A Philosophical Reflection on the Political Economy of Jurgen Habermas

The following essay is a reflection on the social theory of Jurgen Habermas. It argues that we need to move beyond his philosophic-normative theory and re-ground the ‘lifeworld-system’ distinction in the political-economic theory of Wolfgang Streeck. This enables us to explain and understand the politics of corporatist policy making in the Irish case and the crisis of democratic legitimacy facing European capitalism. It also provides an opportunity to reinvigorate comparative political economy by uniting the philosophical with the sociological tradition of German critical theory.


Corporatist policy making is a strategy of the state to construct a social institution that mediates between the needs and demands of the ‘lifeworld’ and the ‘sub-systems’ of the administrative state and market economy through the coordination of a national incomes policy. It is not a deliberative exchange of validity claims over the direction and constitution of ‘state and market’ but a legitimation of them. It provides the necessary political stability for a market economy to function. Whether this is considered ‘good governance’ or the incorporation of organised interests into ‘market capitalism’ is ultimately a normative judgement. What it does illustrate is that the state is not autonomous from the lifeworld but requires an institutional means to interact with it. The systems of money power and state administration are embedded in the lifeworld. These instrumental domains of ‘market’ and ‘state’ use communicative action strategies as much as civil society actors. This blurs the distinction between functional and communicative rationality by illustrating their shared purposive orientation – an observation that can only be identified when one grounds the ‘lifeworld’ in the material reproduction of political-economic institutions. This, by default, requires an examination of the actors and political coalitions underpinning institutions as it points toward the tension between democracy and capitalism. The empirical observation of communicative action requires a political economic theory.

Habermas does not do this and hence he can establish a philosophic-normatively disconnected sphere of ‘reason’ from the political-economic material reproduction of ‘society’. He does not engage in  institutional or policy analysis nor does he examine the institutional evolution of the modern state but prescribes a normative order for global citizenship against global finance. The evolutionary dynamic of how the system evolves is reduced to the process of rationalisation in the tradition of Max Weber. Law becomes the mechanism through which the state interacts with the lifeworld not organised politics or distributional struggle in civil society. He keeps the communicative in civil society and purposive in politics whereas in practice they cannot be distinguished. The conviction that the political-economic and material reproduction of the lifeworld has to be brought back into democratic theory motivates my study on corporatist policy making, wage setting, industrial relations and welfare states in Europe. The distributional question and the inherent contradiction between capitalist reproduction and socio-political stability, as outlined by Wolfgang Streeck, are perpetually contested. The state and the various institutional mechanisms that surround and constitute a market economy change over time. Corporatist policy making and the interaction between economic and political democracy cannot be reduced to a timeless constitutional legality because they are political in design. In this regard, the philosophic-normative whilst it may act as an important ‘idealisation’ of deliberative democracy must be replaced with a political-economic analysis if we are to understand and explain the evolution and causal mechanisms of capitalism, particularly in its current historical formation.


Those who are familiar with the theory of Jurgen Habermas in a political economic context tend to use his discursive ethics as a normative prescription on how best to govern a market economy. This leads to a celebration of open ended, pluralistic and discursive methods of coordination. Empirical examples are selected to show participatory budgets, social partnerships and public-private collaborations. What all of these perspectives lack, however, is an appreciation of the underlying power, politics and capitalist orientation of public governance. An implicit assumption is made that power is an instrumental strategy of action that is ‘negative’. Therefore one should seek out alternative modes of coordinating collective behaviour that negate power by engaging the less powerful through various forms of ‘social dialogue’. This is not only problematic methodologically but it empirically ignores a fundamental ontological reality i.e. power and politics condition the evolution of society. Power is a relation that acts in much the same way as gravity. We do not really understand what it is but we know that it exists. It can be positive (democratic will formation) and negative (imposition of coercive packages of austerity). Furthermore, Habermas never intended his theory of deliberative democracy, with its grounding in a complex theory of communicative rationality and linguistic structures of communication, to be empirical in orientation. The deliberative exchange of validity claims that emerge from the linguistic structure of communication was prescribed as a mechanism to democratise existing institutions through the establishment of an independent public sphere. The mass media, as we know, is anything but this.

The theory of communicative rationality was crafted to illustrate that functionalist reasoning and the evolution of money is premised upon a foundation of trust and communication that need explicit institutionalisation to ensure capital does not become the means of social integration.  For Habermas, the only way to tame the vulture instincts of ‘state and market power’ is to defend lifeworld norms via a legal constitution. Culture has to be non-capitalist to avoid the capitalist economy eating into society. Politics cannot do this but law can.  In this regard, it is ironic that theorists of ‘new forms of governance’ tend to focus on ‘soft’ forms of regulation such as peer review or social norms to coordinate collective behaviour rather than ‘hard’ forms of legal constraints. The European Union is an important test case to illustrate the paucity of democratic decision making. Economic competition is legally enshrined in the single market whereas social and labour policies aimed at regulating the market in the interests of labour are non-legally binding. They are coordinated through softer or ‘open methods’ of coordination. Rather than view this as an example of powerful market interests dominating fragmented social interests, many scholars view it as an ‘innovation in governance’. This is because they consider the state a negative form of social organisation. Or, they consider the defence of labour via collective bargaining and legal-formal norms as the remnants of an old European welfare state.

It is not sufficient to be content with a normative political economy that accepts new forms of governance as an example of democracy. This limits an empirical analysis of institutions, actors and political interests underpinning a capitalist polity. In this regard, various forms of democratic theory ignore what really matters. The currency of money, which Habermas recognised as colonising the democratic and political institutions of society, has enormous power and influence over public policy decisions. A counter-factual world of discursive will formation and an ‘ideal speech situation’ is an important idealisation from a normative perspective but it cannot be used to describe any new ‘mode of governance’ as deliberative and innovative. Open methods of coordination, social pacts and various forms of state engagement with civil society are premised on market economies and the coalition of interests who govern them. Material interests exist in the political economic (empirical world) not in a counter-factual idealisation of deliberative democracy. This is a tension that exists throughout the scholarship on ‘new social movement’ and ‘new forms of governance’ theory.  It is normatively prescriptive and therefore misses some of the most important dimensions and observations of how capitalist institutions change. Thus, rather than view social partnership or new methods of coordination as an example of participatory democracy one can view them as methods through which the state or European polity seeks legitimation for a market economy. Most new forms of governance reflect the evolution of how the contemporary state governs (or gives power over to new collectivities) in a capitalist society.


Sociology and political economy are natural bed fellows because they both seek to explain and understand how order, meaning, stability, exploitation and social institutions evolve over time. The empirical analysis of these disciplines focus on actors and institutions in the complex process of socio-economic reproduction. This inevitably leads to an analysis of politics, understood as the distribution of power at the micro (in the Foucauldian sense) and macro level (in the Durkheimian sense).  Economic and political institutions aim at establishing ‘order’, ‘coordination’ and ‘stability’ in different places and different times. This (the coalition of interests who underpin the institutions) produces different varieties of capitalism. Thus, the means through which social order is established is dependent upon the historically evolved institutional context. The lifeworld-subsystem distinction offers an important mechanism to conceptualise how societies are ‘ordered’ and ‘governed’ over time.  It is a more nuanced approach to the ‘structure versus agency’ problem as it illustrates that the structural and functional domains of state and market require democratic input for their legitimation. Some political systems minimize democratic input and maximize corporate-business input. For example – neoliberal America and state capitalist China. But, in Europe, the attempt to embed political and economic institutions in a capitalist society has given rise to various initiatives that can be broadly considered ‘democratic’. Most of these revolve around labour politics and various attempts at ‘social partnership’ or ‘corporatist policy making’. But, importantly these are attempts at democratic legitimation of capitalism not forms of deliberative democracy in themselves.

These institutions of social regulation aim at embedding a market economy and have been gradual eroding under the pressures of neoliberal capitalism. But, if people believe that the economy affords them no opportunity to compete and succeed, or that the state works against their interest, crisis results. This is the core argument of Habermas sociological theory and directly applicable to what is happening in London under the existing Conservative government or the Tea Party movement against Democratic-Republican congressional government. What Habermas fails to appreciate, however, is that the actors who are fundamental to ‘money (economy) and electoral (state)’ power understand the potential for legitimation crisis in the system. They recognise that going to the ballot box and winning a majority of votes as a percentage of the electorate is not sufficient to reproduce confidence and support for a political system that implements public policies (labour market, fiscal and monetary) to constitute and support a market economy that in turn produces inequality and psycho-social anomalies. Political actors in the state know they have to engage in ‘consultative dialogue’ with civil society, usually over questions of distribution, to increase the legitimacy of public policies that mediate between the ‘market system’ and ‘lifeworld’. A social system aimed at efficiency, calculability, predictability and control is operates as a machine. This machine like system led Adorno and Horkheimer amongst others to declare contemporary societies an iron cage. It has also created a variety of cultural critiques such as the much celebrated US drama ‘the Wire’. The entire project of Habermas is to rescue modernity from this functionalist reductionism.

Societies cannot be reduced to the logic of a machine (even if a modelled construct of a market economy can). Societies require a mechanism of integration to ensure the political legitimation of the ‘system’. Some do this through coercion such as the ex Soviet states, others through electoral mass politics and control of the media such as Berlusconi’s Italy. Corporatist policy making is but one way for the state to manage the democratic pressures of society with electoral mass politics and market integration. It provides a formal input for organised interests to represent civil society and trade unions workers, in addition to opening up elite networks of business-state relations.  Administrative elites in government departments know the benefit of combining business and liberal corporatism better than anyone. Legitimacy is ultimately constituted in the ‘lifeworld’. The subsystems of ‘market-money and state-votes’ cannot provide the stability that all systems crave. Bureaucratic and markets systems of capitalism are ontologically premised upon the lifeworld. Legitimation ‘crises’ emerge when money-power becomes the primary mechanism of social integration. This is precisely what has occurred with the aggressive pursuit of state led free-market capitalism since 1980. Therefore one can only wonder why Habermas failed to analyse the changing political-institutional context that has enabled this to happen. His analysis is contained by the assumed non-purposive dimension of communicative rationality. Communicative power and the global democratisation of capital flows require a transnational actor that no legal theory can provide.


The management of Ireland’s neoliberal economy occurred through a form of social partnership in labour politics. The distributional and productive conflict that will inevitably emerge when an economy goes from being one of the poorest to one of the richest in Europe was bargained and negotiated via this social institution. This makes Ireland quite different from the archetypical liberal market economies of the UK or USA. Given the Irish system of corporatist policy making between the state and civil society it was closer to European social democracy. But, in terms of workplace or economic democracy it was closer to the UK. Social partnership was primarily a national incomes policy. It was a strategy of the state to manage one of the few remaining macro-economic tools available to government in a Euro-global economy. The state did not to legally control wage levels nor leave it to free collective bargaining in the labour market. They attempted to influence the coordination of wages (not least because government is the largest employer in the Irish economy) in the interest of economic performance or ‘competitiveness’. But, the process through which this occurred meant that the state opened itself up to the participation of organised interests in the development of public policy. It supplemented the electoral process of government. Therefore it was primarily political rather than economic in design.

Corporatist policy making (as a form of concertation and wage setting) was a strategy of state development to generate political legitimacy for a market conforming alliance. The political purpose was to establish stability and consistency across a variety of representative interests in society – primarily labour and capital. This was not a democratic experiment in good governance but recognition by the system that it is easier to govern a market economy through processes of communicative dialogue than unilateral legislation (as occurs in the UK). The ‘system’ constructed and nurtured a ‘social institution’ to mediate and generate input from the ‘lifeworld’. The collapse of corporatist policy making in response to the crisis, however, illustrates the primacy of power and politics underpinning social institutions that are non-market in design. At European level it is not a crisis of capitalism per se but a crisis of political legitimacy. The political-democratic is simply weaker and lacks the coordinating capacity to rein in the effects of free-market finance capitalism. The latter has successfully insulated itself from the lifeworld and potential democratisation as it operates via transnational computer transactions and Wall Street political donation. In this regard, if the subsystem of capitalist markets has become so footloose that they are accountable to nobody except their shareholders then we can expect to see more instances of the London riots and the growth of conservative reactionary movements such as the Tea Party in the USA. Both reflect the collapse of the political-state to provide the resources or will to reduce economic inequalities and embed social stability, as a result of aggressive capitalist self-interested individuation. For all its faults, Irish corporatist policy making recognised this as a problem and constructed a coalition of interests to mediate the worst effects of neoliberalism. The outcome was increased expenditure on social transfers and an attempt to regulate the labour market quite unlike the USA or UK.


The project of Habermas is aimed toward those he is closest to – radical critique of subjectivist reason and enlightenment illusions – whereas it is better focused on those who embrace the a priori ‘autonomous rational man’; rational choice economics. Communicative reason tackles both sides of the sword. The deconstructivist and the positivist are but two ends of a broad spectrum. The social sciences require an ability to recognise the immanence of concepts such as truth and falsity, right and wrong, democratic and oligarchic but to simultaneously make transcendent claims and judgements about which are truthful. To critique ideology is to critique the underlying assumptions and truth claims of the ‘rational man’. Both Marx and neoclassical economics make this error in their totalising reductions. The point is not to return to labour or the market but to examine the social consensus governing the relationship between lifeworld and system and ask why? To ask what is the social currency in circulation? Do we agree this is the way we want to organise our society? All of this I agree with but it does not mean that one can avoid the central logic of purposive action in the economic and political domain. The rationalisation of each may result in a process of economic democracy or a bargained compromise called ‘social partnership’. But, the successive rounds of liberalisation in labour relations have meant that these too operate according to market exchange. The same applies to finance and industry. The outcome is a very different society from which ‘the theory of communicative action’ was born, both in Germany and Europe. Habermas cannot account for this institutional change because he considers communicative and purposive action (communicative and instrumental reasoning) as ontologically separate. But, communicative action is impotent if it is not purposive. Recognising this does not mean the democratic project of modernity is a will to power but a constant battle between the irreconcilable tension between democracy and capitalism.


One response to “A Philosophical Reflection on the Political Economy of Jurgen Habermas

  1. Wow Aiden, amazing article. Gets easier to read as you go on. I studied Habermas at university and fortunately possess some of the tools necessary for following you. This is a brief philosophical response to only a small part of what you discussed.

    I tackled the distinction between communicative rationality and purposive action from an argumentation perspective once. I found that the pragma-dialectic theory of strategic maneuvering to be an advance on Habermas’s position in reconciling the tension between them, because this approach sees successful arguers and persuaders as those who are simultaneously reasonable and skillful in achieving their own objectives. Synchronizing with Habermas, successful arguing involves a unity of communicative and purposive rationality that involves being a participant in both lifeworld and system, seeing potential for both communicative and systemic action at any time. This would be
    ‘strategic maneuvering between lifeworld and system’ according to pragma-dialectics, which I will call ‘dual-action’ here..

    In our present-day politically and economically tumultuous world, could this ‘dual action’ approach lessen the tension between democracy (lifeworld) and capitalism (system), and even solve some of the current problems? Accepting Habermas’s enlightenment-based ideal for now as context, I see this approach as being relevant in two typical scenarios.

    First, an over-colonized world must be stabilized at least within acceptable limits, and the system has to be “tamed” through a process of negative critique. There is therefore a justified interest of reasonableness. But the chaotic, immediate demands on actors means that systemic interests must also be considered as almost fundamental. Actors therefore ‘dual-act’ when they try to balance both these types of interest, even if they’re acting primarily to stabilize the system.

    Secondly, after some degree of stabilization, capitalism being tamed by democracy in this case, and not so burdened by systemic failures, dual-action can take a constructive role in positive systemic maintenance and critique of both democracy and capitalism. Dual-action involves literally thinking them both together as forces to be balanced. The emphasis shifts from to “taming” to “problem-solving”. But both phases are types of ‘dual action’.

    I applaude your effort to ground Habermas’s theory by developing a research template through assimilating Habermas’s formal concepts with an empirical dimension. The problem may be getting the right set of categories that both represent him fairly and provide adequate means to foreground research in a particular political field. If we use equate notions such as ‘democracy’ and ‘capitalism’ with ‘lifeworld’ and ‘system’, (respectively) are we dressing, eliminating, or reflecting on him? Maybe the purpose of the research will warrant all three types of response. But I have to agree with you, in today’s political turmoil, Habermas really is seeming rather abstract, and there is certainly a demand for more direct applications of his work. From a theoretical standpoint, maybe there is a danger of exporting the problem again in using ‘democracy’ and
    ‘capitalism’ too idealistically (or even ‘unions’ and ‘business leaders’). This may mean that Habermas is best used (even indirectly) to analyze and describe a particular, well-specified event or institution, given the necessity to use applicable terminology.

    Thanks mate, that was a really good evening ;-)

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