Foucault on neoliberal or raison d’État government. It is not empire:
I think there is a distinctive feature of this art of government organized in terms of raison d’État which is important for understanding what comes after. This is that in its foreign policy, let’s say in its relations with other states, the state, or rather government according to raison d’État, has a limited objective in comparison with the ultimate horizon, the project and desire of most sovereigns and governments in the Middle Ages to occupy the imperial position with regard to other states so that one will have a decisive role both in history and in the theophany. Raison d’État, on the other hand, accepts that every state has its interests and consequently has to defend these interests, and to defend them absolutely, but the state’s objective must not be that of returning to the unifying position of a total and global empire at the end of time. It must not dream that one day it will be the empire of the last day
(Birth of Biopolitics, 2008, p. 6)
Interesting to speculate on where this leaves the great treatises of our time forecasting the return of “empire” (Neil Smith, Hardt & Negri…?).
On the other hand, internal government is not “small”:
it entails precisely an objective or set of objectives that could be described as unlimited, since for those who govern in the police state it is not only a matter of taking into account and taking charge of the activity of groups and orders, that is to say, of different types of individuals with their particular status, but also of taking charge of activity at the most detailed, individual level
(p. 7)
This is no surprise to readers of Foucault (who after all talked of the microphysics of power and its capillary nature in Discipline and Punish). But it is a reminder that neoliberalism has a complicated relationship with the idea of “small government.”
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Foucault blog 
isn’t foucault (or perhaps you, ie selective quotation, I haven’t read the sample chapter yet) collapsing actual government (ie national interests etc) with the dispersed practices of governance?
N&H’s concept of ’empire’ tries to make sense of the dispersed practices of governance that may not actually have anything to do with ‘the’ government, but are rather basically capitalist NGOs and corporations.
A bit of selection, certainly! For Foucault goes on after this bit to describe how liberal government concerns itself with “how not to govern too much” and to “laissez nous faire.”
But I do in fact want to connect what he’s saying with current political (US-based) discourse. Here we have the right talking about small government and that the best government is the one that does a small a job as possible and that people (subjects) are to exist as freely as possible (Foucault criticizes this sort of argument on the grounds that the two can’t be separated).
On the left, to be general, we might say that there is a call to have government perform specific roles such as the welfare state. But on the other hand, from the left (eg Smith) we see a great critique and worry about expansion of government powers in international relations.
What I’m wondering, without proposing an answer, is whether this is in fact going on or is Foucault correct? Can we analytically separate foreign policy governmental actions from domestic ones?
(This is all in need of interpretation of course, for government was expanded greatly under Republican administrations, eg Ronald Reagan ramped up gov spending tremendously, esp in the military sphere, as did JFK.)