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The course, contradictions, and consequences of extending competition as a

mode of (meta-)governance: towards a sociology of competition and its limits

Bob Jessop (Lancaster University)

Initial and Incomplete Draft for ITEPE conference, 19-20 June 2014

Initial abstract (will need updating)

My contribution combines Polanyian, Marxist and Luhmannian perspectives on the
process of governance through market completion and the governance of markets. It
aims to disambiguate the meaning of markets and marketization and, in this context,
explores the effects of marketization of fictitious commodities, such as land, labour-
power, money, and knowledge, as well as the colonization of the public sphere by
market proxies. In addition to exploring the growing significance of differential
accumulation in the organization of the economic field, it also explores the conditions
under which the relative influence of the economic system on other systems and
world society in general is increasing through (world) market completion and the
impact of finance-dominated accumulation and the indebted society. I relate these
processes to economic determination in the first instance, economic domination,
economic hegemony, and the tensions in the process of neoliberalization between
Chicago School neo-liberalism and Freiburg School Ordo-liberalism. To situate the
implications of market completion and the extension of market proxies within the
broader, contemporary framework of neoliberalization, I also address the increased
importance of credit relations, financial intermediation, and risk-management (and its
later parasitic extension into excessive financial speculation and risk-bearing) and
the growing influence of capital as property, e.g., derivatives, as the circuits of
finance capital as property have become dissociated from the circuits of finance
capital as functioning capital within the real economy. Finally, all these issues are
related to questions of governance, governance failure, and meta-governance (and
its failure) within a multi-spatial framework that is suited to analysing the changing
character of a European Union organized increasingly around a market completion
project.

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Prefatory note for the Conference

Pressure of other research and writing commitments as well as the usual trials and
tribulations of examining and university administration mean that this contribution
falls short of the initial ambition. What is missing but should be developed in a
second draft is more specific concern with the forms of market proxy that encourage
governance and regulation through competition in the public sector and civil society
and the specific public goods and/or pathologies with which they are associated. I
did not reach this part of the paper because it was first necessary to de-mystify the
nature of competition and to show the limits of efforts to promote and/or regulate
competition in the formally rational capitalist market economy before importing
mistaken ideas and theoretical fallacies from an idealized conception of competition
into the provision of public goods and services. What goes missing as a result is a
nuanced analysis of the areas where markets and competition may be beneficial and
those areas where they are inefficient and/or ineffective. This means that the move
from market failure to metagovernance is too hasty and the conclusions are
therefore also underdeveloped. I plan some more reading and reflection before the
conference begins and hope to bring a simplified analysis and more robust thoughts
on the underdeveloped parts of the paper. Of course, I also expect the discussion to
improve all parts of the analysis.

15 June 2014

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The course, contradictions, and consequences of extending competition as a
mode of (meta-)governance: towards a sociology of competition and its limits

Competition and competitiveness are complex and confusing topics that defy any
simple interpretation and explanation. As buzzwords or catchwords, they are
polyvalent and vague. Competition is said to exist in nature (hence naturalized and,
in Darwinian terms, seen as beneficial) but it is also regarded as an artefact of
specific social practices, which can have quite varied effects. Markets are socially
constructed via a set of agreed on or imposed rules of the game. There is no
natural or spontaneous implementation of market mechanisms. The nature of
market forces varies with the nature of markets (e.g., perfect vs monopoly
competition, free trade vs protectionism). Different dispositions of resources, different
sets of economic agents, and different market rules will produce different market
outcomes. This highlights the importance of institutional design and suggests that
market forces are not a fact of nature but depend on specific social relations.

If specific markets seem to be self-equilibrating mechanisms, this results from
adherence to sophisticated regulations concerning the quality of goods exchanged,
the inner organization of transactions, the legal penalty for non-compliance, etc.
Without such mechanisms, private sector opportunism and corporate self-interest
would severely distort the alleged smooth adjustment process of supply and
demand. Countering this position is the long tradition (dating back to Aristotle and
Scholastic philosophy) of the just price, according to which ethical or moral
principles would sometimes (if not always) require that goods be exchanged at a
price above or below that which would have been reached through imperfect
markets (Friedman 1980; Lowry 1974). The Ancients and Scholastics also
suggested that usury should be banned even if market exchange would have
allowed it.

These and other complexities make it hard to decipher what competition might mean
as a principle of economic, let alone societal, organization even as it is promoted
as an ideal (and idealized) mechanism of governance both within and far beyond the
economy. As emergent effects of generalized exchange, market forces and
competition are expected (cognitively and normatively) to steer economic activities
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and social life more generally. The recent notion of competitiveness is also
conceptually ambiguous, politically controversial and ideologically charged. As
Robert Reich remarked, somewhat unfairly, the idea of national competitiveness
moved from obscurity to meaninglessness without any intervening period of
coherence.
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Certainly, as we shall see below, it has no place in neo-classical
economics; but it does have a potential role in heterodox economics and has been
mobilized to inform economic, political, and societal strategies. In these terms it
comprises the key set of resources and abilities that underpin competition, whether
or not this capacity is fully realized. As such, competitiveness varies with the forms
and modalities of competition. There are many ways to define and measure it, and
past and current economic, legal, political and policy debates over its nature indicate
the many issues that are at stake.

1. Competition and the Capitalist World

The workshop proposal cites a claim that competition is the most important
organizing principle in the capitalist world (Cini and McGowan 1998: 2). This was
advanced in a work on European competition policy and is questionable even in this
context. More generally, it can be contested on several grounds:

(1) If capitalist world denotes world society as the horizon against which to explore
the relative importance of societal organizing principles, or principles of
societalization (Vergesellschaftsprinzipien), then we might counter this claim by
citing Luhmann to the effect that modern societies are characterized by functional
differentiation and can have no master organizing principle at best there would be
competing societalization principles, processes, and projects, associated with efforts
to extend the code and programme of one functional system at the expense of
others, none of which could be regarded as the most important.
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(2) If it refers to the organization of different functional systems in world society
rather than world society as a whole, then each functional system has its own codes
and programmes. If competition is the dominant principle of organization within each
system, then it will have a different logic in each (e.g., for profit, for scientific
reputation, educational certification, for artistic acclaim, for government office or
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favourable policies, or for positive legal judgements). Whether some common
competitive principles or subjective orientation unifies these logics is questionable. At
most, competition and competitiveness would become a trope or one among several
competing self-descriptions of contemporary society. If competition were to be the
dominant principle of the capitalist world, it would occur through the contingent
subordination, colonization, or penetration of the logic of economic competition into
other spheres (see below for further discussion).

(3) If capitalist world is restricted to the organization of the economy, then, following
Weber, there are several modes of orientation to profit, not all of which rest on profit-
oriented, market-mediated competition that might (conceivably) ensure the efficient
allocation of resources to competing ends. Weber identified three kinds of political
capitalism as well as traditional commercial capitalism in addition to the rational
organization of capitalist production and financial speculation. In these terms, it is by
no means obvious that competition depends on rationally organized, profit-oriented,
market-mediated accumulation. Even within the economy, there are other modes of
competing for gain (Erwerb), including force and domination, financing of political
enterprises, and unusual deals with political authority. Interestingly, these are also
part of the wider neo-liberal project, based in part on accumulation through
dispossession (e.g., privatization) as well as lobbying to promote rent-seeking via
deregulated, desupervised, and decriminalized financialization (cf. Black 2014).

(4) If capitalist world refers only to the rational, capitalist organization of production
and the law of value, then the nature of the capital-wage relation is prior to
competition. As Marx noted, competition is the external expression of the internal
drive of capital as capital to expand, to produce surplus value, and realize it in the
form of profit (1973b: 414). As such, it is not the primary organizing principle of the
capitalist world but one of its crucial mediations. Thus, whereas classical political
economy focused, and neo-classical economics still focuses, on competition in the
sphere of exchange, the historically specific nature of capitalist production based on
wage-labour provides the starting point for the Marxist analysis of competition. It
therefore considers capitalist competition to reduce costs of production and boost
return on capital invested before it considers market price competition and
exchange. In this context, bases of competition could include competitive reduction
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in socially necessary labour time, socially necessary turnover time, and naturally
necessary reproduction time (see below). These can vary in importance in different
stages of capitalist development as well as among so-called varieties of capitalism.

Following these preliminary remarks, my contribution will proceed in six steps.
Section two considers how competition (exchange) might become privileged as a
principle of organization; section three demonstrates some of the complexities of
competition in the actually existing capitalist world; section four considers the more
idealized versions of competition represented in liberalism and neoliberalism
regarded as economic, political and ideological imaginaries; section five considers
the governance of competition in the light of the competition state and competition
law (as two among several ways to steer competition); section six puts
exchange/competition in their place alongside other modes of governance and
identifies limits to exchange as a mode of governance; section seven introduces the
idea of metagovernance as a response to the limits of competition as a mode of
governance/societalization; and, finally, section eight comments on the fetish of
competition as a means of subsuming society under the logic of profit-oriented,
market-mediated accumulation as the dominant principle of societalization [not all
steps are realized in the first written draft, I hope to present them in my PowerPoint].

2. Economization and Competition

To establish competition as a principle of societal organization presupposes a field of
social relations that is not yet (or is no longer) oriented to economic activities and/or
is not yet organized along market (or quasi-market) principles of one kind or another.
Such a field could exist because the (market) economy is not yet disembedded from
the wider ensemble of social relations and therefore organized according to non-
market principles and/or because there are sets of social relations that are organized
according to the codes/programmes of other functional systems. An additional issue,
to be explored below, is the extent to which civil society can be colonized by system
logic(s) and/or subsumed within one or another functional system. The notion of
societalization (Vergesellschaftung) is useful here. Luhmann distinguishes three
successive modes of organizing social formations (or producing society effects):
segmentation, centre-periphery relations (linked to stratification), and functional
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differentiation. I suggest that these three principles are not mutually exclusive and
that each can have its own role in organizing world society and, in addition, that the
codes and programmes associated with particular functionally differentiated systems
can be more or less (ecologically) dominant in world society. This can help to frame
an analysis of the development of economic exchange as a principle of societal
organization and the forms that competition might take as this development unfolds.

Possible steps towards market completion (and, on this basis, the generalization of
competition as a principle of economic organization) in the capitalist world can be
identified and each is associated with different modes of competition, if any:

(1) The development of an exchange economy in which want-satisfying material
means are distributed, reallocated, or circulated through exchange, whether
through barter, a separate medium of exchange, or debt relations. Exchange
replaces other principles of economic organization: householding, reciprocity
among similarly organized economic units, and redistribution through an
allocative centre linked to a political regime, and so on (Polanyi 1982). This step
does not require that exchange becomes central to social organization; indeed,
historically, markets existed on the borders of households, redistributive
communities, reciprocity-based networks, and so on (cf. Marx, Weber, Polanyi).

(2) The development of commodification and monetization such that, to a greater or
lesser extent, material provisioning acquires the form of commodity production
and/or some economic agents seek to derive monetary revenues from material
provisioning or immaterial activities that were not previously subject to monetary
exchange. Where this becomes a general feature of economic organization, we
can talk of the rise of a commercial economy. This is not necessarily a
competitive society, however; monopolies, limits on competition, principles of fair
exchange, just price, etc. could constrain the degree and forms of competition.

(3) The development of the market economy as the site of free trade in commodities,
the rational organization of production, and trade in money and credit
instruments (Webers two main forms of rational capitalism, with the rationality of
production defined in terms of its organization according to book-keeping
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principles). Weber (1968, 2003) distinguishes this form of economic organization
from three internally heterogeneous forms of political capitalism in which profits
are sought in ways that contradiction the principles of free trade and rational
accounting (e.g., through force and domination, unusual deals with political
authority, or the financing of political adventures and enterprises). The rational
organization of commodity production and exchange may introduce competition
but also be subordinate to non-competitive principles (e.g., monastic production).

(4) The development of a capitalist economy based on the extension of the
commodity form to the fictitious commodities: land, labour-power, money, and
knowledge (cf. Marx 1963a; Polanyi 1944; see also appendix 1). This could
result from a quantity-quality shift in which the continuing extension and
consolidation of the three preceding changes interact to produce a distinctive
mode of production. This development affects many areas of social life. The
resulting extension of property rights, contracts, and markets to include labour-
power leads to distinct tendential laws (in the descriptive-sociological sense
rather than normative-legal sense) of competition that distinguish capitalism from
other modes of production. It is in this context that competition becomes the
external expression of the immanent nature of the self-valorization and expanded
reproduction of the capital relation.

(5) The organization and dynamic of the capitalist economy is subordinated to the
circuits of capitalist credit-money and the circulation of capital as property rather
than functioning capital. The development of a competitive financialized economy
intensifies competition by enhancing the equalization of profit rates and the
equalization of interest rates. This occurs, respectively, as finance capital qua
functioning capital is reallocated among competing profit-generating investments
and as finance capital qua property (fictitious capital) is re-allocated to alternative
asset classes (e.g., government bonds, derivatives, gold, or fine art). This
involves a qualitative transformation in the form and functions of money and
credit relations such that other economic activities are subordinated to the
perceived need to maintain liquidity. This leads to a permanent tension between
maintaining the liquidity of economic agents and the economic system as a
whole (cf. Amato and Fantacci 2011).
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(6) The development of a full-fledged finance-dominated capitalist economy based
on a strategy of ever-increasing market completion facilitated by ever more
rarefied forms of fictitious capital (notably derivatives) and associated forms of
leverage oriented to a search for super-profits. This involves the growing
dominance of finance capital qua property over functioning capital and is the
most extreme form of marketization, promoted in the name of market completion,
and, in consequence, universalizing and intensifying the competition for gain.

There is nothing automatic in movement across these forms of economization and
much effort is required on the part of different social forces to extend market
principles along capitalist lines and to compensate for the contradictions, crisis-
tendencies, and market failures entailed in this movement. It is worth noting here that
competition has several effects with the development of capitalism as a mode of
production: in addition to its role in the equalization of profit rates and interest rates,
it also facilitates the concentration and centralization of capital (in competition, one
capital kills many), promotes the treadmill of competition through the generalization
of best practice, reinforces the logic of differential accumulation based on a political
economy of time realized in space, and thereby contributes to the completion of the
world market. The three forms of marketization, capitalization, and financialization
respectively are strongly associated with liberalism and, especially, neo-liberalism
and the fetishization of competition as a principle of social organization.

3. The Complexities of Competition

The laws of supply and demand and their mediation through market competition are
foundational to classical political economy (Smith 1776). As John Stuart Mill noted:

Only through the principle of competition has political economy any
pretension to the character of a science. So far as rents, profits, wages,
prices, are determined by competition, [sociological] laws may be assigned
for them. Assume competition to be their exclusive regulator, and principles
of broad generality and scientific precision may be laid down, according to
which they will be regulated (Mill 1848: Book II: chapter IV, section 1).

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Classical political economists initially examined how market exchange was
organized and regulated through competition. But they neglected the role that
changes in the labour process and/or the organization of production played as bases
of competition. In this way, they reflected the mercantile capitalists concern with
price formation as the basis for profit and loss and regarded competitive in price
formation as the key to efficient markets. Following the introduction of the idea of
perfect competition by Nassau W. Senior (1836), classical political economists also
explored the role of competition in allocating capital among alternative investments
and thereby helping to form the general rate of profit. On this basis they criticized
firms that took action, alone or in collusion, to hinder this crucial role of competition.
Such actions indicated a tension between the interests of particular capitals to
secure above average rates of profit at the expense of other capitals through what
we might call anti-competitive forms of competition, such as the formation of cartels
or monopolies, and those of capital in general in securing the free play of market
forces on a level playing field so that no particular capitals are disadvantaged. This
prompted many studies of different forms of competition, whether pro- or anti-
competitive.

In contrast, neo-classical economics began to treat perfect competition as an
abstract, idealized benchmark to define and defend the allocative efficiency of
markets and argued, on this basis, that, insofar as it existed, perfect competition
ensured that no firm could secure a long-term competitive advantage (Horverak
1988). It has been on this basis that neoclassical economists have tended to dismiss
interest in promoting competitiveness and/or securing long-term competitive
advantages as another form of nonsense on stilts (for a critical discussion of this
dismissal, see Reinert 1994). Consequently, as Hayek put it, if the state of affairs
assumed by the [neo-classical] theory of perfect competition ever existed, it would
not only deprive of their scope all the activities which the verb to compete describes
but would make them virtually impossible (Hayek 1948: 96).

In addressing the complexities of actually existing competition in the capitalist world,
I draw on classical political economy, the critique of classical (and vulgar) political
economy developed by Marx, and the historical analyses of Polanyi on the limits to
fictitious commodification in the dynamic of profit-oriented, market-mediated
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accumulation. I will return to neo-classical (or theo-classical) economics, with its
fetishistic worship and one-sided treatment of the market in subsequent sections.

It is through competition that the contingent necessities of the differential
accumulation of particular enterprises, clusters, or sectors and the differential growth
of particular economic spaces are realized. Competition takes many forms and plays
out in many ways. It is not confined to any particular type of economic activities
although, in todays world, financial innovation and competition are especially
significant. The ultimate horizon of competition is the world market but the world
market is not a constant. It changes not only through the anarchic effects of market-
mediated competition (and the crises that this periodically produces) but also through
competing hierarchical or heterarchic efforts to redesign its rules and institutional
architecture, and to govern the conduct of the economic (and extra-economic) forces
with stakes in the competitive game. Taking account of the metamorphosis of capital
as it travels through the circuit of production, distribution, and exchange, Marx
showed that capitalist competition is not simply for market share or for sales but for
profit earned on investment. Thus the capitalists key strategic decision is where to
invest and the defining feature of competition thus lies in the mobility of investment,
both among different commercial/financial/industrial activities and across space-time.

Profit-oriented, market-mediated competition occurs in two main ways. Merchant
capital continually compares purchase and sale prices for its merchandise because
mercantile profit is based on the principle of buying cheap and selling dear. This
principle also shapes more refined forms of arbitrage (including the activities of
interest-bearing capital) and can be generalized to regulatory and other kinds of
institutional arbitrage too. In contrast, '[t]he industrial capitalist always has the world-
market before him, compares, and must constantly compare, his own cost-prices
with the market prices at home, and throughout the world (Marx 1963b: 336). This
puts the organization of production at the heart of competition for profit-producing
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fractions of capital and this competition becomes the more intense, the more
integrated is the world market. In a consolidated capitalist economy, however, we
should also note the vital role of the credit system and interest-bearing capital in
promoting competition on the world market (Marx 1967c: Part V) and, on this basis,
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reinforcing the treadmill of competition, the concentration and centralization of
capital, and the equalization of profit and interest rates.

Related to the distinction between competition in market exchange and competition
in the organization of production is that between competition in the routine activities
of firms in a stable competitive market oriented to price competition and competition
in the disruptive, creatively destructive, effects of entrepreneurship in dynamic
markets. This distinction is conventionally associated with Joseph Schumpeter
(1934, 1943) but was anticipated in Marxs critique of political economy. Schumpeter
rejected the notion of perfect competition both in reality and as an abstract reference
point for analysing imperfect competition. He also disputed the idea that markets
tended towards equilibrium. He argued that entrepreneurship disrupts equilibrium
through the creative destruction of innovation, and that that is constantly altering the
pace and direction of economic growth.

Schumpeter identified five areas of innovation. These are: (1) the introduction of a
new good or a new quality of a good; (2) the introduction of a new method of
production or a new way of commercially handling a commodity; (3) the opening of
new markets for ones own products; (4) securing a new source of supply of raw
materials or half-finished goods; and (5) the reorganization of an industry, e.g., the
creation of a new cartel or monopoly position, or the breaking up of existing cartels
or monopolies (Schumpeter 1934: 129-35). Successful competition in these areas
allows, in the short-term, monopoly profits. But in a well-functioning market, these
higher profit-levels will eventually be competed away as other firms adopt these
innovations or seek to counter them with their own innovations (whether competitive
or anti-competitive). Without directly following Schumpeters arguments, the Austrian
School of Economics, which also rejects the ideal of a perfect competition (see
Hayek above), is another theoretical paradigm that emphasizes the importance of
dynamic competition as opposed to static, price and production cost competition.

These considerations become all the more significant the more integrated the world
market becomes in real time. For this integration tends to universalize competition
to rebase the modalities of competition and reinforce its treadmill effects for all forms
of competition, and to intensify the contradictions of capital accumulation that exist
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on a world scale. Indeed, the recent ascendency of financialization over
industrialization, together with the enormous expansion of liquidity associated with
derivatives and securitization, has enhanced the primacy of financial capital over
productive capital. This pressures other capitals to achieve rates of return obtained
by financial capital (or expected by financial capital on the basis of maximizing
shareholder value), and establishes a new form of commensuration that allows for
the further universalization and standardization of competition (cf. Bryan and Rafferty
2006).

4. Competition, Liberalism, and Neoliberalism

An idealized account of competition became a key element in the promotion of
liberalism and has become even more important in the ideological justification of
neoliberalism. But competition is only one of several organizing principles in
liberalism and neoliberalism and its importance for both varies across different
spheres of societal organization. I show this first for liberalism, then neoliberalism.

Economically, liberalism endorses the expansion of the market economy that is,
spreading the commodity form to all factors of production (including labour power)
and formally free, monetized exchange to as many social practices as possible.
Politically, it holds that collective decision-making should involve a constitutional
state with limited substantive powers of economic and social intervention, and a
commitment to maximizing the formal freedom of actors in the economy and the
substantive freedom of legally recognized subjects in the public sphere. Competition
for votes should be confined within the limits of a state based on the rule of law to
prevent the tyranny of the majority at the expense of minorities. The latter is based in
turn on spontaneous freedom of association of individuals to pursue any social
activities that are not forbidden by constitutionally valid laws. Ideologically, it claims
that economic, political, and social relations are best organized through formally
free
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choices of formally free and rational actors who seek to advance their own
material or ideal interests in an institutional framework that, by accident or design,
maximizes the scope for formally free choice. These three principles may conflict
regarding the scope of anarchic market relations based on (perfect) competition,
collective decision-making, and spontaneous self-organization as well as the formal
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and substantive freedoms available to economic, legal, and civil subjects. And, as
Marx (1996: 243) noted, Where equal rights exist, force decides. In other words,
within the matrix of liberal principles, the relative balance of economic, political, and
civic liberalism depends on the changing balance of forces within an institutionalized
(but changeable) compromise. A fortiori, this means that the role of competition also
changes its meaning across these fields, and, if it is the most important principle of
organization of a liberal capitalist world, it is one that is internally heterogeneous and
even incoherent.

Neoliberalism is a more complicated phenomenon and has taken many forms. The
core set of neoliberal economic policies can be summarized as: liberalization
(making markets more competitive), deregulation (reducing state intervention in the
operation of the market), privatization (bringing state-owned or state-funded activities
into the private profit-oriented, market-mediated sector), the use of market proxies in
the residual public sector, internationalization (to promote competition and the
spread of best practice), and reductions in direct taxes (to enable consumers greater
freedom to spend their money and thereby enhance consumer sovereignty in a
global market economy). The initial starting point for pursuing these policies, their
sequencing, the manner in which they are implemented, and the political and social
contexts in which they are implemented are quite varied and this explains the
different forms of neoliberalism and the variegated nature of neoliberalization seen
as a process rather than a one-off accomplishment (on this see, for example, Jessop
2002; Peck 2010). The political and ideological aspects of neoliberalism also vary.

The resurgence of liberalism in the form of neoliberalism is often attributed to a
successful hegemonic project that articulated the interests of financial and/or
transnational capital and that resonated with social forces discontented with Atlantic
Fordism and/or disoriented by its crisis and seeking an alternative, post-Fordist
future (possibly involving a return to a liberal golden age). The appeal of neoliberal
regimes in the 1980s and 1990s undoubtedly depended on the successful exercise
of political, intellectual, and moral leadership in response to the crisis of Atlantic
Fordism -- a crisis that the rise of neoliberalism and neoliberal policies had helped to
exacerbate. More interesting is the question of the survival power of neoliberalism in
the aftermath of the North Atlantic Financial Crisis. Among other explanations, I
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suggest that this can be explained in part in terms of inherent features of the
capitalist world. Liberalism can be seen as a more or less spontaneous philosophy
within capitalist societies -- that is, as a seemingly natural, almost self-evident
economic, political, and social imaginary that corresponds to specific features of
bourgeois society. In particular, it is consistent with four such features.

The first of these is the institution of private property -- that is, the juridical fiction of
private ownership and control of the factors of production. This encourages
individual property owners and those who dispose over fictitious commodities such
as labour-power and natural resources to see themselves as entitled to use or
alienate their property as they think fit, without due regard to the substantive
interdependence of activities in a market economy and market society. In this realm
rule Freedom, Equality, Property and Bentham, because both buyer and seller of a
commodity, say of labour-power, are constrained only by their own free will (Marx
1996:186). Second, and relatedly, there is the appearance of free choice in
consumption, where those with sufficient money choose what to buy and how to
dispose over it. Third, the institutional separation and operational autonomies of the
economy and state make the latters interventions appear as external intrusions into
the activities of otherwise free economic agents. This may initially be an unwelcome
but necessary extra-economic condition for orderly free markets, but if pushed
beyond this minimum night-watchman role it appears as an obstacle to free markets
and/or as direct political oppression. Fourth, there is the closely related institutional
separation of civil society and the state. This encourages the belief that state
intervention is an intrusion into the formally free choices of particular members of
civil society once the conditions for social order have been established.

Opposition to liberalism may also emerge spontaneously on the basis of four other
features of capitalist social relations that are closely related to the former set. First,
growing socialization of the forces of production despite continued private ownership
of the means of production suggests the need for ex ante collaboration among
producer groups to limit market anarchy, through top-down planning and/or various
forms of self-organization. Second, there are the strategic dilemmas posed by the
shared interests of producers (including wage-earners) in maximizing total revenues
through cooperation and their divided and potentially conflictual interests over how
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these revenues are distributed. Various non-market governance mechanisms may
help to balance cooperation and conflict in this regard. Third, contradictions and
conflicts are posed by the coexistence of the institutional separation and mutual
dependence of the economic and state systems. This leads to different logics of
economic and political action, at the same time as it generates a need to consult on
the economic impact of state policies and/or on the political repercussions of private
economic decision-making. Fourth, there are problems generated by the nature of
civil society as a sphere of particular interests opposed to the states supposed
embodiment of universal interests. This indicates the need for some institutional
means of mediating the particular and universal and, since this is impossible in the
abstract, for some hegemonic definition of the general interest (on the always
imperfect, strategically selective nature of such reconciliations, see Jessop 1990).

This suggests that, if liberalism can be interpreted as a more or less spontaneous
philosophy rooted in capitalist social relations, one should also recognize that it is
prone to spontaneous combustion due to tensions inherent in these same relations.
This has clear implications for the limits of freedom and competition as bases of
economic, political, and social organization. Polanyi emphasized this in his critique of
nineteenth-century liberalism. He argued that, in response to crisis-tendencies in
laissez-faire capitalism, many social forces struggled to re-embed and reregulate the
market. The eventual compromise solution was a market economy embedded in and
sustained by a market society (Polanyi 1944). This result broke down in the 1920s
and 1930s, however, leading to a range of reactions, including the New Deal,
fascism, and state socialism. The limits to marketization without a market economy
are also seen in neoliberalism. Thus, after the efforts of roll-back neoliberalism to
liberate a neoliberal market economy by disembedding market forces from various
corporatist and statist impediments, attempts were made to secure its medium-term
viability by embedding it in a neoliberal market society. This involved third way
measures to flank, support, and sustain the continued dominance of the neoliberal
project but, as the neoliberal regimes came to be associated with finance-dominated
accumulation, these also broke down, precipitating financial crises.

This line of argument should not be restricted to liberalism and neoliberalism. Other
modes of governance in capitalist social formations are also contradictory and
17

tension-ridden. Indeed, there are strange complementarities here. On the one hand,
liberalism tends to regenerate itself spontaneously on the basis of key features of
capitalist societies; regeneration also meets obstacles from some of its other key
features. On the other hand, while the latter features provide the basis for the
resurgence of other discourses, strategies, and organizational paradigms, such as
corporatism or statism, their realization tends to be fettered in turn by those features
that generate liberalism. Overall, these mutually related tendencies and
countertendencies produce oscillations in the relative weight of different kinds of co-
ordination and modes of policymaking. I explore the implications of this unstable
configuration for competition as a mode of regulation and/or governance below.

5. Governance of Competition

So far, I have examined competition from two perspectives: (1) the complexities of
actually existing competition and their role in differential accumulation; and (2) its
representation in the doxa of liberalism and neo-liberalism considered in terms of a
rough threefold distinction among economic, political, and ideological imaginaries.
This section considers competition from two further perspectives: (3) how to regulate
or govern competition from the viewpoint of its purported role as a public good; and
(4) the role of competition as a direct principle of governance. Ad (3), while there is a
rational kernel to the perspective of competition itself as a public good (namely, in
the contradictions between particular capitals and the interests of capital in general),
it is typically interpreted in ways that merit at least a sceptical interrogation, if not a
more radical ideological critique. Ad (4), as the preceding discussion suggests,
actually existing competition is so heterogeneous and complex a process that efforts
to promote it as a principle of governance must involve serious cognitive and
normative simplification, if not fetishism and ideological mystification.

Two among many useful entry points into the governance of competition are the
competition state and the competition law. Although competition figures in both
terms, it has different connotations that reveal, yet again, the complexities of this
phenomenon. Whereas the competition state attempts to promote competitiveness,
competition (or anti-trust) law attempts to regulate competition. These efforts at
governing also tend to rest on different understandings of competition and
18

competitiveness. Thus the competition state draws on the other canon, i.e.,
heterodox analyses of competition that justify strategies and policies to promote
competitiveness at various scales from micro- through meso- and macro- to meta-
competitiveness). The definition of competitiveness, the target variables, and the
strategies adopted are all discursively constituted and will vary from case to case.
The rationale for promoting competitiveness can also vary (including, for example,
perceived military threats from rivals or enemies as well economic challenges).
5
In
contrast, competition law draws mainly on orthodox analyses of (perfect) competition
and/or on institutional analyses of contestable markets (e.g., in the law and
economics movement). It is also concerned largely with micro-economic competition
and may be supplemented by efforts to remove or control tariff- and non-tariff
barriers to trade (extending into questions of new constitutionalism, and so on). One
consequence of this is that the policies pursued by competition states (e.g., in the
field of industrial policy) may well be ruled illegal under competition law.

The competition state

Once competitiveness is accepted as a real phenomenon that varies at different
scales of economic (and extra-economic) organization and affects capacities to
compete in a world market characterized by a stratified terrain of competition,
uneven development, centre-periphery relations, and so on, then it can become the
target of strategies and policies to enhance, neutralize, or undermine competitive
capacities. As the forms of competition and the sources of competitiveness change
(partly in response to changing forms of regulation and the opportunities for
regulatory arbitrage), we also observe changes in the modes of governance and
regulation, whether through legal or extra-legal means.

Definitions and discourses of competition and competitiveness date back centuries
and are linked to different economic imaginaries at different times and in different
contexts. Thus mercantilist notions from the 17th century tied to state policies to
control trade and increase financial reserves can be contrasted with 1890s
imperialism oriented to state enclosure of territory for military-political as well as geo-
economic goals. Following the transition from classical imperialism to a more liberal
post-war order (in the shadow of US hegemony), competition focused more on
19

domestic growth and multinational foreign investment, leading to conflicts between
techno-nationalism and techno-globalism (Ostry and Nelson 1995; Ruggie 1982).
Further, with the rise of the current neo-liberal transnational financial order and the
theoretical and policy interest in the globalizing knowledge-based economy,
competition has refocused on innovation (including in finance and securitization) and
how best to link extra-economic factors to the 'demands' of economic competition.

In short, since at least the fifteenth century, there has been a succession of state
strategies to promote catch-up competitiveness on the part of laggard economies
that have been resisted by other states that seek to maintain their advantages by
promoting free trade (cf. Reinert seriatim).although the notions of developmental
and/or competition state are new and competitiveness is also a new concept, there
have been significant historical analogues that have guided state policy in the
capitalist world for almost 600 years.

In general, the competition state is one that aims to secure economic growth within
its borders and/or to secure competitive advantages for capitals based in its borders,
even where they operate abroad, by promoting the economic and extra-economic
conditions that are currently deemed vital for success in economic competition with
economic actors and spaces located in other states. As such the competition state
prioritizes the pursuit of strategies intended to create, restructure, or reinforce as
far as it is economically and politically feasible to do so the competitive advantages
of its territory, population, built environment, social institutions, and economic agents.
The same idea is sometimes expressed in the notion of entrepreneurial state. The
same tendency is equally evident in the leading Western economies in terms of the
organization of regional and global outsourcing, regional and global commodity
chains, and in the organization of global finance. Paradoxically, offshore, more
peripheral national economies can themselves be an element in this struggle for
competition, insofar as they can be sponsored (or tolerated) by the competition state
in order to secure competitive advantages for domestic or international capitals
based in their own territories (such as via transnational supply chains) (Palan 1998;
Hudson 2000). Just as there are different forms of competition, so too are there
different forms of competition state (among types distinguished are neo-liberal,
dirigiste, and social democratic competition states: see Cerny 1997; Jessop 2002).
20


Although developmental and competition states have been analysed primarily at the
national level, this is not justified by the historical record. Catch-up competitiveness
has been pursued at different scales from the city through regions and provinces to
national states and international or supranational blocs (imperial blocs, the capitalist
and communist camps, the European Union, etc.). It has also targeted actors,
factors, and mechanisms that promote competitiveness that operate below the
national scale, across borders, or beyond the direct reach of national institutions. In
addition, and self-evident nowadays, many leading firms and banks are transnational
in their manifestation, with complex internal divisions of labour and with complex
forms of embedding into global production chains and financial flows that may
nonetheless be regarded as important for national or bloc competitiveness,
especially where these firms and banks have significant bases within a national state
(contrasting examples are the USA and the European Union).

Understandings of competition and competitiveness are discursively shaped by
specific frames, categories, strategies original, mimetic, or imposed that simplify
what would otherwise be too complex to observe, calculate, manage, regulate, or
otherwise govern. Different framings of competition and competitiveness involve
different forms of action with uneven impact on positioning of firms, sectors, regions,
nations, and continents, as well as on the balance of economic and political forces in
and beyond the state system itself.

Unsurprisingly, then, a wide range of factors has been identified in different
economic imaginaries, theoretical and policy paradigms and at different times as
relevant to competitiveness. Definitions and discourses of competitiveness are prone
to change: mercantilist notions from the 17th century can be contrasted with 1890s
imperialism or recent worries about structural competitiveness vis--vis emerging
market economies. In the 1980s, for example, the OECD listed the following factors
that affected macro-economic competitiveness: the size of domestic markets, the
structure of domestic production, relationships between different sectors and
industries ... the distribution and market power of supplier firms ... the characteristics
and size distribution of buyers, and the efficiency of non-market relations between
firms and production units. It might further depend on no exaggerated conflict in the
21

field of income distribution, price stability, flexibility, and the adaptability of all
participants in the market ... a balanced economic structure based on small,
medium-sized, and big companies ... the acceptance of new technology, favourable
scientific and technological infrastructure and realistic requirements for risk
containment and environmental protection. (OECD 1986: 91-2; cf. Messner and
Meyer-Stammer 1993; Pedersen 2010; Campbell and Pedersen, seriatim; see also
Figure 1).


Figure 1. Systemic Competitiveness and the Competition State

Competition in modern capitalist economies is said to depend increasingly on extra-
economic factors, and this is leading tendentially to the subordination of the whole
social formation to the imperatives of accumulation and competition. This occurs
because of the growing importance that is attached to structural or systemic
competitiveness and to cultivating the knowledge-base as a critical source of
dynamic competitive advantage. It extends economic competition to a virtual
competition between entire social worlds, as mediated through the audit of the world
22

market, and it increases pressures to valorize a wide range of previously social and
extra-economic institutions and relations. Among many examples, consider the
importance that that social capital, social trust, collective learning, institutional
thickness, untraded interdependencies, local amenities, and even culture are
now said to play in global competitiveness. Likewise, discourses and strategies of
structural or systemic competitiveness now emphasize not only firm-level and
sectoral-level factors, but also the role of an extended range of the social and extra-
economic institutional contexts and socio-cultural conditions in which economic
actors also compete. They are linked to the rapid expansion of (competing!)
benchmarking exercises and services concerned to construct league tables and offer
recommendations on how to enhance such competitiveness. This is reinforced by
the growing importance attached to the knowledge-base in post-Fordism and thus to
knowledge production and transfer in the wider society. This has also been extended
to encouragement of financial innovation (and tacit acceptance of financial
criminnovation) as means of competitive advantages sometimes linked to a
regulatory race to the bottom (which London has won vis--vis New York).

Although the competition state's strategies may target specific places, spaces, and
scales and even directed against particular competitors it is always mediated through
the operation of the world market as a whole especially as efforts are made to
widen and deepen the latter through strategies of neoliberal globalization. This also
extends the importance of the three main forms of capitalist competition: reducing
socially necessary labour time, reducing socially necessary turnover time, and
reducing naturally necessary reproduction time. This also interacts with competition
around extra-economic factors bearing on competitiveness and profitability (such as
tax competition, regulatory arbitrage, capacities to exploit offshoring, and so on). [It
may also be relevant to include other forms of competition, e.g., through force and
domination, unusual deals with political authority, lobbying for favourable, anti-
competitive legislation, deregulation, de-supervision, and de-criminalization.]

Competition law

This subsection examines competition law from three aspects. The first is in terms of
the complexities of its object, rather than in terms of its mechanisms, its institutional
23

architecture, its advocates, facilitators, coordinators, targets, and agents. Without
attending to these complexities, there is a tendency to blame regulatory failure on
the design of competition law rather than on the inherent ungovernability of its object.
This obviously poses interesting questions for competition law. Should it be oriented
to governing competitive behaviour in dynamic markets, or to achieving the
conditions for perfect competition? And how has the balance between these goals
changed as competition and anti-trust law have been modified over the years? A
second interesting aspect of competition law is its place as one among several
means in which economic and political forces seek to design social modes of
regulation to promote the differential accumulation of some capitals at the expense
of others. And a third aspect is the problems of governing competition and at the
same time boosting competitiveness in a world market that is becoming more
integrated.

Traditionally, competition law seeks to regulate micro-economic competitiveness,
i.e., competition in the structure and behaviour of firms. This is often measured
through market share, profits, and growth rates. There is an extensive body of
managerial and industrial economics literature that argues that firm-specific
advantages i.e., factors that unavailable in the short-term to competing firms are
the key basis for this kind of competitiveness. Such advantages are the basis of
monopolistic competition. They might originate in factors of production (patent rights,
know-how, research and development capacity) or in marketing capacity (design,
image, knowledge of likely demand, sales networks). But they can also derive from
extra-legal or illegal activities (e.g., predatory pricing, political deals, mafia-like
conduct). This is the level of competitiveness in which the paradox discussed in
section 4 between the interests of particular capitals in securing above average profit
rates (facilitating their differential accumulation at the expense of less profitable
firms) and the interest of capital in general in the formation of an average rate of
profit, an average rate of interest, and so on, is located.

The relative importance of static competition focusing on the formation of market
prices on the one hand and dynamic competition focusing on innovation on the other
varies significantly. Competition, as an actual rather than idealized process, is
inherently disequilibrating and, when it takes a Schumpeterian form, is creatively
24

destructive. The latter is especially important during those punctuated evolutionary
periods in which a previously dominant form of productive technology and/or
associated forms of firm organization and finance is overtaken by some other. Such
transitions tend to disrupt competition law, which lags behind changes in products,
processes, marketing, sourcing, and corporate organization. A particular system of
competition law can weather the relatively minor disruptions and crises associated
with contiguous day-to-day developments, the more serious crises that accompany
the punctuated transitions from one technological epoch to another will sooner or
later trigger a corresponding search for new regulatory system.

Efforts to regulate competition are further complicated by the fact that
competitiveness has many bases, many of which (notably extra-economic ones) are
unsuited to competition law. The expanding world market and the plurality of states
create further regulatory problems, regarding, for example, the role of international
private law, how to handle conflicts of laws, and the reach of extraterritoriality.
Competition occurs not only between economic actors (for example, firms, strategic
alliances, networks) but also between political entities representing specific spaces
and places (for example, cities, regions, nations, triads). Likewise, competition and
competitiveness depend on extra-economic as well as economic conditions,
capacities, and competencies. It follows that, if competition is hard to regulate
through law, it is impossible to govern the factors making for the competitiveness as
a set of real capacities/powers that affect the ability of agents to engage in
competition and prevail in struggle over differential accumulation.

[Two points to be integrated:

1. Competition law cannot fully eliminate anti-competitive behaviour. For example,
it cannot address problems with competition as it operates within corporations:
in the allocation of capital to different activities within the corporation in the
expectation that this will increase profits of enterprise. This is an example of
what is sometimes termed dynamic allocative efficiency, a form of competition
that is often thought to be difficult to regulate through the lever of competition
law (cf. Graham and Smith 2004) (although the principles of shareholder value
make a valiant effort to substitute for it).
25


2. The growing transnationalization of competition law (Gerber 2010) and the
emergence of new, state-centred structures of global competition law (Dowdle
2013). These include transnational networks that link together national
competition agencies; treaty arrangements affecting state-level responsibilities
for implementing competition policy; and inter-state arrangements for the
transnational enforcement of national competition law regimes.]

6. Competition as Governance

According to Polanyi, the economistic fallacy assimilates the properties and
dynamics of non-capitalist economies to those of market economies and employs
categories specific to the latter to (mis)describe the former and seek to explain their
operation in terms of maximizing behaviour. It also mistakes the useful fiction that
land, labour, money, knowledge are commodities for reality and then fetishizes and
generalizes market principles to society as a whole. This is one more example of the
tendency in the competitive paradigm of neoclassical economics to strip
commodities (and fictitious commodities) of their specific properties and to assume
that they can all be organized in the same way to produce efficient market outcomes.
(cf. Alam 2014). This tends to produce such powerful contradictions and crisis-
tendencies in market economies that society eventually fights back against their
environmentally and socially destructive effects. Neglecting this set of problems is
the basis for extending market principles and competition in particular beyond the
formal market economy organized in the shadow of profit-oriented, market-mediated
principles to the operations of the state and civil society. This is the ambition of neo-
liberal economic policy to the extent that the public sphere cannot be privatized.

Different principles of governance seem more or less well-suited to different stages
of capitalism and/or its contemporary variants. Thus, liberalism was probably more
suited to the pioneering forms of competitive capitalism than to later forms -- though
Polanyi and others note that it has clear limitations even for competitive capitalism;
and students of varieties of capitalism suggest that it characterizes uncoordinated
rather than coordinated market economies, for which statism and corporatism may
be better (Coates 2000; Hall and Soskice 2001; Huber and Stephens 2001; Schmidt
26

2002). Thus, different stages and forms of capitalism may have distinctive
institutional attractors (or centres of gravity) around which the oscillation of regulatory
or governance principles occurs. Neo-liberalism, more than liberalism, privileges the
market and, in this context, market forces and competition, as an organizational
principle. Indeed, neo-liberalism idealizes the market mechanism and this leads to
neoliberal attempts to extend it as far as possible. This was evident in the efforts of
the Thatcher and Reagan regimes to maximize the scope for the operation of market
forces in economic systems, to promote popular capitalism, to develop an enterprise
culture, and to make civil society more market-friendly. Such projects also operate
on supra-national scales, such as the Single European Market, or even globally, as
with the World Trade Organisation, the proposals for a Trans-Pacific Partnership
(TPP) and a Transatlantic Trade and Investment Partnership (TTIP).

Neo-classical economists and (neo-)liberals tend to assume that the 'procedural
rationality' of perfect markets guarantees efficient allocation of scarce resources to
competing ends to produce a Pareto- optimal outcome. Market competition is an
essentially 'trial-and-error' discovery mechanism steered through the profit-and-loss
accounts of economic actors so that agents learn and innovate. It provides the most
flexible and least disastrous coordinating and adaptive mechanism for economic
activity and it operates best when it is least regulated by government or other extra-
economic forces. The market knows best and government cannot know the market.
Thus, for many advocates of the market, the initial response to market failure is
'more market, not less'. They see market forces as a self-correcting learning
mechanism. In contrast, the state is deemed inherently incorrigible and ineducable.
Needless to say, this is a specious account of markets and the state alike and is
contradicted even by neo-classical work on many kinds of market failure, let alone by
the historical record.

Exchange based on the anarchy of the market or quasi-market arrangements is one
of the four principal modes of governance of complex reciprocal interdependence.
The other three modes are command based on hierarchy; networks and partnerships
based on heterarchy; and solidarity based on unconditional commitments. There are
also hybrid forms. Historically all four principles have co-existed albeit with different
weights across different social fields and in different time-space envelopes. As noted
27

above, neoliberalism favours the market as a principle of governance even more
than liberalism. Thus it supports the extension of the market based on liberalization,
deregulation, and privatization and the introduction of market proxies in those social
areas, in the state or public sphere and in civil society, where the formally rational
procedures of profit-oriented, market-mediated do not exist and/or are deemed
inappropriate. These procedures presuppose the centrality of the commodity form,
price form, and money form and, to the extent that these do not exist, then
competition depends on functional equivalents to these social forms.

Market failure is usually seen as the failure of markets to provide economically
efficient allocations in and through pursuit of monetized private interests (as would,
presumably, occur if the market functioned according to the standards of an
imaginary perfect market). Those who believe in the beneficence of market forces
regard state failure as normal and market failure as exceptional; they generally
respond to market failure by calling for more market, not less! Conversely, those who
believe in the rationality of the state and its embodiment of the public interest,
typically consider market failure as inevitable and state failure as something that, if
not exceptional, is at least conjunctural. They therefore conclude that it can be
solved through improved institutional design, knowledge, or political practice. For
those who recognize at least the formal procedural rationality of markets, it might still
be possible to adjudge market outcomes as failures in terms of substantive (political)
criteria, such as an unjust distribution of life-chances. Likewise, even if one accepts
that state elites are motivated by the public interest, political outcomes might still be
seen as failures in terms of formal (economic) criteria, such as the oversupply of
poor quality, high priced public goods (cf. Mitchell and Simmons 1994). It is this
respect that market proxies are considered worth introducing.

At this point 3-4 paragraphs are needed on (1) the different forms of market proxies;
(2) the difficulty of applying market proxies to non-standard goods and services
produced in different kinds of labour process and with different turnover times; (3)
the role of market proxies and competitive treadmill of best practice as a disciplinary
mechanism; (4) the role of privatization and market proxies in generating crisis-
tendencies in neo-liberal regimes and regimes undergoing neoliberal policy
28

adjustments; and (5) pressures from international agencies tied to Washington and
post-Washington Consensuses including, most recently, proposals for TPP/TTIP.

7. Metagovernance

One response to the growing recognition of the failures of all forms of governance
(market anarchy, hierarchical command, networked heterarchy, the social solidarity
of collective commitments) has been interest in metagovernance or collibration. This
is an approach to governance that involves the judicious mixing of market, hierarchy,
networks, and solidarity to achieve the best possible outcomes from the viewpoint of
those engaged in metagovernance (Dunsire 1996; Jessop 1998; Kooiman 2003;
Scott 2006). Governments have a key role to play here, but even this kind of meta-
governance is fallible. The emerging system is a complex, multi-scalar, hybrid, and
tangled system of meta-governance. Yet the very complexity of the interweaving of
different forms of governance and government on different scales means that the
resulting system is more complex than any state, or political or social entity, can
understand, and its overall evolution lies beyond the control of a state or its society.

The idea of metagovernance or collibration should not be confused with a super-
ordinate level of government to which all governance arrangements are
subordinated. It involves instead the design of institutions and generation of visions
that can facilitate not only self-organization in different fields but also the relative
coherence of the diverse objectives, spatial and temporal horizons, actions, and
outcomes of various self-organizing arrangements. Meta-governance has
institutional and strategic dimensions. Institutionally, it provides mechanisms for
collective learning about the functional linkages and the material interdependencies
among different sites and spheres of action. Strategically, it promotes the
development of shared visions that might encourage new institutional arrangements
and/or new activities to be pursued to supplement and/or complement existing
patterns of governance. In both respects it involves the shaping of the context within
which heterarchies can be forged rather than developing specific strategies and
initiatives for them. States have a major role here as the primary organizer of the
dialogue among policy communities, as an institutional ensemble charged with
ensuring some coherence among all subsystems, as the source of a regulatory order
29

in and through which they can pursue their aims, and as the sovereign power
responsible in the last resort for compensatory action where other subsystems fail
(e.g. where markets, unions, or the science policy community have failed). This
involves almost permanent institutional and organizational innovation in order to
maintain the very possibility (however remote) of sustained economic growth.

Meta-governance does not amount to the installation of a monolithic mode of
governance. Rather, it involves the management of complexity and plurality. Thus
markets, hierarchies, and heterarchies still exist; but they operate in a context of
negotiated decision-making. Thus, on the one hand, market competition will be
balanced by cooperation, the invisible hand will be combined with a visible
handshake. On the other hand, the state is no longer the sovereign authority. It
becomes but one participant among others in the pluralistic guidance system and
contributes its own distinctive resources to the negotiation process. As the range of
networks, partnerships, and other models of economic and political governance
expand, official apparatuses remain at best primus inter pares. For, although public
money and law would still be important in underpinning their operation, other
resources (such as private money, knowledge, or expertise) would also be critical to
their success. The states involvement would become less hierarchical, less
centralized, and less dirigiste in character. The exchange of information and moral
suasion become key sources of legitimation and the states influence depends as
much on its role as a prime source and mediator of collective intelligence as on its
command over economic resources or legitimate coercion (cf. Willke 1992).

In exercising this meta-governance role, the state provides the ground rules for
governance, ensures the compatibility of different governance mechanisms and
regimes, deploys a relative monopoly of organizational intelligence and information
with which to shape cognitive expectations, acts as a court of appeal for disputes
arising within and over governance, serves to re-balance power differentials by
strengthening weaker parties or systems in the interests of system integration and/or
social cohesion, etc.. This emerging meta-governance role means that networking,
negotiation, noise reduction, and negative coordination take place in the shadow of
hierarchy (Scharpf 1994: 40). The need for such a role is especially acute in the light
of the wide dispersion of governance mechanisms and the corresponding need to
30

build appropriate macro-organizational capacities to address far-reaching inter-
organizational changes without undermining the basic coherence and integrity of the
(national) state. This role tends to fall to the state because of its heightened
paradoxical position as an institutional subsystem that is simultaneously merely part
of a wider, more complex society (and thus unable to control the latter from above)
and also a part normatively charged (notably in the last resort) with securing the
institutional integration and social cohesion of that society (Jessop 1990).

Metagovernance involves not only institutional design but also the transformation of
subjects and cultures. Whereas there has been much interest in issues of
institutional design appropriate to different objects of governance, less attention has
been paid by governance theorists to reforming the subjects of governance and their
values. Yet the neoliberal project, for example, clearly requires attempts to create
entrepreneurial subjects and demanding consumers aware of their choices and
rights as well as needing actions to shift the respective scope and powers of the
market mechanism and state intervention. This is an area where Foucauldian
students of governmentality offer more than students of governance. They have
been especially interested in the role of power and knowledge in shaping the
attributes, capacities, and identities of social agents and, in the context of self-
reflexive governance, in enabling them to become self-governing and self-
transforming (cf. Miller and Rose 2008). This raises important questions about the
compatibility of different modes of governance insofar as this involves not only
questions of institutional compatibility but also the distribution of the individual and
collective capacities needed to pursue creatively and autonomously the appropriate
strategies and tactics to sustain contrasting modes of governance.

7. Notes For A Conclusion (to be redrafted following discussion)

The market is: (1) a simplifying self-description for the interactions among profit-
oriented economic agents and, as such, enables actors to orient their economic
strategies without having to fully comprehend the economy in real time in all its
complexity. It is, then, a social construct and can be linked to very different
technological and economic imaginaries and very different sets of institutions, social
practices, and dispositives. (2) It is also the actual form of movement of a complex
31

material substratum of economic interactions that are more or less embedded in a
wider nexus of social relations. In these terms, we can also see competition as a
simplifying reference point for orienting economic action that can never fully grasp all
of the factors that shape the competitive process and its outcomes and as a real
process that works behind the backs of the producers (and other economic actors)
through the metaphorical invisible hand of the market (and other processes that
bear on the outcome of competition). The capacity to compete is grounded in turn in
diverse sources of competitiveness, both economic (broadly considered) and extra-
economic.

This distinction is one way to make sense of the simultaneity of the invisible hand
metaphor and the recurrent efforts of social actors to shape the ways in which
markets operate and to enhance their chances of success in competition. The
factors, actors, and forces relevant to economic competition and economic
competitiveness are essentially contested, inherently relational, and often politically
controversial notions. It is impossible to regulate the market and/or competition in
this second sense. This sets limits to the role of competition in governance.

But it should be recognized that markets, states, governance, and solidarity are all
prone to fail. This is not surprising because failure is a central feature of all social
relations. Indeed, there is no such thing as complete or total control of an object or
set of objects -- governance is necessarily incomplete and as a necessary
consequence must always fail (Malpas and Wickham 1995: 40). Given the growing
structural complexity and opacity of the social world, indeed, failure becomes the
most likely outcome of most attempts to govern it with reference to multiple
objectives over extended spatial and temporal horizons -- whether through markets,
states, partnerships, or some other mechanism.

This is often recognized. However, whilst failure in the other three modes of
coordination is regarded as inevitable, in the preferred mode of coordination it is
typically seen as exceptional and corrigible. For example, for liberals, although the
state is prone to failure, a turn to the market will solve the problem. If the market
fails, however, it can be improved. Conversely, for statists, the response to market
failure is government. If government fails, however, then it should be improved. This
32

polarization is reflected both in the succession of governments and in policy cycles
within governments in which different modes of policy-making succeed each other as
the difficulties of each become more evident. The challenge is to develop strategies
for combining (and recombining) modes of governance to produce desired outcomes
in full recognition that this is a contested process with winners and losers.



Endnotes

1
Cited Reinert (1994)
2
Other functional systems such as juridification, medicalization, militarization,
sacralization, politicization, or scientization or, indeed, with identities and values
anchored in civil society (or the lifeworld rather than system-world) such as ethnicity
or race (apartheid), gender (patriarchy), generation (gerontocracy), or nationality
(nation-statehood).
3
Profit-producing identifies the place of a particular capital or capital fraction in the
circuits of capital; it does not entail that every profit-producing capitalist always
makes a profit.
4
I use the concept of formal freedom here to draw an implicit contrast with the lack
of full substantive freedom due to the multiple constraints that limit free choice. The
institutionalization of formal freedom is a significant political accomplishment and a
major element in liberal citizenship, as well as a precondition for market economies.
5
Concerns about the communist military threat and the economic threat posed by
allies catch-up and potential overtaking of the USA were the twin angst-ridden
justifications for state intervention in USA almost as soon as it became the
undisputed hegemonic power in the capitalist world after WW2 (cf. Belabes 1999).

Appendix 1:

There are different commodity forms. First, a simple commodity is a product (a good
or service) that is offered for sale perhaps with only a surplus beyond the
immediate needs of the producers being offered for sale rather than the entire
33

production being produced in order to sell it. Goods and services offered for sale can
arise from peasant, petty commodity, state production, cooperative production, or
social enterprise as well as capitalist production. Second, a capitalist commodity is
one produced in a labour process subject to capitalist competition. This creates
pressures to reduce the socially necessary labour-time involved in its production and
the socially necessary turnover time involved in realizing the surplus-value that it
embodies. This generates a dynamic relation between the organization of production
and the capitalist commodity form. Third, a fictitious commodity has the form of a
commodity (can be bought and sold) but is not produced in order to be sold. In
particular, it does not originate in a profit-oriented labour process subject to the
competitive pressures of market forces to rationalize its production and circulation.
This concept is important because analysing land, money, labour-power, and
knowledge (as intellectual commons) as simple and/or capitalist commodities would
obscure the conditions under which they enter the market economy, get transformed
therein, and so contribute to the production of goods and services for sale.

As fictitious commodities, land, labour, and money would comprise: (1) land that has
been enclosed and appropriated and then sold or rented in a private commercial
transaction with its price reflecting its productive potential and/or market demand; (2)
the capacity to perform useful labour reproduced outside the market economy and
entering the labour-market from outside in return for a wage; and (3) money as a
marketable store of value and medium of exchange, with competing commodity
monies (e.g., gold, silver), fiduciary monies (tokens, paper money, bank credits, fiat
money), or tradable currencies (e.g., dollars, euros, yen). In each case, what is
crucial to their status as fictitious commodities is that they are not produced in order
to be sold but have entered into exchange relations because markets in land, labour-
power, and monetary tokens have been established. They could also be
redistributed in other ways, e.g., territorial conquest, enslavement, requisition or
confiscation, direct or indirect reciprocity, and so on. Similar arguments apply to
knowledge as a fictitious commodity, when it is transformed from an aspect of the
intellectual commons into one or another form of intellectual property (cf. Jessop
2007). A fundamental limit to the extension of competition as a principle of economic
governance is found in the fictitious nature of the commodity form of land, money,
labour-power and knowledge.
34

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35

Appendix 2


EXCHANGE COMMAND DIALOGUE SOLIDARITY
Rationality
Formal and
procedural
Substantive and
goal-oriented
Reflexive and
procedural
Unreflexive and
value-oriented
Criterion of
Success
Efficient resource
allocation
Effective goal-
attainment
Negotiated
consent
Requited
commitment
Typical
example
Market State Network Love
Stylized
mode of
calculation
Homo
economicus
Homo
hierarchicus
Homo
Politicus
Homo
fidelis
Spatio-
temporal
horizons
World market,
reversible time
Organizational
space, planning
Re-scaling,
path-shaping
Any time,
any where
Primary
criterion of
failure
Economic
inefficiency
Ineffectiveness
'Noise',
'talking shop'
Betrayal,
mistrust
Secondary
criterion of
failure
Market
inadequacies
Bureaucratism,
red tape
Secrecy,
distorted
communication
Co-dependency
asymmetry