.”21 The second
was that “in the public economy there is no comparative weighting of specific
benefits and sacrifices by consumers as exists in the private economy.”22 The
public economy thus lacked “adequate means for weighting alternatives on
the part of the various voters and for expressing their various sets of prefer-
ences specifically through the ballot.”23 Consequently, “even when costs and
benefits are related, they cannot easily be put on an individual basis for deci-
sions by individual voters.” Against this backdrop, Bowman and Bach warned
against “carrying too far the analogy between “citizens’ sovereignty” and “con-
sumers’ sovereignty.”24 Moreover, while stressing the policy implications of
economic theory, they urged that measuring the success of government
response to citizens’ political votes was difficult and ought to be carried out
by political scientists rather than economists.
In debating the implications of and limitations to citizens’ sovereignty
and consumers’ sovereignty in respect to the allocation of societal
resources, as will be discussed further below, Bowman and Bach referred
to disciplinary discussions that had been sparked during the socialist cal-
culation debate and within the field of welfare economics in the 1930s.
These discussions concerned whether economics should be related to or
separated from policy making, what values should underpin policy
­decisions if these were to be guided by economic analysis, and how indi-
vidual preferences could possibly be aggregated into a common social
objective. Rather than taking sides in the debate, Bowman and Bach
pointed to the difficulties of giving clear answers to these questions. As
such, their work differed from most textbooks that appeared in the imme-
diate post-war period, as these were much less hesitant in determining
common societal values and in encouraging governments to intervene in
the economy in pursuit of these values.

21
 Bowman and Bach, Economic Analysis and Public Policy, 717.
22
 Bowman and Bach, Economic Analysis and Public Policy, 717.
23
 Bowman and Bach, Economic Analysis and Public Policy, 717.
24
 Bowman and Bach, Economic Analysis and Public Policy, 718.
150  N. Olsen

Ideal and Reality: The Sovereign Consumer


in Post-war Textbooks
Unlike Benham’s Economics and Bowman and Bach’s Economic Analysis
and Public Policy, none of the textbooks published in the immediate post-­
war period directly referred to the notion of consumer sovereignty that
scholars such as Ludwig von Mises, Friedrich Hayek, and William
H.  Hutt had advanced in the interwar era. However, most textbooks
introduced the general idea that sovereign consumers are the drivers of
the capitalist economy. Moreover, in so doing, they used many of the
same conceptual elements that the abovementioned scholars had coined
and embraced, including the voting analogy. These conceptual elements,
however, were in various ways modified, inserted into new analytical con-
texts, and overshadowed by what most economists at the time believed to
be the real sovereign actor in the capitalist economy: the state.
The most elaborate discussions of the descriptive and normative ele-
ments associated with the figure of the sovereign consumer were found in
the most influential textbooks of the post-war period, namely, Paul
Samuelson’s Economics, which first appeared in 1948 and was reissued in
six editions by 1964.25 Recent research has provided excellent perspec-
tives on the aims of this book and the contexts in which it emerged.26
Among other things, the research has shown that Samuelson initially
attempted to write a policy-oriented textbook with a strong Keynesian
element, but he addressed the concerns of conservative critics regarding
the market-critical and government-friendly passages in drafts by turning
the book into a more theoretical text that toned down polemic passages
and presented its policy proposals in a softer fashion. Samuelson’s main
objective was to take a middle-of-the-road position rather than tie his
analysis to a specific ideological cause.
25
 Paul Samuelson, Economics: An Introductory Analysis (New York: McGraw-Hill, 1948).
26
 Roger E. Backhouse, Founder of Modern Economics: Paul A. Samuelson, Volume I: Becoming Paul
Samuelson, 1915–1948 (Oxford: Oxford University Press), 532–596; Yann Giraud, “Negotiating
the ‘Middle-of-the-Road’ Position: Paul Samuelson, MIT, and the Politics of Textbook Writing,
1945–55,” History of Political Economy 46, 5 (2014): 134–152; Yann Giraud, “The Changing Place
of Visual Representation in Economics: Paul Samuelson Between Principle and Strategy,
1941–1955,” Journal of the History of Economic Thought 32, 2 (2010): 175–197. Lucid observations
are also found in Rodgers, Age of Fracture, 40–78.
  The Emergence of the Sovereign Consumer in Post-war…    151

The middle-of-the-road position also characterized Samuelson’s take


on the sovereign consumer. On the one hand, in defining its rule of the
economy as a distinguishing feature of capitalism, he wrote: “What things
will be produced is determined by the votes of consumers – not every two
years at the polls but every day in their decisions to purchase this item
and not that.”27 This analogy between the market and democratic politics
was placed in the section on “How a Free-Enterprise System Solves the
Basic Economic Problems.”28 According to Samuelson, the free market
order denoted “Not Chaos but Economic Order.” Giving the example of
how a gigantic capitalist system secured the constant flow of goods in and
out of New York every week, he wrote: “All this is undertaken without
coercion or centralized direction by any conscious body!”29 To his (almost
Hayekian) perspective on the spontaneous economic order, he added:
“There is in it [the capitalist system] a certain order and orderliness. It
works. It functions. Without intelligence it solves one of the most com-
plex problems imaginable, involving thousands of unknown variables
and relations (…).”30
On the other hand, Samuelson’s endorsement of capitalism as an
ordered, efficient, and democratic system dictated by consumer voting
was accompanied by several reservations. Samuelson immediately added
that his description of capitalism as a perfect and harmonic system only
served as an antidote to the contrasting description of capitalism as “pure
chaos.”31 Adding that free markets were “nowhere near perfect” and in
fact non-existent—and that a thoroughly planned economy was equally
defective and undesirable—Samuelson went on to outline the basis of a
“Mixed Capitalistic Enterprise System.” This involved mending what he
believed to be the limitations of capitalism in respect to its potential to
enhance political democracy and economic efficiency.
Some of the limitations that Samuelson detected in the capitalist order,
based on consumer voting, were similar to those pointed out by William
H. Hutt in Economists and the Public. Among other things, Samuelson
27
 Samuelson, Economics, 38.
28
 Samuelson, Economics, 35.
29
 Samuelson, Economics, 35.
30
 Samuelson, Economics, 35.
31
 Samuelson, Economics, 36.
152  N. Olsen

drew attention to the unequal distribution of votes in the marketplace


that were caused by massive inequality in terms of income and wealth in
modern society. “In the first place,” he wrote to illustrate the resulting
problem, “goods go to where there are the most votes or dollars. John
D. Rockefeller’s dog may receive the milk that a poor child needs to avoid
rickets.”32 Moreover, he argued that capitalism’s monopoly elements
resulted in “wrong price, distorted profit uses, incorrect and wasteful
resource allocation,” and as such prevented the efficient use of resources
and a mechanism of a market order that responded to consumer
voting.33
Additionally—and here he deviated from Hutt and echoed instead
arguments from John Maynard Keynes’ The General Theory—Samuelson
associated capitalism with periodic “acute and chronic cycles” in unem-
ployment, output, and prices.34 Moreover, he held that government had
to alleviate the flaws of capitalism by regulating the marketplace, distrib-
uting income, and providing welfare services, as well as by securing full
employment. Again, invoking the analogy made between the market and
the democratic form of government, he wrote: “By casting sufficient
votes in the form of dollar bids in certain directions, it causes resources to
flow there.”35 He thus introduced the state as the real captain of a
­well-­functioning capitalist system. Indeed, because he presented fiscal
policy as the main tool to secure full employment, Samuelson diluted his
earlier account of how sovereign consumers dictate the capitalist econ-
omy: “The private economy is not unlike a machine without an effective
steering wheel or governor. Compensatory fiscal policy tries to introduce
such a governor or thermostatic control devise.”36
Samuelson’s description of the consumer’s role in the economy was
similarly double-sided. On the one hand, in his chapter on “The Theory
of Consumption and Demand,” Samuelson introduced the neoclassical
utility-maximizing agent with stable preferences, full information, and
complete rationality.37 Given this, Noel Thompson has detected in
32
 Samuelson, Economics, 38.
33
 Samuelson, Economics, 39.
34
 Samuelson, Economics, 41.
35
 Samuelson, Economics, 41.
36
 Samuelson, Economics, 412.
37
 Samuelson, Economics, 447–479.
  The Emergence of the Sovereign Consumer in Post-war…    153

Economics “the free, rational chooser, playing his/her vital, directive, util-
ity maximizing role in the economic democracy of a market economy.”38
On the other hand, in Economics, Samuelson often described consum-
ers in the capitalist economy as deeply susceptible and vulnerable, rather
than as vital, directive, and autonomous actors. In the chapter on
“Personal Finance and Social Security,” he wrote: “In spending their
money, people act with regularity, but not always with rationality.” He
added: (…) the average consumer (…) is an amateur when it comes to
spending money.”39 In his view, “the consumer’s health as well as his
pocketbook” were always at stake in a market ruled by great corporations
and their advertising machines that produced nothing but “the squander-
ing of valuable brains on repetitious slogans.”40
Summed up, the most popular textbook of the post-war period,
Samuelson’s Economics both enthroned and dethroned the sovereign con-
sumer as the ruler of capitalism. More precisely, it first enthroned the
figure as a descriptive and normative ideal that, by voting on the market-
place, enhanced economic efficiency and political democracy, and then
dethroned it as a utopian, and, ultimately, undesirable mode of pursuing
these objectives. Instead, Economics positioned the state as the sovereign,
who, by casting its votes in the economy, established a mixed capitalist
system that was much better equipped to secure efficiency and democ-
racy. While later editions of Economics underwent many changes, this
foundation remained in place.
Few other textbooks of the post-war era ventured into such explicit politi-
cal discussions and evaluations of the idea of an economy based on sovereign
consumers as Samuelson’s Economics. However, using a more descriptive
style, most of them similarly thematized the idea of a consumer-­driven econ-
omy by combining a neoclassical language of supply and demand theory and
a Keynesian discourse of full employment. This was, for example, the case in
Kenneth Boulding’s Economic Analysis, which first appeared in 1941 and was
reprinted several times in the period under discussion.
Like many other textbooks reappearing in the immediate post-war
period, Economic Analysis was revised in order to make its original
38
 Thompson, Social Opulence, 112.
39
 Samuelson, Economics, 206.
40
 Samuelson, Economics, 207–207.
154  N. Olsen

neoclassical emphasis fit the Keynesian impulses prevalent after


1945.41 The first edition of this book included only two sections; they
were, (1) supply and demand, and (2) marginal analysis. In these sec-
tions, Boulding relied on the idealized figure of an economic agent
that acts with full information, complete rationality, and without
obstacles in a market of perfect competition and thereby drives the
economy. By examining changes in demand as caused by “the supreme
mover of the economic order – the ultimate consumer, for whom all
goods are made and toward whom all economic activity is directed,”42
he thus described the behavior of consumers as being defined by util-
ity maximization and their preferences as merely a function of taste,
income, and price.43
To be sure, Boulding also thematized possible limitations to the
idea of a market in perfect competition as he outlines in Economic
Analysis. One of these was the challenge of monopoly, which could
potentially “exploit consumers” by making them pay higher prices
and thereby bring about a “general social loss.”44 Another was the role
of advertising about which he had a highly critical opinion. According
to Boulding, even if it might serve a purpose by providing a descrip-
tion of prices and commodities, most advertisement was “devoted to
an attempt to build up in the minds of the consumer irrational prefer-
ences for certain kinds of goods.”45 However, Boulding did not offer
more detailed discussions of the extent to which consumers were vul-
nerable to large corporations and advertisement in a market economy.
Moreover, his discussions of the possible limitations of the idea of a
market in perfect competition were rather short and not prioritized in
the analysis. It was the ideal, not the challenges to it, that Boulding’s
Economic Analysis centered. In this setup, a descriptive version of the
sovereign consumer appeared to be the efficient ruler of the capitalist
democracy.

41
 Kenneth Boulding, Economic Analysis (New York: Harper and Brothers Publishers, 1941).
42
 Boulding, Economic Analysis, 636.
43
 Boulding, Economic Analysis, 648–653.
44
 Boulding, Economic Analysis, 568.
45
 Boulding, Economic Analysis, 620.
  The Emergence of the Sovereign Consumer in Post-war…    155

The second edition of Economic Analysis, which came out in 1948,


was substantially revised.46 Whereas the first edition included only two
sections, on “Demand and Supply” and “The Marginal Analysis,” the
new edition also contained sections on “Macroeconomics” and “More
Advanced Analysis,” which presented Keynesian tools alongside neo-
classical economics. Explaining this addition to his text, Boulding
pointed to what he perceived as the limitations of equilibrium analysis
by stating that “many propositions which are true of individuals or of
small groups turn out to be untrue when we are considering the system
as a whole.” He therefore emphasized the need for an aggregate
approach.47 Moreover, as Boulding introduced issues such as aggrega-
tion, unemployment, business cycles, and the impact of government
policy on the economic system, the government emerged as a macro-
sovereign that warranted as much attention as the micro-sovereign fig-
ure of the consumer in his analysis of the dynamics and workings of the
capitalist market economy.
In the second edition of his Introduction to Economics, published in
1952, Alec Cairncross (a Cambridge economist greatly inspired by
Keynes) also stressed that he “inevitably” had “given more prominence to
the influence of the State in economic life” than in the first edition from
1944.48 In addition to expanding the section on unemployment,
Cairncross now assigned an ample role to the state as a “planner” that was
“responsible for the economic life of the country.”49 He explained that “it
is pledged to maintain full employment; it must try to secure the most
effective use of all available resources; it must ensure that adequate provi-
sion is made for the future through the stock of capital; it has to give
effect, as best it can, to the demand of social justice.”50
To be sure, Cairncross’ Introduction to Economics also relied on a supply
and demand analysis based on the neoclassical assumption of perfect
competition and a notion of the sovereign consumer as an economic

46
 Kenneth Boulding, Economic Analysis, revised edition (London: Hamish Hamilton, 1948).
47
 Boulding, Economic Analysis, revised edition, 260.
48
 Alec Cairncross, Introduction to Economics, second edition (London: Butterworth & CO., 1951), v.
49
 Cairncross, Introduction to Economics, second edition, 571.
50
 Cairncross, Introduction to Economics, second edition, 572.
156  N. Olsen

agent, “who is simply completely ‘rational’ in satisfying his wants, and


pays no regard to the interest of others.”51 However, Cairncross modified
this assumption throughout the book. Among other things, he wrote:
“We buy, very often, impulsively or through the habit of force of exam-
ple. Or we may buy because our sales resistance has crumpled at the
sounding of some advertiser’s trumpet.”52 Moreover, Cairncross held that
consumers were weak in the face of monopoly. Conceding that monop-
oly could in theory be “possible and effective,” he nevertheless argued
that “if some commodity is monopolized, consumers may be powerless
to get what they want (and will pay for) in the proper quantity. They
show their readiness to cast votes (…). But the election is disregarded.”53
Against this background, Cairncross found it legitimate for the state to
regulate the economy by encouraging, enforcing, and prohibiting the
consumption of some goods over others – even if it thereby “set aside any
contrary verdicts by individual consumers.”54
Cairncross’ Introduction to Economics is arguably representative of the
general take on the figure of the consumer found in economics textbooks
in the early post-war period. These textbooks both embraced a figure
resembling the neoliberal sovereign consumer as a descriptive and nor-
mative ideal of the capitalist economy and rejected it as a utopian, flawed,
and, ultimately, undesirable way to pursue the objectives of economic
efficiency and political democracy. Consequently, they stressed the need
for another sovereign in the economy: the state.

 trengthening the Sovereign Consumer


S
and Questioning the State
Certain changes related to the figure of the sovereign consumer can be
observed in some of the textbooks first published in the early 1960s, such
as in, for example, Richard G.  Lipsey’s An Introduction to Positive

51
 Cairncross, Introduction to Economics, second edition, 8.
52
 Cairncross, Introduction to Economics, second edition, 572.
53
 Cairncross, Introduction to Economics, second edition, 9.
54
 Cairncross, Introduction to Economics, second edition, 287.
  The Emergence of the Sovereign Consumer in Post-war…    157

Economics, which appeared for the first time in 1963 and became one of
the most popular textbooks in the 1960s and 1970s.55 Lipsey’s book con-
tained many of the same elements as its predecessors, including theories
of supply and demand, consumer demand and competition, and
Keynesian income and employment theory. However, it also introduced
new themes. Most importantly, as suggested by the title, the book empha-
sized deductive theory, inspired by Karl Popper and Milton Friedman,
with an economics based on measurement and testing.
An Introduction to Positive Economics rendered the workings of the
capitalist economy, including its trademark of consumer sovereignty, in
an optimistic tone. In the chapter on price theory, using Robbesian-­
Hayekian language, Lipsey wrote: “In a market society, the allocation is
the outcome of millions of independent decisions made by consumers
and producers all acting through the mechanism of the market, and it is
the study of the market mechanism which is our task in this book.”56
Softening his claim, he added: “It is often remarked that in a free market
society the consumer is king. Such a maxim reveals only half of the truth.
Prices are determined by both demand and supply; a free market society
gives sovereignty to two groups, producers and consumers, and the deci-
sion of both groups affects the allocation of resources.”57
However, An Introduction to Positive Economics did not elaborate on
the challenges facing consumers from the supply side critically.
Consequently, the section of the book dedicated to consumer rationality
focused on establishing rationality as a theory of consistent behavior
rather than on consumer susceptibility.58 Moreover, the section on
monopoly merely stated that, from the perspective of positive economics,
it was impossible to say anything “for or against monopoly as compared
with competition.”59 In keeping with this, and as part of his ambition not
to offer direct policy advice, Lipsey did not strongly emphasize the neces-
sity of state intervention in the economy. As such, An Introduction to
55
 Richard G.  Lipsey, An Introduction to Positive Economics (London: Weidenfeld and Nicolson,
1963).
56
 Lipsey, An Introduction to Positive Economics, 53.
57
 Lipsey, An Introduction to Positive Economics, 54.
58
 Lipsey, An Introduction to Positive Economics, 148–149.
59
 Lipsey, An Introduction to Positive Economics, 256.
158  N. Olsen

Positive Economics launched a simpler, more robust, and positive version


of the neoclassical sovereign consumer, while it painted a weaker picture
of the other sovereign in the capitalist economy: the state. This formed
part of a positive economics focused on measurement, testing, and pre-
dictability, which became widespread in economics from the 1960s
onwards.
While An Introduction to Positive Economics was not tied to any ideo-
logical cause, two other textbooks argued directly in favor of the free
market system and unfolded a figure of the sovereign consumer similar to
those that Milton Friedman and George Stigler had advanced in their
pursuit of deregulation from the 1950s onwards. Both books were co-­
authored by scholars related to the neoliberal network.
Appearing in 1954, Prices, Income and Public Policy was written by
James M. Buchanan in collaboration with Clark Lee Allen and Marshall
R. Colberg.60 Buchanan received his PhD from the University of Chicago
in 1948. He taught at the University of Virginia from 1956 to 1968, and,
following a short stint at UCLA, at Virginia Tech from 1969 to 1983. He
received the Nobel Memorial Prize in Economic Science in 1986 for his
contribution to public choice theory. Throughout his career, he was
­associated with several free market think tanks and institutions, includ-
ing the Mont Pèlerin Society. Among other positions, he acted as presi-
dent of the Society from 1984 to 1986.61
In Prices, Income and Public Policy, Buchanan and his co-authors intro-
duced an understanding of the economy—and of the sovereign con-
sumer—that was, ideologically, in accordance with the work of Milton
Friedman and couched in a positivist language of technical economics that
included the use of curves and talk of “predictive value.” The sovereign
consumer was presented with reference to the voting analogy in the open-
ing section (“Prices Direct Our Economic Behaviour”) of the first chapter
(“Consumers Are Sovereign: The Organizing Principle”) of the book:
60
 Clark Lee Allen, James M. Buchanan, and Marshall R. Colberg, Prices, Income, and Public Policy
(New York: McGraw-Hill, 1954).
61
 For Buchanan’s life and work, see Richard E. Wagner, James M. Buchanan and Liberal Political
Economy: A Rational Reconstruction (London: Lexington Book, 2017); David A. Reisman, James
Buchanan (Basingstoke: Palgrave, 2015); Amadae, Rationalizing Capitalist Democracy, 133–155;
and recent articles by Alain Marciano and Peter J.  Boettke, such as Alain Marciano and Peter
J. Boettke, “The Past, Present and Future of Virginia Political Economy,” Public Choice 163, 1–2
(2015): 53–65.
  The Emergence of the Sovereign Consumer in Post-war…    159

The determination of which goods and services are to be produced is really


made in the final analysis by the consumer himself. Every dollar spent for
a good constitutes a vote for the production of that commodity, and the
number of votes cast determines what will be produced (…). But the
important thing is that the fundamental decisions which run the economy
are made by millions of individual consumers shopping in the nation’s
market places. This has been referred to as the “principle of consumer sov-
ereignty,” and it is the organizing principle which in a private-enterprise
economy renders a governmental planning agency unnecessary.62

Similar to Friedman, while they juxtaposed free markets with govern-


ment planning, Buchanan, Allen, and Colberg were not in favor of
entirely free markets but assigned a vital role to the state to create and
keep the free market economy in balance. Alongside recommending the
use of monetary policy as a counter-cyclical measure similar to Henry
C. Simons and the early work of Friedman, they were in favor of antitrust
laws (although they believed that government intervention was the source
of most monopoly power).63 However, Prices, Income and Public Policy
clearly advocated a market order in which the role of government was
limited and primarily aimed at securing effective competition through
consumer sovereignty. Hence, Buchanan, Allen, and Colberg explained:

The power of individuals voting in the market place to call forth goods and
services, to motivate production, is reduced, and the power of individuals
voting in the polling places (or their representatives) is correspondingly
increased. Voter sovereignty replaces consumer sovereignty, carrying with it
all the imperfections of decision making in representative democracies, the
influence of pressure groups, voter ignorance, etc. It must be recognized
that one of the most difficult problems of our times concerns the proper
dividing line between these two great principles of economic control.64

Buchanan, Allen, and Colberg do not specify their view on the “proper
dividing line between these two great principles of economic control.”

62
 Allen, Buchanan, and Colberg, Prices, Income, and Public Policy, 7.
63
 Allen, Buchanan, and Colberg, Prices, Income, and Public Policy, 61–83, 127–137, 298–311.
64
 Allen, Buchanan, and Colberg, Prices, Income, and Public Policy, 281.
160  N. Olsen

However, they clearly contrasted what they saw as the imperfect voting
procedure in the ballot box to the much more effective market democ-
racy as entailed in the principle of consumer sovereignty. This “disen-
chantment of politics by economics” was a key feature of the first, and for
a long time only, neoliberal economics textbook to appear in the post-war
era.
Prices, Income and Public Policy was joined in 1964 by Armen A. Alchian
and William R. Allen’s neoliberal textbook University Economics.65 A pro-
fessor of economics at UCLA, Alchian nurtured close ties to the Chicago
School of Economics and became a member of the Mont Pèlerin Society
in the 1950s.66 This might explain the particular take on the free market
and the sovereign consumer put forth in University Economics, which, in
many respects, overlapped the accounts found in Prices, Income and
Public Policy and Lipsey’s An Introduction to Positive Economics.
University Economics understood economic theory and analysis as a
“positive” and “non-normative” enterprise.67 It began by taking the reader
through 30 entire sections on micro-economics, based on the ideal of the
neoclassical consumer, and then, in the remaining third of the book, pro-
vided only a cursory overview of macro-economic issues. Moreover, it
offered a positive account of the capitalist system that unfolded as a
vibrant normative defense of free markets and free consumer choice.
The normative features of University Economics are, for example, seen in
its discussion of the role of advertisement in capitalism. Rather than criticiz-
ing advertisement for wasting societal resources or for prompting consum-
ers’ irrationality, as George Stigler did, Alchian and Allen stressed its potential
for “providing information about potential exchange opportunities at less

65
 Armen A.  Alchian and William R.  Allen, University Economics (Belmont, CA: Wadsworth
Publishing Company, Inc., 1964).
66
 Alchian presented papers at the Society’s meetings in in 1959, 1965 and 1976. See “Mont Pèlerin
Society (1947–…): Inventory of the General Meeting Files (1947–1998),” Liberaal Archief,
accessed 1 January 2018, http://www.liberaalarchief.be/MPS2005.pdf. See also the comments on
the paper “Some Economists of Property Rights” that Alchian presented at the 1965 meeting in
Dieter Plehwe, “The Origins of the Neoliberal Economic Development Discourse,” in The Road from
Mont Pelerin: The Making of the Neoliberal Thought Collective, eds., Phillip Mirowski and Dieter
Plehwe (Cambridge, MA: Harvard University Press 2009), 392. William R.  Allen obtained his
PhD from Duke University in 1953 and joined the UCLA faculty in 1952, where he remained for
the rest of his career.
67
 Alchian and Allen, University Economics, 5.
  The Emergence of the Sovereign Consumer in Post-war…    161

cost and effort than by other methods.”68 Moreover, like Milton Friedman,
they stressed the market’s potential for satisfying consumer demands.
Against the idea that advertisement fabricated consumer wants and there-
fore ought to be considered harmful, the authors wrote: “However, if I took
a less authoritarian, less paternalistic attitude, with more humility and rec-
ognition of differences in tastes, I might be willing to entertain the possibil-
ity that customers prefer (…) to buy the cigarette that does that advertising
rather than the one that does not.”69
Alchian and Allen’s praise of advertisement for helping to give con-
sumers what they wanted formed part of a generally favorable account of
a free market economy that was juxtaposed of what the authors spoke of
as the only possible alternative, namely, a system in which government
decides on “the life and actions of other people.”70
Indeed, while elevating free consumer choice as the ultimate symbol of
efficiency and ethics in economics, Alchian and Allen were more hesitant
with respect to assigning a role to the government in the economy.
Among other things, in contrast to earlier textbook authors, they doubted
that Keynesian tools necessarily provided useful correctives to the dynam-
ics of free markets. In the chapter titled “National Income Theory: The
Basic Keynesian Model,” they wrote: “Some have regarded him (Keynes)
as a virtual messiah; in the eyes of others, he was – if not the devil him-
self – at least the first lieutenant of the fallen angel.”71 For the readers of
University Economics, it was not difficult to see through which of these
perspectives Alchian and Allen viewed Keynes.
To sum up: a number of new textbooks presented a simpler, more
robust, and positive version of the neoclassical consumer in describing
the capitalist economy, leaving out the portrayal of the state as a macro-­
sovereign steering the economy and protecting the consumer. At the
same time, free market ideologists associated with the Mont Pèlerin
Society further challenged the traditional interpretation of consumer
and state sovereignty and the relationship between these two modes of

68
 Alchian and Allen, University Economics, 58.
69
 Alchian and Allen, University Economics, 378.
70
 Alchian and Allen, University Economics, 379.
71
 Alchian and Allen, University Economics, 592, note 1.
162  N. Olsen

sovereignty. In so doing, they disenchanted the political on behalf of


the economic and sewed doubt about the possibility of creating a sta-
ble, democratic, and prosperous economy through government
intervention.
However, the abovementioned works were hardly representative of the
mainstream view on sovereign consumers and free markets in economics
textbooks in the early 1960s. First, this period also saw several reprints of
textbooks that reused the distinction between a normative ideal and a
contrasting reality in relation to these issues. Second, it also saw the
appearance of new textbooks that continued to stress the existence of two
sovereigns, a micro and a macro, in an effort to describe capitalism, but
framed the constellation slightly differently than earlier books by adding
new reference points.
Campbell R. McConnel’s Economics: Principles, Problems and Policies
from 1960 was one of the textbooks that added new reference points to
the traditional description of capitalism. It did so by introducing John
Kenneth Galbraith’s arguments that (1) market power undermined con-
sumer sovereignty by creating false needs through advertisement and that
(2) private consumption pushed out public spending and therefore neces-
sitated further economic regulation and redistribution. Obviously, this
account portrayed the consumer as a vulnerable being in need of govern-
ment protection.72
Similar textbooks, such as later editions of Samuelson’s Economics, also
referred to Galbraith, thus adding to the tradition of enthroning and
dethroning the consumer as sovereign ruler of the capitalist economy.
Yet, at the same time, they included discussions of new theories that
questioned whether government was capable of meeting individual pref-
erences through social planning. For example, McConnel’s Economics
referred to public choice scholars such as James M.  Buchanan and
Anthony Downs in discussions of the purpose and effect of government
regulation of the economy and public spending.73 Likewise, in the fifth
edition of his Economic Analysis from 1966, Boulding included a longer

72
 Campbell R. McConnel, Economics: Principles, Problems and Policies (New York: McGraw-Hill,
1960). See the entire 15 references to Galbraith in the index (748).
73
 McConnel, Economics: Principles, Problems and Policies, 500 and 695.
  The Emergence of the Sovereign Consumer in Post-war…    163

section on welfare economics in which he referred to the so-called impos-


sibility theorem that Kenneth J.  Arrow launched in Social Choice and
Individual Values from 1951, claiming, as will be further discussed below,
that there was no ethically acceptable way to move from a set of individ-
ual preferences to a social preference.74 The 1964 edition of Samuelson’s
Economics also contained sections on welfare economics, including a note
discussing Ludwig von Mises and Friedrich Hayek’s questioning of the
feasibility of a socialist economy.75
Many textbooks refuted the assumptions of social choice and public
choice (and other ideas questioning the idea of the state as a social plan-
ner and collective decision-maker). However, as will be elaborated below,
mainstream economics could no longer ignore these doctrines on the
verge of the 1970s, when a stronger embrace of market forces eclipsed
confidence in the possibilities of macroeconomic management among
economists. But how did the emerging choice theories challenge the
­traditional understandings of economics and politics in the discipline?
And what role did the figure of the sovereign consumer play in the con-
struction and legitimization of these theories?

 ocial Choice and the Sovereign Consumer:


S
The Contribution of Kenneth Arrow
Social choice theory, public choice theory, and rational choice theory all
emerged as subfields in economics in the late 1940s and 1950s. Rational
choice theory was, in the broadest sense, the framework for analyzing the
individual social and economic behavior that informed both social and
public choice (and post-war neoclassical economics more generally).
However, as we saw in Chap. 4, rational choice also became associated
with the more specific research concerning both regulation and human
behavior in relation to crime, marriage, and education as conducted by

74
 Kenneth Boulding, Economics (fifth edition): Volume I: Microeconomics (New York: Harper Row,
1966), 647.
75
 Paul Samuelson, Economics: An Introductory Analysis, sixth edition (New York: McGraw Hill,
1964), 620–623, 630, 629, note 2.
164  N. Olsen

Chicago School economists such as George Stigler and Gary Becker,


whose work had a clear ideological bearing.
However, as we will see below, what characterized the emergence of
choice doctrines was in fact the broad spectrum of analytical purposes and
political positions that economists used the sovereign consumer to frame
and legitimize. Indeed, with the rise of social choice theory and public
choice theory, the sovereign consumer ceased to be a strictly neoliberal
notion. At the same time, these choice doctrines offered an interpretation
of the economy that had striking similarities to neoliberal analyses.
The Stanford Encyclopaedia of Philosophy defines social choice theory as
“the study of collective decision processes and procedures (…) concerning
the aggregation of individual inputs (e.g., votes, preferences, judgments,
welfare) into collective outputs (e.g., collective decisions, preferences, judg-
ments, welfare).”76 While scholars have pondered these issues since the
eighteenth century, social choice theory took off as a ­specific subfield of
economics in the 1950s, aided especially by the publication of Kenneth
J. Arrow’s Social Choice and Individual Values in 1951.77
Social Choice and Individual Values was Arrow’s PhD thesis. While
writing the thesis, Arrow was associated with several institutions. He was
a graduate student at Columbia University, a research assistant at the
Cowles Commission for Research in Economics, and an assistant profes-
sor at the University of Chicago. Moreover, he was employed at the global
policy think tank RAND Corporation, which was founded in 1948 by
Douglas Aircraft Company to provide the United States Armed Forces
with research and analysis. In 1951, after submitting his thesis, Arrow
became a professor of economics and statistics at Stanford University. He
later received the Nobel Memorial Prize in economics, due to his work on
social choice theory, among other things.78

76
 See Christian List, “Social Choice Theory,” Stanford Encyclopaedia of Philosophy, accessed 1
November 2017, https://plato.stanford.edu/entries/social-choice/
77
 Kenneth Arrow, Social Choice and Individual Values (New York: John Wiley, 1951).
78
 Arrow was awarded the prize in 1972. He shared it with economist John Hicks. Biographical
information about Arrow – and excellent accounts of Social Choice and Individual Values – can be
found in Philip Mirowski, Machine Dreams Economics Becomes a Cyborg Science (Cambridge:
Cambridge University Press, 2002), 153–308, and Amadae, Rationalizing Capitalist Democracy,
83–103. See also the authoritative account in Roger E. Backhouse, A History of Modern Economic
Analysis (Oxford: Blackwell, 1985), 307–311.
  The Emergence of the Sovereign Consumer in Post-war…    165

While giving birth to social choice theory, Social Choice and


Individual Values struck a final deathblow to a specific tradition of so-
called welfare economics.79 Emerging in the work of Alfred Marshall
and Henry Sidgwick in the nineteenth century and culminating in
the writings of Cambridge economist Arthur C. Pigou (who gave the
field its name) in the 1920s, the exponents of this tradition argued
that different individuals’ utilities could be compared. In addition to
providing a way to judge the greatest good to the greatest number of
persons, Pigou listed a number of problems in the market economy
with respect to securing societal welfare, such as various negative
externalities (costs not internalized in the market price, e.g., noise
and pollution) and the provision of public goods. Given this, he
endorsed a range of economic policies that one historian interpreted
as “providing a blue-print for the welfare state.”80
The traditional approach to welfare economics was heavily challenged
from two different sides in the 1930s in a dispute that overlapped with
the socialist calculation debate. First, Lionel Robbins, as discussed in
Chap. 4, argued that there was no scientific way of comparing one indi-
vidual’s utility with another’s. Second, Swedish economist and Social
Democratic politician Gunnar Myrdal argued that, like all other assump-
tions in economics, the notion of interpersonal utility comparisons was
deeply invested with values. While Robbins argued that making such
comparisons should be distinguished from objective economic analysis,
Myrdal stated that the values behind this and all other assumptions
should be clearly explicated. In spite of their very different conclusions,
the attacks launched by Robbins and Myrdal on welfare economics was
perceived as being similar in kind and altogether devastating for this
tradition.81
In Social Choice and Individual Values—responding to further discus-
sions of welfare economics that had taken place among economists such
as Abram Bergson, Paul Samuelson, and John Hicks since the early
79
 Amadae, Rationalizing Capitalist Democracy, 83; Roger E.  Backhouse, The Penguin History of
Economics (London: Penguin, 2002), 281–282.
80
 Cited from Backhouse, A History of Modern Economic Analysis, 166, from which the above
account is drawn.
81
 Backhouse, A History of Modern Economic Analysis, 169–170.
166  N. Olsen

1930s—Arrow aimed to probe how individual preferences can be amassed


into a collective expression through the choice mechanism.82 In so doing,
he set out five conditions for his analysis, which largely drew on main-
stream theoretical assumptions in post-war neoclassical economics. These
were (1) people are rational and have consistent and transitive prefer-
ences; (2) preferences must count as the data to be assayed into the col-
lective outcome; (3) individual preferences are unrestricted; (4) no
individual can be a dictator; (5) individual preferences cannot be inter-
personally compared. Against this background, Arrow used a mathemati-
cal proof to launch his so-called impossibility theorem, stating that for
three or more people choosing from three or more alternatives, it is
impossible to guarantee a “collective rational” outcome accurately repre-
senting individuals’ preferences.83 Stated in less technical language, Arrow
proved that there is no democratic decision-making process that can
aggregate individual preferences into an unambiguous collective result.
For our purposes, it is worth noticing that, in framing his impossibility
theorem, Arrow utilized two key features associated with neoliberal ideol-
ogy, namely, the voting analogy and the notion of the sovereign consum-
er.84 Arrow introduced the first of these features in the opening paragraph
of Social Choice and Individual Values: “In a capitalist democracy, there
are essentially two methods by which social choices can be made: voting,
typically used to make ‘political’ decisions, and the market mechanism,
typically used to make ‘economic’ decisions’.”85 By linking the voting
analogy to the notion of consumer sovereignty, Arrow introduced the
notion of citizen sovereignty. He thus transferred the economic idea of
individual choice into the realm of social choice as the foundational value
upon which collective decisions must be built. “We certainly want to
assume,” Arrow wrote regarding the notion of citizens’ sovereignty, “that
the individuals in our society are free to choose, by varying their values,

82
 For these developments and Arrow’s contribution to them, see Backhouse, A History of Modern
Economic Analysis, 302–317.
83
 In rendering the five conditions for Arrow’s analysis and his impossibility theorem, I am echoing
the authoritative account in Amadae, Rationalizing Capitalist Democracy, 103 and 104.
84
 Amadae, Rationalizing Capitalist Democracy, 2 and 106–109; Mirowski, Machine Dreams,
302–303.
85
 Arrow, Social Choice and Individual Values, 1.
  The Emergence of the Sovereign Consumer in Post-war…    167

among the alternatives available.”86 The notion also informed his argu-
ment that “the doctrine of voters’ sovereignty is incompatible with that of
collective rationality.”87
Obviously, Social Choice and Individual Values drew not only on the
analytical features that informed free market ideology; its conclusions
also seemed to resemble arguments launched by free market ideologists
concerning the impossibility of fulfilling individual preferences through
government planning. “The upshot of this claim,” Philip Mirowski wrote
in a review of Sonja M. Amadae’s authoritative analysis of Arrow’s impos-
sibility theorem, “was that market expression of citizen preferences was a
faithful and dependable representation of their desires, whereas standard
majority voting procedures were not. It privileged economic virtues over
political democracy.”88
In the abovementioned study, Amadae argues that Arrow’s highly the-
oretical and mathematical analysis in Social Choice and Individual Values
formed part of a wave of literature that emerged from RAND and pro-
vided a rationale for both democracy and market capitalism as part of the
country’s Cold War ideological conflict with Marxist Communism. More
specifically, by constructing a new understanding of a so-called rational
choice liberalism, this literature postulated an implicit and inevitable
connection between free market economics and democratic politics,
doubted the meaningfulness of notions such as public interest and social
welfare, and relied on the ideal of a self-interested, strategic rational actor
exercising her/his choices unconstrained by others.
However, as Amadae also points out, Arrow was not a neoliberal.89
Nor did he offer his analysis to ideological networks associated with the
Mont Pèlerin Society or any other institution devoted to free market poli-
tics. Accordingly, Social Choice and Individual Values, which was issued as
an official RAND report, was devoid of references to economists such as
Friedrich Hayek or Ludwig von Mises. In ideological terms, Arrow began
his career as a socialist, and his work continued to be shaped by a leftist
86
 Arrow, Social Choice and Individual Values, 28.
87
 Arrow, Social Choice and Individual Values, 60.
88
 Philip Mirowski, “Sleights of the Invisible Hand: Economists’ Interventions in Political Theory,”
Journal of the History of Economic Thought 27, 1 (2005), 95.
89
 Amadae, Rationalizing Capitalist Democracy, 128–129, 183–184.
168  N. Olsen

sensibility. He believed that an effective and fair economy could be


achieved through a mix of free enterprise and public planning, which
involved emending what Arrow understood as flaws in the free market
through government intervention.90 While this perspective was not expli-
cated in Social Choice and Individual Values, Arrow’s conclusion, in fact,
referred to decision-making processes on the market.91 Against this back-
drop, it has been suggested that, by pointing to the limits of the conclu-
sions that could be drawn from individualistic reasoning, Arrow
emphasized the need to look for other decision-making mechanisms and
values in order to decide what is good and just for the community.92
Summed up: even if the book launched arguments that resembled
those offered by free market ideologists concerning the impossibility of
fulfilling individual preferences through government planning, Social
Choice and Individual Values can arguably be read in various and contrast-
ing ways and is difficult to place politically. To this, we can add that it
drew on analytical features that were becoming widespread across ideo-
logical boundaries in economics, including both the voting analogy and
the notion of consumer sovereignty. But from where, exactly, did Arrow
draw these two features?
In his introduction, Arrow pointed to a number of studies in which
“the analogy between economic choice and political choice has been
pointed out (…)”. Among these were the articles “The Interpretation of
Voting in the Allocation of Economic Recourses” (1943) by Howard
Bowen, “Economic Theory and Nationalism” (1933) by Frank
H. Knight, and “The Rational of Group Decision-Making” (1948) by
Duncan Black.93 However, none of these studies coupled the voting
analogy to the notion of consumer sovereignty. It is more likely, as sug-
gested by Sonja M.  Amadae, that Arrow drew this notion from the

90
 Daniel B. Klein, “Kenneth J. Arrow,” Econ Journal Watch 10, 3 (2013): 268–281.
91
 As also pointed out by Amadae, Rationalizing Capitalist Democracy, 128–129.
92
 Howard Brick, Transcending Capitalism: Visions of a New Society in Modern American Thought
(Ithaca: Cornell University Press, 2006), 472–480.
93
 Arrow, Social Choice and Individual Values, 5–6. Howard Bowen, “The Interpretation of Voting
in the Allocation of Economic Resources,” The Quarterly Journal of Economics 58, 1 (1943): 27–48;
Frank H. Knight, “Economic Theory and Nationalism,” Frank H. Knight, The Ethics of Competition
and Other Essays (London: George Allen & Unwin, 1936), 277–359; Duncan Black, “The Rational
of Group Making,” Journal of Political Economy 56, 1 (1948): 23–34.
  The Emergence of the Sovereign Consumer in Post-war…    169

Austrian contributions to the socialist calculation debate or, rather, from


the socialist responses to arguments against the feasibility of a socialist
economy launched by Ludwig von Mises, Friedrich Hayek, and Lionel
Robbins.94
As mentioned in Chap. 2, in addition to invoking the sovereign con-
sumer as an analytical category when debating the possibilities of achiev-
ing Pareto efficiency, socialist and Marxist economists also referred to the
figure in discussions of whether individual preferences constituted an
appropriate ethical basis for a modern socialist society. This issue first
raised in Marxist economist Maurice H. Dobb’s widely discussed article,
“Economic Theory and the Problems of a Socialist Society,” which
appeared in 1933.95 In the article, Dobb rejected both Ludwig von Mises’
argument that a socialist economy is infeasible due to the lack of a price
mechanism and the argument offered by socialist economist H.  D.
Dickinson that a socialist economy striving for equality could be com-
bined with a price system, including free choice of consumption.96 In so
doing, Dobb criticized the Robbinsian position that science should be
value-neutral, singling out the position taken by economist Nicholas
Kaldor, who had sided with Robbins’ definition of economics by suggest-
ing that the economy should be judged from its ability to allocate scarce
means efficiently by fulfilling individual wants.97 According to Dobb,
Kaldor’s suggestion relied on tacit assumptions that involved “an undi-
minished capacity to deliver judgements on practical affairs.” These
assumptions, Dobb explained, involved flawed ideas of free consumer
choice and the analogy concerning voting on the market and in politics:

The virtues of “economic democracy” which it confers on a free market rest


on a similar sacredness of individual choice to the virtues of Parliamentary
democracy. Both operate through a convenient franchise system: in the one

94
 See Amadae, Rationalizing Capitalist Democracy, 88–102, which the following account to large
extent relies on.
95
 Maurice Dobb, “Economic Theory and the Problems of a Socialist Economy,” The Economic
Journal 43, 172 (1933): 588–598.
96
 H.  D. Dickinson, “The Economic Basis of Socialism,” The Political Quarterly 1, 4 (1930):
561–572.
97
 Nicholas Kaldor, “Review of Planwirtschaft und Verkehrswirtschaft by Carl Landauer,” The
Economic Journal 42, 166 (1932): 276–281.
170  N. Olsen

votes are cast by offers on a market, in the other by crosses at a polling


booth. The highest economic good consists in giving the consumer what he
thinks he wants, as political good consists in giving the people the govern-
ment it thinks it deserves.98

Dobb identified problems in both conceptions of democracy. Labeling


them “part of our bourgeois heritage from the nineteenth century,” he
argued that, in pursuit of power, their proponents manipulated people to
vote for their cause. However, he also argued that the economic ideal of
democracy was the more problematic of the two, due to the inequality of
wealth and the social construction of wants on the marketplace:

in the economic sphere there is not even an approach to universal suffrage:


on the contrary, a widely graded system of plural voting is the rule. Some
men poll each a thousand votes to another’s one. Moreover, like the old-­
fashioned squire, the possessors of many economic “votes” powerfully
influence the verdict of the mass  – they “set the pace,” establish the
­conventions for the multitude and the standards which others strive to
imitate and attain.99

Unlike liberals such as Mises, Robbinsians like Kaldor, or socialists like


Dickinson, Dobb plainly denied the authenticity and fairness of any
market order based on consumer choice. Moreover, he claimed that
planned economies were better suited to allocate societal resources in an
efficient and democratic fashion, though he did not provide concrete evi-
dence of the economic order he envisioned.
In his 1934 article “Economic Theory and Socialist Economy,” social-
ist economist Abba Lerner rejected not only Mises’ claim that only a
market economy can be organized rationally according to the principle
of consumer sovereignty but also Dobb’s arguments against the possibil-
ity of founding a socialist economic order based on free consumer
choice.100 Instead, Lerner sided with Dickinson’s assertion that efficiency

98
 Dobb, “Economic Theory,” 591.
99
 Dobb, “Economic Theory,” 591.
100
 A. P. Lerner, “Economic Theory and Socialist Economy,” The Review of Economic Studies 2, 1
(1934): 51–61.
  The Emergence of the Sovereign Consumer in Post-war…    171

was a value-neutral objective for organizing a planned economy.


Moreover, he rejected the idea that consumer preferences are easily
manipulated and held that the “sacredness of consumers’ preferences”
was in accord with socialist ideals. He also held that free consumer choice
was more desirable than its alternative—an economic order in which
government firmly decides what is good for individual members of
society:

A superior contempt for the tastes and judgment of the “masses,” and a
paternal solicitude in choosing for the people what is good for them, does
not seem to me to be the avoidance of an unscientific major premise about
“sacredness.” It consists rather in supplanting the democratic assumption
that – in the absence of vitiating factors – people try to get what they like,
by the much more suspect proposition that somebody else (the Government,
Mr. Dobb?) knows better than the people themselves what is really good
for them.101

In an attempt to find a middle ground between “authoritarianism” and


“intransigent liberalism,” Lerner maintained that the competitive system,
as based on consumer preferences, should be adapted to the socialist soci-
ety. He also held that efficiency, as based on the price mechanism, formed
a value-neutral principle applicable to the measurement of all economic
systems. Yet, in his dispute with Dobb, Lerner did not take the next step
of defining the specificities of the general principles underpinning his
synthesis.
In Social Choice and Individual Values, Arrow sided with Lerner against
Dobb by elevating consumer sovereignty as the ultimate social value
instead of pursuing a transcendent collective value.102 In doing so, he
bypassed a discussion of what Dobb and other scholars with different
ideological observations and analytical inclinations had pointed to as
being fundamental flaws in the notion of consumer sovereignty. In
Arrow’s own words, he took individual values “as data and not capable of
being altered by the nature of the decision process itself,” even if “the

101
 Lerner, “Economic Theory and Socialist Economy,” 54.
102
 Arrow, Social Choice and Individual Values, 81–89.
172  N. Olsen

unreality of this assumption” had been asserted by scholars such as


Thorsten Veblen and Frank H. Knight.103
One of the places that Knight had questioned the authenticity of indi-
vidual values as expressed through choice was in fact in the article
“Economic Theory and Nationalism,” which Arrow, as mentioned,
referred to as a forerunner in discussions of the voting analogy.104 In his
essay, Knight portrayed capitalism and democracy as compatible and
complimentary modes of societal organization because democratic politi-
cal activity allowed for the coordination of individual interests in collec-
tive decisions in a manner similar to the coordination of individual
choices on the market.105 However, he also detected fundamental flaws in
both systems. Similar to Dobb, Knight argued that liberal politics and
economics essentially concerned a pursuit for power in which the
­competition for votes between party political machines and business
firms resulted in inequality and monopoly and involved endless coercion
and persuasion of individuals whose activities on the marketplace were
easily influenced by advertising and other stimuli.
By heralding the notion of consumer sovereignty as the ultimate social
value from socialist contributions to the calculation debate, Arrow
stripped the idea of the freely choosing individual (and thereby the voting
analogy) from the potential problems that Knight and others had dis-
cussed. Moreover, in moving this agent from the economic to the politi-
cal world, he also endowed it with a set of capabilities concerning human
rationality that he took from mainstream neoclassical economics, thereby
constructing a rational utility maximizing agent with stable preferences,
who acts independently, based on full and relevant information. Finally,
in keeping with other scholars in the field of welfare economics, such as
Paul Samuelson and John Hicks, he approached the criticisms of tradi-
tional welfare economics by using the Pareto-criterion as his social wel-
fare function. That is, he connected the notion of consumer sovereignty
103
 Arrow, Social Choice and Individual Values, 8.
104
 Knight, “Economic Theory and Nationalism”.
105
 See the excellent comment on this dimension of Knight’s thought in Ross B. Emmett, Frank
Knight and the Chicago School in American Economics (London: Routledge, 2013): 105–106 and
Angus Burgin, “The Radical Conservatism of Frank Knight,” Modern Intellectual History 6, 3
(2009), 520.
  The Emergence of the Sovereign Consumer in Post-war…    173

to the idea that a reallocation of resources can only take place if it does
not make any individual worse off.106 Altogether, these features consti-
tuted a formal theory of politics that challenged the idea of legitimate
collective decision-making.
Evidently, although Arrow understood himself as a leftist, it is possible
to read his political theory as reflecting the free market ideals underpin-
ning contemporary American Cold War ideology. As mentioned in Chap.
4, in this worldview, the discourse of individual choice was linked to the
struggle for democratic over totalitarian values, democratic social organi-
zation was interpreted through market metaphors and comprehensive
social planning by a central government was viewed with suspicion. To
this, we can add that Social Choice and Individual Values drew on analyti-
cal assumptions that later informed the writing of neoliberal scholars
such as Milton Friedman and George Stigler. As in their work, the argu-
mentative force of Arrow’s study ultimately relied on its use of the figure
of the sovereign consumer.

 ublic Choice and the Sovereign Consumer:


P
The Contribution of Anthony Downs
From a disciplinary perspective, Social Choice and Individual Values not
only ended the traditional approach to welfare economics by undermin-
ing the possibility of talking about social welfare. It also stimulated the
emergence of social choice theory as a new field and helped shape the
wave of voting literature that became prominent in the discipline of eco-
nomics in the 1950s, facilitated in part by the rise of public choice
theory.
Public choice theory rose to fame in the 1950s and 1960s and is often
associated with a range of influential books, including Duncan Black’s
The Theory of Committees and Elections (1958), Anthony Downs’ An
Economic Theory of Democracy (1957), James M. Buchanan and Gordon
Tullock’s The Calculus of Consent: Logical Foundations of Constitutional

106
 Backhouse, A History of Modern Economic Analysis, 302–317.
174  N. Olsen

Democracy, and Mancur Olsen’s The Logic of Collective Action (1965).107


Applying the theories and methods of (neoclassical) economics to the
study of politics, these writings have been influential both within and
beyond economics in launching an understanding government as a polit-
ical marketplace in which people are motivated by self-interest rather
than ideas about the common good.108
Like social choice theory, public choice theory was couched in the
neoclassical paradigm and shaped with reference to socialist calculation
and welfare economics debates. Hence, its promoters utilized the notion
of a rational and utility-maximizing agent, discussed collective choice
through the voting analogy, and stressed the difficulties of aggregating
individual preferences into collective social choices. However, they did
not portray the sovereign consumer as the key figure of modern society.
Instead, they explored the behavior of political actors such as the voter,
the politician, and the bureaucrat, who, unless kept in check, would
allegedly create a government characterized by an inefficient allocation of
resources through excessive spending and an uncontrollable growth of
the public sector. Alasdair Roberts described the disenchantment of dem-
ocratic politics advanced by public choice theory as follows:

Public Choice scholars argued that the game of democratic politics was set
up to encourage the overproduction of public services. Politicians, for
example, had an incentive to make large promises to win the next election.
Bureaucrats in public agencies had an incentive to promote new programs
so that they could increase their budgets and perquisites. Special interests
had an incentive to lobby for programs whose costs could be loaded onto
the shoulders of less-organized taxpayers. And voters in general had an
incentive to press politicians for benefits whose costs could be transferred,
by borrowing, to future generations. In sum, endless budget growth was
the inevitable result of politicians, bureaucrats, and voters engaged in their

107
 Duncan Black, The Theory of Committees and Elections (Cambridge: Cambridge University Press,
1958); Anthony Downs, An Economic Theory of Democracy (New York: Harper & Row, 1957),
James M.  Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of
Constitutional Democracy (Ann Arbor: The University of Michigan Press, 1962); Mancur Olsen,
The Logic of Collective Action (Cambridge, MA: Harvard University Press, 1965).
108
 Charles K. Rowley and Friedrich Schneider, eds., The Encyclopedia of Public Choice (Dordrecht:
Kluwer Academic Publishers, 2004).
  The Emergence of the Sovereign Consumer in Post-war…    175

“natural proclivities” within the democratic process. This defect in democ-


racy was held to be “inherent and universal.”109

In this account of politics, the consumer represented just one among


many societal actors pursuing her/his interests within politics. James
M. Buchanan also advanced this view in a 1975 article on “Consumerism
and Public Utility Regulation.” Theorizing the nature of consumer inter-
est and its potential influence on politicians and regulatory agencies, he
concluded that “if regulation is aimed at maximizing consumers’ interest
exclusively, inefficiency may be produced.”110
Buchanan represents an exception to the general rule outlined in this
book, namely, that neoliberals have consistently mobilized the sovereign
consumer in their efforts to sketch new liberalisms. He seemingly decided
to discard the figure shortly after having embraced the sovereign con-
sumer in Prices, Income and Public Policy in the early 1950s. At this point,
Buchanan had begun to discuss collective choice through the voting anal-
ogy and, with reference to Ludwig von Mises, Friedrich Hayek, and
Frank Knight, developed an argument about the superiority of the mar-
ket mechanism in comparison to individual voting.111 Against this back-
drop, along with Gordon Tullock, Buchanan set out to build a theory
that would make political decision-making processes resemble decision-­
making processes on the market. The result was The Calculus of Consent—a
book that analyzed how to construct a social contract in which individu-
als are given a say in collective decisions taken by political institutions
while constraining those given power within the state. However, although
the book argued for a market order in which the role of government was
limited and kept in check by individual preferences, Buchanan did not
refer to the sovereign consumer in The Calculus of Consent or in any other
text after Prices, Income and Public.
109
 Alisdair Roberts, Four Crises of American Democracy: Representation, Mastery, Discipline,
Anticipation (Oxford: Oxford University Press, 2017), 108. The two quotes within the quote cite
texts authored by public choice scholars.
110
 James M.  Buchanan, “Consumerism and Public Utility Regulation,” in Telecommunications,
Regulation, and Public Choice, eds., Charles F. Phillips, Jr. (Lexington, VA: Washington and Lee
University Press, 1975), 3.
111
 James M. Buchanan, “Individual Choice in Voting and the Market,” Journal of Political Economy
62, 4, 334–343.
176  N. Olsen

Indeed, Buchanan refused to use the figure due to certain reservations


he developed regarding the sovereign consumer in the 1950s and 1960s.
He explained these reservations in a 1988 article in which he discussed
William H.  Hutt’s notion of consumer sovereignty.112 Expressing deep
respect for Hutt’s work, Buchanan still found his notion of consumer
sovereignty limited by certain idealistic features and by the absence of an
ultimate ethical criterion against which reform measures can be tested.
More precisely, Buchanan detected a flawed idealism in Hutt’s belief that
government institutions represented an institutional alternative to mar-
ket interactions because public choice had demonstrated that flaws also
characterized government institutions. As for the issue of ethics, he ques-
tioned why Hutt singled out the role of individuals as consumers to the
exclusion of all the other social roles of the individual. Only by appealing
to individuals in all their societal roles, so Buchanan argued, can a general
agreement on a social contract be reached in which individual ends are
aggregated into a system of social ends. Aiming not only to thematize the
role of the individual in respect to buying and selling on the marketplace
but also in relation to the political economy of government, Buchanan
found the notion of consumer sovereignty quite simply inadequate for
his specific project.
However, even if they did not elevate the sovereign consumer as a key
actor, public choice theorists nevertheless thematized the role of individuals
as consumers in relation to the political realm. Important here is, firstly,
Anthony Downs’s An Economic Theory of Democracy (1957), which stands
not only as one of the founding books on public choice theory but also as
one of the most influential social science books of the twentieth century.113
An Economic Theory of Democracy was Downs’ doctoral dissertation in eco-

112
 James M.  Buchanan, “Economists and the Gains from Trade,” Managerial and Decision
Economics, special issue (1988): 5–12. Buchanan had been familiar with Hutt’s notion at least since
the 1950s: in the piece, he stated that, encouraged by Friedrich Hayek, he read Hutt’s A Plan for
Reconstruction (London: Paul Kegan, Trench, Trubner & Co., 1943) in 1963, at which point he was
already familiar with Economists and the Public. Buchanan and Hutt were personally acquainted,
when Buchanan invited Hutt to spend a year at University of Virginia in 1965. See the passages in
the interview with Buchanan  – “Hutt’s Role in Economics: An Interview with Professor James
M. Buchanan,” Manhattan Report 3 (1983), reprinted in Hutt’s unpublished autobiography The
Autobiography of an Economist (1984, Hoover Institution Archives, Box 70, Folder 6), 129–133.
113
 Anthony Downs, An Economic Theory of Democracy (New York: Harper & Brothers, 1957).
  The Emergence of the Sovereign Consumer in Post-war…    177

nomics at Stanford, written under the supervision of Kenneth Arrow and


published without any changes.114 Citing mainstream neoclassical econom-
ics, Downs proceeded in the book from “a generalized yet realistic behav-
iour rule traditionally used for rational consumers and producers” in
neoclassical economic theory, which involved viewing all political actors as
individuals maximizing utility.115 On that basis, he built a model for
describing the political behavior of people in a parliamentary democracy,
based on the assumption that the only goal of politicians and voters are,
respectively, the rewards of office and private benefits from government.
Drawing also on Joseph A. Schumpeter’s idea that democracy concerns the
competition of leaders for votes, this assumption was linked to a number of
more specific notions. One of these was the so-called median voter theo-
rem, which stated that a majority rule voting system always selects the out-
come most preferred by the median voter and thus explains why politicians
on both ends of the spectrum tend to gravitate toward the political center.
In re-conceptualizing political democracy as a marketplace dominated
by individual interests, Downs made frequent reference to the figure of
the consumer. On a general level, Downs translated the language of neo-
classical economics into his analysis of parliamentary democracy by
speaking of political parties as entrepreneurs and of voters as utility maxi-
mizing consumers.116 As such, modelling politics on the idea of the mar-
ketplace, he rendered governing as the act of coordinating production
and consumption.117 Moreover, within this analytical framework, and
with reference to the observations made on this issue by Chicago School
economist Henry C. Simons in the 1930s and 1940s, Downs portrayed
consumers as weak and vulnerable beings who lost out to more organized
powers in the allocation of societal resources. He wrote:

The consumer representative never has effective forces behind him compa-
rable to those of labor and management. Hence these boards practically
always seize any opportunities for labor and management jointly to exploit
114
 Bernard Grofman, “Anthony Downs (1930-),” in Readings in Public Choice and Constitutional
Political Economy, eds. Charles K. Rowley and Friedrich G. Schneider (New York: Springer, 2008),
91–95.
115
 Downs, An Economic Theory of Democracy, 3.
116
 Downs, An Economic Theory of Democracy, 5, 16, 45, 165.
117
 See particularly Downs, An Economic Theory of Democracy, 169, note 4.
178  N. Olsen

consumers. Even giant labor unions acting for their members’ interests as
consumers have to spread their influence across too many products to be
truly effective as counterweights to producers in each field. Economically
speaking, government policy in a democracy almost always exhibits an
anti-consumer, pro-producer bias. And this bias in our model exists not
because the various agents concerned are irrational, but because they
behave rationally. This fact has tremendous implications for economic pre-
dictions in almost every field, though we cannot explore them here.118

However, while echoing Simons’ view on consumers as heterogeneous,


vulnerable, and in danger of being exploited by organized interest groups
in modern society, Downs evidently made a decisive shift in perspective.
Instead of discussing the consumer in relation to powers on the private
market, he focused on its status and possibilities vis-à-vis forces in the
arena of government politics. Given on what he saw as consumers’
­disadvantaged position in politics, in one of the 25 testable hypotheses
that Downs derived from his analysis in An Economic Theory of Democracy,
he concluded: “Democratic governments tend to favor producers more
than consumers in their actions.”119
However, like Arrow, and in contrast to Simons, Downs was not a
neoliberal or associated with any free market network, and, like Social
Choice and Individual Values, An Economic Theory of Democracy can be
read in many diverse ways and is not easy to place politically. Surprisingly,
a study that can help us understand the political implications of An
Economic Theory of Democracy has yet to be undertaken.
Having said that, in the 1971 article “Public Goods and Private Status”
that he co-authored with economist R. Joseph Monsen,120 Downs offered
a set of concrete policy proposals for how the functions of government
118
 Downs, An Economic Theory of Democracy, 256. Downs specifically referred to Henry C. Simons,
“Some Reflections on Syndicalism,” Henry C. Simons, Economic Policy for a Free Society (Chicago:
University of Chicago Press, 1948), 121–159, in the sentence referring to the exploitation of
consumers.
119
 Downs, An Economic Theory of Democracy, 297.
120
 R.  Joseph Monsen received his PhD from the University of California in 1960 and became
associate professor in the Department of Business, Government, and Society at the University of
Washington in 1963. He remained at the University of Washington, serving as acting chair of the
Department of Business, Government, and Society from 1965 to 1968 and chair from 1973–1981.
The biographical info is taken from the entry “R. Joseph Monsen Papers, 1954–2003,” Archives
West, accessed 4 January 2018, http://archiveswest.orbiscascade.org/ark:/80444/xv19163
  The Emergence of the Sovereign Consumer in Post-war…    179

could better serve its citizens as consumers by adjusting its provision of


public goods.121 In fact, “Public Goods and Private Status” was framed as
a contribution to the ongoing debate among economists on the societal
role of the consumer. The article began by assessing John Kenneth
Galbraith’s claim that present-day society was “privately rich but publicly
poor” because the advertising machines of big business manipulated indi-
viduals into buying things they did not want or need, thereby effecting a
misallocation of resources. Disagreeing with Galbraith, and elaborating
on Thorstein Veblen, Downs and Monsen instead argued that “consumer
behavior is motivated by the desire for emulation and differentiation, and
that consumers want to create visible distinctions between large social
groups or classes, and, within such groups more subtle distinctions of
individuality.”122
According to Downs and Monsen, the problem with the system of
government provision of goods was that it did not allow citizens as con-
sumers to express their need for differentiation: “Most government goods,
whether distributed equally or discriminatingly are ineffective in satisfy-
ing consumers’ desire to distinguish themselves through consumption.”123
Therefore, the authors explained, consumers felt that they gained more
benefit from dollars spent on private goods than on government goods.
On that premise, they argued that “designing government goods to
accommodate this basic desire of differentiation would significantly
increase investment in those goods and would help combat the criticism
of a ‘privately rich but publicly poor economy’.”124
Downs and Monsen moreover listed an entire eight policy suggestions
to increase public support for the provision of government goods: (1)
implement consumer differentiation in public goods such as college dor-
mitories and publicly assisted housing (with different price levels, rules,
regulations and subsidy levels, unit sizes and locations); (2) remove from
the public sector those goods that do not need to be distributed by gov-
ernment, such as postal offices, to increase efficiency; (3) reconsider the
121
 Anthony Downs and R. Joseph Monsen, “Public Goods and Private Status,” The Public Interest
23, (1971): 64–77.
122
 Downs and Monsen, “Public Goods and Private Status,” 64.
123
 Downs and Monsen, “Public Goods and Private Status,” 68.
124
 Downs and Monsen, “Public Goods and Private Status,” 68.
180  N. Olsen

mix of government goods; (4) allow metropolitan areas to vary the qual-
ity of public services among neighborhoods; (5) increase competition
through the use of honorary and monetary rewards for public agencies
that succeed in differentiating their services; (6) place more emphasis on
competition among communities in creating high standards of civic life;
(7) use private providers of goods and services to a much greater degree
to facilitate greater product diversity; (8) relate international competition
to domestic welfare rather than military power.125
Altogether, the analysis and proposals in “Public Goods and Private Status”
were embedded in analytical assumptions and features that were founda-
tional for public choice and became widespread in the discipline of econom-
ics more generally from the 1960s onwards. To this, it should be added that
discussions of consumer choice in relation to the provision of public goods
had been ongoing within the discipline since the 1930s and had intensified
in the 1950s with publications by Paul Samuelson and Richard A. Musgrave
on public finance.126 For example, in response to Samuelson and Musgrave,
Charles M. Tiebout published, in 1956, a seminal article on “A Pure Theory
of Local Expenditures” in which he offered “a solution for the level of local
expenditures for local public goods which reflects the preferences of the pop-
ulation more adequately than they can be reflected at the national level.”127
This solution hinged on the idea of “foot voting”—the idea that citizens
move to the communities that best fit their interests—as a mechanism of
replacing “the usual market test to willingness to buy a good and reveals the
consumer-voter’s demand for public goods.”128 As pointed out by John
D. Singleton, Tiebout’s suggestion “relied on establishing assumptions under
which the public sector would approximate a competitive market, with com-
munities behaving like firms and voters like consumers.”129 As such, Tiebout’s
article (and the contributions to the debate of public finance by Samuelson,
Musgrave, and Buchanan) foreshadowed many of the themes outlined in
Downs and Monsen’s 1971 article.
125
 Downs and Monsen, “Public Goods and Private Status,” 72–76.
126
 Cherrier and Fleury, “Economists’ interest in collective decision after World War II,” 26–27.
127
 Charles M. Tiebout, “A Pure Theory of Local Expenditures,” The Journal of Political Economy 64,
5 (1956), 416.
128
 Tiebout, “A Pure Theory of Local Expenditures,” 420.
129
 John D. Singleton, “Sorting Charles Tiebout,” History of Political Economy 47, suppl. 1 (2015):
199–226.
  The Emergence of the Sovereign Consumer in Post-war…    181

However, Downs and Monsen went a step further than Tiebout. Firstly,
they offer a more systematic discussion of the idea of subjecting the provision
of public goods to consumer choice as a way to make the public sector serve
its citizens in the same efficient and democratic manner that firms served
individual preferences on the market. Further, by framing the discussion of
this issue in relation to ongoing debates of the relation between the public
sector, the market, and the individual consumer, they also disenchanted the
idea of government politics as a search for the common good. Moreover, they
rehabilitated the market by rejecting the idea that its advertisement machines
compelled people to buy things they neither wanted nor desired.
Similarly inspired by public choice theory, several scholars offered
analyses of the public sector in the 1960s that corresponded with or took
the interpretations of Downs/Monsen and Tiebout in new directions.
For example, as demonstrated by Jacob Jensen, new theories of public
administration were outlined by scholars such as William H. Riker and
Vincent Ostrom, who likewise drew on the figure of the sovereign con-
sumer. In Jensen’s words, drawing on a tradition of thinking politics that
was founded by Ludwig von Mises, these scholars sought “to make the
citizen the captain of politics in much the same way that the consumer
was captain of the economy.”130
Instead of pursuing these developments in more detail, I will end this
chapter with a set of conclusions and perspectives—and return to the
topic of public sector reform in the following chapter by exploring how
it entered political debates on the welfare state.

 he Sovereign Consumer and the Age


T
of Fracture
As pointed out by Beatrice Cherrier and Jean-Baptiste Fleury, An Economic
Theory of Democracy and Social Choice and Individual Values contributed to
a growing disagreement in economics concerning how to identify and
aggregate those individual values that might guide collective-decision


130
Cited from the chapter draft “Blurring the Boundaries between Public and Private
Administration” from Jensen’s dissertation project on Visions of Politics as Economics that he is cur-
rently finishing at Aarhus University. The chapter is on file with the author.
182  N. Olsen

mechanisms. Common in books like An Economic Theory of Democracy and


Social Choice and Individual Values was an approach to the political world
via an economic analysis that merged mainstream neoclassical assumptions
with notions that free market thinkers had coined in the interwar period.
Shared analytical features included the utility-­maximizing consumer, the
voting analogy, consumer sovereignty, and the Pareto criterion. Following
a period in which the idea of the state as collective decision-maker had been
widely accepted, from the early 1950s onwards, economists used these ana-
lytical features to question the legitimacy and capability of government
social planning. This development reinforced political debates about the
welfare state, which highlighted the problem of the ever-growing public
sector and the wealth of demands for government legislation and assistance
that interest groups—such as labor unions, civil society organizations, and
business associations—raised for their own benefit.131
Social choice, public choice, and rational choice were, arguably, par-
ticularly prominent in the challenge to prevalent ideas of collective
decision-­making within economics. Social choice theory argues that
there is no democratic decision process that can aggregate individual
preferences into an unambiguous collective result. Public choice theory
added the more specific argument that parliamentary democracy is noth-
ing but a marketplace dominated by utility maximizing politicians,
bureaucrats, and voters, and sought to redesign the public sector to serve
consumer demands similar to the way in which firms served individual
preferences on the market. Rational choice theory provided the frame-
work for analyzing individual social and economic behavior that informed
social and public choice (and post-war neoclassical economics more gen-
erally) and for specific research on deregulation and human social behav-
ior as carried out by Chicago School scholars such as George Stigler and
Gary Becker.
It is important to point out that choice doctrine scholars came from
different ideological camps and pursued different political visions. George
Stigler and James M. Buchanan placed their work directly in the service
of neoliberal networks working for societal orders based on free markets
and limited government. While Kenneth Arrow was a leftist, his main
 Cherrier and Fleury, “Economists’ interest in collective decision after World War II.”
131
  The Emergence of the Sovereign Consumer in Post-war…    183

work Social Choice and Individual Values can be read in various and con-
tradictory ways—both as a case for the superiority of economic virtues
over political democracy and as a plea to look for non-market decision-­
making mechanisms to decide social welfare issues for the community.
Likewise, Anthony Downs’ An Economic Theory of Democracy is difficult
to place politically.
In spite of political divergences, the scholars discussed here developed
their ideas not only from the same debates using identical reference points
and notions but also through mutual discussions of their work. These
discussions took place within, for example, the framework of the RAND
Corporation, the Public Choice Society, and in university departments.
As such, post-war economics was both a politically divided discipline and
a discipline characterized by dialogue and cross-fertilization. To this we
can add that, with the exception of the work of James M. Buchanan, the
figure of the sovereign consumer became a shared feature in the construc-
tion of the three choice doctrines examined here.
The analysis of the role played by the sovereign consumer in textbooks
and in the emergence of choice doctrines in post-war economics is associ-
ated with the observations made by Daniel T. Rodgers in The Age of Fracture.
In the book, Rodgers describes how, from the 1960s onwards, the disci-
pline of economics abandoned the idea of viewing economic activity in
relation to collective ideas about society and institutions in favor of a more
abstract and decontextualized conception of the economy as comprised of
independent sellers and buyers seeking each other out through the price
signals of the economy. At the center of this new view of the economy
stood the notion of the market as a realm of freedom, choice, and reason
wherein rational agents could realize their wants and desires. The market,
Rodgers explains, was now conceptualized in opposition to the state, which
in turn was understood as a site for the maximization of individual interest
rather than an arena devoted to the search of public interest. Concentrating
on government failure rather than market flaws, economists abandoned
earlier ideas of state intervention in the economy, arguing instead for fur-
ther deregulation and marketization of society under the assumption that
all individuals would profit from such efforts.132
132
 Rodgers, Age of Fracture, 41–77.
184  N. Olsen

In detailing Rodgers’ account, we can add that a strong reliance on


market metaphors, such as the voting analogy and the sovereign con-
sumer, was already in place in economics textbooks and choice doctrines
in the late 1940s and early 1950s. We can also add that these metaphors
had roots in the free market ideology developed in the interwar period. It
was thus a re-accentuation of these features—rather than a complete
makeover—that took place in the 1960s. Arguably, the gradual shaping
and embrace of a figure that resembled the neoliberal sovereign consumer
was particularly important in this transformation. This embrace went
hand in hand with a disenchantment of the workings of political democ-
racy, and, in many instances, with a re-enchantment of free market
capitalism.
George Stigler framed his call for deregulation by pointing to the ulti-
mate social value and economic efficiency of consumer sovereignty.
Kenneth Arrow used a flawless version of the sovereign consumer to
problematize the idea of government as a democratic institution capable
of improving social welfare. And, although he conceptualized the con-
sumer as weak and vulnerable, Anthony Downs utilized the figure to
offer a more concrete perspective on the problems of viewing government
politics as an idealistic enterprise characterized by a search for the com-
mon good. Moreover, he offered a set of policy suggestions for how the
functions of government could better serve its citizens by exposing its
provision of public goods to market forces, that is, free consumer choice.
Arrow and Downs’ disenchantments of politics were compatible with
neoliberal dogmas and arguably paved the way for a broader acceptance
and spread of the ideology, even if this was not their intent. They espe-
cially helped to frame and legitimize a wealth of new neoliberal political
agendas directed at the state apparatus. While Milton Friedman offered
some proposals for how to reform the public sector in the 1960s, neolib-
erals in Scandinavia took a much more systematic approach to the issue
in the early 1970s, as we will see in the following chapter.
6
Sovereign Consumers Enter
the Scandinavian Welfare State:
The Case of Denmark

This chapter adds a new geographical dimension to the study of neolib-


eralism as a political movement and ideology. Focusing mainly on core
countries such as Britain, Germany, and France, this research has largely
neglected smaller countries such as Denmark and the region of
Scandinavia more generally.1 We know that Denmark, Sweden, and
Norway followed a distinct welfare model in which the state played a key
role in the protection and promotion of the social and economic well-­
being of its citizens in the post-war period and that Social Democratic
parties were crucial in creating this model.2 We also know that, in recent
decades, there have been attempts to transform the “welfare” state into a

1
 For exceptions that explore the attempts to institutionalize neoliberalism in Scandinavia from the
1940s to the 1970s, see Niklas Olsen, “A Second Hand Dealer in Ideas: Christian Gandil and
Scandinavian Configurations of European Neoliberalism, 1945–1970,” in Re-Inventing Western
Civilisation: Transnational Reconstructions of Liberalism in Europe in the Twentieth Century, eds.,
Niklas Olsen and Hagen Schulz-Forberg (Newcastle Upon Tyne: Cambridge Scholars Press, 2014),
137–167 and Lars Mjøset, “Trygve Hoff,” in Troen på markedet, eds., Håvard Friis Nilsen and
Christian Anton (Oslo: Res Publica, 2011), 163–198.
2
 See, for example, Francis Sejersted, The Age of Social Democracy: Norway and Sweden in the
Twentieth Century (Princeton: Princeton University Press, 2011); Mary Hilson, The Nordic Model:
Scandinavia since 1945 (London: University of Chicago Press, 2008).

© The Author(s) 2019 185


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_6
186  N. Olsen

“competition” state—denoting reforms implementing fiscal authority,


welfare retrenchment, marketization, reregulation, and privatization—in
Scandinavia.3
However, nobody has examined whether the push for the “competi-
tion” state happened alongside and was related to the development and
dissemination of neoliberal ideology in this region. By addressing this
issue from the perspective of international neoliberal developments, this
chapter aims to enrich our historical knowledge of the political-­ideological
landscapes and transformations in Scandinavia. Conversely, by looking
into the specific neoliberal constellations and contributions of the
Scandinavian political sphere, it also seeks to transform the overall inter-
national picture.
Focusing on the case of Denmark, the chapter shows how neoliberal
ideology and the sovereign consumer were introduced in discussions
about the Scandinavian welfare state in the 1970s. More precisely, it
shows how a new generation of politicians in the liberal party Venstre
introduced the semantics of neoliberal ideology into Danish political
debates to address the contemporary crisis of the welfare state and in
efforts to renew the ideological foundation of their party.4 Locating the
main source of the crisis of the welfare state in its ever-growing, ineffec-
tive, and undemocratic public sector, the neoliberals under discussion did
not aim to abolish the public sector but to reduce its size and change its
content. Thus, the aim was to introduce competition in public adminis-
tration and service provision. In this pursuit, they launched new ideas
concerning decentralization of and free choice in the public sector.
Moreover, they argued that turning citizens into sovereign consumers by

3
 For the notion of the competition state, see Philipp Genschel and Laura Seelkopf, “The
Competition State: The Modern State in a Global Economy,” in The Oxford Handbook of
Transformations of the State, eds., Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah
D. Levy, and John D. Stephens (Oxford: Oxford University Press, 2015), 234–249. For a study of
attempts to construct a competition state in a Danish context, see Ove K. Pedersen, Konkurrencestaten
(Copenhagen: Gyldendal, 2011).
4
 Venstre literally means “left.” The party was named Venstre due to its position on the left side on
the Danish parliament, when it was founded in 1870. It is today known as “Denmark’s Liberal
Party.” However, Venstre in fact only added this description to its name in 1963, and, as it will
appear below, it only developed a liberal identity and language after World War I. Therefore, the
party is consequently labelled Venstre in the following.
  Sovereign Consumers Enter the Scandinavian Welfare State…    187

subjecting the functions of the public sector to their demands would turn
the Danish welfare state into more efficient and democratic society.
As we will see, neoliberal ideology was not initially central either to
societal debates or to practical politics in the Danish context. However,
the long-term significance of these ideas to the subsequent push for the
competition state can hardly be overstated. This push took place in two
phases. First, as part of a new government pursing welfare state reforms,
the abovementioned Venstre politicians turned the ideas of the sovereign
consumer and decentralization in the public sector into concrete policy
options in the 1980s when they served as influential ministers of various
departments in a government headed by the Conservative Party.
Moreover, in this phase, the Social Democratic Party gradually developed
a new ideology that had strong similarities to the neoliberal agenda out-
lined by Venstre in the 1970s, as it also embraced the idea of reforming
the public sector through marketization. Second, from the 1990s through
the 2000s, the Social Democratic Party (which held government power
from 1993 to 2001) and Venstre (which took power in 2001) further
developed, and aligned, their reform agendas. Moreover, in this phase,
the two parties effected concrete changes of the Danish public sector by
executing a range of privatizations and liberalizations of state-owned
companies and implementing New Public Management in the public
sector.
The second phase in the push for the competition state is analyzed in
the following chapter. This chapter is solely devoted to the first phase. It
illustrates how neoliberalism entered Danish political language begin-
ning in the early 1970s; how it was turned into a concrete policy option
in the 1980s; and how, also in this decade, the Social Democratic Party
embraced the neoliberal paradigm and its figure of the sovereign con-
sumer. Accordingly, this chapter offers three specific points in connection
to the larger story told in this book. (1) The neoliberal politicians from
Venstre developed a deeply economized, individualized, and marketized
figure of the sovereign consumer, which was inextricably linked to the
idea of choosing between available “products” as a central approach to
political activity. Hence, they reinforced the trend that their West German
and American counterparts had begun in the post-war period. (2) At the
same time, they added to the figure by primarily relating its interests and
188  N. Olsen

capabilities to the arena of the public sector. In so doing, they anticipated


the market-focused approach to running public service institutions and
agencies, which became central to the push for the competition state and
is today known as New Public Management. (3) The figure of the sover-
eign consumer that Danish neoliberals created bore many similarities to
the figures that neoliberals in other countries had conceptualized.
However, the figure was largely shaped in response to national develop-
ments and contexts. Ideas emanating from the left and from within eco-
nomics greatly inspired this specific figure, and it became more widely
disseminated and accepted in Danish politics as Social Democratic politi-
cians took over and further shaped the figure. Against this backdrop, the
history of how the sovereign consumer entered the Scandinavian welfare
state is, in many respects, one that goes beyond neoliberal actors and
ideology.

 enstre’s Liberal Ideology and Politics,


V
1920–1970
The new liberalism, which Venstre launched in the early 1970s, aimed
not only at reforming the welfare state.5 It strove also to revise the liberal
ideology that the party had pursued since the early 1920s. Back then, as
a critique of the wide-ranging regulation policies, which Det Radikale
Venstre (The Radical Left)6 and the Social Democratic Party had imple-
mented during World War I, Venstre had articulated an economically
focused liberal language that was based on ideas of free trade, freedom,
and individualism. In this process, Venstre politicians also began to iden-
tify themselves as liberals and speak of liberalism as the party’s ideology.
Venstre’s liberal language was particularly promoted by the agricultural

5
 The following section is based on Jeppe Nevers and Niklas Olsen, “Liberalism and the Welfare
State: The Danish Case in a European Perspective,” in Liberalismus im 20. Jahrhundert, eds.,
Anselm Doering-Manteuffel and Jörn Leonhard (Stuttgart, Franz Steiner Verlag, 2015), 239–267.
6
 Det Radikale Venstre has often been labelled the “social liberal party.” However, Det Radikale
Venstre literally means the Radical Left. Inspired by French radicalism, the party was founded in
1905 and located further to the political left than Venstre. To avoid misunderstandings and anach-
ronisms, the original party name will be used consistently in the following.
  Sovereign Consumers Enter the Scandinavian Welfare State…    189

leader (and for a brief period Prime Minister) Thomas Madsen-Mygdal,


whose demands for free trade were closely linked to the interests of the
agrarian sector and characterized by an anti-statist and individualist
notion of society. As such, Venstre framed its liberalism in direct opposi-
tion to the more community-oriented aspirations of the rapidly growing
Social Democratic Party.7
From the 1930s to the 1960s, Venstre continued to contrast its visions
of free trade and individual freedom to the more state- and regulation-­
friendly program of the Social Democratic Party. In the 1930s, when the
crisis of liberalism loomed large, members of Venstre moved the party
toward a more social conception of society. Among other things, the
party embraced a Keynesian idea of a counter-cyclical fiscal policy to
combat unemployment and create economic growth. Moreover, Venstre
took part in the greatest economic-political settlement of the period, the
so-called Kanslergadeforlig (Kanslergade Agreement) that was made in
January 1933  in the private home of the Social Democratic Prime
Minister Thorvald Stauning. The settlement balanced support for the
agricultural sector, partly through devaluation, with protection for work-
ers and assistance to the unemployed and included a major social and
welfare bill. It also involved a significant recovery package that lowered
interest and boosted public investment in, for example, housing.8 Still,
Venstre understood itself as a liberal, anti-socialist, and state-critical
party.9
After having modified its ideological foundation during the 1930s and
early 1940s (when Denmark was occupied by Germany), Venstre re-­
launched economic liberalism as its aim in its 1948 program. This pro-
gram sought to expand the private sector and the individual citizen’s
freedom, initiative, and responsibility through decreased state interven-
tion in economics and society. The state was mainly to take action in
relation to very basic social needs, and the tax system was to be revised
through tax reliefs. These visions were at the center of Venstre’s agenda in
the 1950s, when the party portrayed Danish politics as a battle between
7
 Jeppe Nevers, “The Rise of Agrarian Liberalism,” Contributions to the History of Concepts 8, 2
(2013): 96–102.
8
 Bo Lidegaard, A Short History of Denmark in the Twentieth Century (Copenhagen: Gyldendal,
2009), 106.
9
 Nevers, “The Rise of Agrarian Liberalism,” 104.
190  N. Olsen

“centralized planning” and “liberal freedom.” Spearheaded by chairman


of the party (and Prime Minister from 1950 to 1953) Erik Eriksen, the
party continually emphasized that it strove for a “liberal politics” in oppo-
sition to the “socialistic” vision of the Social Democratic Party.10
Venstre’s most famous attempt to undermine the social democratic wel-
fare state agenda was the so-called VK-Plan, which the party launched in
collaboration with the Conservative Party in 1959. The VK-Plan aimed to
downscale the welfare state through substantial tax reliefs and reductions of
state budgets and spending. This “liberal” alternative was meant to reduce
the role of the state and make individual citizens more responsible for their
own lives. Even if it was a purely economic plan, it formed part of the
opposition’s moral critique of the welfare state as a “guardian state” that
allegedly destroyed individual freedom and initiative.11
However, the failure of the VK-Plan illustrates the limited success that
Venstre’s liberal ideology enjoyed in the long period from 1953 to 1968
during which the party was in opposition to the Social Democrats. In
these years, Venstre’s ability to influence Danish politics was severely con-
strained in the competition against the strong Social Democratic welfare
state ideology. Moreover, a more doctrinaire “liberal” rhetoric might also
have discouraged the more pragmatic Det Radikale Venstre from cooper-
ating with Venstre. In these constellations, everyday politics demanded a
course of action that diverged significantly from the rhetoric and visions
articulated in party programs and newspapers. Accordingly, in the 1950s,
Venstre attempted to form alliances with the Conservative Party and Det
Radikale Venstre (and at times with both parties simultaneously).
Moreover, it made several compromises with Social Democratic demands
for further state intervention in and distribution of the economy. One
example is the tax-financed and universal People’s Pension, ratified in
1956, which was interpreted by contemporaries, such as the conservative
politician Poul Møller, as a breakthrough of the welfare state.12
10
 Nevers and Olsen, “Liberalism and the Welfare State,” 255–260.
11
 Klaus Petersen, “Velfærdsstaten i dansk politisk retorik,” Tidsskrift for Velferdsforskning 5, 1
(2002), 22; Henning Fonsmark, Historien om den danske utopi (Copenhagen: Gyldendal, 1990),
206–215; Nikolaj Bøgh, Brødrene Møller: Historien om et konservativt dynasti (Copenhagen:
Aschehoug, 2007), 209–222.
12
 Petersen, “Velfærdsstaten i dansk politisk retorik,” 20; Lidegaard, A Short History of Denmark,
233–239.
  Sovereign Consumers Enter the Scandinavian Welfare State…    191

In reaction to the failure of cooperation with the Conservative Party,


Venstre attempted to change its profile in the early 1960s—a period in
which economic growth increased the popularity of the Social Democratic
welfare state. The attempt at ideological change is evinced, for example,
by Venstre’s 1963 program, which expressed a more positive stance
toward social policies. Additionally, theologian Poul Hartling, who in
1965 succeeded Erik Eriksen and became the first leader of Venstre from
a non-agrarian background, launched a more culturally and socially
focused conception of liberalism.13 Soon after, together with Det Radikale
Venstre and the Conservative Party, Venstre managed to seize power
(from 1968 to 1971) and thus interrupt 16 years of Social Democratic
rule. However, the change of power owed more to an exhausted Social
Democratic Party and to Det Radikale Venstre’s more independent ideo-
logical line regarding the increasingly left-leaning Social Democrats than
it did to Venstre’s successes in forming a distinct liberal alternative to the
welfare state project.
In the late 1960s and early 1970s, a new generation of politicians
emerged within Venstre. Reacting to Venstre’s recent compromises with
the welfare state and its long-standing tradition of thinking of state and
market as separate and antagonistic spheres, they sought to change the
party profile by developing new liberal ideological foundations. Key
members of this generation included Bertel Haarder, Henning
Christophersen, Uffe Ellemann-Jensen, Peter Brixtofte, and Anders Fogh
Rasmussen, who were all academics with social science backgrounds and
who had authored a veritable flood of books and articles on liberal ideol-
ogy and politics in the 1970s. The importance of these entrepreneurial
ideologists can hardly be overstated. They all became members of parlia-
ment for Venstre and eventually became very prolific and powerful min-
isters as well. Moreover, Christophersen, Ellemann-Jensen, and Fogh
Rasmussen became chairs of the party, and Rasmussen became a very
influential Prime Minister (2001–2009). Through processes that began
in the 1970s and ended in the 2000s, these politicians contributed not
only to key transformations of Venstre’s ideological profile and political
strategy but also to major political changes of the Danish welfare state.

13
 Nevers and Olsen, “Liberalism and the Welfare State,” 255–260.
192  N. Olsen

Accordingly, their ambition to rethink Venstre’s ideological foundations


in the early 1970s was spurred by the supreme political challenge of the
time—the crisis of the welfare state.

 he Crisis of the Welfare State and Neoliberal


T
Mobilization
In spite of the consensus with respect to practical politics, criticism of the
welfare state had begun during its initial phase in the mid-1950s. Three
types of criticism were especially common. The first was an economically
liberal criticism voiced against a public sector that was seen as a threat to
free enterprise and as unaffordable for the public purse. The second was a
moral conservative critique of how the welfare state as a “guardian state”
put the individuals under tutelage. While these two criticisms were voiced
mainly from the right side of the political spectrum, politicians, intellec-
tuals, and scholars from the left wing launched the third type of criticism.
They saw the welfare state as being part of the capitalist system in that it
served to defend capitalism against a radicalization of the working class:
while retaining private ownership of the means of production, the welfare
state allegedly neutralized the revolutionary potential of the workers
through social benefits.14
New voices extended the criticism of the welfare state during its con-
solidation phase in the 1960s. Among other things, the youth movement
revolted not only against capitalism, imperialism, and exploitation in the
third world, but also against what they perceived to be a technocratic,
authoritarian, and consumerist welfare state at home, which stultified
and alienated its citizens by offering standardized consumption as their
only pleasure. This revolt involved demands to create a society that was
based on notions of autonomy, self-determination, and self-management
and allowed for the more direct participation of individuals and small
groups in the decision-making processes shaping the societal order and
culture.15

 Petersen, “Velfærdsstaten i dansk politisk retorik.”


14

 Thomas Ekman Jørgensen and Steven L. B. Jensen, 1968—og alt det der fulgte (Copenhagen:
15

Gyldendal, 2008).
  Sovereign Consumers Enter the Scandinavian Welfare State…    193

Furthermore, a series of public debates regarding how the welfare state


spent its tax revenue began in the mid-1960s. The most famous of these
was the so-called Rindalism debate, named after the warehouse worker
Peter Rindal, who reacted against the establishment of Statens Kunstfond
in 1964; an institution that was to award stipends (including lifelong
benefits), to artists, financed through taxation. Rindal specifically ques-
tioned whether tax money should be used to support artists who were
unable to sell their products and whether art circles in Copenhagen
should enforce what he took to be often unwanted and incomprehensible
art installations on province towns. Rindal came to personify the ordi-
nary Dane’s disapproval of art support, which was conceived as irrespon-
sible spending of state finances that was forced upon and paid for by the
population.16 This critique, which cut across political camps, joined the
criticisms launched since the mid-1950s of the welfare state as an eco-
nomically irresponsible, patronizing, and repressive political order.
In spite of the criticisms voiced against the welfare state, and the end
of 16 years of Social Democratic government in 1968, the Social
Democratic Party remained optimistic about its welfare state project
throughout the 1960s. The party had good reasons for its optimism. The
1960s is today known as the “golden age” of the Danish welfare state,
when, against the backdrop of the international economic boom, the
political visions about universal coverage of citizens became entrenched.
The decade was generally characterized by economic growth, low unem-
ployment, and little concern for the growing tax burden that had been
caused by the expansion of the welfare state. In this context, the political
consensus on securing, safeguarding, and extending social rights to wel-
fare benefits was sustained.17
However, this changed in the early 1970s, when the international oil
crisis, rising taxes, and growing unemployment hit Denmark (and many
other countries around the world). These developments gave birth to
widespread discussion of the crisis of the welfare state. As part of this
crisis, politicians and intellectuals from across the political spectrum

 Henrik Nissen, Landet blev by, 1950–1970 (Copenhagen: Gyldendal, 1991), 274–278.
16

 Klaus Petersen, Legitimität und Krise: Die politische Geschichte des dänischen Wohlfartsstaates
17

1945–1973 (Berlin: Berlin Verlag, 1998).


194  N. Olsen

challenged the fundamental values and the very legitimacy of the welfare
state. As summarized in volume 5 of Dansk velfærdshistorie (Danish
Welfare History):

A whole range of issues were increasingly questioned: the tax burden, the
expansion of the welfare system, the number of public servants, equality as
a political aim, the efficiency of the public sector, the deficiencies and nega-
tive side-effects of the welfare state, the standardization of its services, the
lack of control mechanisms, the bureaucracy and the lack of regard for
individual preferences.18

As shown in this quotation, the criticism of the welfare state and its
growing public sector was economic and political in nature. According to
its critics, the welfare state was ineffective and expensive, as well as repres-
sive and undemocratic because it subjected its citizens to and made them
dependent on a system that was particularly beneficial for its rulers—the
public servants. In other words, people were, apparently, being repressed
and exploited by the system.
Against this backdrop, political debaters introduced a new and critical
vocabulary around the sector and its employees. Two debaters from
opposite sides of the political spectrum—Mogens Glistrup and Jørgen
S. Dich—were crucial in framing the discussion of the crisis of the wel-
fare state. Glistrup rose to fame as a lawyer, tax protester, and founder of
the populist party Fremskridtspartiet (The Progress Party) in the early
1970s. His notorious attacks on the public sector were launched in
Fremskridtspartiet’s first program from 1973, which used a range of neg-
atively loaded concepts to describe government bureaucracy, for example,
“papirnusser” (paper-pusher), “skrankepave” (jack-in-office), and
“lovjungle” (jungle of laws).19 In Glistrup’s economically liberal—if not
anarchistic20—perspective, the welfare state’s repression and waste of

18
 Jørn Henrik Petersen, Klaus Petersen, and Niels Finn Christiansen, eds., Velfærdsstaten i tidehverv.
Dansk Velfærdshistorie, bind 5, 1973–1993 (Odense: University Press of Southern Denmark, 2013),
83.
19
 Michael Kuur Sørensen, “Den innovative ideolog i politisk historie: Mogens Glistrup som case,”
Temp 4, 8 (2014): 115–129.
20
 Flemming Christian Nielsen, Glistrup—en biografi om en anarkist (Copenhagen: Gyldendal,
2013).
  Sovereign Consumers Enter the Scandinavian Welfare State…    195

resources had to be replaced by a freer and more productive society by


dramatically reducing the size and scope of the public sector, lowering the
tax burden, and providing private business with better opportunities for
hiring employees.
Glistrup’s Fremskridtspartiet shocked the political establishment by
entering Parliament, with 16%, as the second largest party in the so-­
called Landslide Election of December 1973. Altogether, the election saw
five new or previously unrepresented parties winning seats and the
replacement of more than half of the members of parliament. The elec-
tion was a disaster for the old political parties. The Social Democrats
went from 37% to 26% of the votes; the Conservative’s support was
nearly cut by half; and Venstre and Det Radikale Venstre suffered heavy
losses. Clearly, the voters had grown tired of the traditional welfare state
consensus politics that the old parties had constructed and sustained.21
Shortly before the Landslide Election, economist and socialist Jørgen
S. Dich had launched a strong critique of the Danish welfare state with his
book Den herskende klasse (The Ruling Class), which, as reflected in its title,
portrayed the welfare state as the political project of the ruling class. As an
advisor for Social Democratic politicians since the 1930s, and as the direc-
tor of the government’s Employment Council in the early 1940s, Dich had
been involved in the making of the Danish social state. In 1950, he became
a professor of economics at Aarhus University with a focus on social and
welfare politics, and he subsequently authored a series of theoretical justi-
fications for the rationality of the welfare state. Against this background,
the critical tone of Den herskende klasse surprised many of its readers.
However, Dich’s turn from theoretical justification to political critique had
long been in the making and reflected a broader ideational convergence
between left and right in thinking about the welfare state, which had its
roots in public debates about the topic that began in the early 1950s.22
Some of the most dedicated participants in the welfare state debates
were economists working as bureaucrats and/or as university profes-
sors that were involved in the decision-making processes leading to the

 Lidegaard, A Short History of Denmark, 294–295.


21

 Arne Hardis, Den kætterske socialdemokrat: Jørgen Dich og den herskende klasse (Copenhagen:
22

Gyldendal, 2018).
196  N. Olsen

construction of the welfare state, but who soon began to identify


seemingly deep-rooted challenges and problems in the ideational
foundations and institutional dynamics behind the system. Many of
these economists argued strongly against “too much” welfare state.
They agreed that, to uphold the efficiency of production and provide
democratic legitimacy to the welfare state, the system required a cer-
tain degree of private ownership, private initiative, free choice of con-
sumption, proper incentives, “healthy fear of dependency,” and less
bureaucratization. However, some of them also questioned the very
possibility of balancing individual and collective needs, welfare and
efficiency, and freedom and equality in a sustainable and legitimate
fashion within the structure of the welfare state.23
From the 1950s to the 1970s, many scholars and debaters grew increas-
ingly critical of how the welfare state had developed in practice. Moreover,
they felt that its flaws could not be explained with reference to old para-
digms and tools but required a search for new analytical frameworks. This
was also the case for Jørgen S. Dich who would emerge as a central par-
ticipant in the welfare state debates. In abandoning his early theoretical
justifications of the welfare state in favor of political critique in Den her-
skende klasse, he elaborated on the analytical perspectives of welfare eco-
nomics that, with reference to international debates about the topic, he
had been developing since the 1950s. These analytical perspectives
merged Karl Marx’s theory of class struggle with Alfred Marshall’s ideas
of supply and demand, marginal utility and costs of production, and
Anthony Down’s theory of the median voter. Against this diverse theo-
retical background, Dich rendered the welfare state not as the product of
a specific program or ideology, but as the (costly) outcome of party politi-
cal concerns for the median voter and the domination of the public sector
by power-seeking interest groups. These groups, Dich argued, assumed
control of the state by forcing overtly expensive government services on
the happily receiving population without regard for people’s real wants.24

23
 See first of all Jørn Henrik Petersen, Klaus Petersen and Niels Finn Christiansen, eds., Dansk
velfærdshistorie. Bind 3: 1933–1956: Velfærdsstaten i støbeskeen (Odense: University Press of Southern
Denmark, 2012), 117–151 and Jørn Henrik Petersen, Klaus Petersen, and Niels Finn Christiansen,
eds., Dansk velfærdshistorie. Bind 4: 1956–1973: Velfærdsstatens storhedstid (Odense: University Press
of Southern Denmark, 2012), 145–162.
24
 Jørn Henrik Petersen, “Værdier og interesser i socialpolitikken,” Politica 28, 4 (1996): 440–451.
  Sovereign Consumers Enter the Scandinavian Welfare State…    197

Hence, in his assessment, the rulers of modern society were not the capi-
talist class, but public servants in the social, educational, and health sec-
tors. About this ruling class, he wrote:

Its power is not based on possession, but on its ability to create an obliging
social ideology, which has its roots in a humanistic culture, escape from
bodily work and the fear of illness and death. It is shaped in a mode of
perfectionism and a societal critique, which safeguards the interest of this
class in high salaries, limited work and a gigantic expansion of the public
sector. This expansion oversteps in many ways the limit, where costs exceeds
societal utility, and thus performs a social degradation and economic
exploitation of the rest of the population.25

Dich’s analysis of the welfare state and his solution to its current crisis was
distinctly different from Mogens Glistrup’s. Instead of minimalizing the
public sector and liberalizing the economy, Dich sought an economic
steering policy that would prevent a further expansion of the welfare state
and control its expenses. The responsibility for this policy was to be
assigned to groups of independent economic experts and to a powerful
troika composed of the Budget, Finance, and Prime Minister.26 To avoid
a waste of resources in public services and to direct these services to the
real needs of consumers, Dich recommended introducing user fees and
private alternatives to certain public services. Moreover, he discussed how
the steering of municipal economies could be organized in the most
rational and efficient way. Regarding the idea of rationalizing the public
sector, he wrote:

Rationalization is extremely difficult to implement. In private business, it


is only caused by relentless competition, which is spurred by the fear of
going bankrupt. These mechanisms do not work in the public sector, so we
have to find other and just as tough measures, which work in the same
direction and thus help to improve total welfare.27

25
 Jørgen S. Dich, Den herskende klasse (Copenhagen: Gyldendal, 1973), back cover.
26
 Dich, Den herskende klasse, 137–143.
27
 Dich, Den herskende klasse, 170.
198  N. Olsen

The absence of competition mechanisms in the public sector was also a


central theme for the new generation of Venstre politicians, whose analy-
sis of the welfare state were deeply indebted to the contemporary writings
of Glistrup and Dich. Glistrup animated these politicians with a renewed
attack on the taxation system and the coinage of new and pejorative terms
and phrases with which to describe the public sector and its employees.
Dich compelled them to interpret the welfare state through his argument
about the ruling class.
With reference to Dich’s argument—and to John Kenneth Galbraith’s
theory that producer sovereignty and not consumer sovereignty consti-
tuted the key feature of industrial economies28—Bertel Haarder argued
in his book Statskollektivisme og spildproduktion (State Collectivism and
Waste-Production) (1973) that the public sector was run by a ruling class
and had achieved a monopolist position in the Danish welfare state. The
result was a political order in public goods was pressured down on indi-
vidual citizens (state collectivism), while it was exempted from the com-
petition and profitability that typifies a market economy (waste
production).29
Already in 1972, Henning Christophersen had presented a similar
analysis of the public sector in his book En udfordring for de liberale (A
Challenge for the Liberals).30 Christophersen argued that while the state
had become Denmark’s largest business enterprise it differed from all
other producers in that its incomes and sales were guaranteed and
exempted from all the dynamics that characterized the free market,
including free demand, competition, and the price mechanism. In other
words, it lacked a method of measuring the efficiency and quality of its

28
 Galbraith did in fact not use the specific term “producer sovereignty.” Interpreters of Galbraith
coined it to conceptualize his argument of how producers, and not consumers, determine what is
produced, and ultimately how resources are allocated in the market economy. Raymond Benton,
Jr., “Producer and Consumer Sovereignty,” in Encyclopedia of Political Economy, vol. 2, L-Z, ed.,
Philip Anthony O’Hara (London; Routledge, 2001), 912.
29
 Bertel Haarder, Statskollektivisme og spildproduktion—om årsagerne til overforbruget, skatteplyn-
dringen, institutionernes tyranni og det tiltagende misbrug af vores ressourcer (Copenhagen: Bramsen
& Hjort, 1973). Haarder’s book in fact appeared before the publication of Dich’s. However,
Haarder knew about the argument of the ruling class from Dich’s contemporary talks. Hardis, Den
kætterske socialdemokrat, 171–172.
30
 Henning Christophersen, En udfordring til de liberale (Holte: Forlaget Liberal, 1972).
  Sovereign Consumers Enter the Scandinavian Welfare State…    199

services. The result was an inefficient and expensive system, and a con-
centration of power in the public sector that was escaping political con-
trol, as bureaucrats and interest organizations—whose domination of the
system minimized the individual’s potential to shape her/his own life and
society more generally—ran the administrative apparatus.
To solve the problems they had identified within the public sector,
Haarder and Christophersen echoed arguments that Venstre had voiced
since the 1920s: the public sector had to be reduced on behalf of the
private sector. According to Haarder and Christophersen, less state and
more market would result in increased efficiency and productivity and a
more democratic society that allowed individual citizens to pursue their
everyday activities without being subjected to an omnipresent and des-
potic state.
However, in their attempts to counter the growth of the public sector,
the new generation of Venstre politicians diverged in crucial respects
from their predecessors. The wave of literature that emanated from
Venstre in the 1970s thus contained a strong criticism of “classical,” “eco-
nomic,” or “old-fashioned” liberalism, which denoted a society based on
laissez faire (this criticism also addressed Glistrup’s libertarian agenda,
which the politicians in Venstre sought to distance themselves from).
“Classical liberalism is not capable of solving current societal problems,”
Anders Fogh Rasmussen (who was chairman of the youth section of the
party and considered to be a left-liberal) symptomatically wrote in an
article published in the party journal Liberal in 1973.31 Like most of the
politicians in the mother party, Fogh Rasmussen demanded an ideologi-
cal renewal in Venstre in the early 1970s.
The demand for an ideological renewal in Venstre led to a conference
in September 1973 wherein key members of the party met at
Christiansborg (the site of the Danish parliamentary building) to discuss
liberalism’s status, relevance, and future in Danish politics. At the confer-
ence, like many other Venstre politicians, Rasmussen argued that the
public sector necessarily had a key role to play in modern, liberal society:
“We must in many areas accept public regulation, steering and enterprise

 Anders Fogh Rasmussen, “Lillesamfundet må være et liberalt mål,” Liberal. Venstres Månedsblad
31

6 (1973), 39.
200  N. Olsen

more generally. We must get used to understanding public steering as an


instrument that can be applied to retain liberal society.”32 Instead of a
classical liberal agenda, which attempted to dismantle or minimize the
welfare state, Rasmussen and his colleagues in Venstre sought to outline
a positive liberal vision that not only criticized the existing system but
also offered future-oriented ideas of how its frames and content might be
changed. The ambition was—as expressed by economist Poul Nyboe
Andersen, a prominent member of the party—to outline a “liberal reform
politics,” which offered “constructive, functional, usable solutions to
[societal] challenges.”33

 arketizing the State: Progressive Values


M
and Consumer Sovereignty
Venstre’s idea of welfare state reforms differed not only from the reform
visions that the Social Democratic Party had pursued in efforts to expand
on the equality of opportunity by financing social security systems, health
services, and educational institutions. It also diverged from the traditional
way of thinking about the welfare state within Venstre. More precisely,
Venstre’s “liberal reform politics” contained two aspects that were not
rooted in the sharp distinction between state and market that had charac-
terized the party’s ideology since the 1920s. The first aspect involved a set
of progressive visions, which Venstre had co-opted from the societal cri-
tique that had been launched on the left wing beginning in the mid-­
1960s. Venstre politicians thus wanted to create a society that had the
individual human being at its center and enhanced values such as “local
democracy,” “participation,” “well-being,” “free choice,” and “decentral-
ization.” In the early 1970s, many politicians from Venstre combined the
pursuit of “progressive” societal values with a critique of “blind” economic
growth, concerns about the environment, and intentions of developing

32
 Anders Fogh Rasmussen, “Vi må nyvurdere den økonomiske liberalisme,” in At være liberal i det
moderne samfund, ed., Flemming Albertsen (Holte: Forlaget Liberal, 1974), 43.
33
 Poul Nyboe Andersen, “En liberal reformpolitik,” in At være liberal i det moderne samfund, ed.,
Flemming Albertsen (Holte: Forlaget Liberal, 1974), 25.
  Sovereign Consumers Enter the Scandinavian Welfare State…    201

the societies of Danish provinces and thereby countering the concentra-


tion of the population in the big cities.34 By connecting its economic-
political program with such social-cultural aspects, which aimed to create
a good life for all the citizens of the welfare state, Venstre confronted the
purely economic and “de-culturalized” liberalism that the party had rep-
resented since the 1950s.35
Venstre’s progressive visions worked alongside the other new aspect of
the party’s political ideology, which concerned a distinct break with the
liberal tradition of thinking of state and market as two separate and
antagonistic spheres. Along with accepting the state as an important eco-
nomic actor in building modern liberal society, the party now aimed to
regain control of the public sector and limit its expenses, expansion, and
power by subjecting it to market-like mechanisms. In En udfordring til de
liberale, Henning Christophersen envisioned:

(…) another way to organize public production. A method, which is not a


copy of the private market, but which gives the same inbuilt regulation of
quality, costs and accordingly prices that is found on the private market. In
short, a system that secures a reasonable degree of free consumer choice for
every individual, an efficient use of the resources, which the public sector
can dispose of, and growing public productivity.36

In order to marketize and infuse the public sector with competition-­


enhancing dynamics, Christophersen proposed, above all, to subject its
services to consumer sovereignty. According to Christophersen, the
­welfare state had undermined free consumer choice because it forced the
individual voter as consumer to accept goods from a monopolist pro-
ducer, which worked without any kind of measuring rod for price, qual-
ity, or efficiency. His solution to this problem was to liberate citizens as
consumers. According to Christophersen, by letting citizens as consum-
ers decide for what purposes the funds of the public sector should be
used, the system would be exposed to the mechanisms of competition

34
 Jesper Vestermark Køber, Et spørgsmål om nærhed: nærdemokratibegrebets historie i 1970ernes
Danmark (PhD dissertation, University of Copenhagen, 2017).
35
 Nevers and Olsen, “Liberalism and the Welfare State,” 260–263.
36
 Christophersen, En udfordring for de liberale, 22.
202  N. Olsen

and forced to produce new, better, and cheaper goods. He wrote: “The
voter is seemingly the perfect consumer. He requests only the best and is
willing to pay the price for it. New products or better versions of old
goods are received with great interest and placed on the shopping list.”37
Obviously, Christophersen not only expected free consumer choice to
result in a more effective, productive, and innovative order but also in a
more democratic and free economic political order that responded to
individual needs and interests.38
Christophersen was only one among many Venstre politicians, who, in
the early 1970s, framed the citizen as a consumer, who, due to his/her
competition-enhancing dynamics, is capable of creating efficiency and
democracy in the public sector. Similar to how neoliberals in other coun-
tries had mobilized and positioned the figure, these politicians portrayed
the consumer as the quintessence of the free, liberal, and responsible
human being that needed to be placed at the center of a new and more
democratic way of organizing modern society.
The consumer was particularly central in Bertel Haarder’s publica-
tions from the 1970s. Haarder continually complained that the pub-
lic sector forced consumers to accept its products, thereby enforcing
state collectivism and waste production. In Statskollektivisme og spild-
produktion, he wrote: “The public subsidies, decision-making systems,
hiring procedures etc. seem to be more influenced by public sector
concerns than concerns about the interests of the consumer, who
would be better off – and save money – if they were allowed to decide
more by themselves.”39 Similar to Christophersen, he wanted to mar-
ketize the public sector by subjecting it to consumer sovereignty. In
Institutionernes tyranni (The Tyranny of Institutions) from 1974,
Haarder wrote: “The important thing is to liberalize the public as well
as the private sector (…). Similar to the private sector, the public sec-
tor must be subjected to the demands of the consumer, so that needs
and expenses are kept in check.”40

37
 Christophersen, En udfordring for de liberale, 20.
38
 Christophersen, En udfordring for de liberale, 16–27.
39
 Haarder, Statskollektivisme og spildproduktion, 67.
40
 Bertel Haarder, Institutionernes tyranni (Copenhagen: Bramsen & Hjort, 1974).
  Sovereign Consumers Enter the Scandinavian Welfare State…    203

The figure of the sovereign consumer represented an innovation not


only in Venstre’s ideology but also in Danish political rhetoric more gen-
erally. In contrast to developments in other countries, such as the United
States and Germany, the consumer only emerged as a key figure in Danish
public and political discourse after 1945.41 As in other Scandinavian
countries, Social Democratic parties heavily influenced the politicization
of the consumer in the post-war period. In collaboration with interest
organizations and experts, they paved the way for new legislation and
institutions that aimed to promote consumer interests and incorporate
consumer politics into government frameworks.42 These frameworks
were based on the idea of consumers as vulnerable beings whose rights to
free choice, fair prices, and accurate information in the marketplace had
to be protected by state institutions and legislation. This view was shared
by Danske Husmødres Forbrugerråd (The Consumer Council of the
Danish Housewives), which was founded in 1947 as the first state-­
supported organization in Scandinavia specifically devoted to consumer
affairs. In the late 1940s and early 1950s, the organization was a close ally
of the Social Democratic Party and contributed to the politicization of
the consumer that took place in Denmark during this period.43
In the 1960s, due to deep disagreements, the consumer-political alli-
ance between Danske Husmødres Forbrugerråd—which in 1963 changed
its name to Forbrugerrådet (The Consumer Council)—and the Social
Democratic Party eventually ended. The consumer council intensified its

41
 The belated development of the consumer figure in Denmark (and in other Scandinavian coun-
tries) had to do with the absence of consumer leagues and advocacy groups in the period before
1945. The emergence of such groups and leagues was seemingly pre-empted by the strong standing
of the Danish cooperative movements in the period. Even if they were concerned with consumption-­
related issues, none of the Danish co-operatives—or the educational organizations that emerged in
the early twentieth century Denmark—was closely associated with the social-political category of
the consumer. They were founded to further the interests of the farmer/peasant, the worker, and the
housewife. Tellingly, they did not refer to the consumer when naming their initiatives, and being a
consumer was not a primary identity for their members.
42
 For a Scandinavian perspective on these developments, see Iselin Theien, “Shopping for the
‘People’s Home’: Consumer Planning in Norway and Sweden after the Second World War,” in The
Expert Consumer: Associations and Professionals in Consumer Society, eds., Alain Chatriot, Marie-­
Emmanuelle Chessel, and Matthew Hilton (Aldershot: Ashgate, 2006).
43
 Morten Bendix Andersen, “Kampen om forbrugersamfundet: Lis Groes og debatten om reklame
i Danmark 1945–1965,” Arbejderhistorie 2 (2011): 46–67 and Karen Møller, Lis Groes: En kvinde
i sin tid (Copenhagen: Gyldendal, 2000).
204  N. Olsen

campaign for further government intervention in and regulation of eco-


nomic matters related to consumption critique. Much of its activism
focused on advertisement, and, alongside its critique of economic issues
related to advertisement, it began to argue that unrestrained advertising
activities would result in a consumer culture that undermined the demo-
cratic basis of modern society.44 These arguments were unfolded in,
among other places, the popular journal named Tænk (Think), launched
by Forbrugerrådet in 1963, which drew inspiration from the writings of
international critics such as John Kenneth Galbraith and Vance Packard
that were translated into Danish in the 1960s.45
In contrast, the Social Democratic Party adopted a more positive atti-
tude toward material welfare and individual consumption in the 1950s
when it began to pursue economic growth and technological innovation
rather than regulation.46 This change was in keeping with the demands
for a liberalization of the Danish economy that had been raised interna-
tionally (with the implementation of the OEEC programs and the
Marshall Plan) and nationally (by other political parties and the business
community).47 In this process, the Social Democratic Party adjusted its
productivity politics to satisfy public demands for mass consumption and
adopted a new habit of addressing its electorate as consumers instead of
as workers.48
While the Danish Social Democratic Party came to view free con-
sumer choice as a basic premise for any democratic society, its vision of
consumer politics remained rooted in an idea of consumers as vulnerable
beings whose rights to free choice, fair prices, and accurate information

44
 Bendix Andersen, “Kampen om forbrugersamfundet,” 54–60.
45
 Hans Hertel, PH—en biografi (Copenhagen: Gyldendal, 2012), 351–354; Anne Borup, “PH og
Tænk: Forbrugeroplysning og reklamekritik,” in Poul Henningsen—dengang og nu, ed., Hans
Hertel (Copenhagen: Gyldendal, 2009), 292–300; Bendix Andersen, “Kampen om forbrugersam-
fundet,” 54–56.
46
 Niels Ole Finnemann, I broderskabets aand, den socialdemokratiske arbejderbevægelses idéhistorie
1871–1977 (Copenhagen: Gyldendal, 1985), 280–347.
47
 Thorsten Borring Olesen and Poul Villaume, I blokopdelingens tegn, 1945–1972 (Copenhagen:
Gyldendal, 2005), 126–143.
48
 Margit Bech Vilstrup, Kampen om arbejderne—Arbejderbegrebets politiske historie, 1750–2017
(PhD dissertation, University of Southern Denmark, 2017), 184–193; Sissel Bjerrum Fossat, Den
artige lille pige med iskagen: Marshall-plan, produktivitet og amerikanisering (Odense: University
Press of Southern Denmark, 2015), 221–222.
  Sovereign Consumers Enter the Scandinavian Welfare State…    205

in the market place had to be protected by means of state institutions and


legislation. Most Danish political parties shared this vision, including
Venstre. Similar to the Social Democratic Party, Venstre began, in the
1960s, to address its electorate as consumers, prioritize the issue of how
to protect their interests in their agendas, and argue for the necessity of a
state-directed framework of consumer policy. As such, the party became
part of a consensus in respect to Danish consumer politics, stating that
government intervention was necessary to ensure a market order that
protected and promoted free consumer choice.49
Two innovative features characterized the ideal of the sovereign con-
sumer that Venstre politicians launched in the early 1970s. First, this
ideal no longer conceptualized consumers as vulnerable and susceptible
beings, but as strong, independent, and ultimately sovereign individuals.
Second, it no longer aimed to protect consumers from market mecha-
nisms through state powers but to protect consumers from state powers
through market mechanisms that involved subjecting the public sector to
consumer demand. This redefinition of the consumer depicted the figure
as a savior who would bring an end to the crisis of the welfare state. As
such, it formed part of Venstre’s attempt to transform itself from an agrar-
ian party to a modern party with a broad electoral appeal by updating its
liberal ideological profile.

 arketizing the State: Decentralization,


M
Economization, and Individualization
Venstre politicians’ demand for consumer sovereignty in the public sector
constituted a crucial part of what, at Venstre’s conference in September
1973, Bertel Haarder labeled “a long-term politics of liberalization.” In
this, he explained, “[p]ersons, families, communes, social offices, doctors and
all forms of public institutions have to be brought into a situation in which they

49
 See Lis Groes, ed., Forbruger, elsket, ombejlet—svigtet?, en debatbog om forbrugeren i det moderne
samfund (Albertslund: Det danske forlag, 1972), 277–293, which documents the attitude of all
Danish political parties toward consumer politics in their political programs and pamphlets in the
1960s.
206  N. Olsen

can benefit the consumer as much as possible.”50 According to Haarder, giving


public subsidies directly to the consumers would not only increase compe-
tition and efficiency but would also dissolve “discrimination on behalf of
enhanced consumer choice.”51 This ambition connected to a comprehen-
sive decentralization strategy directed at the public sector that Venstre poli-
ticians formulated in the early 1970s. The strategy aimed to disperse funds,
decisions, and power into as many hands and institutions as possible. At
the conference in 1973, Haarder spoke of “direct, neutral block grants to
families with children, communes, social offices, health services, indepen-
dent institutions, young people undergoing education etc.”52
Decentralization was also a keyword for Henning Christophersen. In
En udfordring for de liberale, he wrote that, in order to get an overview of
and create efficiency in the public sector, it would be necessary to “decen-
tralize the functions of the enterprise”:

to segregate them into homogenous groups and in many cases also into
geographically limited enterprises. This is at the same time a pre-condition
if the public sector is to arrive at realistic calculation systems in which real
prices can be calculated for individual goods and services. Without such an
internal calculation and pricing, any kind of steering is impossible.53

Christophersen’s agenda of decentralizing the public sector involved a


new distribution of competencies. More specifically, he proposed to
transform all state enterprises (e.g., the Danish State Railways and the
Post- and Telegraph Company) as well as hospitals, universities, and
schools into “self-governing public institutions with independent eco-
nomic responsibilities and a considerable degree of decision-making
competencies assigned to the direction.” Next to calculating prices with
the use of modern calculation methods, Christophersen wanted to imple-
ment “regulating processes in the individual spheres of the enterprise.”
50
 Bertel Haarder, “Et langsigtet liberaliseringsprogram kan rette op på vores overadministrerede,
skatte-tyngede og skæve Danmark,” in At være liberal i det moderne samfund, ed., Flemming
Albertsen (Holte: Forlaget Liberal, 1974), 67.
51
 Haarder, “Et langsigtet liberaliseringsprogram,” 67.
52
 Haarder, “Et langsigtet liberaliseringsprogram,” 67.
53
 Christophersen, En udfordring for de liberale, 23.
  Sovereign Consumers Enter the Scandinavian Welfare State…    207

Above all, he emphasized the need for “modern wage and bonus systems
that enhance productivity” and to encourage “immersion and participa-
tion in decision-making processes” among employees in public
enterprises.54
In addition to his visions for the marketization of the public sector,
Christophersen wanted to create a more flexible relationship between the
state and the private sector so that “the public to a much higher degree
begins to buy special services or one-time services on the private market
instead of producing them itself.” The aim was once again a “competitive
situation, which will be reflected in the calculations and economic per-
formances of the individual public enterprise.”55
Henning Christophersen’s visionary book En udfordring for de liberale
was symptomatic of the new liberalism, which was formulated in Venstre
in the early 1970s. This liberalism connected the broader and progressive
societal visions of “local democracy,” “participation,” “well-being” “free
choice,” and “decentralization” to the ambition to make the public sector
more efficient by subjecting it to market-like competition mechanisms
and allowing for a dynamic cooperation with the private sector.
However, as the economic crisis intensified during the 1970s, Venstre’s
broad societal visions were overshadowed by its aim of creating more
efficiency and growth in the public sector and on the market. This change
is reflected in Christophersen’s writings, which, rather than problematiz-
ing “blind” economic growth, began to focus more narrowly on criticiz-
ing the power of interest organizations, most notably trade unions, and
the size of the public sector, as these features of the welfare state allegedly
prevented economic growth, well-being, and fair competition.56
The narrower focus on efficiency and growth also characterized the
contributions of Peter Brixtofte, Uffe Ellemann-Jensen, and Anders Fogh
Rasmussen to the liberal mobilization taking place in Venstre in the sec-
ond half of the 1970s. In his book Krisen i det danske samfund (The Crisis
in Danish Society) from 1977, in accordance with Bertel Haarder and
54
 Christophersen, En udfordring for de liberale, 23–24.
55
 Christophersen, En udfordring for de liberale, 25.
56
 Jesper Vestermark Køber, Liberale udfordringer, en undersøgelse af brugen af politiske begreber samt
opfattelser af liberalisme og demokrati i årene 1971–1982 blandt liberale i Venstre (MA thesis:
University of Copenhagen, 2013).
208  N. Olsen

Henning Christophersen, Brixtofte defined “consumer democracy” and


“free competition” as the two basic principles of liberal society.57 But he
simply contrasted “free consumer choice” on the market with the “lack of
freedom” in the public sector without embedding his reform proposals in
broader cultural ideas of the good society. Moreover, while Brixtofte
announced that the public was obliged to handle many tasks in modern
society, he mainly recommended a “reform of the public sector according
to liberal principles” and to create better conditions for “Business life –
society’s foundation” as a remedy for the current crisis.58
Brixtofte repeated his recommendations for societal reform in his con-
tribution to the volume Den truede velstand: En debatbog om, hvordan vi
får styr på den offentlige sektor (Threatened Affluence: A Book About How We
Gain Control Over the Public Sector) that appeared in 1980 (which he
edited). Besides Brixtofte and Haarder, Uffe Ellemann-Jensen, Anders
Fogh Rasmussen, Erik Fabrin, and Claus Hjort Frederiksen also contrib-
uted to the volume, which collected and further developed the catalogue
of ideas that politicians from Venstre had advanced since the early
1970s.59 The contributions were given titles such as: “Control of the
Public Sector – the Most Important Task of the 1980s” (Brixtofte); “The
Reinforced Tyranny of Institutions” (Haarder); “Debating Free Services”
(Ellemann-Jensen); “Debating the Public Budgetary Systems” (Fogh
Rasmussen)”; “Decentralization and Privatization” (Fabrin); and
“Unemployment Benefits and the Private Sector” (Hjort Frederiksen). In
brief, the common aim was to make the public sector more effective and
productive by reducing, marketizing and, now, by privatizing its
functions.
In Den truede velstand, the “progressive” visions, which had been cen-
tral to Venstre’s political language in the early 1970s, were virtually
replaced by the ambition of enhancing efficiency and economic growth
in the public and private sector. However, the argument that marketiza-
tion and privatization would breed virtues such as individual freedom of

57
 Peter Brixtofte, Krisen i det danske samfund (Holte: Forlaget Liberal, 1977), 14–22.
58
 Brixtofte, Krisen i det danske samfund, 67–98 and 37–46
59
 Den truede velstand: En debatbog om, hvordan vi får styr på den offentlige sektor, ed., Peter Brixtofte
(Holte: Forlaget Liberal, 1980).
  Sovereign Consumers Enter the Scandinavian Welfare State…    209

choice and personal responsibility in modern society remained in place.


As such, the social-cultural aspect of the new liberalism was now increas-
ingly economized and individualized.
How freedom to choose and personal responsibility were framed as the
new “progressive” ideals in Venstre’s liberalism is seen in Claus Hjort
Frederiksen’s appeal to lower unemployment benefits in his contribution
to Den truede velstand. Hjort Frederiksen explained and supported his
appeal with the following words: “For a liberal, it is key that services pro-
vided by society do not deprive human beings of responsibility over their
situation, at the same time as society extends a social security web.” He
added: “Real solidarity with the unemployed consists in providing them
with jobs – and not only with higher unemployment benefits.”60
The virtues of free choice, individualism, and personal responsibility
were also central to the book Ny-liberalismen og dens rødder (New
Liberalism and Its Roots) from 1982, which Bertel Haarder co-authored
with fellow party members Erik Nilsson and Hanne Severinsen.61 The
book represented the culmination of the wave of literature on “liberal
reform politics” that Venstre politicians had authored since the early
1970s. It introduced neoliberalism through the works of Friedrich Hayek
and Milton Friedman and related their ideas and proposals to current
societal issues. Haarder later reported that Friedman was vital to his idea
of reforming the public sector by subjecting it to competition as a means
of enhancing economic efficiency and individual freedom in the welfare
state. Haarder had followed Friedman’s lectures (at Harvard) in the early
1960s, when the latter prepared the manuscript of Capitalism and
Freedom, and he found great inspiration in the book, not least in
Friedman’s proposal of allowing the public sector to give its subsidies
directly to citizens as individual consumers.62
60
 Claus Hjort Frederiksen, “Dagpengeordningen og erhvervslivet,” in Den truede velstand: En
debatbog om, hvordan vi får styr på den offentlige sektor, ed., Peter Brixtofte (Holte: Forlaget Liberal,
1980), 66.
61
 Bertel Haarder, Erik Nilsson, and Hanne Severinsen, Ny-liberalismen—og dens rødder (Holte:
Forlaget Liberal, 1982).
62
 See the video footage of Haarder’s introduction to the launch of the Danish translation of Free to
Choose taking place at the (neo)liberal think tank Cepos in June 2010—“CEPOS Boglancering
‘Det frie Valg’ af Milton Friedman,” accessed 5 January 2018, Cepos, https://www.youtube.com/
watch?v=aNN6AHXyZe8. See also Bertel Haarder, Op mod strømmen, med højskolen i ryggen
(Copenhagen: Gyldendal, 2013), 120–121.
210  N. Olsen

More generally, Ny-liberalismen og dens rødder illustrates how the tradi-


tion in Venstre of understanding negative freedom as the core of liberal-
ism was compatible with the ideas of the active state as a promoter and
guarantor of liberal society. These ideas had been articulated by members
of the neoliberal network since the 1930s, but they were not introduced
to Danish political debates—as only one of many ideological responses to
the contemporary crisis of the welfare state—until the 1970s.

Neoliberalism as a Fringe Idea in the 1970s


In the early 1970s, there were few indications that neoliberal ideas would
have a promising future in Danish politics. The landslide election in 1973
left the major political parties bewildered concerning how to continue
parliamentary work and meet economic challenges and popular dissatis-
faction. Shifting governments, which took different measures in order to
create economic growth, were characteristic of the era.63
From December 1973 to January 1975, in a government led by Poul
Hartling, Venstre tried to break the deadlock by introducing tax reliefs,
which were to be followed by massive cutbacks in the public sector, but
which did not manage to solve the crisis. And while the new generation
of Venstre politicians mobilized to develop a neoliberal alternative to the
welfare state project, other liberal milieus in Denmark experienced
fatigue. Among other things, Venstre’s folk high school, Breidablik, and
Erhvervenes Oplysningsråd (Information Council of the Trades and
Industries) closed down in the 1972 and 1974, respectively, due to a lack
of interest and support.64 The latter was an internationally connected
think tank that, since its inception in 1945, had propagated the advan-
tages of a free trade economy vis-à-vis the obstacles allegedly posed by a

63
 Søren Hein Rasmussen and Poul Villaume, Et land i forvandling: Danmarks Historie, 1970–2005
(Copenhagen: Gyldendal, 2007), 79–307.
64
 Offering non-formal adult education, the Danish folk high school system was established in the
second half of the nineteenth century and remains an important cornerstone of the Danish educa-
tional system. It was and remains associated with the ideas concerning free educational opportuni-
ties outlined by Danish philosopher, poet, educational thinker, and clergyman, N. F. S. Grundtvig
(1783–1872).
  Sovereign Consumers Enter the Scandinavian Welfare State…    211

planned economy.65 Moreover, even if the chairman of Venstre’s youth


section, Anders Fogh Rasmussen, strove to foster a new liberalism, he was
also, as mentioned above, a left-leaning liberal and passionate about the
idea of economic democracy pursued by the labor movements and sec-
tions of the Social Democratic Party in the early 1970s.
Indeed, neoliberalism offered only one of many answers to the crisis of
the welfare state that were voiced in Denmark during the 1970s, and it
was certainly not the most prominent. In the first part of the decade, the
neoliberal proposals to reform the welfare state through consumer sover-
eignty and decentralization were accompanied (and often overshadowed)
by Mogens Glistrup’s economically liberal visions of undoing the state on
behalf of the market, radical demands launched by leftist revolutionaries
to overthrow the existing societal order, and the idea of economic democ-
racy formulated by the labor movement and the Social Democratic Party.
Moreover, in the latter part of the decade, the most hotly debated contri-
bution to the political debate was not neoliberal ideas emanating from
Venstre, but the book Oprør fra midten (Rebellion from the Center) that
aimed to formulate an alternative to the existing society from a non-­
Marxist, center-left perspective that involved the proposal of basic
income.66
Moreover, while ideological debate was raging, welfare state expan-
sions continued through further social reforms. Most importantly, as
an outcome of the work conducted by the Social Reform Commission
that had been established in the mid-1960s, the so-called Support Act
(Bistandslov) was implemented in 1975. This law extended the uni-
versal system of the welfare state. Every citizen, who was subject to a
“situation of need,” now labeled a “social event,” was entitled to con-
tact the local Social Support Office to request benefits. This Act has
been described as the pinnacle of the Social Democratic welfare proj-
ect and as a testimony to the thorough Social Democratization of
public opinion and politics taking place in this period, in spite of the
political critique of the welfare state that was voiced from the left and

 Olsen, “A Second Hand Dealer in Ideas.”


65

 Niels I.  Meyer, Villy Sørensen, and K.  Helveg Petersen, Oprør fra midten (Copenhagen:
66

Gyldendal, 1978).
212  N. Olsen

the right. Each of the four old parties and the newly established
Socialistic Party agreed on the law.67
The role of the state was also expanded in respect to consumer politics.
One of the outcomes of the increased political attention given to con-
sumers and consumption in the 1960s was the establishment of a
Consumer Commission (in 1969) that was to offer proposals for new
initiatives in the area of consumer policy. As a result of the Commission’s
work, the Danish government established two new institutions address-
ing consumer politics in 1975. These were Forbrugerombudsmanden
(the Consumer Ombudsman) that was to ensure that private companies
complied with consumer protection and marketing rules (the work con-
ducted by the Commission also led to the codification of a new market-
ing legislation in 1974), and Forbrugerklagenævnet (the Consumer
Complaints Board) that was tasked with considering consumer com-
plaints related to goods and services purchased from traders.68
In contrast to the neoliberal visions developed within Venstre, these
institutions did not view consumers as strong, independent, and sov-
ereign individuals but as vulnerable and susceptible beings, and they
did not aim to protect consumers from state powers through market
mechanisms, but the other way around. This perspective mirrored the
general idea of consumers and consumption in Danish politics at the
time. In the 1970s, there was little talk of the sovereign consumer out-
side the limited circle of politicians partaking in the neoliberal mobi-
lization within Venstre. When the consumer was referred to, it was
framed in a distinctively non-neoliberal manner, both in political and
societal debate and within economics. This is seen in the first essay
exclusively devoted to the notion of consumer sovereignty that
appeared in a Danish context. It was authored by economist Jørn
Henrik Petersen—Jørgen S.  Dich’s successor at Aarhus University—
and appeared in the Social Democratic journal Ny Politik (New Politics)

67
 Niels Finn Christiansen, “Velfærd. Vision og virkelighed,” in Udfordring og omstilling. Bidrag til
Socialdemokratiets historie, eds., Gerd Callesen, Sten Christensen and Henning Grelle (Copenhagen:
Fremad, 1996), 120.
68
 Hans Ole Stoltenberg, Dansk forbrugerpolitik 1935–2000, en institutionel analyse af etableringen
af Statens Husholdningsråd, Forbrugerombudsmandens embede, Forbrugerklagenævnet samt
Forbrugerinformationen (MA thesis, Århus University, 2000).
  Sovereign Consumers Enter the Scandinavian Welfare State…    213

in 1972.69 In this piece, Petersen questioned the idea of consumer sov-


ereignty in the market with reference to the efforts made by advertise-
ment and business to create artificial demand. Tellingly, the piece was
titled “Bedrag at forbrugerne styrer produktionen?” (“Deceit that con-
sumers control production?”). Giving a negative answer to this ques-
tion, Petersen argued that the lack of consumer sovereignty ought to
be answered by a modern, state-driven consumer politics.
The economic crisis continued throughout the 1970s and climaxed
when the second oil crisis hit Denmark at the end of 1979. This crisis
impaired the national economic problems in the form of inflation and
deficits on the balance of payments; a development that prompted the
Social Democratic Minister of Finance, Knud Heinesen, to remark that
Denmark was heading toward the “economic abyss.” The Social Democratic
government sought to improve the economy through various measures.
From 30 August 1978 to 26 October 1979, the party entered a govern-
ment coalition with Venstre, of which Henning Christophersen was now
chair, but without much success. Finally, in the summer of 1982, the Social
Democrats stepped down and were succeeded by Poul Schlüter’s coalition
government, which singled out the massive foreign debt and the growing
state budget deficit as its primary policy aims.70

 eoliberalism as a Concrete Policy Tool


N
in the 1980s
Venstre and the Conservative Party had launched a liberal “alternative” in
1981, which, in the words of Poul Schlüter, “was more than numbers and
economics. It was a philosophy.”71 The economic visions of the plan were
69
 Jørn Henrik Petersen, “Bedrag at forbrugerne styrer produktionen?,” Ny Politik 2 (1972): 10–18.
The figure of the sovereign consumer had been introduced before within the discipline of econom-
ics in relation to discussions of welfare economics. See, for example, Erik Hoffmeyer and Erling
Olsen, “Økonomisk velfærdsteori,” in Velfærdsteori og velfærdsstat, ed., Erik Hoffmeyer (Copenhagen,
Berlingske Forlag, 1962), 9–28, which provided an account of recent international discussions of
welfare economics, including the different figures of the sovereign consumer that these discussions
thematized.
70
 Rasmussen and Villaume, Et land i forvandling, 243–285.
71
 Rasmussen and Villaume, Et land i forvandling, 276–277.
214  N. Olsen

inspired by developments in Great Britain and the United States, where


Margaret Thatcher and Ronald Reagan had formed governments in 1979
and 1981 respectively. They were also, to a large extent, driven by politi-
cians that had been central to the neoliberal mobilization in Venstre.
Particularly prolific in the early 1980s were Henning Christophersen,
Uffe Ellemann-Jensen, and Bertel Haarder, who served as, respectively,
Minister of Finance, Foreign Affairs, and Education in the 1982
government.
It was during Henning Christophersen’s reign as Minister of Finance
that implementing consumer sovereignty in the public sector was trans-
formed from a fringe idea into a policy option that could be employed in
the attempt to end the state budget deficit. Most importantly,
Christophersen presented in 1983 the first of a series of so-called mod-
ernization programs, which aimed to establish a new society that pro-
moted individual responsibility and initiative and reduced patronage and
guardianship.72 The proposals of the 1983 program sounded like echoes
of the ideas for welfare state reforms that Christophersen and his fellow
party members had authored since the early 1970s. The key objective of
the program was to change the relationship between the individual and
the state through a set of reforms that should make the public sector less
bureaucratic, and more productive, effective, and responsive to individ-
ual demands and desires. It presented the government’s ideas of imple-
menting self-regulating mechanisms and competition systems with a
focus on five areas: (1) decentralization of responsibility and competence;
(2) market steering, freer consumer choice, and changed finance mecha-
nisms; (3) better customer service and simplification of rules; (4) training
of leaders and personnel; and (5) increased use of new technology.
Overall, the idea to design the public sector in a way that involved and
benefitted the freely choosing consumer (or user) permeated the 1983
program. For example, the section on decentralization stated that the
“decentralization of responsibility and competencies” aimed at establish-
ing practices that would “better accommodate to the needs of the user.”
72
 Finansministeriet, Redegørelse til Folketinget om regeringens program for modernisering af den stats-
lige administration (1983). The program is analyzed in Niels Ejersbo and Carsten Greve,
Moderniseringen af den offentlige sektor (Copenhagen: Akademisk forlag, 2014), 34–36 and in
Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 115–116.
  Sovereign Consumers Enter the Scandinavian Welfare State…    215

Likewise, the section on market steering announced: “Funds are given


directly to the users of the respective service rather than to the producing
institution. It will increase the service awareness of the providers and
encourage economization.” Likewise, the section explained that “a
broader supply of services and thereby more freedom of choice for the
citizens will increase satisfaction with the public services. Everywhere
possible, free consumer choice must be created between the different ser-
vice institutions, such as for example, in the area of education.” The gen-
eral message in the crucial section on market steering was summed up in
the following passage, which again referred to the aim of making a public
sector that is based on market mechanisms, competition, and free con-
sumer choice:

The government intends to take various initiatives to secure that demand


becomes more decisive for which services and how much is to be produced.
Public activities will to a much higher degree be steered through market
mechanisms. The aim is to ensure that the users will achieve as much influ-
ence as possible in the extent and quality of public services and further-
more encourage the public companies and institutions to organize and
modernize their services.73

The 1983 modernization program was met with criticism within and
outside the government, due to its critical attitude toward the welfare
state (ideas about privatizations had already been removed from the pro-
gram, as they had proved to be very controversial in the preceding discus-
sions). Consequently, the conservative politician, Palle Simonsen, who in
1984 succeeded Henning Christophersen as Minister of Finance, modi-
fied the government’s visions in the following modernization programs.
They did not thematize market mechanisms and free choice in the public
sector, but instead they spoke in more general terms about changes in the
state administration.74
Accordingly, political changes were not realized in Denmark to the
same degree as in Great Britain and the United states in the 1980s. After
a period of international economic expansion, which was favorable to the

73
 Finansministeriet, Redegørelse til Folketinget, 3, 7, 5–6.
74
 Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 119–121.
216  N. Olsen

government’s new economic program, its visions of change was sidelined


on behalf of a pragmatic view of politics. By 1983, Prime Minister Poul
Schlüter—who was more of a tactician than an ideologist—announced
that “ideologier er noget bras” (“ideology is junk”), and he avoided direct
confrontations with the welfare state in the following years.75
However, comprehensive plans concerning public sector reforms were
issued again after a reconstitution of government in the late 1980s, for
example, in the fourth modernization program that appeared in 1988.76
It echoed the 1983 program by emphasizing key words such as market
mechanisms, competition, efficiency, decentralization, self-management,
steering, and free consumer choice in the attempt to transform the public
sector. Moreover, it contained a separate section on the users of the public
sector, which among other things announced that all ministries should be
obliged to conduct user evaluations. In the following years, spearheaded
by neoliberal Venstre politicians such as Bertel Haarder, Uffe Ellemann-­
Jensen, Peter Brixtofte, and Anders Fogh Rasmussen, the government
launched more sweeping agendas of welfare state reforms. In fact, the
seventh modernization program, which appeared in 1991, envisioned a
“change of system,” referring to the “market model in which the private
sector has provided consumers with better and cheaper services called
forth by competition, effectiveness and product innovations.”77
In April 1992, the Danish government published its seventh and final
modernization report, titled Valg af velfærd—konkurrence med frit valg for
borgerne (Choice of welfare—competition with free choice for citizens). The
report described a market model designed as “citizen controlled competi-
tion” and explained its main idea as follows: “Freedom of choice for citi-
zens, competition between further service providers, decentralization and
a reform of finances.” To this, the report added: “The individual citizen
should be free to choose in as many ways as possible between different
suppliers and different forms of public service. The citizen is in this way

75
 Rasmussen and Poul Villaume, Et land i forvandling, 326–330.
76
 Finansministeriet, Moderniseringsplaner 1988–1989 (1988). See also Ejersbo and Greve,
Moderniseringen af den offentlige sektor, 40–41.
77
 Finansministeriet, Den offentlige sektor år 2000—moderniseringsredegørelse 1991 (1991), 4.
Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 122–123 and Ejersbo and Greve,
Moderniseringen af den offentlige sektor, 42–44.
  Sovereign Consumers Enter the Scandinavian Welfare State…    217

enabled to vote with their feet in the public sector and will consequently
through her/his choices influence the composition of the services.”78 Not
long after, the government published a report that aimed to introduce
free choice of daycare, domestic help, hospitals, high schools, elementary
schools, and so on, along with a marketization and privatization of vital
parts of the public sector.79
These examples show that, from the early 1970s to the early 1990s,
that status of neoliberalism had changed from that of a fringe idea voiced
by a minority in Danish welfare state debates to a policy tool that govern-
ment politicians wanted to make use of to transform the public sector.
Members of government explicated the ideological basis of this new
political economy of consumer choice that aimed to marketize the politi-
cal in their capacities as influential ministers of various resorts. Taxation
Minister Anders Fogh Rasmussen, who became Prime Minister of
Denmark for Venstre in 2001, was especially energetic. Having been a
leftist liberal in the 1970s, Fogh Rasmussen allegedly experienced an
“ideological awakening” during a visit to the United States in the early
1980s. Economist Robert Lucas, especially, inspired him. From Lucas,
Fogh Rasmussen took the idea that politicians should abandon the idea
of controlling the economy with Keynesian measures and aim instead at
a balanced state budget, leaving the responsibility of full employment to
market forces. On that basis, during his reign as Minister of Taxation
from 1987 to 1990, Fogh Rasmussen confronted a long-standing tradi-
tion of Keynesian economics in Danish politics.80
Shortly after, in relation to his attempt to continue the liberal ideologi-
cal mobilization in Venstre, Fogh Rasmussen published the book Fra
socialstat til minimalstat (From Social State to Minimal State).81 In the
book, next to Grundtvig, he drew on Friedrich Hayek, Milton Friedman,
and Robert Nozick in making a case for a liberal society based on limited

78
 Finansministeriet, Valg af velfærd—konkurrence med frit valg for borgerne (1992), 5.
79
 Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 123–123 and Ejersbo and Greve,
Moderniseringen af den offentlige sektor, 42–44.
80
 Balder Asmussen, Drivkræfterne bag den økonomiske politik, 1977–1994 (PhD dissertation,
Aalborg University, 2007), 121–127.
81
 Anders Fogh Rasmussen, Fra socialstat til minimalstat, en liberal strategi (Copenhagen: Samleren,
1993).
218  N. Olsen

government, individual liberty, the rule of law, and free markets. In so


doing, Fogh Rasmussen made himself a spokesperson of the moral foun-
dation informing neoliberal thought: the idea that the social order cre-
ated by the market is the fairest as it is based on individual preferences
and not created by an elite minority. More generally, he presented liberal-
ism as an ideology that aimed to liberate the Danish population from the
high-hatted and repressive experts running the public sector.
Fogh Rasmussen’s ideological visions were more radical than those
pursued by the government he represented. Rather than dismantling the
public sector through privatization, the government primarily aimed to
downsize its scale and reform its functions by implementing market
mechanisms. However it shared the idea, propagated by Fogh Rasmussen,
of the citizen as a consumer who is best protected by her/his own ratio-
nality and the efficiency of the market, and the ambition of marketizing
the public sector in order to enhance economic efficiency and individual
freedom.

 anish Social Democrats Embrace


D
the Sovereign Consumer
In the late 1980s and early 1990s, ideas of public sector reforms had been
widely disseminated and were more broadly accepted in Danish politics.
Moreover, the actual implementation of public sector reforms was
expected to be realized in the near future. In this situation, however, the
government that had spearheaded the ideas of public sector reform was
forced to resign in January 1993 (an investigation of how Minister of
Justice, Erik Ninn-Hansen from the Conservative Party, had decided to
stall the advance of family reunification of Tamil refugees led to the
resignation).
Yet it turned out that the government’s resignation had little impact on
the new approach to the public sector in Danish politics that it had
launched. Hence, by this time, the Social Democratic Party had come to
share many of the visions that the Schlüter governments had pursued
since the publication of it first modernization program in 1983. This
  Sovereign Consumers Enter the Scandinavian Welfare State…    219

ambition had not formed part of the Social Democratic imaginary in the
1970s, when, on the contrary, it had taken a leftist ideological turn,
among other things by pursuing ideas of economic democracy. In the
early 1980s, in response to the economic crisis, the party again changed
its course by outlining an ideology that combined values such as solidar-
ity, equality, and well-being (“trivsel”) with economic growth.82 The grave
economic situation, most party members agreed, required a strong
emphasis on growth if standards of living and public services were to be
upheld. Moreover, leading Social Democratic politicians arrived at the
conclusion that the welfare state should be defended rather than expanded
and that public sector cuts and creating better conditions for private busi-
ness were, in fact, needed to enhance economic growth and
competitiveness.
These (and other proposals) were intensely debated among Danish
Social Democrats in the early 1980s. While some party members were in
favor of sticking to “classic” Social Democratic welfare state politics, oth-
ers argued that it limiting the growth of the public sector and making it
more efficient were vital if popular discontent with this sector was to be
disarmed. The first connections between free consumer choice and public
sector reform within the Social Democratic Party were made in these
debates. For example, former Minister of Finance, Knud Heinesen, noted
in a 1984 article titled “Kan velfærdssamfundet overleve” (“Can the wel-
fare society survive?”), which appeared in the party journal ny politik
(New Politics), that many “users” viewed the public services as “bureau-
cratic and rigid.” Moreover, he proposed adapting Social Democratic
politics to “the growing user demand for greater flexibility and concern
for greater efficiency with a more extensive decentralization.”83
A similar discourse was expressed in the new Social Democratic work
program during the period from 1984 to 1988, titled For ny fremgang

82
 For the ideological discussion and transformations taking place within the Social Democratic
Party in the 1980s, see Jørn Henrik Petersen, Klaus Petersen, and Niels Finn Christiansen, eds.,
Velfærdsstaten i tidehverv. Dansk Velfærdshistorie, bind 5, 1973–1993 (Odense: University Press of
Southern Denmark, 2013), 105–136 and Rasmus Knold Andersen, “Det knager i Samfundets Fuger
og Baand”: Individ, stat og marked i Socialdemokratiets ideologi fra 1982 til 1993 (MA thesis,
University of Copenhagen, 2018).
83
 Cited from Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 118.
220  N. Olsen

(For New Progress). While criticizing the government’s aim to privatize


public services, the program announced a Social Democratic aim to “fur-
ther a development within the entire institutional area to secure a treat-
ment in which ‘the users’ are entrusted with greater responsibility and
participation and which opens public institutions towards society.”84 This
involved the idea of initiating public/private collaboration in the produc-
tion and delivery of public services, and, more generally, a portrayal of
the market not only as a force that needs to be tamed and controlled by
the state but also as a useful tool in solving the economic and political
challenges of the welfare state.
The ideological debates within the Danish Social Democratic Party
took place in the context of a larger discussion of the development of a
“new Nordic model” that unfolded within SAMAK (the Co-operation
Committee of the Nordic Social Democratic Parties and Trade Unions).85
The Swedish Social Democratic Party, which had been in opposition in
the period from 1976 to 1982, greatly influenced this discussion with
ideas that it had outlined in pursuit of a new ideological-political foun-
dation.86 Central for this renewal was a defense against the attacks on the
public sector that economically liberal politicians had launched in the
preceding years. As part of this defense, the Swedish Social Democratic
Party emphasized the necessity of implementing efficiency and rational-
ization in the public sector so that tax money was spent to the greatest
effect. Hence, the party coined the slogan “No more money for reforms,
but extended reforms for the money.” Moreover, it made free choice in
the public sector a key theme in its reform efforts. For example, at its
1984 congress, the party presented a draft for a program that specifically
aimed to enlarge the dimension of individual choice within the public
sector. Furthermore, the political guidelines, which were agreed upon in
the party’s 1987 congress, announced: “Citizens can choose between
alternative forms of public service. The freedom of choice applies to all
citizens. The whole sector is permeated by consumer friendliness.”87

84
 For ny fremgang: Socialdemokratiets arbejdsprogram 1984–1988 (Copenhagen, 1984), 26. See also
Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 118.
85
 Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 121–123.
86
 Jenny Andersson, Between Growth and Security: Swedish Social Democracy from a Strong Society to
a Third Way (Manchester: Manchester University Press, 2006), 105–127.
87
 Cited from Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 122.
  Sovereign Consumers Enter the Scandinavian Welfare State…    221

The discussion in SAMAK resulted in the report Förnya den offentliga


sektorn (Renewal of the Public Sector) that was drafted in 1988 and pub-
lished in 1990.88 Its key theme was the idea of a more individually dif-
ferentiated and effective public sector service. In response to those Social
Democrats, who might respond negatively to this idea, the report stated:
“In contrast, we ought to see the demand for the freedom to choose as
something positive and as a victory for welfare politics.”89 Therefore, free
consumer choice was to be realized in several areas, bureaucracy reduced,
and production was to serve consumer interests (consumers should be
enabled to “vote with their feet” by choosing between different goods and
services and consumer evaluations should be utilized to measure and
improve public sector performance).90 While the report thus called for
the application of competition-enhancing measures modeled on market
mechanisms, it was cautious in its discussion of private suppliers of pub-
lic services; a theme that was still seen as delicate by Social Democrats.91
During most of the 1980s, the Danish Social Democratic Party pur-
sued a less clear reform agenda than the ones outlined by its Swedish
counterpart and in SAMAK.92 In addition to debating how to renew its
ideological profile, the party channeled much of its energy into a critique
of how the government’s reform politics allegedly aimed to dismantle the
welfare state and establish a society characterized by individualism and
extreme inequality of wealth and income in its place.93 However, in the
late 1980s, most Danish Social Democrats had abandoned ideas of com-
prehensive state planning. Instead, they began to discuss the idea of initi-
ating collaboration between the state and private business, outsourcing
some provisions of public goods to private deliverers, and to implement-
ing market mechanisms in parts of the public sector. These ideas, some of
which Knud Heinesen had launched in the early 1980s under the label of
“the third way,” to mark their deviation from the ideas of public sector
reforms pushed by the government, gained prominence within the party
88
 SAMAK, Förnya den offentliga sektorn (1990).
89
 SAMAK, Förnya den offentliga sektorn, 15.
90
 SAMAK, Förnya den offentliga sektorn, 29.
91
 Petersen, Petersen, and Christiansen, Velfærdsstaten i tidehverv, 122–123.
92
 Knold Andersen, “Det knager i Samfundets Fuger og Baand.”
93
 Hein Rasmussen and Villaume, Et land i forvandling, 308–329.
222  N. Olsen

in the late 1980s.94 Among other places, this is seen in the new working
program for the period 1990–1995, which the Social Democratic Party
presented in 1989. Referring to the SAMAK report that was then under-
way, the working program announced that “decentralization and enlarged
freedom to choose has to be the guiding principle. Responsibility and
economy has to be outsourced to the users and the employers in the indi-
vidual public institutions.”95
In this context, it had become difficult for the Danish Social Democratic
Party to criticize the reform visions that the Schlüter government had
outlined in its modernization programs in the late 1980s. In fact, on the
verge of the 1990s, the Social Democratic Party had become fixed on an
ideological course that likewise aimed at reforming the public sector
through the introduction of market mechanisms. As will elaborate on in
the following chapter, even the party presented its reform agenda as a
political alternative that, to a significant extent, promoted social solidar-
ity and protected the interests of the lower strata of the population; it was
embracing and developing a neoliberal agenda of governing for the sov-
ereign consumer.

 he Sovereign Consumer and the Seeds


T
of New Public Management
Placing the developments described in the current chapter in relation to
the broader story told in the previous chapters, we might begin by noting
the many similarities between the neoliberal program that Danish Venstre
politicians outlined in the 1970s and the programs that neoliberals had
outlined in other contexts and countries since the interwar period. Five
similarities are particularly striking.

1. The idea that classical liberalism should be rejected in favor of a new,


flexible, and more constructive liberalism that assigned a vital role to
the state in creating and sustaining liberal society.
 Knold Andersen, “Det knager i Samfundets Fuger og Baand,” 31.
94

 Socialdemokratier, Gang i 90’erne. Socialdemokratiets bud på en samlet indsats 1990–1995 (1989),


95

11. See also Petersen, Petersen and Christiansen, Velfærdsstaten i tidehverv, 123.
  Sovereign Consumers Enter the Scandinavian Welfare State…    223

2. The assumption that comprehensive state intervention in the econ-


omy results in an inefficient allocation of societal resources and paves
the way for a system in which power- and profit-seeking bureaucrats
and vested interests suppress the population.
3. The promotion of the sovereign consumer as the agent, who can create
and guarantee economic efficiency and political democracy in (neo)
liberal society.
4. The concrete proposal to improve the efficiency of the public sector
and to democratize its functions by subjecting it to free consumer
choice.
5. The overall reconceptualization of politics as a method of choosing
between different products.

However, we should be careful not to stress the links and the similarities
between the Danish case and international neoliberalism too strongly. As
for the links, Bertel Haarder was in fact the only Venstre politician who
directly referred to Mont Pèlerin–associated scholars such as Friedrich
Hayek and Milton Friedman. Some Venstre politicians occasionally
referred to “classic” liberal thinkers (from Hobbes, Locke, and
Montesquieu to Smith, Tocqueville, and Mill—and Grundtvig in a
Danish context). But their ideological innovations were, arguably, pri-
marily inspired by political actors who had little do to with liberal
­ideology, old or new, but nevertheless helped pave the way for the cre-
ation and diffusion neoliberal thought in Denmark. Ideas developed by
leftist scholars and intellectuals were especially important. For example,
in Haarder’s Statskollektivisme and spildproduktion, Jørgen S. Dich’s and
John Kenneth Galbraith’s critiques of the ruling class and of producer
sovereignty were cited next to proposals to redirect funds from the public
sector directly to the consumer through educational accounts put for-
ward by the Austrian-American author and social critic Ivan Illich.
There were, of course, crucial differences between the agendas of Illich
and Dich and the project pursued by the Danish neoliberals in the 1970s.
Illich was critical not only of publicly funded schooling but of schooling
as such, and he aimed not at a free market in educational services but at
a de-schooled society. Likewise, even if Dich believed that introducing
competition-enhancing mechanisms might contribute to a solution to
224  N. Olsen

the problems in the public sector, he did not argue that the Danish wel-
fare state ought to be completely reorganized through a fundamental
marketization of the public sector.
The writings of Illich and Dich nevertheless testify to the ideational
convergence that took place from the 1960s onwards concerning the
ways in which scholars, intellectuals, and politicians from across the
political spectrum interpreted societal phenomena. As pointed out by
Daniel T. Rodgers, on both the intellectual right and the intellectual left,
earlier notions of history, society, and politics that stressed collective
institutions, interdependence, and common solutions and social circum-
stances gave way to categories and perspectives that stressed society’s
many, different, and often incompatible interests, as represented by the
diverse preferences and desires held by autonomous individuals.96
Rodgers’ observations primarily concern American developments, but it
is evident that this ideational convergence also played out in a Danish
context. Here, in creating their neoliberal agenda, Venstre politicians
responded to and co-opted many of the new concepts and perspectives
with which left-wing intellectuals interpreted and evaluated the welfare
state. These included calls made by the youth movement and by social
critics for further autonomy, self-determination, and self-management,
as well as for the more direct participation of individuals and small groups
in decision-making processes, and the portrayal of the welfare state as the
repressive and expensive product of the ruling class as outlined by econo-
mist Jørgen S. Dich.
Consequently, it is important to emphasize that most of the Danish
neoliberals (including Christophersen, Fogh Rasmussen, Brixtofte) were
educated as economists, and that, in their analysis of the public sector,
they came to dire conclusions about its dynamics and efficiency which
would come to be shared by economists of different political observations
in this very period. In particular, Social Democratic politicians developed
a way to diagnose and prescribe a cure to the economic-political illnesses
of the public sector that were in keeping with and made neoliberal ideol-
ogy more widely disseminated and accepted in Danish politics.

 Daniel T. Rodgers, The Age of Fracture (Cambridge, MA: Harvard University Press, 2011).
96
  Sovereign Consumers Enter the Scandinavian Welfare State…    225

To sum up: early neoliberalism in Denmark developed largely on its


own premises. Moreover, an ideational convergence between left and
right and ongoing changes in the discipline of economics helped shape
neoliberal ideology and its figure of the sovereign consumer. In line with
this, while Danish neoliberalism shared many points of similarity with
international variants, a unique feature characterized it. While the sover-
eign consumer had been thematized primarily in relation to the private
market, the Danish neoliberals mobilized the figure with, above all, the
aim of reforming the public sector. This involved approaching public
service institutions and agencies through the lens of what is now known
as New Public Management.97 It concerned an ambition to make public
service more business-like and to improve its efficiency by implementing
quasi-market production structures that focused on consumer services,
de-centralized delivery models, co-operation and competition with pri-
vate companies, all while, at the same time, introducing individual incen-
tives to employees and the assessment of performance through audits,
benchmarks, and evaluations.
It is widely accepted that New Public Management was deeply inspired
by public choice theory in its application of the theories and methods of
(neoclassical) economics to the study of politics, as described in Chap. 5.
As for the Danish case, it is noteworthy that economist Jørn Henrik
Petersen, who had introduced and problematized the notion of consumer
sovereignty in the early 1970s, was also responsible for presenting public
choice theory to Danish academic and political debate in the late 1970s
and early 1980s.98 Petersen was not part of any neoliberal network or
dedicated to a neoliberal cause. Pondering the question as to why public
spending kept growing, he simply found a usable answer in the work of
James M. Buchanan and other public choice theorists and communicated
his findings to colleagues and to political decision-makers. This illustrates

97
 Mark Bevir, Key Concepts in Governance (London: Sage, 2009), 142–145.
98
 See, for example, Kjeld Møller Pedersen and Jørn Henrik Petersen, “Den offentlige sektor og
velfærdsøkonomien,” Nationaløkonomisk Tidsskrift 117 (1979), 35–54; Jørn Henrik Petersen, “Kan
man  - som alternativ til central planlægning  - benytte elementer af markedsmekanismen i den
offentlige sektor,” Nordisk Administrativt Tidsskrift 4 (1980), 29–44; Jørn Henrik Petersen,
“Decentralisering i den offentlige sektor,” Nationaløkonomisk Tidsskrift 119 (1981): 314–327. See
also Rasmus Remegius Berg, Indførsel og udbredelse af Public Choice teori i Danmark (MA thesis,
University of Copenhagen, 2016).
226  N. Olsen

from another angle the argument pursued in this and other chapters that
the idea of governing for the sovereign consumer was gradually picked up,
further developed, and disseminated by non-neoliberals.
As we will see in the following chapter, New Public Management was
also central to the continued push toward the competition state that took
place in Denmark and the other Scandinavian countries from the 1990s
onwards. Here, the neoliberal sovereign consumer became an even more
powerful and omnipresent political paradigm, not only because it was
introduced to debates of the public sector but also because it was freed
from traditional discussions of the possible problems that might charac-
terize a market order based on consumer sovereignty. These discussions
had been vital for the conceptualization of the figure of the sovereign
consumer among neoliberals from William H. Hutt to Milton Friedman,
but they were largely ignored or forgotten once the status of the sovereign
consumer as the dominant political paradigm was consolidated.
7
Neoliberalism Without Neoliberals

Scholars agree that neoliberalism has become the dominant political


ideology and practice of our age. They point to the fact that politicians
across the political spectrum all practice neoliberal politics in so far as
they grant the state a key role in efforts to establish societal orders based
on the market economy and individual freedom. In fact, due to the lack
of a credible intellectual alternative to this political ideology, scholars
speak of the emergence of a so-called neoliberal hegemony since the
1980s.1 At the same time, few identify with, and most are critical of, the
“neoliberal” label in contemporary politics. As such, we are living in a
neoliberal age without neoliberals.2
Many scholars have narrated the making of neoliberal hegemony
through a focus on how international institutions, such as the International
Monetary Fund, the World Bank, and the European Union, have framed
and implemented neoliberal policies in recent decades. Other scholars
1
 See the references in the introductory chapter.
2
 There are of course several institutions in many countries, in particular think tanks and research
institutions, which are devoted to promoting neoliberal ideas as associated with, for example,
Ludwig von Mises and Friedrich Hayek. The point is that there are few, if any, larger political par-
ties, or international organizations regulating matters related to the economy, which identify with
the neoliberal label.

© The Author(s) 2019 227


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_7
228  N. Olsen

have focused on the national level, often with an emphasis on the


­neoliberal reforms overseen by Ronald Reagan and Margaret Thatcher in
the 1980s.
However, some have also begun to pay attention to the role of center-­
left parties on the national level, arguing that they have been instrumen-
tal in creating and sustaining the present age of neoliberal hegemony. For
example, in her groundbreaking new book, Leftism Reinvented: Western
Parties from Socialism to Neoliberalism, Stephanie L. Mudge has tracked
the history of leftist parties from the late nineteenth century through the
2000s in a comparative study that illuminates developments in the
German Social Democratic Party, the Swedish Social Democratic Party,
the British Labor Party, and the American Democratic Party.3 In so
doing, she detects a fundamental transformation that has taken place in
the history of leftist ideology and politics in the period under discus-
sion.4 According to Mudge, the term “left” had a “shared origin in claims
to representation of the underrepresented in service of equality.” She
adds: “For this historical reason left parties bear a unique responsibility
to speak for the poor, disadvantaged, and disenfranchised groups – and
are, by extension, important barriers to the descent of democracy into
plutocracy.”5 In contrast, in their turn to neoliberalism in the 1980s and
1990s, the traditional concerns of inequality and democratic participa-
tion in politics have been withdrawn from center stage in leftist parties
in favor of a commitment to “work-centric welfare reform, balanced
budgets, market-led growth, and smaller governments.” As such, Mudge
explains, the neoliberal ideology embraced by leftist parties in recent
decades “elevates markets over politics.”6
Without offering the same long-term historical perspective or compre-
hensive comparative angle, other scholars have made arguments about
center-left parties’ turn to neoliberalism that resembles Mudge’s.7
3
 Stephanie L.  Mudge, Leftism Reinvented: Western Parties from Socialism to Neoliberalism
(Cambridge, MA: Harvard University Press, 2018).
4
 Mudge identifies three distinctive moments in the history of Social Democracy: a socialist moment
in the 1920s–1930s, a Keynesian moment in the 1950s–1960s, and a neoliberal moment in the
1980s–2000s.
5
 Mudge, Leftism Reinvented, xii.
6
 Mudge, Leftism Reinvented, 11.
7
 For references, see Mudge, Leftism Reinvented.
  Neoliberalism Without Neoliberals    229

Ironically, according to this research, neoliberalism was never as effec-


tively implemented as under Social Democratic rule in the 1990s. In
other words, the decade in which Social Democracies once again enjoyed
widespread electoral success and took power in many countries was also
the one in which neoliberal political reforms were most successfully real-
ized in many contexts.
This chapter contributes to the literature on the relation between
center-­left parties and neoliberalism in an attempt to explore how neolib-
eralism has become the dominant political paradigm of our age. It con-
firms the interpretation that the rise of neoliberal hegemony in recent
decades is closely connected to ideological changes taking place within—
and to the actual policies pursued by—these parties. However, it aims to
deepen our understanding of the development of “neoliberalism without
neoliberals” by focusing on the role of the figure of the sovereign con-
sumer in the transformation of leftist ideology. It argues that neoliberal-
ism’s rise to hegemony during the 1980s and 1990s was inextricably
linked to the fact that center-left parties embraced, further developed,
and utilized the figure of the sovereign consumer as a policy tool.
This chapter thereby continues the story begun in previous chapters.
These chapters have documented how, from the 1950s to the 1980s, neo-
liberals and center-left politicians, scholars and intellectuals converged in
framing the sovereign consumer as an individual who ensured democracy
and efficiency if only she/he was allowed to move within a free market
economy or in marketized institutions. Moreover, the present chapter
highlights a particular development that began in the 1960s and was
crucial to the making of neoliberal hegemony in the 1980s and 1990s,
namely, the convergence between neoliberal and center-left approaches
to public administration.
More precisely, this chapter describes how center-left parties in
Denmark, Great Britain, and the United States followed in the footsteps
of neoliberal politicians by framing the sovereign consumer as a motive
and tool for public sector reforms. Center-left parties were surely critical
of the agendas of their neoliberal opponents. However, they gradually
incorporated the idea of government as being unable to respond to indi-
vidual demands into their political ideology and practice. In so doing,
they aimed to transform the state into a positive societal force by
230  N. Olsen

s­ubjecting its functions to consumer sovereignty. In this process, so the


chapter argues, center-left parties added to neoliberal ideology by seeking
to re-­enchant the public sector by modeling it in the mirror of the market
and by portraying the citizen as its customer and captain. This positive
shaping of the state—and of its relations to its citizens—arguably consti-
tuted the main difference between center-left reform agendas and their
neoliberal origins.
In keeping with this, the center-left’s turn to neoliberalism gave birth
to a new variant of the political consumer. Similar to earlier variants of
the figure, this political consumer connoted not only the fulfillment of
individual demands and desires but also the making of a better society by
buying on the market. However, in updating the political consumer to
the era of global competition, center-left parties argued that the individ-
ual’s capacity to shape her/his own life and contemporary society was
much better fulfilled by market forces than by protections offered by state
institutions. Consequently, as center-left parties adopted and further
developed an ideological language they had not invented themselves,
they gave birth to a new version of the neoliberal sovereign consumer,
now dressed up in traditional leftist political slogans.
The embrace of the sovereign consumer by the center-left thus ulti-
mately continued and reinforced its neoliberal features. First, the figure
remained fixed in a neoliberal discourse, stating that the figure is harmed
by state regulations and best protected by his/her individual rationality
and by market efficiency. Second, it remained closely linked to the idea of
political democracy as a mechanism of choosing between available prod-
ucts. Third, it continued to stress economic rather than traditional politi-
cal values.
Two caveats should be kept in mind in relation to the analysis unfolded
in this chapter. First, the following account of the most recent history of
the sovereign consumer is not exhaustive. This chapter uses select cases to
provide various perspectives on how the figure has functioned as the
driver of the dominant paradigm of politics since the 1980s. Moreover,
instead of continuing the detailed textual analysis pursued in earlier
chapters, this chapter draws largely on analyses from different research
fields that support the overall argument. In addition, it does not explore
in detail the ways in which public sector reforms and deregulation
  Neoliberalism Without Neoliberals    231

­ olitics, as pursued by center-left parties at the national level, were coor-


p
dinated with and at times dictated by the policies of neoliberalized inter-
national institutions. The chapter thus only provides a brief review of the
international level by describing the rise of the sovereign consumer as a
policy tool in the European integration project since the 1980s.
Second, the aim of the present chapter is not to portray neoliberalism
as a unitary program, where all countries and institutions have concur-
rently undergone the exact same developments and converged on an
identical policy model. To join with Jamie Peck, it instead describes an
ongoing, varied, and open-ended project of “neoliberalization,” where
neoliberal ideology is always imported and adapted to specific settings,
developed in different directions, and implemented in different ways.8
Still, the initiatives described below concern the same project: setting up
new and market-oriented orders that supposedly enhance the interests of
sovereign consumers.

 anish Social Democracy: The Competition


D
State and the Political Consumer
The economic crisis in the West that unfolded in the 1970s resulted in
the election of politicians on neoliberal platforms, such as Margaret
Thatcher in Great Britain and Ronald Reagan in the United States. It also
resulted in a questioning of the viability of traditional political center-­
leftism, including Social Democratic ideology and politics. Among other
things, facing severe difficulties responding to the crisis, Social Democratic
and other center-left governments were heavily criticized for the expen-
sive and bureaucratic administrative apparatuses sustaining their welfare
states.
In the late 1970s and early 1980s, center-left parties responded to the
loss of power and criticism of their welfare state model with ideological
introspection and debate. The aim was to create new policy ideals and
models, which held the promise of renewed economic efficiency and
political democracy and could catapult center-left parties back into

 Jamie Peck, Constructions of Neoliberal Reason (Oxford: Oxford University Press, 2010), 2.
8
232  N. Olsen

power. In this pursuit, they were up against economically liberal and


politically conservative opponents who responded to the current crisis by
replacing the traditional leftist roles concerning solidarity, equality, and
collectivity with visions of free trade, competition, privatization, eco-
nomic growth, individual freedom, and social order.9
To begin with, center-left parties in many countries denounced the
new political agendas launched by their opponents and held onto the
system of ideas that had formed the basis of their economic-political the-
ory and policy in previous decades. However, during the 1980s, they
gradually moved away from this platform and came to share some of the
ideological visions held by their opponents. In particular, they embraced
the aim to reform the public sector of the welfare state by marketizing its
functions in order to make its products and services respond to consum-
ers’ individual preferences. The Swedish Social Democrats were pioneers
in this respect, but center-left parties elsewhere soon followed suit.10 In
fact, in the 1980s and 1990s, center-leftists and neoliberals converged in
pursuing the ambition to govern their public administrations neither for
the worker nor for the people but for the sovereign consumer. Below we
will focus on the specific cases of Denmark, Great Britain, and the United
States.11
As described in the previous chapter, in Denmark, the aim to reform
the public sector through market mechanisms was first formulated by
members of the liberal party Venstre, which introduced neoliberal ideol-
ogy into Danish political debates in the context of the crisis of the welfare
state in the 1970s. Launching new ideas about decentralization of and
free choice in the public sector, the Venstre politicians argued that turn-
ing citizens into sovereign consumers by subjecting public sector func-
tions to their demands would make the Danish welfare state more efficient
and democratic.
9
 For the “neoliberal” rhetoric used and economic policies pursued by some of these new govern-
ments, see Monica Prasad, The Politics of Free Markets: The Rise of Neoliberal Economic Policies in
Britain, France, Germany, and the United States (Chicago: University of Chicago Press, 2006).
10
 For the Swedish developments, see Jenny Andersson, Between Growth and Security: Swedish Social
Democracy from a Strong Society to a Third Way (Manchester: Manchester University Press, 2006),
105–127. See also the account of these developments in the previous chapter.
11
 The Danish case is less researched than the British and the American and hence treated in more
detail.
  Neoliberalism Without Neoliberals    233

When a coalition government led by Poul Schlüter from the


Conservative Party, and including Venstre, replaced the Social Democratic
government in 1982, these ideas were turned into concrete policy pro-
posals for welfare state reforms. These proposals were introduced in a
series of modernization programs that were issued by the Ministry of
Finance from 1983 onwards and which suggested using New Public
Management principles to make public services more business-like and
to improve their efficiency. However, the plans to transform the Danish
welfare state into a “competition” state were yet to be realized, when
Schlüter’s government was forced to resign in January 1993. As men-
tioned in the previous chapter, the Danish Social Democratic Party had
at this time come to share many of the visions for public sector reforms
that the Schlüter government had pursued since the early 1980s. Once
the party came to power in 1993, it elaborated upon its aim to reform the
public sector through market mechanisms.
This ambition was announced in the report Nyt syn på den offentlige
sektor (New Perspective on the Public Sector) issued by the Ministry of
Finance in 1993.12 The report was not identical to the modernization
programs that had appeared under Poul Schlüter. For example, it referred
to “renewal” rather than to “modernization,” toned down free choice
rhetoric, and argued to a significant extent for the need to balance reforms
and the pursuit of efficiency with other policy concerns such as social
equality. However, several of the main components that had informed
earlier modernization programs were also outlined in Nyt syn på den
offentlige sektor. The report thus encouraged a number of competition-­
enhancing initiatives to make the public sector more efficient and user-­
friendly. These included increased public/private collaboration,
institutional decentralization, new employment policies, user involve-
ment, and instruments to steer, control, and measure performance.13
These ideas continued to form the basis for the policy agendas that
the Danish Social Democratic Party pursued in the 1990s, where the
transformation of the party ideology continued. Rather than primarily

12
 Finansministeriet, Nyt syn på den offentlige sektor (1993).
13
 Niels Ejersbo and Carsten Greve, Moderniseringen af den offentlige sektor (Copenhagen: Akademisk
forlag, 2014), 46–52.
234  N. Olsen

addressing economic redistribution toward lower economic strata, this


ideology now focused on public sector reforms. As such, Danish Social
Democrats were confronting the administrative cornerstone of the wel-
fare state they had been instrumental in creating. In this process, as it had
been the case in the re-articulation of Swedish Social Democratic ideol-
ogy in the 1980s, efficiency became a powerful metaphor that addressed
issues of costliness and cuts in the public sector.14 Moreover, the market
was viewed as a key collaborator and source of inspiration in the quest for
efficiency. Economic efficiency was thus to be pursued through partner-
ships and outsourcing of the provision of public goods and by modeling
the public sector on the private sector. Central to all debates of how and
to what extent the public sector should be reformed through market
mechanisms was a discourse of free consumer choice, user influence, and
client participation, which linked the quest for efficiency to that of creat-
ing a more individualized, responsive, and democratic system.
Again, it should be emphasized that the Danish Social Democratic
government embedded its reform agendas in slogans such as “responsibil-
ity for all” and emphasized the necessity of “political steering” to indicate
the limits of the intended reforms. Moreover, as a way to distinguish its
political program from that pursued by the former government, it stressed
that a market solution should be implemented only where it was “natu-
ral” to allow for competition and “meaningful” to let citizens act as
consumers.15
However, the reform agenda had become a defining feature of Social
Democratic ideology, and Social Democratic politicians coined a wealth
of new ideas and concepts to shape this agenda. Among other things, the
influential Minister of Finance, Mogens Lykketoft, published in 1994

14
 For the new focus on efficiency among Swedish Social Democrats in the 1980s, see Andersson,
Between Growth and Security, 109–11. For the values guiding the reform visions pursued by the
Danish Social Democratic Party in the 1990s, see Jørn Henrik Petersen, Klaus Petersen, and Niels
Finn Christiansen, eds., Hvor glider vi hen? Dansk velfærdshistorie, bind 6, 1993–2014 (Odense:
University Press of Southern Denmark, 2014), 89–125; Ejersbo and Greve, Moderniseringen af den
offentlige sektor, 46–48; and Rasmus Knold Andersen, “Det knager i Samfundets Fuger og Baand”:
Individ, stat og marked i Socialdemokratiets ideologi fra 1982 til 1993 (MA thesis, University of
Copenhagen, 2018).
15
 Ejersbo and Greve, Moderniseringen af den offentlige sektor, 46–52 and Petersen, Petersen, and
Christiansen, Hvor glider vi hen?, 89–91.
  Neoliberalism Without Neoliberals    235

the book Sans og Samling (Sense and Unity) that anticipated the debate
about the competition state in a Danish context. In the book, with refer-
ence to observations made by then American Secretary of Labor Robert
Reich on the manifestation of a new globalized economy, Lykketoft
argued that the increased international competition between nations
required a new type of welfare state. According to Lykketoft, the objective
was a competitive and efficient “welfare society” in which “every indi-
vidual had a right to develop and realize her/himself – where we must get
rid of suppression, exploitation and unemployment.”16 Still, he related
the idea of a new society to the aim of securing a good life for the lower
strata of the population.
In the book Velfærd i vanskeligheder (Welfare in Troubles), also published
in 1994, a group of younger Social Democrats argued more plainly for
reforming the public sector by subjecting its infrastructure to free choice,
outsourcing, streamlining, and privatization.17 Similar to Lykketoft, the
authors of Velfærd i vanskeligheder rejected what they labeled as the “eco-
nomic individualism” of the opposition parties. Instead, they developed
their societal visions with reference to the concept of “autonomy,” which
they drew from Greek-French philosopher Cornelius Castoriadis and
connected to those of “solidarity” and “participation.”18 However, the
arguments made for the necessity of reforming the welfare state were
strikingly similar to those launched by the opposition parties: “The indi-
vidual’s desire to become captain of his/her own life requires changes in
the societal order – and thereby also the political system.”19 The same was
the case with the reform agenda proposed in the book: to achieve a society
characterized by autonomy, solidarity, and participation, and to regain
control of what was described as an ever-growing welfare state that had
been captured by special interest groups, the public sector had to be
decentralized, marketized, and, to some extent, also privatized. This

16
 Mogens Lykketoft, Sans og Samling: En socialdemokratisk krønike (Copenhagen: Samleren, 1994),
26. See Petersen, Petersen, and Christiansen, Hvor glider vi hen?, 99–101.
17
 Jacob Christensen, Peter Mogensen, and Eskil Thuesen, Velfærd i vanskeligheder, Socialdemokratiet
mellem autonomi og autoritet (Copenhagen: Fremad, 1994). Petersen, Petersen, and Christiansen,
Hvor glider vi hen?, 99–101.
18
 Christensen, Mogensen, Thuesen, Velfærd i vanskeligheder, 27.
19
 Christensen, Mogensen, Thuesen, Velfærd i vanskeligheder, 30.
236  N. Olsen

included establishing a system of consumer choice for the services covered


by the state, for example, in relation to schools and hospitals. “The politi-
cal challenges to autonomy”—the authors wrote, fusing Social Democratic
slogans with a distinct neoliberal discourse—“concerns ensuring further
self-determination, participation and freedom of choice for the individual
citizen.”20
Velfærd i vanskeligheder inspired strong debate about the Social
Democratic reform agenda, especially with respect to the role of privati-
zations in the agenda. Eventually, Prime Minister Poul Nyrup Rasmussen
intervened in the debate, declaring that extensive privatizations were not
part of the Social Democratic agenda.21 A similar dynamic was at play
two years later when a Social Democratic group, called Hilden & the
Hackers, published a policy agenda that echoed the modernization rheto-
ric pursued by the former government. “We must develop the welfare
system,” the group declared, “by placing the citizens at its center.”22 This
involved streamlining through marketization, outsourcing, and decen-
tralization of functions and authority. For example, responsibility should
be delegated to leaders of public agencies as a way to renew these agen-
cies. The overall aim was to increase freedom of choice for the individual
citizen in the public sector. Once again, to stop the debate, Nyrup
Rasmussen declared that his government had no plans to privatize key
public services.
During the 1990s, the opposition’s call for further reforms and contro-
versial experiments with outsourcing public sector services caused the
Social Democratic leadership to pursue a cautious reform agenda. But
the idea of changing the public sector through marketizing its services
and functions had become integral to Social Democratic ideology in
Denmark. So had the rhetoric of free choice. Indeed, to create greater
choice in the public sector and thereby a society characterized by freedom
was consistently portrayed as a key ambition in the Social Democratic
reform agendas.23

20
 Christensen, Mogensen, Thuesen, Velfærd i vanskeligheder, 70.
21
 Petersen, Petersen, and Christiansen, Hvor glider vi hen?, 105–108.
22
 Cited from Petersen, Petersen, and Christiansen, Hvor glider vi hen?, 105.
23
 Ejersbo and Greve, Moderniseringen af den offentlige sektor, 46–58.
  Neoliberalism Without Neoliberals    237

The consumer figure that emerged as part of the new Social Democratic
agenda was distinctly different from the consumer figure it had outlined
in the 1950s and 1960s and which had framed consumers as vulnerable
and susceptible beings whose rights to free choice, fair prices, and accu-
rate information in the marketplace had to be protected by state institu-
tions and legislation. It was more in line with the so-called political
consumer that was coined and widely disseminated in Danish public
debate in the mid-1990s, not least in relation to the coverage by Danish
mass media of the so-called Brent Spar conflict in June 1995.24 According
to many commentators, Danish consumers were creating a new form of
political activism by boycotting Shell due to its plans of dumping an oil
storage tanker into the sea. Hence, like earlier constructions of “political
consumers,” this figure drew on the idea of turning shopping into a polit-
ical statement. It thus relied on the conception of a consumer that
expressed her/his opinions about, for example, politics, environmental
issues, and ethics, through the acquisition of products and goods on the
market. This political consumer, so it was assumed, not only pursued
individual demands and desires but also contributed to the making of a
better society and a better world by making appropriate decisions when
buying on the market.
However, the desired relations between the state, the market, and the
individual were imagined very differently in relation to the political con-
sumer of the 1990s than had been the case in respect to earlier ideals of
this consumer figure. Steen Svendsen from the consultancy bureau
Institut for Fremtidsforskning (Institute for Future Research), who intro-
duced the ideal of the political consumer in a Danish context, explained
in various articles that this particular consumer related to the state and
the market by referring to three contexts that he deemed vital for its
emergence.25 First, the economic affluence allowed for the expression of
post-material political concerns and demands, which were transformed
into concrete political demands. Second, due to deep-seated societal

24
 Mads P.  Sørensen, Den politiske forbruger, i det liberale samfund (Copenhagen: Hans Reitzel,
2004), 9–56. Hans Rask Jensen, “Staging political consumption: a discourse analysis of the Brent
Spar conflict as recast by the Danish mass media,” Journal of Retailing and Consumer Services 10
(2003): 71–80.
25
 See, for example, Steen Svendsen, “Den politiske forbruger,” Politiken, June 24, 1995.
238  N. Olsen

changes, individuals had lost their belief in the ability of authorities, such
as politicians and governments, in constructing the good society, and
wanted to play a much bigger part in this effort. Third, increasing inter-
nationalization had created a global market that nation-states were losing
influence on and control of, whereas individuals were capable of shaping
this new global order by shopping politically on the market. Indeed,
according to Svendsen, the global market offered a much better potential
for individual societal participation than traditional politics as practiced
within and through the political institutions associated with the
nation-state.
To be sure, the Social Democratic consumer figure was not entirely
identical to the political consumer. Most importantly, the Danish Social
Democratic Party was not silent in the same way regarding ideas of social,
political, and cultural rights or of economic redistribution. In line with
this, with its new consumer figure, the party reintroduced the themes of
participatory, local, and economic democracy that had been central to its
agenda in the 1970s. But by embedding the figure in the new Social
Democratic new market logic, the party endorsed the basic idea that
there were limits to what the state could do for citizens as consumers and
that market forces and mechanisms better accommodated individuals’
right to choose in politics and thereby ability to participate in the shaping
of their own lives and contemporary society more generally. As such, this
political consumer came to resemble the neoliberal sovereign consumer.
In the 1990s, in reaction to ongoing developments, Danish Social
Democrats came to view the dissemination of market mechanisms and
consumer choice to all areas of society as necessary if Denmark was to
compete with other nations in the globalized economy. In the late 1990s,
the aim to mobilize for global competition merged with visions of increas-
ing freedom of choice, user influence, and client participation to create a
more individualist and democratic society. In this process, the Social
Democratic Party abandoned its traditional values in many areas.26 For
example, the party now held that unemployment was linked to the indi-
vidual, her/his lack of work ethic, or other personal shortcomings, rather

26
 For a thorough discussion, see Jørn Henrik Petersen, Pligt og ret – ret og pligt, refleksioner over den
socialdemokratiske idéarv (Odense: University Press of Southern Denmark, 2014).
  Neoliberalism Without Neoliberals    239

than to structural causes. Moreover, it no longer viewed employment as


an individual right, but as a duty given to the individual by society. These
changes testify to the extensive ideological convergence that took place
between the Social Democratic Party and the increasingly powerful
opposition party, Venstre. These parties had evidently come to share the
view that choosing between available products constituted the central
approach to political activity and became united in the pursuit of a new
political economy of consumer choice that aimed to marketize the
political.
In terms of the practical implementation of political reforms, Denmark
lagged behind Sweden, where market-oriented reform processes of wel-
fare state services had already begun in the Social Democratic era of the
1980s, for example, in the health sector. In Denmark, reforms only began
in the 1990s, when the Social Democratic Party began to implement
New Public Management principles in parts of the public sector.27 This
included, among other things, new budget models, steering policies, cal-
culation, and documentation methods; new leadership and employment
policies and wage systems; new initiatives to de-bureaucratize by stan-
dardizing administrative procedures; new methods of evaluation via con-
sumer feedback; new public/private partnerships and collaborations; and,
finally, privatizations of state-owned companies, such as the national air-
port and the national tele-communications company.28 It is worth
emphasizing that these privatizations took place less than five years after
the Social Democratic Prime Minister Poul Nyrup Rasmussen had denied
that privatizations of key public services formed part of the reform agenda
pursued by his government.
The reform agenda continued when Anders Fogh Rasmussen suc-
ceeded Poul Nyrup Rasmussen as Prime Minister in November 2001.
Emphasizing free consumer choice as a key element of the modern public

27
 For comparisons, see Jørn Henrik Petersen, “Marketization and Free Choice in the Provision of
Social Services: Normative Shifts 1982–2008: Social Democratic Lip Service as a Response to
Problems of Legitimacy,” in Beyond Welfare State Models: Transnational Perspectives on Social Policy,
eds., Klaus Petersen and Pauli Kettunen (Cheltenham: Edward Elgar Publishing, 2011), 170–198;
Christoffer Green-Pedersen, “New Public Management Reforms of the Danish and Swedish
Welfare States: The Role of Different Social Democratic Responses,” Governance 15, 2 (2002):
271–294.
28
 See Ejersbo and Greve, Moderniseringen af den offentlige sektor, 101–234.
240  N. Olsen

sector, the government under Fogh Rasmussen among other things intro-
duced the right to free choice of hospitals (which also included the pos-
sibility of choosing from a number of private hospitals). Since then,
governments led by the Social Democratic Party and Venstre have
reformed further areas of the Danish public sector by subjecting it to a
wealth of other New Public Management initiatives (as will be explored
further below, these reforms have recently caused a large public debate).

 ew Labor, the Third Way, and the Sovereign


N
Consumer
In Great Britain, the New Labor government under Tony Blair that came
to power in 1997 also pursued an ideology that focused on the figure of
the sovereign consumer and as such resembled the ideology pursued by
the previous neoliberal government.
As mentioned in Chap. 4, neoliberal ideology and the figure of the
sovereign consumer was first introduced in a British political context by
neoliberal think tanks such as Institute of Economic Affairs and Centre
for Policy Studies in the 1960s and 1970s.29 Addressing specific problems
that they had detected in the British economy at the time, these think
tanks introduced the work of neoliberal ideologists such as Friedrich
Hayek and Milton Friedman to problematize Keynesian techniques for
governing the economy and create a new policy program. Questioning
the ideas of “society,” “economic security,” the “state”—and the figure of
the “worker-saver,” which informed the Keynesian policy paradigm30—
British neoliberals introduced a new political rationality that took for
granted that it was necessary to govern for the sovereign consumer in
order to create an efficient economy and democratic society.
The neoliberal political rationality associated with the sovereign con-
sumer was connected to a policy program that involved deregulation of
the economy and monetarist policy. During the 1970s, this paradigm

29
 The following relies on Christopher Payne, The Consumer, Credit and Neoliberalism: Governing the
Modern Economy (New York: Routledge, 2012), 75–96.
30
 For the Keynesian “worker-saver” figure, see Chap. 2.
  Neoliberalism Without Neoliberals    241

was promoted in debates of the British economy by the coalition of con-


servative politicians, journalists, and economists that prepared the politi-
cal platform for Margaret Thatcher’s takeover of government power in
1979. In the 1980s, Thatcher continued to pursue a policy agenda pro-
moting the belief that a sound economy and a free society required more
people to think and act as entrepreneurs and consumers rather than as
workers. This agenda linked to efforts to crush the trade unions, deregu-
late financial markets, and privatize public services and companies. For
example, Thatcher initiated a “right to buy public housing” policy agenda
that referred to the democratic right of individuals as consumers to buy
and own private property which involved expanding the possibilities of
taking on personal debt. In the words of Christopher Payne, Thatcher
was governing for the free consumer, mobilizing state powers and policies
for the purpose.31
And as pointed out by Peter Guerney, the rhetoric of choice that
underpinned Thatcher’s governing for the consumer was also directed at
reforming public education, health, and welfare, demanding that public
services provide more choice and become more responsive to the needs of
individual consumers.32 In so doing, Thatcher aimed to privatize and
marketize the public sector, thus turning what had previously been
regarded as a social entitlement into a market commodity. More gener-
ally, during her reign as Prime Minister from 1979 to 1990, she presented
her political program as a rejection of the post-war, state-driven, more
wasteful, and un-democratic way of doing things. Further, she coupled
her program to a law-and-order agenda that aimed to restore Victorian
values, thereby fusing neoliberalism and conservatism.33
The New Labor government headed by Tony Blair that came to power
in 1997 rejected the conservative values of previous Tory governments.
However, in framing its political program, it likewise referred to con-
sumer desires and discontents as a way to compete with and offer an
alternative to the conservative consumption agenda. To be sure, Labor
31
 Payne, The Consumer, 75–98.
32
 Peter Guerney, The Making of Consumer Culture in Modern Britain (London: Bloomsbury
Publishing PLC, 2017), 185–192.
33
 For recent perspectives on Thatcher’s ideology and politics, see Ben Jackson and Robert Saunders,
eds., Making Thatcher’s Britain (Cambridge: Cambridge University Press, 2012).
242  N. Olsen

had for most of the post-war period accepted and promoted a culture of
mass consumption. However, it had combined its consumption politics
with the intention of educating and protecting vulnerable consumers
along with a larger political economy that emphasized egalitarian values
and utilized Keynesian policy tools to regulate and redistribute the econ-
omy. Moreover, Labor governments had used public expenditure to
finance collective consumption as a way to improve society.34
Having seen the political program it had pursued since 1945 subjected
to fundamental critique, the British Labor Party that came to power in
1997 outlined a different idea of consumer culture as a way to build a
new and attractive ideological platform. First, consumers were in this
agenda not conceptualized as weak and vulnerable and in need of protec-
tion by the state but as self-asserting, strong, and sovereign and in need
of liberation through market powers. Second, the consumer was no lon-
ger primarily thought of vis-à-vis the market but in relation to govern-
ment and its public services. Third, Labor leaders, such as Tony Blair,
Gordon Brown, and Alan Milburn, now stressed the need to move on
from the post-war welfare state and infuse public services with the ethos
of consumer sovereignty in order to fulfill individual needs and expecta-
tions. The idea was that a “democratic individualism,” as opposed to
Thatcher’s “consumer individualism,” would provide a more differenti-
ated and consumer-oriented public sector that everyone would benefit
from. The idea of this new consumer culture was encapsulated in the
figure of the “citizen consumer,” which was crucial to the so-called third
way agenda that Tony Blair pursued in the 1990s.35
The British citizen consumer was strikingly similar to the political con-
sumer that appeared in Danish public-political debate in the same period.
Sociologist Anthony Giddens, the chief theoretician of Labor’s third way
agenda, understood the citizen consumer as essential to the update of

34
 For perspectives on Labor’s consumption politics in the post-war period, see Guerney, The
Making of Consumer Culture in Modern Britain, 158–185; Noel Thompson, Social Opulence and
Private Restraint: The Consumer in British Socialist Thought since 1800 (Oxford: Oxford University
Press, 2015), 75–104; Matthew Hilton, Consumerism in Twentieth-century Britain: The Search for a
Historical Movement (New York: Cambridge University Press, 2003), 167–193.
35
 Guerney, The Making of Consumer Culture in Modern Britain, 193–200; Thompson, Social
Opulence and Private Restraint, 152–156; Payne, The Consumer, 125–149.
  Neoliberalism Without Neoliberals    243

traditional statist programs in the new globalized epoch in which the old
class-based divisions of left and right were supposedly obsolete. In his
theory of modern politics, Giddens portrayed choosing as an existential
and unavoidable activity through which human beings create and develop
themselves. Moreover, he argued that in the global era the market was far
better equipped to accommodate individual self-making and self-­
fashioning than the state. Holding that states still had an important task
in governing society democratically, he nevertheless argued that
“Consumer choice is real choice” and avidly defended big corporations
from the critique of the construction and use of consumption rationali-
ties that a long line of critics from Theodor Adorno and Max Horkheimer
to Michel Foucault, Nicholas Rose, and Naomi Klein have offered in
their academic work.36 In contrast to these critics, in his synthesis of
center-­left and center-right policies, Giddens obviously embraced a fig-
ure that was much closer to the neoliberal sovereign consumer than to
any traditional consumer-ideal formulated by scholars or politicians asso-
ciated with the center-left.
Blair drew on a consumer figure similar to the one embraced by
Giddens when he proposed “[b]uilding public services around the con-
sumer” in an effort to reform government agencies and provisions along
the lines of New Public Management principles.37 In terms of the practi-
cal implementation, Great Britain was one of the forerunners. Already
under Margaret Thatcher, privatizations of state-owned companies and
assets were carried out (perhaps most famously, the Housing Act of 1980
allowed council tenants to buy their own homes), processes that encour-
aged privatization and reducing public spending in areas such as educa-
tion and healthcare were initiated, and public management was subjected
to new ideas of planning, financial management, audits, and evaluations.
After winning a landslide victory in 1997, Blair and Labor continued
many of the reforms that Margaret Thatcher had initiated in the 1980s
and which were continued during the government of John Major from
1990 to 1997. Moreover, Blair intensified his reform agenda in the early
36
 See “An Interview with Anthony Giddens,” Journal of Consumer Culture 3 (2003): 387–399. A
more critical view on consumption is unfolded in Anthony Giddens, Modernity and Self-Identity:
Self and Society in the Late Modern Age (Oxford: Polity Press, 1991), 197–201.
37
 Guerney, The Making of Consumer Culture in Modern Britain, 197–202.
244  N. Olsen

2000s. Here, Great Britain thus saw a further convergence between neo-
liberal and center-left ideology in the approach to government adminis-
tration. As illustrated, this approach was framed, legitimized and enacted
with reference to the figure of the sovereign consumer.

 einventing Government, Customer Choice,


R
and Market Populism
Four years before Tony Blair came to power in Great Britain, in 1993,
Bill Clinton was elected President of the United States on a policy pro-
gram that likewise reflected a centrist “third way” political philosophy,
drawing on the figure of the sovereign consumer. Clinton’s program in
many ways contributed to the convergence between center-left and neo-
liberal ways of thinking about the state, the market, and the individual as
consumer, which had taken place in the United States from the 1950s
onwards. As illustrated in earlier chapters, this convergence took place in
at least three contexts.38
First, a merging took place in relation to the waning of the regulation
movement and of the institutional framework that had dominated the
American political economy after 1945. In its place rose a strong deregu-
lation movement, which aimed to roll back the state. This movement was
not only composed of neoliberal think tanks, scholars, and businesses, it
also included leftist consumer advocates and intellectuals. For example,
famous consumer advocate Ralph Nader eventually adopted a theoretical
critique of agency capture that was similar in some ways to the critique
launched by Chicago economist George Stigler. In fact, Nader also
arrived at the conclusion that inefficient and repressive federal agencies
needed to be scaled back in favor of a decentralized market order as a way
to restore economic liberty and protect the consumer.39
Second, the rise of the deregulation movement coincided with a new
tendency among intellectuals in North America (and beyond) to embrace

 See Chaps. 4 and 5.


38

 Eduardo F. Canedo, The Rise of the Deregulation Movement in Modern America, 1957–1980 (PhD
39

dissertation, Columbia University, 2008), 134–157.


  Neoliberalism Without Neoliberals    245

rather than denounce the cultural-political dynamics of mass consump-


tion. For example, Canadian public intellectual Marshall McLuhan, who
became an influential figure in the counter-culture movement in the
1960s, abandoned in this decade his earlier moralistic critique of how the
forces of mass culture and its technologies allegedly threatened to isolate
individuals in modern society.40 Instead, he expressed a much more posi-
tive attitude toward modern technology and arts, portraying them as
media through which empowered consumers could shape and form their
identities and lives. Tellingly, McLuhan was named senior creative con-
sultant for a leading Canadian advertising agency in 1966. McLuhan was
perhaps unique in appealing to the counter-culture movement and the
corporations; however, he was representative of the new trend among
American intellectuals to regard the market of mass consumption in a
similar fashion to neoliberal economists, namely, as a place where indi-
viduals are free to pursue their dreams and desires.
Third, center-left American economists, such as Kenneth Arrow,
embraced in the post-war period, like neoliberal economists, a mode of
economic analysis that reframed the traditional understanding of the
relation between the state, the individual, and the market in mainstream
economics. This mode of analysis elevated consumer sovereignty into the
only norm according to which societal well-being can be measured,
reworked the ideal of traditional political democracy by interpreting it
through market metaphors, and questioned the role of the state as a col-
lective decision-maker and social planner. This shift in economics estab-
lished a more positive conception of the market as a place that is better
designed to meet consumer preferences than government agencies.
Moreover, in the form of public choice analysis, it also involved sugges-
tions to make government offices and public services more business-like
and to improve their efficiency through implementing quasi-market pro-
duction structures that focused on free consumer choice, decentraliza-
tion, and cooperation with private companies among other things.
More generally, in the so-called Age of Reagan, which had begun in
the mid-1970s and intensified in the 1980s, the idea of reducing the role

40
 Daniel Horowitz, Consuming Pleasures: Intellectuals and Popular Culture in the Postwar World
(Philadelphia: University of Pennsylvania Press, 2012), 136–162.
246  N. Olsen

of government and releasing individuals as consumers on the market


would lead to increased economic growth, individual freedom, and polit-
ical democracy gained strong currency in American public-political
debate.41 It was not only republicans and libertarians that backed this
idea; it was also supported by political actors on the left. For example, as
described by Corey Robin, a group of journalists, intellectuals, and poli-
ticians on the center-left outlined a program in the 1970s and 1980s that
they actually labeled “neoliberal” to signal its departure from the type of
liberalism associated with the New Deal and the Great Society.42 In fact,
this program was fundamentally in line with the original neoliberal ideo-
logical tradition, as it opposed unions and big government, supported big
business, and portrayed the interests of the poor in getting jobs and
improving their living conditions as being at odds with government social
programs and regulation of the market.
According to Robin, these leftist “neoliberals” were influential in shap-
ing the New Democratic platform that Bill Clinton pursued in his suc-
cessful presidential campaign in 1992 and further developed throughout
the 1990s. To be sure, Clinton was less enthusiastic about laissez-faire
economics than most of the Republicans who had supported Reagan.
Most importantly, he persistently advocated for federal social programs.
However, in an attempt to outline a New Democratic political alternative
that would appeal to the many Americans who then seemed skeptical and
resentful of the centralized government and its public service systems,
Clinton also supported ample financial deregulation and made it his
ambition to trim government agencies and programs through New Public
Management principles.43
Already in his campaign for the presidency, Clinton promised to “end
welfare as we know it,” “so that it will cease to be a way of life,” by making
welfare benefits limited (a promise he repeated in his 1993 State of the
Union Address). Also in 1993, he set up the so-called task force National
Performance Review to reform the way the United States Federal
41
 Sean Wilenz, The Age of Reagan, a History, 1974–2008 (New York: Harper, 2008).
42
 Corey Robin, “The First Neoliberals,” Jacobin (28 November 2016), https://www.jacobinmag.
com/2016/04/chait-neoliberal-new-inquiry-democrats-socialism/.
43
 Wilenz, The Age of Reagan, 288–381; James T. Patterson, Restless Giant: The United States from
Watergate to Bush v. Gore (New York: Oxford University Press, 2005), 346–386.
  Neoliberalism Without Neoliberals    247

Government worked by introducing market mechanisms in government


agencies.44 Declaring that he aimed to “reinvent government,” Clinton
explained: “Our goal is to make the entire federal government less expen-
sive and more efficient, and to change the culture of our national bureau-
cracy away from complacency and entitlement toward initiative and
empowerment.” The intention, he added, was to create a government
“that puts people first, by: serving its customers, empowering its employ-
ees, and fostering excellence.” Among other things, this would require
that government agencies “create a clear sense of mission; delegate author-
ity and responsibility; replace regulations with incentives; develop budget-­
based outcomes; and measure success by customer satisfaction.”45
Vice President Al Gore was placed in charge of the project, which
issued its first report in September 1993. The report presented 384 rec-
ommendations for improving bureaucracy’s performance and downscal-
ing its size across the federal government and forecasted that the reforms
would save the government more than 100 billion dollars. The epigraph
to the second chapter of what amounted to a full-blown agenda of gov-
ernment agency reform based on New Public Management principles,
titled “Putting Customers First,” cited a speech that had been recently
given by Gore:

We are going to rationalize the way the federal government relates to the
American people, and we are going to make the Federal government cus-
tomer friendly. A lot of people don’t realize that the Federal government
has customers. We have customers. The American people.46

Many other visions to reform the public sector, which cast citizens as
consumers of public goods, were announced during Clinton’s terms as
President (in 1998, the National Performance Review was renamed
the National Partnership for Reinventing Government). Moreover, in
44
 See “A Brief History of the National Performance Review,” https://govinfo.library.unt.edu/npr/
library/papers/bkgrd/brief.html (accessed 10 February 2018).
45
 Cited from GovInfoLibrary, “A Brief History of the National Performance Review.” See also
Robert L. Hollings, Reinventing Government: An Analysis and Annotated Bibliography (Commack,
NY: Nova Science Publishers, Inc., 1996).
46
 Al Gore, From Red Tape to Results: Creating a Government That Works Better & Costs Less. Report of
the National Performance Review (Washington, DC: Office of the Vice President, 1993), 43.
248  N. Olsen

­ ractical terms, Clinton implemented various methods related to ideas of


p
competition, incentives, performance measurement, audits, and manage-
ment in US federal, state, and local public management. In a heterodox
fashion, George W. Bush continued and added to these methods during
his period as president.47
Seen from a broader perspective, Clinton’s reform visions in the 1990s
were outlined during what Thomas Frank has labeled the era of “market
populism.”48 According to Frank, market populism is defined by the
notion that markets are, in some transcendent way, identifiable with
democracy and the will of the people. As such, it resembled the idea of
the tight link between capitalism, democracy, and free consumer choice
that Ludwig von Mises outlined in the early 1920s as part of his effort to
renew liberalism. Obviously, market populism also drew on a figure of
the sovereign consumer resembling the one created by the Austrian inven-
tor of the neoliberal paradigm.49
In the United States, the idea that markets were a popular system was
in the 1990s no longer an idea launched by a single individual in defense
of a seemingly outmoded ideology but a notion widely shared by a wide
range of academics, executives, democrats, and republicans. They held
the optimistic belief that the challenges in the transition from the
manufacturing-­based economy to a service-based economy was best left
to market forces, which would allocate resources in the most efficient and
democratic way, leaving the common man a winner of the wealth
creation.
Against this background, in America, the economically prosperous
1990s were also characterized by financial deregulation, undertaken by
the democratic government headed by Clinton. Here we can draw on the
excellent analysis outlined by Christopher Payne in The Consumer, Credit
and Neoliberalism.50 In his book, Payne demonstrates how, from the
beginning, there was a close link between deregulation of consumer

47
 Laurence E. Lynn, Jr., “New Public Management Comes to America,” Working Papers, Harris
School of Public Policy Studies, University of Chicago, 0804 (2008): 1–19.
48
 Thomas Frank, One Market under God, Extreme Capitalism, Market Populism, and the End of
Economic Democracy (London: Vintage, 2000).
49
 For an account of Mises as the originator of neoliberalism, see Chap. 2.
50
 Payne, The Consumer.
  Neoliberalism Without Neoliberals    249

credit, neoliberalism, and the sovereign consumer. Focusing on American


and British developments, Payne details how neoliberal economists,
think tanks, and politicians, actively pushed the weakening of consumer
credit beginning in the 1950s and 1960s and intensified their efforts in
the 1970s and 1980s. Legitimizing their efforts with reference to the
interests and capabilities of the figure of the sovereign consumer in respect
to securing economic growth and political democracy, these neoliberals
sought to foster and elicit a particular consumer mentality, by persuading
consumers to exercise sovereignty by borrowing and spending. Moreover,
they urged governments to create financial conditions that responded to
and served this mentality by allowing and encouraging banks to liberalize
their lending practices to meet consumer demands.
However, Payne emphasizes that deregulation of consumer credit was
never a political issue pushed exclusively by political forces associated
with neoliberal networks. Most importantly, he uncovers how “third
way” politicians, such as Bill Clinton and Tony Blair, continued to push
a neoliberal ideal of economic agency based on the figure of the sovereign
consumer, thereby encouraging and allowing for a deregulation of con-
sumer credit. This was, for example, the case with respect to the housing
market, where consumers could seemingly do no wrong and banks were
given the freedom to increase their mortgages and debts. According to
Payne, regardless of whether power was with New Democrats or
Republicans, New Labor or Tories, American and British governments
doggedly governed in the name of the sovereign consumer and did little
to keep increasing indebtedness under control. Accordingly, Payne iden-
tifies the weakening of consumer credit laws, as a political agenda pur-
sued by both neoliberals and center-left politicians, as a key factor
contributing to the financial crisis.51

51
 The deregulation of consumer credit law is a theme that sociologists, political scientists, and his-
torians have illuminated from several angles. However, many have arrived at similar conclusions as
Christopher Payne, namely, that deregulation concerned the construction of new (and vulnerable
consumer), and that both neoliberal and center-left political forces pushed it. See, for example, Paul
Langley, The Everyday Life of Global Finance: Saving and Borrowing in Anglo-America (New York:
Oxford, 2008); Colin Crouch, “Privatized Keynesianism: An Unacknowledged Policy Regime,”
The British Journal of Politics and International Relations 11, 3 (2009): 382–399; Gunnar Trumbull,
Consumer Lending in France and America, Credit and Welfare (Cambridge, MA: Cambridge
University Press, 2014).
250  N. Olsen

To sum up: alongside the ambition to deregulate financial markets


shared by center-left political forces in Great Britain and the United
States (as illustrated by Payne), in the 1990s, center-left parties in several
countries (as exemplified on the previous pages) evidently came to share
the ambition of liberating the consumer from the authoritative powers of
the state through the mechanisms of the market. This ambition evidently
took over and converged with neoliberal visions of public sector reforms,
most notably through their mobilization of a figure resembling the neo-
liberal sovereign consumer.
However, center-left parties also elaborated on the neoliberal para-
digm and its figure of the sovereign consumer in a number of ways.
Most importantly, by modeling the public sector in the mirror of the
market and portraying the citizen as its customer, they disenchanted
politics by economics and, at the same time, by using concepts such as
“reinvention” and “reform,” and by inventing new figures such as the
“political consumer,” they re-enchanted the public sector as a place
that was capable of responding to individual desires and helping peo-
ple fulfill their dreams. In other words, center-left parties reinvented
the public sector as a constructive and positive force in modern soci-
ety, thus reclaiming a political terrain they had lost in the 1970s and
1980s.
Still, this reclaiming of the public sector took place on different politi-
cal premises and was evidently characterized by new governing techniques
and purposes. Above all, the center-left’s reinvention of the public sector
went hand in hand with the embrace of the neoliberal idea of democratic
politics as a matter of making individual choices in the marketplace rather
than, primarily, as a process of collective deliberation and decision-­
making. Moreover, when center-left political forces began to govern for
the sovereign consumer they left behind long-standing discussions of the
problems that might characterize a market order based on consumer sov-
ereignty, including issues concerning social equality, individual rational-
ity, and producer power in the market economy. Instead, they took issue
with those scholars and debaters, who questioned the sovereign con-
sumer. As such, by accepting, protecting and purifying this figure, center-­
left parties consolidated the status of neoliberalism as the dominant
political paradigm.
  Neoliberalism Without Neoliberals    251

Contextualizing Neoliberal Hegemony


Of course the neoliberalization of center-left parties in the West was
related to larger political shifts that took place in the period under discus-
sion, particularly at the end of the Cold War, as symbolized by the fall of
the Berlin Wall in 1989. The transformation of these parties thus took
place during a time in which liberal capitalism emerged as victorious in
the long-standing battle against socialism and seemed to offer the final
form of government for all nations and for the overall international
economic-­political system. This was the message of Francis Fukuyama’s
famous essay “The End of History” that appeared in 1989 and in some
ways represented the current Zeitgeist.52
The contemporary Zeitgeist certainly made center-left parties less hos-
tile to market-oriented ideas, which they had previously critiqued and
kept at a distance. Moreover, it opened a discursive space in which they
could reinvent themselves in the mirror of a market logic that involved
new policies of deregulation and public sector reforms.
Moreover, in many countries, the politics of deregulation and of public
sector reforms happened alongside and were coordinated with or dictated
by supranational institutions such as the International Monetary Fund,
the World Bank, and the European Union, which also began to pursue
neoliberal politics in this period. In so doing, these institutions likewise
drew on the figure of the sovereign consumer, as I will briefly touch upon
below, with a perspective on its role in the European integration project.
Several researchers have argued that German neoliberalism (also
known as ordoliberalism) provided the blueprint for the creation of the
European Single Market in the 1980s and provides the key tools for the
handling of the European Debt Crisis since 2008.53 Scholars have focused
on the austerity policy advanced by the German government in conjunc-
tion with the decision group formed by the unelected institutions, the
European Commission, the European Central Bank, and the International
Monetary Fund, which aims to minimize the role of government and
state interference in markets. Moreover, they have argued that this

52
 Francis Fukuyama, “The End of History,” The National Interest, 16 (1989): 3–18.
53
 For the German variant of neoliberalism, see Chap. 3.
252  N. Olsen

­ olitical rationality and practice, at least to some extent, has its roots in
p
and is modeled on the German variant of neoliberalism.54
I have no quarrel with this interpretation. However, I would like to
add to our understanding of the neoliberal aspects of the European
Integration project by pointing to how it mobilized the sovereign con-
sumer as a policy tool in its attempt to create, uphold, and reinforce a
single European marketplace from the 1980s onwards.
As emphasized by Frank Trentmann, as a concept referring to specific
laws and policy agendas, the consumer only entered the vocabulary of the
European integration project in the early 1970s.55 This happened in the
context of efforts launched by the European Court of Justice to harmonize
national measures on safety and quality. These efforts responded to a situ-
ation in which there had been no talk of special protection for consumers,
as, citing Trentmann, lawyers and economists had simply relied on the
idea that “the consumer was naturally ‘sovereign’ in the marketplace.”56
Hence, the new focus on consumers in relation to European integration
acknowledged that they could also be vulnerable and in need of protection
and information in the market.
However, in constructing the internal market in the 1980s, the consumer
law and policy pursued by the European Commission dispensed with its
earlier social outlook in favor of a focus on markets, competition, efficiency,
and consumer choice. According to Trentmann, in this internal market
agenda, a figure similar to the neoliberal sovereign consumer was given cen-
ter stage: “The consumer would be the locomotive; choice and competition
the fuel. A new European citizen was born: the ‘market citizen.’”57

54
 For recent discussions of the relation between the politics pursued by the European Union and
the neoliberal political paradigm as associated with German ordoliberalism, see, for example, the
relevant chapters in Werner Bonefeld, The Strong State and the Free Economy (London: Rowman &
Littlefield, 2017) and Josef Hien and Christian Jörges, ed., Ordoliberalism, Law and the Rule of
Economics (Oxford and Portland, OR: Hart Publishing, 2017).
55
 Jim Davies, The European Consumer Citizen in Law and Policy (Basingstoke: Palgrave Macmillan,
2011), 22–67.
56
 Frank Trentmann, Empire of Things: How We Became a World of Consumers, from the Fifteenth
Century to the Twenty-First (New York: Harper Collins, 2016), 559. See also Steven Weatherhill,
EU Consumer Law and Policy (Cheltenham: Edward Elgar, 2005) and Michelle Everson and
Christian Jörges, “Consumer Citizenship in Postnational Constellations?,” EUI Working Paper Law
47 (2006): 1–30; Jim Davies, The European Consumer Citizen in Law and Policy (Basingstoke:
Palgrave Macmillan, 2011).
57
 Trentmann, Empire of Things, 559.
  Neoliberalism Without Neoliberals    253

The invention of the market citizen joined with the overall develop-
ment in European integration that Bo Stråth and Hagen Schulz-Forberg
has described in The Political History of European Integration: The Hypocrisy
of Democracy-Through-Market, published in 2010.58 Stråth and Schulz-­
Forberg distinguish between two essentially different integration proj-
ects—a Keynesian post-war project with federal aspirations and a
neoliberal project of “democracy through market” that took place in the
1980s and 1990s through the Single European Act and the Maastricht
Treaty and the adoption of the euro. As Europe’s response to the so-called
Shock of the Global,59 what emerged in the later integration project was
a market where the free movement of goods, capital, services, and people
was embedded in a legal framework that increasingly connected the pro-
ducers as well as the consumers to the emerging multi-governance of
Europe. Moreover, according to Stråth and Schulz-Forberg, after failing
to improve the federal European structure, the European political elite
focused their attention on promoting a rhetoric based on the idea of a
democratic Europe that, it was believed, would follow with market inte-
gration. This idea of a market democratic Europe manifested itself in the
1980s, when neoliberal ideas gradually became hegemonic.
To this, we can add that, with the advent of the new democracy-­
through-­market Europe, the EU connected to the European market citi-
zen through a particular legal-economic framing of the consumer. As
Trentmann observes, the (neoliberal) rationale was based on the idea that
individual choice and competitive markets ensured the best defense of
the consumer interest: choice would empower consumers.60
Hans-W. Micklitz has, in several analyses since the 1980s, documented
in further detail (and criticized) the use of the sovereign consumer as a
policy tool in the European integration project. Overall, Micklitz also
depicts a shift from national to European consumer law as one from a
social welfare paradigm, where the weak consumer enjoyed protection
through the state, to a circumspect, marketized, and fragmentized
58
 Bo Stråth and Hagen Schulz-Forberg, The Political History of European Integration, the Hypocrisy
of Democracy-through-Market (London: Routledge, 2010).
59
 See Niall Ferguson, Charles Maier, Erez Manela and Daniel J.  Sergant, eds., The Shock of the
Global, the 1970s in Perspective (Cambridge, MA: Harvard University Press, 2010).
60
 Trentmann, Empire of Things, 559–560.
254  N. Olsen

consumer that is dependent on constitutional rights.61 Moreover, he


argues that, in the pursuit of a market state, the integration project is
now completing a paradigm shift from a European tradition of promot-
ing consumer protection to an American approach that promotes “con-
sumer welfare through market efficiency.”62
In keeping with this, other scholars are currently discussing the extent
to which EU competition and consumer law is in a process of realigning
its competition and consumer law with the economic thinking on effi-
ciency and welfare that informs American antitrust theory.63 The discus-
sion is ongoing—and not all scholars agree that European consumer law
and policy has moved in a purely neoliberal direction.64
However, there can be no doubt that, in the recent decades, European
integration has been driven forwards through a political paradigm that
refers to the sovereign consumer and stresses the economic values of effi-
ciency and growth rather than the political values of participation and
protection. This paradigm, and the idea of an empowered market con-

61
 Hans-W.  Micklitz, “The Consumer: Marketized, Fragmentized, Constitutionalized,” Dorota
Leczykiewicz and Stephen Weatherill, eds., The Images of the Consumer in EU Law: Legislation, Free
Movement and Competition Law (Oxford: Hart Publishing, 2016), 21–41. See also Hans-W. Micklitz,
“European Consumer Law,” Erik Jones, Anand Menon, and Stephen Weatherhill, The Oxford
Handbook of the European Union (Oxford: Oxford University Press, 2012), 526–541.
62
 Micklitz, “The Consumer,” 29.
63
 See, for example, Paul Nihoul, Nicolas Charbit, and Elisa Ramundo, eds., Choice? A New
Standard for Competition Law Analysis (New York: Concurrences, 2017); Anne Witt, The More
Economic Approach to EU Antitrust Law (Oxford: Hart Publishing, 2016).
64
 For example, Frank Trentmann warns about reducing the entire history of recent European inte-
gration to a neoliberal narrative. He stresses that the single market also enabled the EU to introduce
measurements of consumer protection, and that the EU was quick to address the environmental
aspect of the consumption of goods and services moving freely across borders. He also points to the
renewed attention paid to vulnerable consumers and social issues related to collective consumption
within recent European integration. See Trentmann, Empire of Things, 560. It should also be
pointed out that the EU not only associates the single market with freedom and choice for the
consumer but also with a form of European protection of consumers against the multinational and
American companies. Only through supranational collaboration—so the argument goes—are the
individual nations able to resist the pressure from those companies that threaten to undermine
competition and lure the consumer into buying things she/he neither wants nor needs. In this
account, the EU thus represents the fair market and not a laissez-faire economy. In line with these
nuances, the volume Dorota Leczykiewicz and Stephen Weatherill, eds., The Images of the Consumer
in EU Law: Legislation, Free Movement and Competition Law (Oxford: Hart Publishing, 2016)
demonstrates that the European integration project today refers to a wealth of different consumer
figures and strives to serve their interests in the multiple.
  Neoliberalism Without Neoliberals    255

sumer, is growing stronger in present day European integration. Indeed,


according to Marija Bartl, it is integral to what she calls the “internal
market rationality.”65
Overall, the European integration project provides an example of how
neoliberalism, based on the figure of the sovereign consumer, has also
emerged as the dominant political paradigm on the international level.
Similar to the center-left parties operating on the national level, these
institutions do not identify themselves as neoliberals. Yet they have been
responsible for constructing the age of neoliberal hegemony.

Concluding Remarks
It is a paradox that most of the political forces that have contributed to
establish neoliberal hegemony have criticized rather than identified with
the label “neoliberalism.” Against this background, we can hardly speak
of, for example, center-left parties as being neoliberal in the same way as
the ideologists explored in earlier chapters of this book. Hence, these par-
ties did not share ideational or institutional links to the Mont Pèlerin
Society or frame their political agendas with reference to the conversa-
tions on the renewal of liberalism that unfolded within that network.
However, following Stephanie L. Mudge, we can say that “as spokes-
people for markets they [center-left parties] were bearers of a neoliberal
ethic.”66 In other words, in defining a new system of principles and values
according to which societies ought to be governed, center-left parties
took over and elaborated on what was originally a neoliberal approach to
the organization of society, its economy, and politics. This neoliberal eth-
ics represented by center-left parties, we might add, relied on and revolved
around the figure of the sovereign consumer. It was based on the embrace
of and elaboration on the idea of the market as the pre-eminent forum

65
 Marija Bartl, “Internal Market Rationality, Private Law and the Direction of the Union:
Resuscitating the Market as the Object of the Political,” European Law Journal 21, 5 (2015):
572–598. See also Marija Bartl, “Internal Market Rationality: in the Way of Reimagining the
Future,” European Law Journal (forthcoming).
66
 Mudge, Leftism Reinvented, 6.
256  N. Olsen

for democracy and of the sovereign consumer as the personification of


democratic action.
As also illustrated, the neoliberal ethics promoted by center-left parties
involved efforts to reform the public sector and to deregulate the econ-
omy, such as, for example, in the sphere of consumer credit. These poli-
cies were coordinated with and at times encouraged, or dictated, by a
number of international institutions, such as the European Union.
Similar to the center-left parties, the institutions sought to rule according
to a neoliberal ethic that was legitimized with reference to the sovereign
consumer and focused on values related to competition, individual free-
dom, and economic efficiency.
The neoliberal paradigm established by these (and other) political
forces arguably suffers from a range of deep-rooted problems and contra-
dictions that are inherent to neoliberalism, as touched upon in the analy-
sis of the deregulation policies emanating from the Chicago School of
Economics.67 Some of the problematic aspects of this paradigm are evi-
dent in the attempt to construct the new European “market citizen.” In
European integration, the “internal market rationality” has restricted the
space of traditional democratic politics, as associated with public delib-
eration and majority voting, on behalf of securing access to markets by
reducing EU citizens to customers (and paying little attention to tradi-
tional consumer protection legislation).
Moreover, in response to the financial crisis, the EU has, as mentioned,
relied on institutions of unelected bureaucrats (the decision group formed
by the European Commission, the European Central Bank, and the
International Monetary Fund) to enforce tough austerity measures on a
number of countries that have found it difficult to pay their debts. This
model of governing for the sovereign consumer in the pursuit of eco-
nomic efficiency and growth has also led to asymmetric effects, in respect
to economic and social developments and standards, by leaving some
countries, and some segments of populations, with increased wealth and
possibilities, and others with few resources, increasing insecurity, and
limited choices.

 For the Chicago School of Economics, see Chap. 4.


67
  Neoliberalism Without Neoliberals    257

Similar dynamics and problems have characterized the democratiza-


tion of consumer credit through deregulation. This reform answered a
political rationality that sought to enhance economic growth and solve
challenges concerning socio-economic rights and participation by invit-
ing less privileged people to act as consumers on the market rather than
addressing these issues through fiscal policies or government provision of
goods or redistribution of wealth. The new consumers entered an uneven
playing field, in which they not only had less money to spend but also
had to borrow on more expensive and risky terms than more privileged
consumers.
Moreover, once incentivized to buy into a housing market that turned
out to be a pyramid scheme, these consumers were left with huge debts
to pay for their loans, while banks contributing to the crisis were bailed
out and are back in the game. And, if this was not enough, governments
have since pursued austerity politics to reduce government budget defi-
cits, forcing these consumers to pay for the massive debts caused by the
crisis through their taxes.68 As such, the deregulation of consumer credit
laws demonstrates how the neoliberal paradigm has served as a blueprint
for societal reforms in which the market-oriented, but government-­
directed, pursuit of economic efficiency has allowed for societal develop-
ments furthering economic inequality and, ultimately, a lack of real
choice for a large part of the population.
The framing across the political spectrum of the sovereign consumer as
a motive and tool for public sector reforms has revealed other, related
problems inherent to the attempt to govern in the name of this figure.
New Public Management principles have been implemented to run gov-
ernment agencies according to market mechanism and liberate citizens as
sovereign consumers enacting their democratic rights by choosing
between available products. However, the reforms have not delivered
what they promised. In their recent evaluation of three decades of reform
and change in British central government, Christopher Hood and Ruth
Dixon conclude that the British government system “exhibited a striking

68
 On the politics of austerity, and their neoliberal origins, see Mark Blyth, Austerity, the History of
a Dangerous Idea (Oxford: Oxford University Press, 2013).
258  N. Olsen

increase in running or administration costs in real terms, while levels of


complaint and legal challenges also soared.”69
Inquiries conducted in Denmark in the wake of Hood and Dixon’s
evaluations confirm these problems. They documented that New Public
Management has led to a system in which political decision-making
power is still centralized in the ministries; the establishment of new,
expensive, and time-consuming bureaucratic procedures used to conduct
consumer assessments, internal evaluations, and reports; a situation in
which consumers have very few and not very attractive products to choose
between due to incessant cuts and reductions in the public sector; and an
administration that has little capacity to help weaker consumers navigate
in the “choice” system.70 Summed up, New Public Management and the
attempt to turn the citizen into a consumer of public goods has not
brought about economic efficiency or increased political democracy.
As will be further elaborated in the epilogue, although the current
neoliberal political paradigm is evidently characterized by deep-rooted
problems, no real alternative has emerged that might take its place in the
present and the near future.

69
 Christopher Hood and Ruth Dixon, A Government That Worked Better and Cost Less? Evaluating
Three Decades of Reform and Change in UK Central Government (Oxford: Oxford University Press,
2015), 1.
70
 Niklas Olsen, “Velfærdsstatens krise og neoliberalismens indtog i Danmark i 1970erne,” Slagmark
74 (2016), 138.
8
Epilogue

This book has argued that the figure of the sovereign consumer emerged
and continues to function as the key actor in the neoliberal political
paradigm.
The advent of the sovereign consumer has to be understood against the
backdrop of broader historical developments and contexts. To begin
with, the rise of capitalism was crucial to its making. The development of
markets, which drew attention to the consumption side, incited political
economists to construct new key actors, such as the sovereign consumer,
that allowed for an understanding and an ordering of the capitalist sys-
tem. Important for the making of the sovereign consumer was also the
rise of the discipline of economics in the late nineteenth and early twen-
tieth centuries, which tried to make sense (and shape particular under-
standings) of capitalism. It did so through a scientific language that was
structured around ideas of consumption and consumers, and it did so in
discussions that transcended first national and then disciplinary
boundaries.
The rise of advertisement as a commercial activity and academic disci-
pline was another development that conditioned and shaped the sovereign
consumer. Advertisement became a major force in capitalist economies

© The Author(s) 2019 259


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0_8
260  N. Olsen

from the nineteenth century onwards and grew radically in the early twen-
tieth century, when marketing activities expanded through the use of new
technologies, and universities and business schools began to conduct
research on consumer behavior.
A range of later developments conditioned the further evolution of the
sovereign consumer through the twentieth century, such as the socio-­
political upheavals in the interwar period, including the rise of socialism,
the Great Depression, the post-war welfare state, and the crisis of the
welfare state order in the 1970s.
The intensive and often coordinated efforts undertaken by a group of
like-minded neoliberal ideologists, who aimed to transform society under
the label of market democracy, took place within and in response to these
developments and contexts.
Indeed, the construction of the neoliberal sovereign consumer was, to
a significant extent, the outcome of the labor carried out by self-­identified
liberals who attempted to renew liberalism as an ideology that claims to
promote societal orders based on free markets and individual freedom,
and who have been connected to the transnational neoliberal network the
Mont Pèlerin Society. In their capacity as economists and politicians, and
often in collaboration with businesses and advertisement agencies, they
joined debates of capitalism as an economic system and legitimized their
political objectives by constructing a particular figure of the sovereign
consumer in the interwar period. Since then, neoliberal ideologists have
used it as an umbrella term for a wide range of ideas asserting that free
consumer choice is the defining feature of the market economy.
Hence, neoliberals have assigned different meanings to the sovereign
consumer in various contexts throughout the twentieth century. Among
other things, they have ascribed different degrees of sovereignty and ratio-
nality to the figure and held diverse views on the proper role of the state in
a consumer-driven economy. Likewise, they have mobilized the figure for
several different political projects and experiments. For example, in the case
of Germany, it was mobilized both in support of the National Socialist
dictatorship and of the democratic Federal Republic of Germany.
However, neoliberals have always portrayed the sovereign consumer as
an agent who guarantees economic efficiency and democratic institu-
tions. Moreover, they have connected the figure to efforts to turn the
 Epilogue    261

choosing between available “products” into a central approach to political


activity. They did so by extending the mechanisms of liberal democracy
to the market, ascribing the same measure of social validity and a similar
rationality on the part of voters in an election and consumers in a mar-
ketplace. As such, they created a new political economy of consumer
choice that reinvented the market as the democratic forum par excel-
lence. Central to this reinvention was the effort to supplement, discredit,
and, ultimately, replace notions of public deliberation and majority vot-
ing as the legitimate sources of democratic political decision-making.
This new political economy eventually embedded the sovereign con-
sumer in a discourse stating that the sovereign consumer is harmed by
state regulation and best protected by individual rationality and the effi-
ciency of the market. This discourse has won out in recent decades. Here,
the sovereign consumer has come to function as a major driver in a vital
and problematic change in political thinking that subordinates tradi-
tional political values to the narrower pursuit of economic ideals by
decoupling visions of efficiency, utility, and growth from the promotion
of rights, participation, and finally, and ironically, choice. This decou-
pling of economics and ethics is a trademark of the neoliberal hegemony
that has been established since the 1980s.
It is important to stress that academics and political forces from other
camps also contributed to the spread and acceptance of neoliberal ideol-
ogy. For example, since the 1950s, mainstream economics and scholars of
the so-called choice doctrines have outlined analyses of economic and
political behavior that resemble neoliberal thought.
Moreover, from the 1980s onwards center-left political forces embraced
the neoliberal idea of framing the sovereign consumer as a motive and
tool for public sector reform. Hence, in attempts to reform (and re-­
enchant) the public sector by modeling in the mirror of the market, they
cast the citizen as a freely choosing consumer of public goods. This ideo-
logical embrace and elaboration of the figure of the sovereign consumer
within center-left parties was crucial to the rise of the neoliberal hege-
mony. Paradoxically, the age of neoliberal hegemony is also an age of
“neoliberalism without neoliberals,” since few, if any, of the political
forces that pursue neoliberal policies identify with the label of
neoliberalism.
262  N. Olsen

The subordination of traditional political virtues to new economic val-


ues, which characterizes the neoliberal political paradigm, took various
roads. For example, early German neoliberalism referred to the voting
analogy between the market and democratic politics, but, beneath the
surface, the analogy only pertained to the market and not to a proper
political order. In fact, they aimed to shield the market order from demo-
cratic politics. Likewise, American anti-trust theory as developed by
scholars associated with the neoliberal Chicago School of Economics,
outright discarded a concern for traditional democratic values in the pur-
suit of economic efficiency.
More generally, scholars and politicians striving to govern in the name
of the sovereign consumer have prioritized economic efficiency, but also
argued that the deregulation of private markets and marketization of gov-
ernment agencies automatically creates a more democratic society for all
citizens as consumers. In this process, the role of the consumer has been
heavily economized and its scope of “democratic” participation limited to
buying and choosing the available goods on the market. The choice dis-
course has outshone and replaced the idea of political democracy as a
system in which government acts as a collective decision-maker and social
planner, which might, for example, promote democracy by reducing
inequality through economic regulation and wealth distribution. The
same is the case with the idea that social movements and organizations
can empower oppressed populations to improve their living conditions
and promote socio-political rights. The neoliberal idea of the market as
the democratic forum par excellence and of individual choice as the ulti-
mate form of democratic action has eclipsed such modes of democratic
thought and action.
In the neoliberal political paradigm, the sovereign consumer appears as
a flawless figure, who can do nothing wrong, if only she/he is liberated on
the market. As such, the figure has been freed from enduring discussions
of the possible problems that might characterize a market order based on
consumer sovereignty—discussions that had been raised by non-­
neoliberals as well as neoliberals through most of the twentieth century.
Three forms of criticism have been particularly prominent. First, crit-
ics have objected that consumer sovereignty lacks the formal equality that
political rights in democracies afford to each citizen, as individual
 Epilogue    263

s­ overeignty on the marketplace in many instances depends on purchasing


power. Second, they have criticized the presupposition that all individu-
als are thoroughly rational in their choices (and are not lacking informa-
tion or influenced by external factors, such as advertisement). Third, they
have protested that the idea of consumer sovereignty disregards the pos-
sibility of producer sovereignty, meaning that people as consumers can
only choose between goods that are actually offered on a market that
might be dominated by big firms. Moreover, to account for what they
saw as flaws in the figure of the sovereign consumer, critics have urged
state intervention in economic and social life, for example, through eco-
nomic regulation and redistribution and consumer protection
mechanisms.
In recent decades, all three criticisms of the figure of the sovereign
consumer have been forgotten, silenced, or debunked on behalf of the
discourse stating that the sovereign consumer is harmed by state regula-
tions and best protected by individual rationality and the efficiency of the
market. Moreover, even if this paradigm has not generated political
democracy in terms of rights, participation, and equality, and in certain
contexts (such as within the public sector) has also failed to create effi-
ciency, it remains hegemonic and has not been rejected or subjected to
major revisions. Indeed, populations are still being addressed as sovereign
consumers, although their sovereignty remains bounded and they have
little money at their disposal. These elements are intrinsic to the dynam-
ics of capital at the beginning of the twenty-first century, when economic
growth is accompanied by extreme inequality that undermined tradi-
tional democratic values as related to economic equality and political
participation, and stir various modes of popular discontent, including
the rise of populist political parties.1
These developments do not necessarily signal the end of the neoliberal
paradigm. In spite of the critiques outlined above, the acceptance of
inequality is still central to the paradigm. Moreover, neoliberalism has
long proved resilient to criticism from other ideologies. More specifically,
it has been successful in absorbing concepts and agendas with roots in
1
 Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press,
2013).
264  N. Olsen

very different political ideologies, such as conservatism and Social


Democratism, and in disseminating its own semantics and visions to
these ideologies and their promoters. Populism is no exception. According
to Quinn Slobodian, populist parties in several countries have direct links
to neoliberal networks, and they are fully compatible with and in fact
represent a distinct strain of neoliberal free market globalism by accept-
ing the free flow of capitalism, but not of people, across national
borders.2
The question is what might come after neoliberalism and its figure of
the sovereign consumer, that is, whether and when economic-political
discourse and practice will see the coming of a consumer figure that is
distinctly different from the one presently driving our political paradigm.
Currently, behavioral economists are exploring the notion of “bounded
rationality,” that is, the idea that when individuals make decisions, their
rationality is limited by various deficiencies, including irrationality. The
American scholar Herbert A. Simon coined the term “bounded rational-
ity” in the 1950s.3 But whereas Simons’ notion was linked to arguments
for consumer protection from the market by government, many behav-
ioral economists today focus on providing policy makers with expertise
using the heuristics and biases of people’s decision-making processes in
order to influence, that is, “nudge,” them, to serve a particular, market-­
focused government rationality.4 In this context, the consumer ideal
encapsulated in “bounded rationality” does not necessarily break with the
ideals of economic efficiency, utility, and growth that have long charac-
terized the neoliberal sovereign consumer.

2
 Quinn Slobodian, “Neoliberalism’s Populist Bastards: A New Political Divide Between National
Nations,” 15 February 2018, http://www.publicseminar.org/2018/02/neoliberalisms-populist-
bastards/
3
 Hunter Crowther-Heyck, Herbert A. Simon: The Bounds of Reason in Modern America (Baltimore,
MD: John Hopkins University Press, 2005).
4
 Behavioural economics is often associated with the work of American economist Richard Thaler,
who won the Nobel Memorial Prize in Economic Science in 2017, and Israeli psychologist Daniel
Kahnemann. For insider perspectives, see Richard Thaler, Misbehaving: The Making of Behavioural
Economics (New York: W.W. Norton & Company, 2015) and Michael Lewis, The Undoing Project,
A Friendship That Changed Our Minds (New York: W.W.  Norton & Company, 2015). See also
Floris Heukelom, Behavioural Economics: A History (Cambridge: Cambridge University Press,
2014) and E. Sent, “Behavioural Economics: How Psychology Made Its (Limited) Way Back into
Economics,” History of Political Economy 36, 4 (2004): 735–760.
 Epilogue    265

Ultimately, the question of what might come after the sovereign con-
sumer is difficult to answer for the historian. Rather than predicting the
future, the aim of this book has been to explore the making and function
of the contemporary neoliberal paradigm and its key actor, the sovereign
consumer. Hopefully, the study has not only contributed to a better
understanding of the neoliberal paradigm but also offered an analytical
perspective that will allow for a better understanding of those paradigms
and key actors, which will eventually replace neoliberalism and its sover-
eign consumer.
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Index1

A Arbeitsgemeinschaft Erwin von


Adenauer, Konrad, 65, 86–88, 102 Beckerath, 85, 86n59
Adorno, Theodor, 99, 243 Aron, Raymond, 50
Advertisement, 49, 70, 115, 144, Arrow, Kenneth J., 163–173, 177,
146, 154, 160–162, 181, 204, 178, 182, 184, 245
213, 259, 260, 263 Austria, 37, 60, 61
Advertising agencies, 24, 245 Austrian Chamber of Commerce, 61
Age of Reagan, 245 Austrian economics, 145, 147
Alchian, Armen A., 160, 160n66, 161 Authoritarian, 53, 60, 61, 74, 81,
Allen, Clark Lee, 158, 159 103n109, 161, 192
Allen, William R., 160, 161 Autonomy, 80, 83, 89, 132, 192,
Allocation of resources, 124, 148, 224, 235
157, 174
Amadae, Sonja M., 166n83, 167,
168 B
American Enterprise Institute, 125 Bach, George Leland, 148–150,
Andersen, Poul Nyboe, 200 148n19
Anti-democratic sentiments, 33 Ballot box (voting analogy), 21, 54,
Antitrust laws, 114, 131–138, 159 82, 123, 124, 160

 Note: Page numbers followed by ‘n’ refer to notes.


1

© The Author(s) 2019 295


N. Olsen, The Sovereign Consumer, Consumption and Public Life,
https://doi.org/10.1007/978-3-319-89584-0
296  Index

Barthes, Roland, 101 45n71, 46, 49, 51, 57, 61, 73,
Bartl, Marija, 255, 255n65 75, 76, 113, 116, 117, 121,
Bastiat, Frédéric, 25, 26, 31, 52, 54 124, 125, 127, 130, 136, 139,
Becker, Gary, 106, 133, 164, 182 142, 144, 146, 147, 151–153,
Behavioral economics, 264 160, 162, 167, 172, 184, 192,
Behrens, Karl Christian, 100 248, 251, 259, 260, 264
Benham, Frederic, 145–147, 150 Castoriadis, Cornelius, 235
Bentham, Jeremy, 28 Center-left, 2, 3, 11, 17, 211,
Bergson, Abram, 165 228–232, 243–246, 249–251,
Black, Duncan, 168, 173 249n51, 255, 256, 261
Böhm, Franz, 20n2, 49, 72–75, Centre for Policy Studies, 240
72n15, 79–82, 79n38, 86n59, Chase, Stuart, 32
92, 92n78, 94 Cherrier, Beatrice, 143n8, 181
Bork, Robert H., 106, 107n4, 109, Chicago Antitrust Project, 134
133, 135–138, 136n78 Chicago School of Economics, 16,
Boulding, Kenneth, 153–155, 162 105–140, 160, 256, 262
Bounded rationality, 142n3, 264 China, 4
Bowen, Howard, 168 Christian Democratic Union, 65,
Bowman, Mary Jean, 148–150, 88n63
148n19 Christianity, 99
Breidablik (Danish Folk High Christiansborg, 199
School), 210 Christian Socialism, 90
Brent Spar, 237 Christophersen, Henning, 191, 198,
Brixtofte, Peter, 191, 207, 208, 216, 199, 201, 202, 206–208,
224 213–215, 224
Brown, Gordon, 242 Citizen consumer, 13, 24, 64, 111,
Buchanan, James M., 158, 158n61, 111n10, 112, 116, 132, 139,
159, 162, 173, 175, 176, 242
176n112, 180, 182, 183, 225 Citizenship, 22, 23, 109, 139
Bureaucracy, 69, 194, 221, 247 Citizen sovereignty, 148, 166
Burgin, Angus, 10, 109n8 Civil society, 23, 182
Business companies, 24, 73 Classical economic theory, 27
Business cycles, 39, 47, 75, 75n20, Classical liberalism, 6, 31n34, 58,
155 62, 123, 199, 222
Clinton, Bill, 244, 246–249
Coase, Ronald, 134
C Coercion, 55, 121, 151, 172
Cairncross, Alec, 155, 156 Cohen, Lizabeth, 13, 111n10
Capitalism, 7, 10n14, 12n18, 14, Cohen, Manuel, 125
21, 31, 33, 35, 36, 39–43, Colberg, Marshall R., 158, 159
 Index 
   297

Cold War, 93n79, 101, 117, 124, Consumer protection, 24, 32, 102,
124n44, 125, 142, 167, 173, 110, 111, 125, 130, 212, 254,
251 254n64, 256, 263, 264
Colloque Walter Lippmann, Consumer sovereignty, 11n16, 17,
50 20, 21n3, 46, 52–58, 63n126,
Columbia University, 164 75, 77, 80, 112, 145–148,
Communism, 25, 50, 63, 64, 110, 150, 157, 159, 160, 162, 166,
146 168, 170–172, 176, 182, 184,
Competition state, 17, 186–188, 198, 200–205, 211–214, 225,
186n3, 226, 231–240 226, 230, 242, 245, 250, 262,
Competitiveness, 4, 219 263
Competitive order, 6, 74, 78, 93, 97, Consumers Research Inc., 24, 32,
135n75 33, 115
Comsumer Complaints Board Consumer surplus, 29
(Danish), 212 Consumer wants, 26, 43, 46,
Conceptual history, 7–9, 7n10, 11 130n59, 161
Consent, 40, 55, 58 Consumer welfare, 109, 131–138,
Conservative Party (Danish), 187, 254
190, 191, 213, 218, 233 Consumption, 14, 22–27, 29,
Conspicuous consumption, 31 32, 34, 57, 64, 69–72,
Consumer boycott, 23 69n5, 74, 78, 80, 80n39,
Consumer Commission (Danish), 81, 83, 84, 89, 91, 92,
212 94–98, 100n96, 101–103,
Consumer credit, 248, 249, 249n51, 110, 118, 122, 125, 132,
256, 257 156, 162, 169, 177, 179,
Consumer demand, 39, 47, 71, 72, 192, 196, 204, 212,
79, 89, 112, 121, 157, 161, 241–243, 242n34, 243n36,
182, 205, 249 245, 254n64, 259
Consumer democracy, 67, 80, 82, Cooperative movement, 23, 31,
92, 99n93, 208 203n41
Consumer individualism, 242 Cowles Commission for Research in
Consumer intelligence, 56, 94 Economics, 164
Consumerism, 14, 22, 33, 99 Crisis of liberalism, 20, 21n3,
Consumer leagues, 111, 203n41 33–37, 45, 189
Consumer Ombudsmand (Danish), Crisis of the welfare state, 17, 186,
212 192–200, 205, 210, 211, 232,
Consumer preferences, 20, 25, 56, 260
140, 148, 171, 245 Currency reform, 65, 87, 88, 96
298  Index

D Dich, Jørgen S., 194–198, 198n29,


Danske Husmødres Forbrugerråd, 203 212, 223, 224
Davies, William, 44 Dickinson, H. D., 169, 170
de Grazia, Victoria, 13 Dictatorship, 24, 42, 60, 61, 76, 84,
Decentralization, 124, 186, 187, 260
200, 205–211, 214, 216, 219, Director, Aaron, 106, 116, 117,
222, 232, 233, 236, 245 133–135, 135n74, 135n75,
Decision-making processes, 41, 97, 138, 139
166, 168, 175, 192, 195, 207, Discipline of economics, 2, 11, 16,
224, 264 69, 112, 117, 119, 126, 141,
De-culturalized liberalism, 201 142, 173, 180, 183, 213n69,
Demand and supply, 89, 157 225, 259
Democracy, 2, 3, 7, 8, 10, 11n16, Disenchantment of politics, 44, 54,
14, 15, 17, 19–21, 21n3, 24, 58, 160
33, 35, 36, 40, 42–46, 45n71, Distribution (economic), 3, 36, 51,
49, 54, 57–59, 61, 62, 67, 80, 128, 129, 190, 234, 238,
75–77, 79, 79n35, 81, 82, 86, 262
87, 89–92, 96, 108, 110–112, Dixon, Ruth, 257, 258
121, 123–125, 124n44, Dobb, Maurice H., 46, 169–172
127–130, 135, 136, 139, 142, Dollfuss, Engelbert, 60, 61
145, 151, 153, 155, 156, 159, Downs, Anthony, 162, 173–181,
160, 166, 167, 169, 170, 172, 183, 184
175, 177, 178, 182–184, 202, Düsseldorfer Leitsätze, 90
211, 219, 223, 228–240, 245,
246, 248, 249, 256, 258, 260
Democracy-through market, 253 E
Democratic individualism, 242 Eastern Europe, 101
Denmark, 17, 140, 185–226, 229, Eco, Umberto, 101
232, 236, 238, 239, 258 Economic democracy, 43, 76n25,
Deregulation, 4, 16, 68, 104–109, 98, 153, 169, 211, 219, 238
108n7, 109n8, 120, 120n34, Economic liberalism, 60, 189
125–127, 125n45, 130–133, Economic miracle, 65, 95, 96n87,
136, 138, 139, 158, 182–184, 103
230, 240, 244, 246, 248, 249, Economic textbooks, 141n1, 143n7,
249n51, 251, 256, 257, 262 144–149, 162, 184
Der Markt der Fertigware, 71 Education, 32, 34, 58, 80, 115, 121,
Det Radikale Venstre, 188, 188n6, 129, 163, 206, 210n64, 215,
190, 191, 195 241, 243
 Index 
   299

Efficiency (economic), 2, 20, 29, 31, Federal Republic of Germany, 15,


34, 45, 46n73, 59, 77, 89, 92, 86, 260
108, 109, 112, 119, 127–129, Federal Trade Commission, 115, 130
131, 133, 135–137, 151, 153, Federal Trade Commission Act, 111
156, 184, 209, 218, 223, 231, Fetter, Frank F., 21, 36, 37, 39,
234, 256–258, 260, 262, 264 45n71, 48, 54, 56, 146
Efficient consumer, 16, 108, 109, First World War, 23, 33, 37, 39, 122,
127, 130, 139 186n4, 188
Elections, 44, 48, 54, 89, 156, 174, Fleury, Jean-Baptiste, 143n8, 181
195, 210, 231, 261 Foot voting, 180
Elitism, 33 Formierte Gesellschaft, 103, 103n109
Ellemann-Jensen, Uffe, 191, 207, Foucault, Michel, 4, 11, 243
208, 214, 216 France, 22, 50, 185
Entrepreneur, 9, 11, 43, 55, 74, 177, Frank, Thomas, 44n65, 248
241 Frankfurt School, 99
Entrepreneurship, 5, 45, 73, 78, 112, Fraser, L. M., 63n126, 147
127 Frederiksen, Claus Hjort, 208, 209
Equality (economic), 263 Freedom, 6, 8, 21, 25, 26, 28, 38,
Equality of opportunity, 58, 200 41, 45n71, 50, 51, 54–56, 58,
Erhard, Ludwig, 65–104 59, 62, 63, 67, 74, 76, 79–81,
Erhvervenes Oplysningsråd, 210 83, 89–92, 98, 99, 108, 112,
Eriksen, Erik, 190, 191 113, 116, 121, 123, 127, 128,
Ethics, 28, 128, 129, 161, 176, 237, 130, 134, 136, 139, 183,
238, 255, 256, 261 188–190, 196, 208–210, 215,
Eucken, Walter, 49, 72, 75, 77, 85, 216, 218, 220–222, 227, 232,
86, 86n59, 88, 99n95 236, 238, 246, 249, 254n64,
European Central Bank, 251, 256 256, 260
European Commission, 251, 252, Free University of Berlin, 100
256 Fremskridtspartiet, 194, 195
European Debt Crisis, 251 Freyer, Hans, 99
European Single Market, 251 Friedman, Milton, 11, 106, 109,
European Union, 227, 251, 252n54, 109n8, 116, 117, 119–127,
256 120n32, 127n51, 127n52,
Exploitation, 33, 77, 78n32, 122, 129–133, 135, 135n74, 136,
178n118, 192, 197, 235 139, 140, 157–159, 161,
173, 184, 209, 217, 223,
226, 240
F Friedman, Rose, 120, 123
Fabrin, Erik, 208 Full employment, 3, 100, 152, 153,
Fascism, 50, 60, 63, 110 155, 217
300  Index

G Hartling, Poul, 191, 210


Galbraith, John Kenneth, 118, 120, Harvey, David, 4, 96n89
142n3, 162, 179, 198, Haselbach, Dieter, 65n1, 72n16, 74,
198n28, 204, 223 79n35, 81n47, 103
Gane, Nicholas, 38, 38n52, 38n53 Hayek, Friedrich, 5, 10n15, 11, 21,
Gehlen, Arnold, 99 37, 45–50, 47n75, 47n76,
General equilibrium theory, 28 48n78, 52, 53n93, 53n94, 54,
Geneva, 37, 48, 61, 75, 76 75, 77, 150, 163, 167, 169,
German Democratic Republic, 101 175, 176n112, 209, 217, 223,
Gesellschaft für Konsumforschung, 70 227n2, 240
Giddens, Anthony, 242, 243, Hayekian (perspective on economic
243n36 order), 151
Gide, Charles, 22, 23, 30, 31, 31n34 Heinesen, Knud, 213, 219, 221
Glistrup, Mogens, 194, 195, Hicks, John, 164n78, 165, 172
197–199, 211 Hierarchy, 30, 41
Goebbels, Joseph, 83 Hilden & the Hackers, 236
Gore, Al, 247 Hitler, Adolf, 48, 75
Graduate School of International Hobbes, Thomas, 223
Studies (Geneva), 75 Hobhouse, Leonard T., 34, 35n44
Grand Coalition (German), 100 Hobson, J. A., 22, 34
Great Britain, 3, 4, 12, 17, 22, 23, Homo oeconomicus, 100
33, 107, 214, 215, 229, 231, Homo sapiens consumens, 98
232, 240, 243, 244, 250 Hood, Christopher, 257, 258,
Great Depression, 49, 64, 260 258n69
Growth (economic), 2, 12n18, 23, Horkheimer, Max, 99, 243
29, 33, 59, 101, 108, 110, Horowitz, Daniel, 13, 13n23,
127, 189, 191, 193, 200, 204, 102n103, 118n29, 132n64,
207, 208, 210, 219, 232, 246, 245n40
249, 254, 256, 257, 261, 263, Human rights, 92, 94, 96
264 Hutt, William H., 20, 21, 52–59,
Grundtvig, 210n64, 217, 223 59n118, 62, 63n126, 64, 77,
Guerney, Peter, 14n25, 64n127, 147, 78, 145–147, 150–152, 176,
241, 242n34 176n112, 226

H I
Haarder, Bertel, 191, 198, 198n29, Ideational convergence, 14, 195,
199, 202, 205–209, 206n50, 224, 225
209n62, 214, 216, 223 Illich, Ivan, 223, 224
Habermas, Jürgen, 101 Impartial, 55
 Index 
   301

Imperfect knowledge, 29, 47 Interwar pluralism (in economics),


Impersonal, 55, 121 113, 119, 142
Impossibility theorem, 163, 166, Intransigent liberalism, 171
166n83, 167
Individual decision-making, 30
Individual desires, 41, 250 J
Individual freedom, 6, 21, 26, 28, Jensen, Jacob, 181, 181n130
38, 50, 51, 59, 62, 63, 74, 81, Jevons, William S., 27–29, 32, 35, 56
89, 92, 113, 123, 134, 189, Jones, Daniel Stedman, 5n7, 10,
190, 208, 209, 218, 227, 232, 10n14, 51n88
246, 256, 260 Journal of Law and Economics, 134,
Industrialist, 9 136n78
Inefficiency, 73, 175 Justice (social), 51, 53, 78, 79, 81,
Inequality, 29, 42, 43, 51, 58, 78, 155, 252
81, 90, 113, 152, 170, 172,
221, 228, 257, 262, 263
Inevitable, 55, 167, 174 K
Inflation, 23, 132, 213 Kaldor, Nicholas, 169, 170
Information, 28, 35, 47, 48, 94, 96, Kanslergadeforliget, 189
115, 119, 122, 130n59, 144, Kelsen, Hans, 40, 40n58
152, 154, 160, 164n78, 172, Key actor, 1, 7–9, 11, 15, 16, 19–21,
203, 204, 237, 252, 263 38, 63, 64, 67, 71, 92, 108,
Innovation, 29, 40n56, 203, 204, 120, 144, 176, 259, 265
216, 223 Keynes, John Maynard, 34, 53n92,
Institute of Economic Affairs, 139, 240 64, 152, 155, 161
Institut for Fremtidsforskning, 237 Keynesianism, 4, 12n18, 63, 64, 132
Institut für Industrieforschung, 84 Klein, Naomi, 243
Institut für Wirtschaftsbeobachtungen Knight, Frank H., 10n15, 56, 106,
der deutschen Fertigwaren, 71 112, 113, 113n14, 116,
Interest groups, 40, 67, 73, 77, 93, 116n25, 117, 168, 168n93,
114, 178, 182, 196, 235 172, 172n105, 175
Internal market rationality, 255, Kuhn, Thomas, 143, 143n7
255n65, 256 Kyrk, Hazel, 32, 32n37
International Monetary Fund, 4,
227, 251, 256
Intervention (government), 3, 23, L
45, 51, 64, 122, 130, 159, Labor Party (British), 228, 242
162, 168, 204, 205 Labor unions, 58, 62, 73, 115, 178,
Interventionism, 73, 77, 78n32, 82 182
302  Index

Laissez faire, 21, 38, 50, 59–62, 175, 205, 212, 215, 216, 218,
63n126, 77, 93, 113, 114, 221, 222, 232–234, 238, 247,
116, 120, 199, 246 257
Landslide election, 195, 210 Market metaphors, 17, 145, 173,
Lange, Oscar, 45 184, 245
Legitimacy, 3, 21, 42, 54, 57, 62, Market populism, 44n65, 244–250
140, 182, 194, 196 Marshall, Alfred, 27, 29, 165, 196
Leitsätzegesetz, 87 Marshall-Plan, 204
Lerner, Abba, 46, 170, 171 Marx, Karl, 196
Levi, Edward, 134, 135 Marxism, 14
Liberal interventionism, 73 Mass democracy, 40, 79
Liberal political economists, 25, 26, Masses, 42, 50, 57, 62, 79, 81,
54, 74 81n47, 171
Liberal reform politics, 200, 209 McConnel, Campbell R., 162
Lippmann, Walter, 50, 50n87 McLuhan, Marshall, 101, 245
Lipsey, Richard G., 156, 157 Means of production, 36, 39, 42,
Local democracy, 200, 207 192
Locke, John, 223 Measuring, 149, 198, 201
London School of Economics, 48, Meat Inspection Act, 111
52, 63n126, 145 Median voter theorem, 177
Lucas, Robert, 217 Menger, Carl, 20–21, 20n2, 27, 29,
30, 35, 47, 56
Micklitz, Hans-W., 253, 254n61
M Miksch, Leonard, 72, 87n60, 88
Maastricht Treaty, 253 Milburn, Alan, 242
Macroeconomics, 155, 163 Mill, John Stuart, 27, 81, 223
Madsen-Mygdal, Thomas, 189 Mirowski, Philip, 5n7, 10, 45n70,
Majority voting, 167, 261 51n88, 72n16, 105n1, 107,
Marginal analysis, 29, 154, 155 107n5, 120n32, 126n48,
Marginalism, 27, 30, 36 142n2, 160n66, 164n78, 167
Marginal revolution, 20, 25–31, 35, Mises, Ludwig von, 11, 12, 15, 20,
74, 119n31, 142 21, 37–52, 45n69, 45n71,
Marketing research, 13, 16, 69 48n80, 54, 56, 56n105,
Marketization, 12n18, 183, 186, 58–62, 61n122, 67, 74,
187, 207, 208, 217, 224, 236, 74n18, 75, 77, 78, 89, 90,
262 123, 124, 128, 130, 146, 150,
Market mechanisms (in the public 163, 167, 169, 170, 175, 181,
sector), 124, 140, 157, 166, 227n2, 248, 248n49
 Index 
   303

Modernization programs (Danish), National Socialist Party, 84


214–216, 218, 222, 233 Neoclassical economics, 28, 28n23,
Møller, Poul, 190 31, 133, 155, 163, 166, 172,
Monarchy, 36 174, 177, 182, 225
Monopolism, 33, 42, 43, 59, 77, Neoclassicism, 119, 119n30, 142,
113, 114, 146 143
Monopoly, 27, 31, 35, 42, 51, 58, Neoliberal hegemony, 227–229,
72, 73, 77, 78n32, 79, 82, 91, 251–255, 261
107, 110, 115–117, 120, 123, Neoliberal political paradigm, 1, 3,
129, 134, 135, 152, 154, 156, 7–9, 11, 15, 18, 21, 21n3,
157, 159, 172 140, 252n54, 258, 259, 262
Monsen, R. Joseph, 178–181, New Deal, 13, 24, 63, 64, 111–113,
178n120 116, 118, 246
Montesquieu, Charles-Louis de New Deal Reformism, 63, 64
Secondat, 223 New Labor, 240–244, 249
Mont Pèlerin Society, 5, 6, 10, 50, New liberalism, 3–7, 15, 34, 175,
52, 53n92, 62, 66, 107, 188, 207, 209, 211
107n4, 113, 119, 120, New Public Management, 187, 188,
120n32, 158, 160, 161, 167, 222–226, 233, 239, 240, 243,
255, 260 246, 247, 257, 258
Morgan, Mary S., 28n23, 30, Nilsson, Erik, 209, 209n61
112n12, 119n30 Nineteenth century capitalism, 51
Müller-Armack, Alfred, 49, 72, 85, Ninn-Hansen, Erik, 218
86, 88–90, 88n63, 90n68, Nobel Memorial Prize in Economics,
90n69, 92, 99, 99n95 164
Musgrave, Richard A., 180 North America, 3, 101, 244
Myrdal, Gunnar, 165 Norway, 185
Nozick, Robert, 217

N
Nader, Ralph, 118, 120, 120n34, O
244 OEEC-programs, 204
National Performance Review Offer, Avner, 142, 143n5
(National Partnership for Oil crisis, 193, 213
Reinventing Government), Oligarchy, 36
246, 247 Olsen, Mancur, 174
National Socialism, 37, 63–64, 69, Ostrom, Vincent, 181
75, 81–86 Outsourcing, 4, 221, 234–236
304  Index

P Popper, Karl, 51, 157


Packard, Vance, 118, 204 Popular sovereignty, 40, 41
Paleo-liberal, 38, 38n51 Posner, Richard, 106, 133, 135,
Pareto-efficiency, 46