Reading Notes – Democracy in Chains

How Kochs destroy US

Nancy MacLean, Democracy in Chains: The deep history of the radical right’s stealth plan for America, 2017, Penguin, 239 pages plus 95 more of notes & index, 17 May 2019.

A Reader’s Guide

Rod Kessler

_ _ _ _ _

This book tells “the utterly chilling story of the ideological origins of the single most powerful and least understood threat to democracy today: the attempt by the billionaire-backed radical right to undo democratic governance” (xvii).

Their strategy is like an octopus with many arms; what unites and control these arms seems to be the Koch brothers’ fortunes.

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This compilation of notes, summaries, explanations, and identifications is intended partly as an overview of Democracy in Chains but mostly as a reader’s guide and companion to the book.

Sections

Introduction 3

Organizations and terms in Democracy in Chains 5

Who’s who in Democracy in Chains: Individuals 20

Who is James Buchanan and what role did he play in the Koch story? 29

Libertarian philosophy and the legitimate role of government 31

Constitutional shackles 33

Undermining public trust in government 34

The Republican Party 35

Buchanan’s economic thinking [Public Choice theory] 36

Buchanan on campus unrest 41

Charles Koch’s thinking 43

Chile under Pinochet: Buchanan’s model for putting democracy in chains 46

Koch-supported entities (partial list) 48

Quotations (Misc): 49

Related Reading: Heather Cox Richardson: 53

Trails to pursue 57

Introduction.

The super-rich often choose to make their mark on the world. And when they do, they often let the world know about it. There’s nothing secret about the global charitable work of Bill and Melinda Gates. Nor has George Soros hidden his contributions to worldwide democratic causes. Mike Bloomberg’s recent attempt to wrest control of Democratic presidential politics? Not a secret. One could add Jeff Bezos’s buying and perhaps rescuing the Washington Post and John Henry’s doing the same for the Boston Globe. But one American billionaire who has spent the last forty years transforming American life has intentionally kept his operations shrouded from public view—and with good reason: his operations are aimed at undermining America’s democratic institutions and “liberating” corporate capitalism from the controls and regulations of “big government.” If people knew about the long-range plans of Charles Koch and the network he assembled, plans to do away with Social Security and Medicare—not to mention public education and environmental regulations, his efforts would have provoked a firestorm of resistance. So, mum’s been the word. But now the shroud of secrecy protecting the Koch network has now been lifted by Nancy MacLean in Democracy in Chains: The deep history of the radical right’s stealth plan for America. Her book is a long-overdue eye-opener.

In her book MacLean shows how Koch money has seeded the organizations, institutes, and entities that have grown over decades into the powerful tentacles of an octopus-like network exerting coordinated power and influence over governance at the federal and state levels, over our media, over our campuses. Here’s a passage from Democracy in Chains that gives a taste of what the Koch network has already accomplished:

[The Koch network] was operating on more fronts through more ostensibly separate organizations than ordinary mortals could easily follow. It was occupying the Republican Party, using the threat of well-funded primary challenges to force its elected officials to do the cause’s bidding or lose their seats. It was pushing out radical right laws ready to bring to the floor in every state through the American Legislative Exchange Council (ALEC). It was selling those laws through the seemingly independent but centrally funded and operationally linked groups of the State Policy Network. It was leveraging the anger of local Tea Party groups to move the legislative agenda of Americans for Prosperity and Freedom-Works. Its state affiliates were energizing voter turnout with deceitful direct mail campaigns. Its elected allies were shutting down the federal government; in effect, using its employees and the millions who rely on it as hostages to get what they otherwise could not—and much, much more (210).

How has Charles Koch (and his brother David) managed all this? How have the billions of Koch dollars been translated into political influence and control, the creation and burgeoning of a right-leaning conservative judiciary, and the rise of the myriad think tanks and policy institutes that influence and shape America’s public attitudes? Democracy in Chains tells the story, starting from the beginning.

Organizations and terms discussed in Democracy in Chains

Academia in Anarchy: Buchanan’s book (co-authored with Nicos Devletogou) and

published by neoconservative Irving Kristol (1970) suggested how to transform public universities structurally to solve problems of campus unrest. Its ideas were implemented in Pinochet’s Chile [157].

Adam Smith Institute(187): British think tank that Buchanan had ties to following

his Nobel Prize award in 1986. According to Wikipedia:

The Adam Smith Institute (ASI) is a neoliberal (formerly libertarianthink tank and lobbying group based in the United Kingdom and named after Adam Smith, a Scottish moral philosopher and classical economist. The libertarian label was officially changed to neoliberal on 10 October 2016. The Institute advocates free market and classical liberal ideas, primarily via the formation of radical policy options with regard to public choice theory, which political decision makers seek to develop upon. ASI President Madsen Pirie has sought to describe the activity of the organisation as “[w]e propose things which people regard as being on the edge of lunacy. The next thing you know, they’re on the edge of policy”.

The ASI formed the primary intellectual force behind privatisation of state-owned industries during the premiership of Margaret Thatcher and alongside the Centre for Policy Studies and Institute of Economic Affairs advanced a neoliberal approach toward public policy on privatisation, taxation, education and healthcare. A number of the policies presented by organisation were adopted by the administrations of John Major and Tony Blair and members of the ASI have also advised non-United Kingdom governments.

ALEC: American Legislative Exchange Council (210, 217). Koch-funded entity for

writing and distributing legislation to be passed by Republican-controlled legiuslative bodies.

American Enterprise Institute: When G. Warren Nutter joined Buchanan at

U.Va., he “helped William Baroody Sr. to transform the ][ American Enterprise Institute from a squawker on the sidelines into a leading public policy institute” (58-59).The Institute published Roger A. Freeman’s paper attacking federal mandates supporting public education—because of the tax burden (p.68). Freeman, with Buchanan, had served on the National Tax Association’s Committee on the Financing of Public Education. The Institute was recipient of Scaife funding (174).

BHC Group (156ff): Chilean corporation (along with Cruzat-Larrain) with ties to

Pinochet government that acquired two-thirds of the privatized social security accounts.

Billionaire-backed radical right” MacLean’s term for extended Koch network.

Cato Institute (140ff): Powered by Koch money, this libertarian think tank was founded

in 1974 by Charles Koch, Edward Crane III, and Murray Rothbard. The founding idea was to assemble a cadre of dedicated and talented individuals to promote the libertarian revolution Koch sought. The enemy was “the statist world system of the twentieth century” (140) including both the liberal and conservative wings of the establishment. Its goals and tactics were expounded in Rothbard’s Toward a Strategy for Libertarian Social Change.” From MacLean:

You cannot understand the influence of the stealth movement that is transforming America today without understanding this critical turning point [the inception of the Cato Institute as a launching of the cadre] (141).

With a permanent staff and a stable of rotating scholar visitors, Cato could generate nonstop propaganda against this ruling class. Buchanan played a crcial role in such propaganda, for Cato’s arguments generally followed the analyses provided by his team. Koch, meanwhile, provided new resources as the cadre brought in recruits with ideas for new ways to advance the cause. They would then be indoctrinated in the core ideas to assure their radical rigor, all of this held together with the gravy train opportunities Koch’s money made available as they pushed their case into the media and public life (141).

MacLean points to “The Republican party’s officialdom after 2008” as Exhibit A of Koch’s success with this model (141).

The Cato Institute uses the example of Pinochet’s Chile as a positive model (166), including in its role to undermine and privatize Social Security (178ff).

Center for Libertarian Studies (187): Institute that Buchanan worked with following

his Nobel Prize award in 1986. Here’s a summary from Wikipedia:

The Center for Libertarian Studies (CLS) was a libertarian and anarcho-capitalist oriented educational organization founded in 1976 by Murray Rothbardand Burton Blumert, which grew out of the Libertarian Scholars Conferences. That year, the conference was sponsored by industrialist and libertarian Charles Koch and several papers were presented in which speakers, including Koch, suggested that the John Birch Society and the Hitler Youth were organizations that libertarians could learn organizing lessons from. It published the Journal of Libertarian Studies from 1977 to 2000 (now published by the Ludwig von Mises Institute), a newsletter (In Pursuit of Liberty), several monographs, and sponsors conferences, seminars, and symposia.

Center for Market Processes (197ff): Led by high-level Koch operative Richie Fink,

the center—which would become the Mercatus Center—functioned to operationalize Charles Koch’s libertarian vision by its outreach programs into the nearby Washington political wing. Winning an internal power struggle at George Masson University, Fink and his Center pushed Buchanan into retirement (203-204). See Richie Fink.

Center for the Study of Public Choice: Established (by Buchanan) in 1969 at the

Virginia Polytech Institute (later Virginia Tech) as an essentially renamed Thomas Jefferson Center for Studies in Political Economy. It would move to George Mason University in 1983. “…with generous support from right-wing foundations, he and his colleagues . . . .deepened their ties to right-wing businessmen and foundations who were looking for ideas to counter the expansion of government from the New Deal and the Great Society, and whose own numbers expanded in these years” (108). It’s here that Charles Koch & Buchanan begin.

Buchanan was invited to Virginia Polytech Institute by his one-time student Charles Goetz (108); he was supported by U. president T.Marshall Hahn, Jr., “a corporate man himself” (109).

The Center presents itself this way:

Public Choice scholarship has profoundly influenced thinking in the scientific community and the formation of public attitudes. Economics traditionally focuses on the behavior of firms and consumers and how individuals interact in market settings. As a research program, public choice extends the tools of economics to analyze the behavior of voters, candidates, legislators, bureaucrats, judges, and so on. Research by scholars at the Center also focuses on other non-market institutions such as religion, the family, clubs, and culture. [https://publicchoice.gmu.edu/about]

Trained at Buchanan’s George Mason center was early M.A. graduate Stephen Moore, who then went on, from the Heritage Foundation, to serve as research dire3ctor of Reagan’s Commission on Privatization—and then to the editorial board of the Wall Street Journal(183).

Centro de Estudios Públicos (187): Chilean think tank that Buchanan had connection

with following his Novel Prize award in 1986. According to Wikipedia:

CEP is based in Santiago and was founded in 1980. Eliodoro Matte Larraín, the billionaire president of the Chilean forestry and paper company CMPC, is chairman of CEP. The president is Harald Beyer, the Minister of Education of Chile from 2011 to 2013 until his impeachment for failing to address illegal for-profit activity in universities.

Charles Koch Foundation, 1974 [137]. Buchanan was 1st featured dinner speaker. Its

seminars included the economics of “Austrian thinkers on matters from labor management to monetary policy” (138).

Club for Growth (216-217): Koch-funded organization “to fund primary challenges to

ensure the party line on environmentalism would be maintained by Republican members of Congress” (216).

Contract with America: [190-193] Republican policy proposal spearheaded by Richard

Dick” Armey that brought a Republican takeover of Congress in 1994 and which, under the leadership of speaker Newt Gingrich, attempted to pass a balanced budget amendment as well as other libertarian/conservative measures including cuts to Social Security and Medicare. Such brinksmanship tactics as shutting down the government backfired; the GOP position was seen as extremist, and Clinton, coopting some of the less extreme policies “outwitted” the radical right [193]. The failure of this initiative impelled Charles Koch “to double down and ‘speed up the whole process’ of radical transformation (193). Koch would now turn to Buchanan, the one libertarian thinker with “an operational strategy” for breaking through “the enduring impediment to the enactment of their political vision,” that being “the ability of the American people, through the power of their numbers, to reject the program” (193).

Earhart Foundation [p.100, 187] Libertarian fund, ended in 2016, subsidizing free-

market training of men from other countries. Buchanan worked with it in the years following his Nobel Prize award in 1986.From Wikipedia:

The Philanthropy Roundtable said of the Earhart Foundation in 2004, “For 75 years, the Earhart Foundation has epitomized achievement in the humanities and social sciences. … Harry B. Earhart started the foundation in 1929 with the fortune he made with White Star Oil Company.” Among his foundation’s early beneficiaries was well-known economist and philosopher, Friedrich von Hayek. Hayek penned the broadly read book, The Road to Serfdom and The Constitution of Liberty and taught at the London School of Economics.

Nine winners of the Nobel Prize in economics came from the ranks of Earhart Foundation Fellows. Other Nobel-winning economists who benefited from Earhart funding include Milton FriedmanGary BeckerJames M. BuchananRonald CoaseRobert LucasDaniel McFaddenVernon L. Smith, and George Stigler.

Federalist Society: Created with inspiration from Ed Meese, this organization “would

do more than any other to transform the nation’s judiciary and law schools” (188-189). Buchanan would speak at one of its early national conferences on “Constitutional Economics,” an appearance arranged by Leonard Liggio, head of Koch’s Institute for Humane Studies (188-189).

Fraser Institute (187): Canadian think tank Buchanan associated with after winning the

Nobel Prize in 1986. According to Wikipedia:

The Fraser Institute is a Canadian public policy think tank and registered charity. It has been described as politically conservative and libertarian. The Institute is headquartered in Vancouver, with offices also located in CalgaryToronto, and Montreal, and ties to a global network of 80 think-tanks through the Economic Freedom Network.

George Mason University (GMU) (169ff, Ch. 10): Founded outside D.C. in Fairfax Co.,

Virginia, it would become, in Buchanan’s economics dept., the training ground and pipeline for the libertarian economists and lawyers that Charles Koch “had longed for” (175). After departmental conflicts at Virginia Tech, Buchanan was drawn in 1981 to GMU by economics faculty member Karen Vaughn, already herself a recipient of Charles Koch’s funding for her Austrian Economics Forum “which studied the ideas of [Koch’s] idols Ludwig von Mises and F. A. Hayek” (173). Vaughn brought onto the faculty Richard A. Fink, already a Koch favorite for his uncompromising militancy as an exponent of Austrian economics (173). The original two-year college in a shopping mall (169) would develop into a model “corporate university,” assisted by partnerships with ideologically driven corporations and foundations. The funding “enabled the school to start producing economics doctorates, among other things” (172) who would populate the “corporate-funded libertarian milieu” in the Reagan-era D.C. area (173), “particularly with the Koch-funded Cato Institute and the Scaife- and Coors- funded Heritage Foundation and the American Enterprise Institute” (174).

Three doctoral students—James C. Miller III, Paul Craig, and Rob’t D. Tollison played important roles in Reagan administration (174).

In 1985, university president George W. Johnson, on the advice of Buchanan and Gordon Tullock, brought in Koch-grantee Henry G. Manne as dean of the newly acquired law school (184). Manne rid the faculty of all but fellow right-wing thinkers, appealing to corporate donors. As MacLean writes:

“For example, Manne’s law school would stake out a position on the side of corporations against “consumerism and environmentalism,” two causes that had grown in popularity and influence since the 1970s. His faculty would advocate for the superiority of “unregulated corporate capitalism” and assert, as Manne himself argued in print, that companies needed liberation from “the distortions introduced by government intervention.” The included full freedom for Wall Street financial firms from government regulation” (185).

The George Mason law school would be a pipeline for libertarian-thinking law graduates. Some 40% of sitting federal judges and law professors participated in the summer programs, exposing them to a Koch-based curriculum that applied free-market economic analyses to legal decision-making (195).

Heritage Foundation: The Heritage Foundation, like the Cato Institute, uses the

example of Pinochet’s Chile as a positive model (166). Staffed in part by graduates of Buchanan’s economics dept. at Geo Mason U (174). It worked with the Cato Institute and Buchanan in efforts to undermine and privatize Social Security (180).

Edwin Meese III, who “to this day plays a pivotal role” at Heritage, was Reagan’s “closest and most trusted advisor” (182).

Independent Institute (187): Libertarian think tank that Buchanan worked with after

winning the Nobel Prize in 1987. [Promotes fighting gov’t expansion, climate change denial, free-market approaches to health care, gun rights–see Wiki]

Institute for Contemporary Studies (ICS) (121ff & Ch.8 “Large Things Can Start”). This

California-based outgrowth of Buchanan’s 1972/73 Third Century Project” connected scholars with right-wing political actors in the state and businessmen recruited by them” (121). It was one expression of Buchanan’s vision of transforming American culture. Funded by the Scaife Family Charitable Trusts and led by Edwin Meese III, part of then-Governor Reagan’s inner circle, it stayed in touch with the governor’s office. Anthony Kennedy, future Supreme Court Justice, was a vice-president. It “set out to remedy ‘misunderstanding” about how ‘our free institutions’ ought to work by targeting ‘opinion-making institutions, especially the mass media.’” [121]. The ICS “planned various ways to get its version of economics into the public debate,” [121] including hiring journalists, putting out brochures, teaching “opinion-makers and decision-makers to understand the field as ICA economists did” (122). Private donors included Exxon, Mobil,Shell, Texaco,Ford, IBM, Chase Manhattan Bank, U.S. Steel, and General Motors. Also: Olin, Scaife, and Smith Richardson Foundation (122). The ICS also worked to refocus law education away from social-justice litigation, aligning with Henry G. Manne’s Law and Economics Center and its Summer Economics Institute for Law Professors (123). [More on Manne’s law school at George Mason U: 184-185]

Institute for Humane Studies (HIS), F.A. Harper’s organization, was “direct

successor” to the Volker Fund (133) and was one of Charles Koch’s first funding outlets, and he became a lifelong board member (133). It was to find and cultivate “much-needed” “leaders for the fight for economic liberty” (133). From Wiki:

The Institute for Humane Studies (IHS) is a libertarian non-profit organization that engages with students and professors throughout the United States. IHS offers educational and career programs, holds seminars and on-campus programs for university students, awards scholarships, provides mentoring and research grants for aspiring professors, and sponsors a collection of online videos.

Founded by F. A. “Baldy” Harper in 1961, the organization later began an association with George Mason University and in 1985 moved to Fairfax, Virginia. The institute is currently located at 3434 Washington Blvd. on the Arlington campus of George Mason University.

The HIS was “the organization closest to [Charles Koch’s] heart, and he its main benefactor” (133)—to train leaders to guide the pursuit of liberty” (133). Here, Koch and Buchanan worked jointly to carry “the battle of ideas” to campuses and to build “a critical mass of freedom-friendly professors” (138).

The Institute was promised carte blanche by George Mason administration in 1985 and would “’ retain complete program and financial autonomy,’ while its ‘post doctoral programs [would] have full and equal standing’ with other GMU programs” (188). Excitement following Buchanan’s Nobel Prize will and his base at George Mason was probably a big reason Koch moved the institute to be near (188). The Institute’s administrator was Leonard P. Liggio “a loyal member of the cadre himself” (188). Liggio worked in concert with the then-new Federalist Society, arranging for Buchanan to speak at its national conference on “Constitutional Economics” (188-189).

Institute of Economic Affairs: Think tank in England that Buchanan had ties to

following his Nobel Prize award in 1986 (187). According to Wikipedia:

The Institute of Economic Affairs (IEA) is a think tank that claims to be dedicated to advocating the role of markets in solving economic and social problems. It subscribes to a right-wing and neoliberal worldview. It is based in Westminster, London.

Founded by businessman and battery farming pioneer Antony Fisher in 1955, it promotes monetarist economics. There has been discussion in the press and among parliamentarians as to whether the IEA is more accurately described as a lobbying operation than as a think tank. It publishes a magazine (Economic Affairs), a student magazine (EA), books and discussion papers, and holds regular lectures.

James Buchanan Center for Political Economy: (194ff): With a ten-million dollar

grant from Charles Koch in 1997, Buchanan’s institute at George Mason was expanded, subsuming Buchanan’s Center for Study of Public Choice and Richie Fink’s Center for the Study of Market Processes. Its mission was expanded, too—to go beyond thinking and analysis to actually implement change in the nation’s political and economic life and bring about Koch’s vision of free-market liberty. According to MacLean, Buchanan, who was offended by the lack of any genuine academics in the cadre of Koch operatives, was outmaneuvered by Koch and Fink and so ended his career. [He stopped coming to campus in 1998, he retired in 2008, and he died in 2013.] Instead of any academic work, the center ran things like “’Chief of Staff Weekend Retreats’ at which figures such as sitting U.S. Supreme Court Justice Antonin Scalia and ‘experts’ from such think tanks as Cato and Reason addressed ‘senior congressional staff’on ‘a variety of important policy issues, while maintaining relevance to the legislative calendar’” (205).

Koch Industries [130]: yearly revenues exceed $115 billion, with sixty-seven thousand

employees in almost 60 nations.

Law and Economics Center at the U. of Miami [122ff] (see Henry G. Manne).

Initiative working in synch with Buchanan-associated Institute for Contemporary Studies (ICS) to promote “the shaping and understanding of law in a manner that CEOs and CFOs could and did appreciate” (122). Manne solicited funding from such corporations as U.S. Steel and from such funds as Olin Foundation and Pierre Goodrich’s Liberty Fund. The Center provided summer workshops (with stipends) to law faculty—judges too, in time—and helped to transform low-ranked law schools—U. Virginia, George Mason—into breeding grounds for lawyers to swell the ranks of the libertarian “counterintelligentsia.” Buchanan’s book The Limits of Liberty received the center’s law and economics prize (152).

Libertarian Party (146ff): When in 1978 Charles Koch contributed to the Gubernatorial

campaign of Ed Clark, the party nationwide attracted 1.2 million votes (147). When the Koch’s withdrew their financial support “the L. party all but crashed” (147).

Liberty Fund. See Pierre Goodrich and connection to Henry Manne’s initiative to

transform legal education and thinking to conform to libertarian ideas. From Wiki:

Liberty Fund, Inc. is a nonprofit foundation  headquartered in Indianapolis, Indiana which promulgates the libertarian views of its founder, Pierre F. Goodrich  through publishing, conferences, and educational resources. The operating mandate of the Liberty Fund was set forth in an unpublished memo written by Mr. Goodrich “to encourage the study of the ideal of a society of free and responsible individuals.” . . . Liberty Fund was founded by Pierre F. Goodrich in 1960. In 1997 it received an $80 million donation from Goodrich’s wife, Enid, increasing its assets to over $300 million. . .In November 2015, it was announced that the Liberty Fund was building a $22 million headquarters in Carmel, Indiana.

This Koch-backed organization brought in Buchanan to run the annual summer conferences, aimed at reviving “the tradition of the Volker Fund conferences, which had yielded so many hard-core libertarians in the late 1950s, including Buchanan and Nutter” (276 in note 68). The target group: young talent in the social sciences (145).

Gary M. Anderson’s research undermining the field of public health was funded by the Liberty Fund (214).

The Limits of Liberty (147ff): 1975 book by James Buchanan, “his magnum opus for the

cause” (147). “More a work of political philosophy than of economics” (148), the book argues that structural measures must be taken lest the expanding public sector lead to unsustainable consequences—namely, the imposition of higher taxes on the rich. Buchanan writes, “Why must the rich be made to suffer?” (149). Here’s the passage from MacLean, quoting Buchanan:

If ‘simple majority voting’ allowed the government to impose higher taxes on the dissenting individual in the minority—‘the citizen who finds that he must, on fear of punishment, pay taxes for public goods in excess of the amounts that he might voluntarily contribute’—what distinguishes that from ‘the thug who takes ][ his wallet in Central Park?’ Why should the well-off, he was asking, be forced to pay for those people, as the popular euphemism put it? ‘So long as unanimity is violated,’ was government action, in fact, truly ‘legitimate.” Even if the people’s representatives were duly elected? Might ‘the confiscation through taxation of goods’ from an unwilling person not be seen as ‘crimimal’ (149-150)?

The remedy for Buchanan was the imposition and enforcement of Constitutional limits (151). “There seemed no way to reconcile robust individual property rights with universal voting rights” (151). “There was no sense glossing over it anymore: democracy was inimical to economic liberty” (152). In Buchanan’s image, the Leviathon—democracy’s inevitable result in government’s growing intrusiveness—must be chained (153).

Mackinac Center (214): Force behind poisoning of Flint, Michigan, water system. An

early part of the Koch-funded State Policy Network.

Makers and Takers: To Buchanan and libertarian economists, “makers” were the

productive elements of the economy, the producers—those who accumulated wealth by earning it on the free market. “Takers,” on the other hand, sought through the power of their numbers to tax the wealth of the “makers” for their own purposes. See rent-seeking.

Mercatus Center: Originally the Center for the Study of Market Processes, this

Koch-funded and essentially Koch-led center on the campus of George Mason University intended to implement Koch’s vision. See Richie Fink.

Mont Pelerin Society (37) Founded in Switzerland in 1947 & led by Frank Knight,

F.A. Hayek, & Ludwig von Mises (40). Sought “to ensure lasting peace and prosperity by freeing markets worldwide from the collective action of government planning that its members believed so perilous” (40). Supported by William Volker Fund (Harold Luhnow is its president in 1947 (39). F.A. Harper, author of the Koch-influencing Why Wages Rise, was a founding member (130). Charles Koch was admitted in 1970 & soon used its newsletter to publicize the groups he funded (134), including writings of Tulloch and Manne (footnote 22, p.273). In its 1978 meeting in Hong Kong, then society president George Stigler (“venerable U. of Chicago economist”) pushed the ideas of Buchanan’s The Limits of Liberty, concluding that non-democratic institutions and policies might be necessary for achieving the desired ends, policies that could include (in his words) “the restriction of the franchises to property owners, educated classes, employed persons, or some such group” (152).

One member, Carlos Fransicso Cáceras, helped bring Buchanan to Chile to draft Pinochet’s libertarian constitution (158), and the Society so approved the changes Buchanan brought to Chile that the Society held its November 1981 regional meeting in Chile. Among the panels there: “Social Security: A Road to Socialism?,” “Education: Government or Personal Responsibility?,” and Buchanan’s own “Democracy: Limited or Unlimited?” (162). “For the society’s members, Chile was a beacon. The constitution, in the summary of one scholar, removed ‘major social questions—such as macroeconomic policy—from democratic influence’” (162).

National Tax Association’s Committee on the Financing of Public Education. This

outfit worried over “the tax consequences of the then-hegemonic commitment to public education. Buchanan, together with a like-minded economist, Roger A. Freeman,…flagged the growing public school spending of the baby boom era as a ‘pork barrel’ problem and threat to states’ rights, because with federal investment in education would come regulations concerning how it was to be spent” (68).

Northern libertarians (p.50)—supported fight against integration espousing states’

rights and economic liberty. Frank Chodorov founded publication The Freeman . Robert LeFevre founded Freedom School.

Olin Foundation [123] Funded Henry Manne’s Law and Economics Center to promote

cohorts of pro-corporate, pro-business, libertarian lawyers—to transform the legal profession. Koch was persuaded by Olin Foundation president William E. Simon in 1978 to become a donor (138).

Poll taxes in Virginia were cumulative, suppressing black vote—and poorer whites’ too

(14, 25)

Powell Memorandum (125): Then corporate attorney Lewis F. Powell, Jr., who would

go on to head the American Bar Association and a Nixon-appointee to the Supreme Court, was invited by the U.S. Chamber of Commerce to write a document now “widely cited as “the beginning of the corporate mobilization to transform American law and politics” (125). The American economic system was under attack, he claimed, “pointing to signs as disparate as the campus revolt, environmentalism, and the rise of pro-consumer litigation, led by Ralph Nader” (125). He prompted many corporations to funnel money into efforts like Henry Manne’s –and Charles Koch was drawn in (126).

Privatization: MacLean warns (182) that “many liberals . . . miss the strategic use of

privatization to undermine democracy, at worse seeing the proposals as coming simply from dogma that preferred the private sector to the public.” To the right wing, privatization is another tool to “effect ‘the intellectual de-legitimation of the welfare state’” (182). It erodes the public’s reliance upon and confidence in government as a source of public good.

See: David Stockman and Reagan Revolution and See Trust in government.

The Reagan Revolution (175-177): Libertarians hoped that Reagan’s 1981 “colossal

Kemp-Roth tax cut” would necessitate “tearing up the social contract on a scale never attempted in a democracy” (175): gutting social security, veterans’ benefits, homeowners’ mortgage tax deductions, subsidies to farmers, Medicare. But public awareness and consequent uproar put an end to this part of Reagan policy (see Reagan budget chief David Stockman). A lesson for the libertarian right going forward was to avoid public awareness (177).

The Reason Foundation (143-144): Koch-supported think tank founded in 1978 by

Robert W. Poole, Jr., (a fan of Ayn Rand) dedicated to the “selling off of public property and outsourcing public services to private corporations” (143). Its magazine is Reason. Poole’s book is Cutting Back City Hall. The Reason Foundation’s idea was to “hack away at government” by (in Poole’s words) “privatizing one function after another, selling each move as justified for its own sake rather than waiting until the majority of the population is convinced of the case for a libertarian utopia” (144). Koch’s funding was dependent upon the Foundation’s promise never to compromise with those in power (145). The Foundation’s board included F.A. Hayek.

Rent-seeking behavior: [see above Buchanan’s Economic Thinking] Term coined by

Gordon Tulloch referring to “all attempts to extract benefits (financial or otherwise) through manipulation of the political or legal system that exceeded what those seeking these advantages would have been able to earn through their own productivity” (128).

The Samaritan’s Dilemma” [142-143] James Buchanan’s 1975 article (used by the

right wing ever since) asserting that “modern man has become incapable of making the choices that are required to prevent his exploitation by predators of his own species” and that Jesus was wrong to praise the Samaritan for assisting the victim—for such assistance “would encourage the victim to ‘exploit’ the giver rather than to solve his own problems” (143). Better to “restore the market to its proper ordering” (143). The victim is a potential parasite of welfare-reform approaches. Society must have ways to shackle impulses like the Samaritan’s. The piece = “captured the stark morality of libertarianism” (143).

Scaife Family Charitable Trusts (110): Endowed by “the oil-and-banking heir”

Richard Mellon Scaife, this “major funder on the right” awarded a $240,000 multi-year grant (“about $1.5 million in 2016 dollars”) “to support public choice scholarship and outreach” at Buchanan’s then-new Center for Economic Education at Virginia Polytech Institute. The fund’s economics specialist was Richard Larry [110]. Scaife money contributed to the Institute for Contemporary Studies [120,122]. Scaife money funded Heritage Foundation and The American Enterprise Institute (174), which were both partly staffed by graduates of George Mason’s economics pgm. (174).

Socialism (196): MacLean explains how the libertarian right understood the term:

“Socialism, as the Mont Pelerin Society members defined the term, was synonymous with any effort by citizens to get their government to act in ways that either cost money to support anything other than police and military functions or encroached on private property rights. By that definition, socialism was indeed alive and well in the 1990s.”

Social Security: Popular pushback to the Reagan administration’s 1981 attempts to link

massive tax cuts with the slashing of Social Security and other elements of “the welfare state” including by the “Save Our Security” mobilization (176), led the libertarian right—the Cato Institute, the Heritage Foundation—to stealthier strategies to undermine Social Security, seen as “the lynchpin of the American welfare state” (177). Buchanan’s strategy for Koch’s Cato Institute included not only divide-and-conquer elements, splitting current recipients from future ones, wealthier from poorer, but also the undermining of confidence in the program in the public mind and the espousal of alternative private policies (IRAs). The idea was to do what Chile had done—bring about the total privatization of all savings for retirement (178ff). Using an incremental approach, the libertarian right would “push for legislation to make private retirement savings easier and more remunerative to the industry; then pull into the fight the financial corporations that would profit from the replacement of social insurance with private savings accounts” (180-181).

Why undermine Social Security? “First, it would break down citizens’ lived connections to government” (181). Second, doing so would undermine “the appeal of collective organization by inducing fracture among groups that had looked to government for solutions to their common problems” (181). And third, it would enrich the capitalists, pushing them “to lobby for further change” and “alter power relations in America in a manner that advanced the libertarian revolution.

State Policy Network (SPN) (214-215): Koch-funded organizations in all fifty states “to

coordinate efforts to prevent state governments from responding to the demands of the ‘takers’” (215). The apparatus to influence governments at the state level.

Takers: see Makers and Takers

Third Century movement [Ch.8 “Large Things Can Start, 116ff] Buchanan’s initiative in

the early 1970s to stimulate a counter-revolution to protect and promote “economic liberty.” The strategy was to slowly build a new counter-intelligentsia—of economists and lawyers, but also “by converting people of power in domains that mattered: politics, business, the media, and the courts” [116]. As for common citizens, in Gordon Tulloch’s words, “they accept what they are told” (116). Buchanan’s initial group, whom he cautioned to keep things secret, included Tulloch,Nicos Devletoglou (co-author of Academia in Anarchy), J.Clayburn L Foirce, Jr. (Mont Peleron economist & former dept. chair at UCLA), and Wilson E. Schmidt (formerly Buchanan’s Virginia Tech. mentor, now Nixon’s deputy assistant secretary of the U.S. Treasury) [116]. Buchanan “idea of convening a tight cluster of kindred economists” (119) took shape in conversation with Richard Larry of the Scaife Family Charitable Fund.—The idea was to create a “counter-Brookings Institute” (119). One idea was to train community college teachers in the South as a way of shaping how people thought about government (119). The plan was to create a ten-person Founders Group & then grow through their contacts. There would be a Society of Fellows and the granting of a big monetary prize—“one to rival the Nobel Prize in Economic Sciences” (120). One result was the California-based Institute of Contemporary Studies.

Trust in government: Buchanan’s public-choice economics portrayed elected government

leaders as selfish actors, motivated by the need to hold office and be elected, not concern with the public good. Public trust in government was further undermined by “Lyndon Johnson’s lying about the war in Vietnam [and] Richard Nixon’s Watergate crimes” (187). In Tullock’s words, the idea was “that politicians were “crooks,” voters were “selfish,” and “bureaucrats” were “incompetent” (187). The aim of the libertarian right was “to show that government action would cause worse trouble than the problems it was called on to cure” (187). [NB: In his Dismantlung Democracy, Donald Cohen argues that one of the memes propagated by the far right is that government is ineffective, always worse than the privatized alternative. The idea is anathema that government can be an effective friend of the public.] see Privatization.

Virginia Commission on Constitutional Government (VCCG) (pp. 81-83) Created by

Virginia General Assembly in 1958, this body asserted an analysis of the Constitution that sought to undo FDR’s New Deal and all the subsequent federal programs of that sort. It was “taking aim at the entire structure of constitutional understanding on which federal regulation, organized labor’s power, and civil rights protections alike depended” (82). School of thought later called “the Constitution in Exile” and associated with Supreme Court Justice Clarence Thomas. Its chairman of publications Jack Kilpatrick sent the VCCG’s publications to “every member of the U.S. Congress, federal judges, bar associations, business leaders, chambers of commerce, town and law school libraries beyond numbers, and daily newspapers and magazines—with, ultimately, two million pamphlets and books that tutored readers in a restrictive understanding of the Constitution” (82).

Buchanan’s Thomas Jefferson Center (esp. economists Ronald Coase and Leon Dure) helped the VCCG out, with an analysis of the alleged success of Virginia’s private school subsidies as a way of evading federal desegregation regulations and government control (83).

Richmond businessman Eugene B. Syndor, Jr. who had had the vision for the VCCG, would, in 1971, as Education Director for the U.S. Chamber of Commerce, solicit the Powell Memorandum (125).

Virginia School Desegregation –Privatization and resistance, the 1959 crisis over school desegregation. [Ch.4 “Letting the Chips Fall Where They May”]

Buchanan & Nutter (Jefferson Center)—“…the team’s first intervention on a public policy issue” (p.67) was to oppose gradual school integration of public schools (federal intervention vs. states’ rights) and to propose privatizing education altogether—and doing so “by strictly economic arguments” (66), avoiding issues of racial injustice. Their argument: “state-run schools” (their preferred term) were monopolies; as such, lacked the incentives to improve that competition—in the form of privately operated schools—would provide. Virginia, they argued, should issue tax-subsidized vouchers to parents. Such schools would be free of gov’t interference. The state could afford this option by selling off public school buildings and equipment. (Milton Friedman suggested going one step further—taking taxes out of the picture and making parents bear “the full burden” of their children’s education (69).)

Failing to stop Virginia from integrating public schools, Buchanan learned lifelong lessons: “Faced with majority [public] opinion as expressed in votes, politicians could not be counted on to stand by their stated commitments. Even those who previously had pledged fealty to state sovereignty, individual liberty, and free enterprise would buckle, owning to their self-interest in reelection,” (p.71) [bolding mine here] Buchanan also learned that constitutions matters (“…it would be nearly impossible to achieve his vision of radical transformation without changing the constitution” (p.72).

Virginia School of political economy Chapter Three “The Real Purpose of the Program”

[The Thomas Jefferson Center for Politcal Economy and Social Philosophy at the U. of Virginia in late 1950s, Ike’s America]

Buchanan got the okay from U. of VA president (and DuPont scion) Charles Darden to (1) promote a school of libertarian economic thinking that countered the accepted thinking of the time and (2) train a cohort of like-minded scholars to become a force for change. The economic approach that they would counter held that government interventions and organized labor were both necessary for a balanced and healthy economy. Even the Republican President held these despised ideas: “[B]elieving that capital and labor must cooperate to ensure stability and prosperity, Einsenhower accepted the New Deal welfare state and mass unions of working people with political influence . . . as settled matters” (52).

Instead, they considered “collectivism” as the enemy of freedom and supported states’ rights and fought segregation. They were against graduated income tax, unions, the Wagner Act [e.g. “federal overreach”]. Favored by endowments from the Volker Fund and contributions from General Electric and several oil companies, the Center imported libertarian thinkers like Hayek [anti-union talk] and W.H. Hutt (p.59).

The Jefferson Center and Buchanan lost their hold at the U. of Virginia in the aftermath of Johnson’s presidency, the retirement of Senator Byrd, and the arrival of new university president Edgar F. Shannon (94). Tullock was denied tenure. The campus desegregated. A new institute was funded to study the state’s economy (95), one seeking to use “public policy and tax dollars to enhance economic development, (95)” views antithetical to Buchanan’s.

Volker Fund (39): Patron of economist Friedrich A Hayek and other pro-market

economists including Aaron Director (U. Chicago) and Ludwig von Mises (NYU) (p.39). Subsidized Buchanan’s Center at the U. of VA. Funded dissemination of Kilpatrick’s book The Sovereign States (p.52-53).

The Volker Fund sought to influence not merely intellectual work but “real change—indeed, radical change” (84) in society—and through funding “a new cohort of thinkers.” Murray Rothbard, “the Manhattan-based talent scout” of the Fund, suggested in 1961 that “We can learn a great deal from Lenin and the Leninists” (84) about strategy and tactics. Economists like Friedman and Hayek were brought to Buchanan’s program, and Buchanan, Nutter, and Coase “made it to the approved list of speakers for the Volker-funded lectures at other U.S. colleges” (p. 84)

Individuals discussed in Democracy in Chains

Richard “Dick” Armey: [190ff] One-time chair of economics at North Texas State—a

libertarian along the lines of public choice theory—who would galvanize the Republicans in 1994 as a congressman proposing the Contract with America, including the plan to cut Social Security and other New Deal accomplishments by a balanced-budget amendment. He was majority leader in Congress for Newt Gingrich.

Stuart Butler, “British-born economist who applied Buchanan’s thinking in fine-tuning

the Leninist strategy to permanently alter the political dynamics of budget growth” during the Reagan presidency (182). An advisor to Edwin Meese, he was promoted by the Heritage Foundation to direct its Center for Policy Innovation (183)

Senator Harry Flood Byrd, Sr. of Virginia. 21ff. The aim of his political organization

“was to insulate government from citizen pressure for public spending or other reform” (p.22). “In his view, if liberty was to be preserved, the federal government should provide for the national defense and law enforcement, and little else” (p.23)

Against federal debt and pre-cursor of supply-side economics (p.49). Fan of Hayek’s Road to Serfdom. Byrd refused to endorse LBJ & retired in 1965 (93); his intended successor in the Senate lost in the primaries “by a combination of black voters and white urban and suburban white voters” (93). After 1966 elections,Virginia’s law against balanced-budget spending (pay-as-you-go) was repealed:

Borrowing money to invest in public schooling and infrastructure in a way that would have been unimaginable with Byrd still in power, [the General Assembly] turned Northern Virginia, especially, into a cornucopia of economic growth. (p.93)

Carlos Francisco Cáceras (158) : Chilean business school dean and “one of the most

antidemocratic members of the Council of State” who hosted Buchanan in Chile to consult on libertarian constitution. Member of Mont Pelerin Society.

Sergio de Castro (158): Chilean Minister of Finance who hosted Buchanan in Chile to

consult on libertarian constitution.

Ed Clark (146-7): Libertarian Party presidential candidate in 1978 with David Koch as

running mate. As part of the ticket, Koch could sidestep financial campaign contribution limits, enabling a $2 million contribution to campaign’s total $3.5 million (147).

Ronald Coase (83) British economist and Nobel Prize winner. See VCCG and Volker

Fund.

Tyler Cowan (212-213): Buchanan’s successor at George Mason and director of the

Mercatus Center. His blog is The Marginal Revolution. His vision of how the poor in American society will fare once Koch’s revolution has been enacted is dystopian. He “prophesies lower-income parts of America ‘recreating a Mexico-like or Brazil-like environment’ complete with favelas like those in Rio de Janeiro . . .(213).

Donald Davidson (33) writer among Southern Agrarians who influenced Buchanan’s

college-days’ thinking against the “Leviathon”—the growth of federal government seen as a move toward totalitarian state. The gov’t acts selfishly & in bad faith, pushing “un-American” values for workers’ rights and federal regulations.

Richard H. Fink (173): George Mason faculty economist (1980-1986) who pushed an

in-your-face style of libertarian (Austrian school) advocacy among the cohorts of economists he trained. His Center for Market Processes would become the Mercatus Center (1999). An early favorite of Charles Koch, he would become a Vice President of Koch Industries. He co-founded Americans for Prosperity and served on the board of Institute for Humane Studies (Wiki). When Koch infused $10 Million into what became the James Buchanan Center for Political Economy at George Mason in 1997, Fink oversaw the merger of his center with Buchanan’s. As Koch’s representative in fact, Fink would prevail in an internal power struggle with Buchanan (but “it was Koch who was really in charge” (199). Fink’s Center for the Study of Market Processes worked as “an academic base camp for the libertarian revolution” (202). Relocated to the Arlington campus of George Mason University, its negligible academic credentials hid its political work “tutoring top legislative staff in such areas as strategies for privatizing Social Security and Medicare, ‘downsizing government,’ and promoting unlimited campaign spending as a form of free speech” (203).

Roger A. Freeman (68). Serving with Buchanan on National Tax Association’s

Committee on the Financing of Public Education, he wrote paper published by American Enterprise Institute worrying over the tax consequences of public education. “’No nation,’ he said in reference to compulsory high school, ‘has ever attempted to keep so many children in school so long.’ It was an excess of democracy to try to educate so many, he suggested, and it would cost taxpayers too much money” (68).

Eduardo Frei (160): Chile’s former Christian Democratic president who mounted some

resistance to passage of Chile’s Buchanan-influenced libertarian Constitution.

Milton Friedman (40): U. Chicago economist who promoted economics-as-a-science,

using math and hypothesis-testing—and refraining from making normative judgements. His approach rubbed Buchanan the wrong way. But Friedman advised Buchanan and Nutter on their privatization proposal during the Virginia school desegregation battle, urging them to go even further so that “… ‘the full burden of education should be borne by the parents of children,’ not paid by the state”(p.68)

MacLean adds this explanation: “That would promote personal responsibility—through birth control. If parents had to bear the full cost of educating their children, he believed that would have ‘the appropriate number of children’.” (p. 68) As Barry Goldwater’s “scholarly surrogate,” (p. 90), he described campaign goals as “to stop the drift toward centralization and collectivism.” Following Goldwater’s loss, Friedman was made a Newsweek columnist, hence America’s “’most prominent conservative public intellectual’” (92). Charles Koch preferred the more uncompromising Buchanan to Friedman, because “he and the rest of the post-Hayek Chicago school of economics” worked “to help government deliver better results, which could only prolong the disease” (135). Friedman, to Koch, was a sellout (135).

Friedman consulted with the Pinochet regime in Chile, controlling inflation by draconian policies “that inflicted mass hardship” (155).

Newt Gingrich (192):Speaker of the House under Clinton who, with Dick Armey,

championed the unsuccessful libertarian-pleasing Contract for America initiative.

Barry Goldwater (88-91) In 1964 campaign, he lost votes for stance against Social

Security and Medicare and for privatizing the Tennessee Valley Authority (TVA). He was against Brown vs. Board of Education ruling, putting freedom to associate (and to not associate) above coercive civil rights policies. His famous line “that extremism in the defense of liberty is no vice,” widely condemned as pro-segregationist, was more a stance for “’a free society’ in the Mont Pelerin sense (91),” e.g., freedom vs. statism, capitalism vs. socialism. Goldwater won in the South because of the dovetailing of segregation’s resistance to Federal ‘interference’ and Goldwater’s libertarian economics, and its desire to keep government out of the market.

Pierre Goodrich (125) established the Liberty Fund in 1960. By the 1970s, he was a

big donor to Henry Manne’s efforts to transform law-schools into seedbeds for pro-business libertarian law schools.

Alan Greenspan (135): Charles Koch saw him as a “sellout to the system,” someone

who sought “to make government work more efficiently when the true libertarian should be tearing it out at the root (Koch quote here -135).

F.A. Harper: wrote Why Wages Rise, a free-market primer (1957) and influence on

Charles Koch (“his cherished mentor”) (130). A founding member of the Mont Pelerin Society, “Baldy” Harper “compared the impact of unions to that of ‘a bank robber’,” (130) targeted “government schools,” and argued that benefits like the shorter work week led only to more crime (131). Reforms such as minimum wage only distorted the market; child-labor laws contributed to juvenile delinquency. An undistorted market would be utopia (131). Government taxing? An enslavement (132). Harper’s Institute for Humane Studies (HIS) was “direct successor” to the Volker Fund (133) was one of Charles Koch’s first funding outlets, and he became a lifelong board member (133).

Friedrich A Hayek (37ff). “Austrian polymath,” co-founder of Mont Pelerin Society,

Economist brought to U. Chicago by Volker Fund, author of best-selling Road to Serfdom, which argued against “socialism”—any reliance on government and the centralized state—and for free market, with its payoff in individual liberty, esp. economic liberty. Only the unfettered market can create “spontaneous order” in the world; “socialism means slavery” (39). He served on the board of the Reason Foundation (145). He served as a consultant to Chile’s Pinochet government, serving as “an apologist for the regime” (155).

George W. Johnson: Head of George Mason University who welcomed and promoted

Buchanan’s Institute & its programs and who, with Buchanan’s advising, brought in Henry G. Manne to lead its new law school in 1985 (184).

Jack Kemp (183): Congressman in Reagan’s presidency who worked with Edwin

Meese and Stuart Butler—in league with the Cato Institute and the Heritage Foundation—to promote libertarian/Koch economic policies in the late 1980s.

John Maynard Keynes “believed that for a modern capitalist democracy to flourish,

all must have a share in the economy’s benefits and in its governance.” (xxxi)

James Jackson Kilpatrick: editor Richmond News Leader whose editorials enflamed

sentiment for states’ rights opposition to desegregation (19ff). Seeks to “abandon tax-supported public education altogether.” (19) Supported by Mont Pelerin Society member Henry Regnery, he would publish The Sovereign States in 1957. Nancy MacLean sums up the gist of the book:

In it, Kilpatrick blended his Calhounian case for states’ “right of interposition”—or “veto” of federal action—to protect their peculiar interests with an argument that the high court’s current interpretation of the Constitution’s Commerce Clause, which since 1937 had enabled all federal regulation, was a departure from the original intent of the founders. By his lights, the Wagner Act, the Social Security Act, and the Fair Labor Standards Act were as unlawful as Brown

[vs. Board of Education]

) (p.51)

–The Volker Fund funded sending copies to 1,200 college libraries and 260 private schools (p.52).

Kilpatrick was active publicist for the Virginia Commission on Constitutional Government (VCCG), spreading the message that “the federal government had been acting illegally since at least the 1930s” (82), in MacLean’s words.

Frank Hyneman Knight (36ff) Star prof at U. Chicago in Buchanan’s grad. school

days, a co-founder of the Mont Pelerin Society and advocate of “market order” and enemy of “any group or government meddling with the market” (36).

Charles Koch: (esp. Ch. 9 “Never Compromise”) First encounters Buchanan at Virginia

Polytech Institute at new (1970) Center for the Study of Public Choice [p.108]. Earned 3 engineering degrees at MIT [129]. “Playing the long game is his forte. . .” [130] Advocate of unhampered capitalism [130]. Early influence: F.A. Harper’s Why Wages Rise, a free-market primer (1957) (130). He disdained not only wage-earners, but men whose businesses failed and even the heads of publically traded companies, who were “just hired hands, beholden to shareholders and lacking in appreciation of true liberty” (134). His real heroes, like himself, had “built their own businesses, kept them private, and were not inclined to compromise” (134). Koch believed in what economist Joseph Schumpeter called “creative destruction (135), a survival-of-the-fittest approach “critical to the health of the capitalist system” (135). There was no place for empathy or compassion. There were, for him, superior and inferior people (135).

David Koch: Subsidized Libertarian Party in 1978 by running for vice-president under

Ed Clark & donating $2 million (147).

Fred Chase Koch [127ff]: (1900-1967). Father of Koch brothers, based in Wichita.

Owned oil-refining & marketing business, fought long legal battle against Universal Oil, hated government and despised those who were dependent on government. Founding member of John Birch society (1958). Passionate about free market.

Robert LeFevre [132]: Early influence on Charles Koch’s thinking. Founder of

Freedom School in rural Colorado and advocate of schools “free of government domination” [132]. Ally of Jack Kilpatrick. LeFevre’s “Platform for a Free America” “blamed the Wagner Act for having ‘enslaved millions’ to ‘Labor Bosses,’ denounced Social Security as ‘unsound’ and ‘immoral,’ and called for ‘constitutional limits . . . both on taxing and spending” (132) –ideas that were “’catnip to a certain class of businessmen.’ Charles Koch was among them” (133).

Leonard Liggio: (188-189). President of Koch’s Institute for Humane Studies who, at

the George Mason U. campus, worked with Buchanan, even arranging for Buchanan to address the national meeting of the Federalist Society. His institute funded and trained graduate students and post-doctoral cadres of libertarians heading to academic careers.

Henry G. Manne [pp.122ff]: Ran Law and Economics Center at the U. of Miami,

founded in 1974. Working to fund and support Manne’s institute was Buchanan’s California-based Institute for Contemporary Studies (ICS). The goal was to promote the legal education of a cohort of lawyers who would view promoting the interests of corporations and the wealthy as being in the public interest (as opposed to “the role public interest attorneys had been playing in the War on Poverty and in suing government bodies to make them more accountable to minority citizens and other impoverished Americans, and to the new reliance on class action lawsuits by social justice litigators” [122]. Manne and the ICS’s Edwin Meese III wanted “conservative counterparts to the ACLU” [122]. Manne established Summer Economics Institute for Law Professors [123] two-week cost-free sessions for pairs of law professors who would, he hoped, encourage their home institutions to hire new right-thinking faculty who would come with Olin Foundation financial backing [123].

Buchanan’s ICS enlisted Manne “to train journalists in an approach to law that was sympathetic to corporations that found themselves in court” (126). Drawn to Manne’s vision was “as relative novice” (126) Charles G. Koch.

In 1985, George Mason University president George Johnson brought in Manne as dean of the newly acquired law school. Manne promptly made it a center for producing pro-corporation, anti-regulation law graduates (184-185). In MacLean’s words:

[Manne’s] summer legal programs had provided intensive training in applying free-market economic analyses to legal decision-making for law professors and for federal judges, luring them with luminaries and luxury accommodations. To name just one index of how successful Manne had been: by 1990, more than two of every five sitting federal judges had participated in his program—a stunning 40% of the federal judiciary had been treated to a Koch-based curriculum. (195. Italics hers)

Jane Mayer (Covert Operations” in New Yorker and Dark Money) “went on to

research and document how the Kochs and other rich right-wing donors were providing vast quantities of ‘dark money’ (political spending that, by law had become untraceable) to groups and candidates whose missions, if successful, would hobble unions, limit voting, deregulate corporations, shift taxes to the less well-off, and even deny climate-change.” (xix) [bolding mine here]

Edwin Meese III (182ff): Reagan’s “closest and most trusted advisor” (still) associated

with the Heritage Foundation. He was advised by Stuart Butler, whom the Heritage Foundation promoted to director of its Center for Policy Innovation (183)

Stephen Moore, early M.A. graduate of Buchanan’s Center at George Mason, who

went on to the Heritage Foundation and then to serve as research dire3ctor of Reagan’s Commission on Privatization—and finally to the editorial board of the Wall Street Journal (183). He’s one of many of the cadre that moved through the Buchanan pipeline into positions of influence in government and society, pursuing Buchanan’s “stealth strategy” (184).

G. Warren Nutter (41). Fellow graduate student with Buchanan at Chicago who would

also be on the faculty with Buchanan at Virginia. Nutter joined Buchanan in attempts to privatize rather than integrate Virginia’s schools, seeking advice from Milton Friedman (67-68). He would be Barry Goldwater’s economic advisor (p.86) and major campaign advisor (89), helping to replace the Republican Party’s pro-civil rights platform to a pro-states’ rights one. Nutter, then part of the defense dept., was heckled in 1970 by anti-war students when Buchanan had him speak at Virginia Tech, feeding uchanon’s outrage over student dissent [p.109].

Robert W. Poole, Jr. (145-145): Founder of Reason Foundation, a Koch-funded think

tank devoted to dismantling big government through gradual privatization of all governmental functions.

Murray Rothbard (138): Intellectual subsidized by Koch who suggested using Lenin’s

revolutionary tactics as a model for Charles Koch. (Small numbers could effect large changes; prepare a hard-core cadre.) He sought “to establish a kind of capitalism purer and less restrained than the world had ever known” (138). Rothbard’s later criticism of Libertarian Party candidate Ed Clark—Clark had been too compromising for Rothbard’s tastes—led Charles Koch fired him from the Cato Institute (147).

Charles K. Rowley (207ff): Colleague of Buchanan at George Mason who became the

disaffected insider recognizing that Koch’s involvement and takeover was a corruption of the original impulse of Friedrich von Hayek and the founders of the Mont Pelerin Society, Rowley refused to serve on Heritage Foundation’s host committee. Rowley saw Koch’s coercive powers as a violation of “classical liberalism” as the Society defined it. “He called Richie Fink, Charles Koch’s chief strategist, ‘a third-rate political hack’ and ‘a man who is very appropriately named’” (209). Rowley died before completing a biography of Buchanan.

Joseph Schumpeter (Austrian political economist 1853-1950; Harvard prof.) His

theory of “creative destruction” as an essential part of economic evolution appealed to Charles Koch (135), with his survival-of-the-fittest view of the healthy market.

William E. Simon: (138) President of the Olin Foundation who in 1978 urged Koch and

other corporate leaders to donate multimillions to promote their vision of liberty.

George Stigler (152): 1978 Mont Pelerin Society president and U. of Chicago

economics professor who advocated non-democratic solutions(including restricting the franchise) to the problems brought into focus in James Buchanan’s The Limits of Liberty.

David A. Stockman (175ff): Budget director under Ronald Reagan associated with the

failed Kemp-Roth tax cut, seen by his fellow Mont Pelerin cohort as Reagan’s chance to “deliver on his word to make tax and spending cuts large enough to undo the mode of government” (175). The Reagan Revolution’s threat to Social Security, veterans’ benefits, and Medicare—over half the domestic budget—provoked sufficient voter outrage to sink the policy. In MacLean’s words (176):

“By 1982,” Stockman reported, “I knew the Reagan Revolution was impossible.” It simply could not happen in “the world of democratic fact.” Indeed, once the public became aware of just how drastic a plan the president’s team intended—including immediate changes to Social Security (as Stockman put it, “a frontal assault on the very inner fortress of the American welfare state,” a program “on which one seventh of the nation’s populace depended for its well-being”)—the jig was up. Even a South Carolina House Republican squawked, furious that his phones were “ringing off the hook” with calls from constituents “who think it’s the end of the world.” As powerful groups rallied to protect the popular program, the mobilization to “Save Our Security” worked. A Washington Post headline read, “Senate Unanimously Rebuffs President on Social Security.” From then on, it was over, said Stockman. “The democracy had defeated the doctrine.”

The lesson that Stockman drew marked his divergence from the Republican right and the Mont Pelerin libertarians, which “looked on Stockman as a turncoat” (176). He came to advocate “that voters must be told the truth. To have all the things they wanted, from clean air and water to retirement security (to say nothing of military power), Americans needed ‘a moderate social democracy,” and to get this, they needed to pay higher taxes. It was that simple: higher taxes could solve the problem, without permanent deficits or economic disaster’” (176).

–The result? Reagan’s advisors, refusing to face the outcomes of their policies, cut taxes anyway, resulting in “a fiscal train wreck” (177) in national debt and ballooning fiscal deficit (“the worst in U.S. history”). Additionally, the libertarian far right took from the episode the lesson that “what was needed to achieve their ends was to stop being honest with the public” (177), to avoid popular opposition by “advancing misleading claims in order to take territory bit by bit, in a manner that cumulatively, yet quietly, could begin to radically alter the power relations of American society” (177).

[–Note effectiveness of popular uprising, expressed through angry constituent calls to elected officials. Here’s an early instance of the tactics suggested by Indivisible.]

Gordon Tullock (76): Buchanan’s colleague at the Jefferson Center & in Public Choice

Society (1958) and coauthor of Calculus of Consent. Backed by the Volker Fund, he developed a critical analysis of government bureaucracy. Later, at the U. of South Carolina, he organized a chapter of Young Americans for Freedom (86).

Karen Vaughn (171ff): George Mason economics professor who drew both Richard

H. Fink and James Buchanan to the school. The department would be a pipeline for delivering Austrian-school libertarian economists to foundations and conservative institutions.

Ludwig von Mises (40), co-founder of Mont Pelerin Society, influence on Charles

Koch (134), reinforcing Koch’s “belief that his own growing financial success as one of the richest men in the world already justified his slowly taking over the Libertarian cause and shaping it to his will” (134). Von Mises held “that entrepreneurs were the unsung geniuses of history…(134).

Louise Wensel (62ff) Country doctor in Virginia who in 1958 ran against Senator

Harry Byrd and who supported both public education and public services and voter rights. “’I do not believe that saving money is more important than saving human lives and relieving human suffering.’ Franklin Delano Roosevelt couldn’t have said it better” (62-63). She lost but attracted 120,000 votes (1/3 of turnout) to “a vision pf the common good based on the preservation of public schools. And more: they voted for a vision of Virginia in which the wealthy and propertied class were taxed something more than a pittance, so the state’s people ][ could have better schools, better health, better roads—more opportunity to build better lives” (64-65).

Knut Wicksell (42-43) 19th C. Swedish political economist whose ideas influenced

Buchanan as grad stud. In Chicago. “…scholars should assume that public officials had the same self-interested motives as other economic actors and go on to scrutinize the actual operational rules, practices, and incentives that created the framework of gov’t and bureaucratic decision-making” (42). He believed that tax policy “ought to be arrived at through unanimous consent” (42).

Who is James Buchanan and what role did he play in the Koch story?

According to MacLean, central to Koch’s strategies was the thinking of a far right libertarian economist and political theorist James M. Buchanan (1919-2013), winner of the Nobel Prize in economics in 1986 for his Public Choice theory. Buchanan’s economic and political worldview, as MacLean puts it, came down to this:

…[G]overnment did not have the right to ‘coerce’ the individual, beyond the basic level of the rule of law and public order. If liberty, as Buchanan and others in the movement would use that term, had any hard and fast meaning, it lay in the conviction that every person, up to the very wealthiest among us, had the same right to control the earnings of his own labor as he saw fit, even when the majority thought that this money might be put to better use serving the public interest. In the movement’s view, government was the realm of coercion, and the market was the realm of freedom, of freely chosen, mutually valued exchange (208).

For Buchanan and Koch (and other billionaires who would join him), creating the ideal society in which markets operated freely, unhindered by government—that realm of coercion—meant doing away with all vestiges of a welfare state (including Medicare, Social Security, public education)—what they would call the “rent-seeking” evils of the broad population. If you are among the wealthy—among the “makers”—the collective interests of everyone else are just threats that must be disarmed. The rule of the majority, they believed, is inherently prone to want to take from the rich—through measures like graduated income tax. Taxation, to them, is exploiting the rich.

Unfettered capitalism required curbing the excesses of democracy. Only by undermining the power of collective action—by undermining democracy—could Koch and the oligarchs who shared his vision prosper.

Koch discovers Buchanan’s ideas in the early 1970s and by the 1990s began to “put [them] into operation [so that] they could secure the transformation in American governance he wanted. From then on, Koch contributed generously to turning those ideas into his personal operational strategy to, as the team saw it, save capitalism from democracy—permanently.” [Boldface added]

Libertarian philosophy and the legitimate role of government

Buchanan and Koch followed the philosophy of libertarianism and supported its goals. In Buchanan’s words:

Those who subscribe to the libertarian philosophy believe that the only legitimate role of government is to ensure the rule of law, guarantee social order, and provide for the national defense. That is why they have long been fervent opponents of Medicare, Medicaid for the poor, and, most recently, Obamacare. The House budget chairman, Paul Ryan, has explained that such public provision for popular needs not only violates the liberty of the taxpayers whose earnings are transferred to others, but also violates the recipients’ spiritual need to earn their own sustenance. He told one audience that the nation’s school lunch program left poor children with ‘a full stomach—and an empty soul’” (213).

MacLean identifies Koch-supported threats to these areas (targets?) of American life and culture:

  1. Public Health (213-215)

“Even before Obamacare was enacted, a public choice economist supported by the [Koch-backed] Liberty Fund, Gary M. Anderson, produced a study alleging that the field of public health was, from its beginnings in the early twentieth century, nothing more than ‘a major device used by organized interest groups to redistribute wealth to themselves’” (214).

MacLean argues that the contamination of the Flint, Michigan, water system “was directly attributable to the prodding of the Mackinac Center, one of the first Koch-funded—and in this case, Koch-staffed—state-level ‘think-and-do’ tanks that now exist in all fifty states and are affiliated with the State Policy Network (SPN), also Koch-concocted, to coordinate efforts to prevent state governments from responding to the demands of the ‘takers’” (214-215).

  1. Climate Change (215-217)

Recognizing the threat of overwhelming public support for environmental causes, such Koch organizations as Citizens for a Sound Economy thought to ignore the crisis (any resultant expansion of governmental regulations was a cure worse than the disease (216) and then to understake a “systematic environmental ‘misinformation campaign’” spreading “junk pseudoscience to make the public believe that there is still doubt about the peril of climate change. ..” (216).

  1. Public Education (217-218)

Koch efforts include undermining confidence in public education as well as the power of teachers’ unions. The Koch network supports for-profit charter schools.

  1. Public Prisons (218-219)

Again, the Koch network seek to turn public functions over to private corporations.

  1. Unions (219-220)

The Koch network pursues the goal of undermining unions through the passage of so-called right-to-work laws:

[B]etween 2012 and 2016, guided by Buchanan’s ideas and pushed by the Koch-funded organizations ALEC, the SPN [State Policy Network], and Americans for Prosperity, four former free states passed such laws: Indiana. Michigan, Wisconsin, and West Virginia” [220].

  1. Social Safety Net[220-222]

The Koch network seeks to dismantle “big government” (think federal regulations, services, and protections) and privatize Social Security. The operation of an unfettered free market, they maintain, will solve social problems. MacLean links such policy goals with the undermining Women’s and minority rights (220) and with endangering the plight of the elderly (221-222).

  1. The Constitution (222ff)

Buchanan advocated for a change not merely of rulers but of the rules themselves (184), specifically in the form of Constitutional change. As explained below, the ideal constitution in their view would protect the very wealthy from the predatory tendencies of majority rule.

Constitutional shackles

The strategy that Buchanan envisioned and that the Koch network assimilated and furthered was “to put legal—indeed constitutional—shackles on public officials, shackles so powerful that no matter how sympathetic these officials might be to the will of majorities, no matter how concerned they were with their own reelections, they would no longer have the ability to respond to those who used their numbers to get government to do their bidding. . . . Once these shackles were put in place, they had to be binding and permanent. The only way to ensure that the will of the majority could no longer influence representative government on core matters of political economy was through what he called ‘constitutional revolution.’” (xxvii-xxviii).

Constitution must be changed. In addition to covert attempts to promote privatization and budget constraints during the Reagan years of the late 1980s, “Buchanan never lost sight of the fact that such rearguard assaults on the welfare state would take the movement only so far. What was needed was a way to amend the Constitution so that public officials would be legally constrained from offering new social programs to the public or in engaging in regulation on their behalf even when vast constituencies were demanding them” (184). In Buchanan’s own words, “the problems of our times require attention to the rules rather than the rulers” (184). (See coverage of Pinochet’s Chile and Buchanan’s role as advisor to the imposed constitution there (154-168).

Undermining public trust in government

Buchanan as a public-finance economist (p.42) “chose to build a career by turning a critical eye . . .[on] identifying and analyzing perceived ‘governmental failure,’ so as to make the case that it should not be relied on by default without a sophisticated evaluation of its drawbacks” (42). . . .”Where his interest and genius lay—even if you call it an evil genius—was in his intuitive grasp of the importance of trust in political life. If only one could break down the trust that now existed between governed and governing, even those who supported liberal objectives would lose confidence in government solutions” (42) [boldface added]

Koch’s tactics: “. . . the need for stealth because only piecemeal, yet mutually reinforcing assaults on the system would survive the prying eyes of the media . . . (xxviii)

The Republican party

The Republican Party has been taken over by Koch power. “Their cause, they say, is liberty. But by that they mean the insulation of private property rights from the reach of government—and the takeover of what was long public (schools, prisons, western lands, and much more) by corporations, a system that would radically reduce the freedom of the many. In a nutshell, they aim to hollow out democratic resistance.” (xxx).

Buchanan’s economic thinking [Public Choice theory]

Public choice economics (p.78ff, 185ff)—Buchanan’s euphemistic term for school of analysist hat de-legitimates democratic governance. In a democracy, self-interested politicians will, through taxation and other policies, siphon wealth from the private sector (and the very wealthy) and spend it on the constituents in the public sector (everyone else), distorting markets and taking money from the private sector, where it could be more productive.

To explain why government spending fails “to decline in periods of prosperity, when pump priming was no longer needed, (78),” Buchanan and the Volker Fund’s Gordon Tullock (76) argued in their book The Calculus of Consent: Logical Foundations of Constitutional Democracy that majority decision-making (e.g. democracy) itself was to blame. The book, as MacLean states, was essentially “a work of political theory . . . focused on the political process, arguing that politicians must be understood as rational human beings who served their own self-interests (reelection) above all else. [Buchanan and Tulllock] recast notions such as ‘the common good’ and ‘the general welfare’ as smoke screens that blocked from view the way in which individual public officials and those who sought to influence these officials pursued their own gain through government (78).”

MacLean summarizes their argument:

“that allocating resources by majority decision-making invited voters to group together as ‘special interests’—or ‘pressure groups’—in collective pursuit of ‘profits’ (later called ‘rent-seeking’) from government programs. In turn, candidates for office felt obligated to appeal to these special interests to achieve their own goal of winning elections, so they promised gains to multiple constituencies.

“Translation: Because the money would not come from the politicians’ own pockets, politicians would continue to distribute the money of third-party taxpayers for self-gain as long as it remained in their interests to do so” (p.78).

Public-choice theory takes it further: elected officials would be inclined to support one another’s spending proposals, assuming the favors would be returned, and bureaucrats too would have “an incentive to keep the money flowing, because the more money there was going out, the more important their jobs and the greater likelihood of their own fiefdoms expanding (78).”

The Public-Choice analysis would later appeal to the Kochs. Here is MacLean’s explanation of the libertarian critique of self-governing democracies:

Here, you might say, is the germ of today’s billionaires’ bid to shackle democracy. The Calculus of Consent claimed to show that simple majority voting thus ‘tend[ed] to result in overinvestment in the public sector.’ The public sector battened, Buchanan and Tullock argued, because powerful coalitions of voters, politicians, and bureaucrats could foist most of the cost onto a minority whom they subjected to ‘discriminatory taxation’—or onto the next generation, which inherited the deficits. The syndrome not only wronged minority interests, the authors averred, but also held down private capital accumulation and investment and therefore overall economic growth. Their case yielded a sobering conclusion. ‘There are no effective limits’ in the current rules to the resources that might be steered to public coffers, even when those monies would be ‘more productive if left in the private sector of the economy” (p.79).

It follows that “Majority rule ought not to be treated as a sacred cow. It was merely one decision-making rule among many possibilities and rarely ideal. It tended to violate the liberty of the minority, because it yoked some citizens unwillingly to others’ goals. Any collective with the power to enlist the state for its members’ benefit, Buchanan and Tullock insisted, was illegitimate in ‘a society of free men’” (p.79).

Public-choice economic theory “provided the moral vocabulary for a political economy like that which prevailed in the United States in the late nineteenth-century, when property rights were nearly sacrosanct” (p.80). To the Koch network, this approach to understanding economics would explain the need to (1) undermine democracy and (2) control legislators at every level of government.

If FDR argued that capitalism “would demolish itself and society” unless the government intervened, Buchanan “in stark contrast argued that representative government had shown that it would destroy capitalism by fleecing the propertied class—unless constitutional reform ensured economic liberty, no matter what most voters wanted” (81).

As president of the Southern Economic Association (1964), Buchanan proposed that economists “should cease focusing on problems of resource distribution—what the field called ‘allocation problems’—because the very idea that inequality was a bad thing led to looking for remedies, which in turn led the discipline ][ toward an applied “mathematics of social engineering’” (96-97).

Despite historical evidence that showed “that the late-nineteenth century notion of a pure market was fiction” (97), Buchanan urged economists “to adopt his radical methodological individualism in all that they studied, and assume that individuals always sought personal gain, whether in the economy or in politics. But, he opined, markets were good, whereas politics was bad” (97).

In a nutshell, Buchanan’s model of economics advocated for a free market untouched by intrusions from government:

What Buchanan was doing was leveraging the prestige of economic “science” to reject what several generations of scholarship on the social sciences, humanities, and law had exposed: that the late-nineteenth century notion of a pure market was fiction. That fiction helped emerging corporate elites to shape law and governance to their advantage while devastating the societies over which they held sway by virtue of their wealth and the control over others it could purchase (97).

Buchanan’s laissez-faire economics had been discarded by “founders of the discipline of modern economics (97),” such as Richard T. Ely, a founder of the American Economics Association, who held that the field “no longer permits the science to be used as a tool in the hands of the greedy and the avaricious for keeping down and oppressing the laboring classes” (97).

A core conceptof Buchanan’s economics was Rent-seeking:

Mainstream economists enlisted the concept of “rents” to describe the additional profits a firm might secure without creating additional value for the economy by productive activity—say, by lobbying to extend a patent on an existing product. Buchanan’s team, though, gave the concept a new and distinctive meaning, one in wide use on the right today. They depicted as “rent-seeking” any collective efforts by citizens or public servants to prompt government action that involved tax revenues. And, in their assumption that individuals always acted to advance their personal economic self-interest rather than collective goals or the common good, Buchanan’s school went further, projecting unseemly motives onto strangers about whom they knew nothing. Similarly, Virginia school economists deployed the existing term “special interests” to refer primarily to organized citizens seeking governmental action and occasionally to corporations seeking legislative favor. Their usage of the phrase implied that these people were scheming, trying to extract money from the economic producers through vote gathering and lobbying rather than earning it through personal labor . . . [T]he very terms of their analysis denied such motives as compassion, fairness, solidarity, generosity, justice, and sustainability. (97-98)

[MacLean adds this illustration: “A case in point: Tullock argued that Lyndon Johnson had undertaken the War on Poverty because ‘he probably foresaw a fairly direct exchange of political favor for votes.’ The allegation was the more absurd because the president had known his policies would cost his party it former hold on the white South . . .” [98]]

The big picture, according to Buchanan: An unfettered free market is best for society, but rent-seeking—and the resulting governmental intrusions—interferes.

An example of how the unfettered market could solve societal problems is provided by Milton Friedman during the Goldwater campaign:

Friedman urged reliance instead [of on civil rights legislation] on “free market principles”: prejudice would cause lower wages for black workers, which in turn would reduce production costs for those who employed them, so more employers would hire African Americans, he said—and, presto, “virtue triumph[s]” (90).

Buchanan on campus unrest

The application of “public choice” economic principles to real world issues is illustrated in Buchanan’s response to campus unrest (black power & antiwar activism) at UCLA and Virginia Tech—the subject of MacLean Chapter 7, “A World Gone Mad,” (102-111).

Buchanan’s book (co-authored with Nicos Devletogou) Academia in Anarchy was published by neoconservative Irving Kristol (1970). MacLean’s summary:

The problem with the university . . .began with its distinctive structural features: “(1) those who consume its product [students] do not purchase it [at full-cost price]; (2) those who produce it

[faculty]

do not sell it; and (3) those who finance it [taxpayers] do not control it” (104).

Buchanan saw both the problem and solution in terms of incentive-affecting institutional structures. As MacLean put it:

The cure flowed from the diagnosis. Students should pay full-cost prices, and universities should compete for them as customers. Taxpayers and donors should organize “as other stockholders do” to monitor their investments. “Weak control” by governing boards must end. . .(105)

MacLean’s analysis of Buchanan’s thinking goes further, identifying Buchanan’s analysis of the university’s structure as a “blueprint for the right’s current fight to radically transform public higher education: to turn state universities into dissent-free suppliers of trained labor, run with firm managerial hands and with little or no input from faculty, and at the lowest possible cost to taxpayers (105).” The authors of Academia in Anarchy, “in essence,” argue “that if you stop making college free and charge a hefty tuition, ideally enough to cover the entire cost of each education, you ensure that students will have a strong economic incentive to focus on their studies and nothing else—certainly not on trying to alter the university of the wider society. But the authors were also arguing for something else: educating far fewer Americans, particularly lower-income Americans who could not afford full-cost tuition. And they were telling the businesspeople who tended to dominate governing boards that it was time to get tough with their wards, faculty and students alike (105). [bold added]

Buchanan’s “magnum opus” was his 1975 The Limits of Liberty (discussed below).

Koch’s team was especially attracted to Buchanan in the first place (mid-1970s) because of his analysis arguing against appeasement of campus protests and their shared commitment “to school privatization at every level” (137).


MacLean’s discussion (185ff) of Buchanan’s Nobel Prize in Economics, awarded in October 1986, clarifies the link between his public-choice thinking and the consequences for changing constitutions to achieve market-related goals:

Traditional economic theory illuminated the decisions of producers and consumers in marketplace settings, the Nobel citation noted, but made no effort to explain the behavior of political actors. Buchanan’s attention to political actors’ quests for gains through exchange (of votes, benefits, or coalition partners rather than profits, per se) directed new attention to “the rules of the game,” i.e., the constitution in a broad sense.” These rules, far more than actors’ stated inclinations, “determined the results of political processes, for different types of constitutions could be predicted to produce different results [bold added]. What public choice revealed, in the end, was the fallacy of assuming that market failure could be remedied through the political process, for there, too, people “behave[d] selfishly” (186).

Inference: By changing a constitution—the “rules of the game”—the influence of politicians/government on free markets can be adjusted—as was attempted in Pinochet’s Chile. It would become appealing to set out “to change the incentives of public life over the long term,” (187) so to speak.

Charles Koch’s thinking see esp. in chapter 9 “Never Compromise,” 134ff

Koch’s economic thinking:

Koch subscribed to the idea of Austrian political economist Joseph Schumpeter (1853-1950; Harvard prof. 1930 on) of “creative destruction”: the “gale of creative destruction” describes the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one” [web source].

In the functioning market with its survival-of-the-fittest dynamic, as MacLean describes Koch’s views, “A business man who did not have the savvy to serve the customer ‘should be a janitor or a worker.’ In Koch’s view of the world, that is what a lifelong wage earner was: the less able or the one sentenced to a form of serfdom by his or her own failures” (135)

Views on insufficiently libertarian economists:

Koch referred to [Milton] Friedman and the rest of the post-Hayek Chicago school of economics he led, as well as to Alan Greenspan. As ‘sellouts to the system.’ Why? Because they sought ‘to make government work more efficiently when the true libertarian should be tearing it out at the root.’ They actually tried to help government deliver better results, which could only prolong the disease. Koch believed that only in its ‘radical, pure form,’ without compromise, would the ideas “appeal to the brightest, most enthusiastic, most capable people.’ (Is it any wonder, then, that his allies would nt rather bring down the government than improve it?) (135)

Views on big blue-chip publicly traded companies:

Charles Koch saw these as “ideological impure” and willing to compromise themselves by accepting corporate welfare (137). “…[H]e had assured himself that his actions were solely motivated by principle, by allegiance to a set of ideas that would create a better society” (137).

Views on party politics (146ff)

Charles Koch rejected the GOP, “the party ‘of business accommodation and partnership with government’” (146). In 1978 he invested in the Libertarian Party’s gubernatorial race of Ed Clark, oil company attorney.

Koch’s two-step strategy for reforming America’s governance [193ff]

Following the collapse of Dick Armey and Newt Gingrich’s Contract for

America, Charles Koch turned to James Buchanan for an action strategy to move the libertarian cause forward, over the impediment of the evident contrary will of the majority of voters. The idea was to operationalize Buchanan’s vision to “change the rules, not simply who rules” (193). The pathway forward “could be executed in small, piecemeal steps that on their own polled well enough with the American people that they could win passage without raising the public’s ire. But each step had to connect back with the previous step and forward to the next one so that when the entire path was laid, all the pieces would reinforce the route to the ultimate destination” when it would be “too late for the American public to cry foul” (194). But other steps that wouldn’t go over with the public “had to be presented…as the opposite of what they really were—as attempts to shore up rather than ultimately destroy—what the majority of Americans wanted, such as sound Medicare and Social Security programs” (194). Koch’s belief in the goodness of his “self-appointed mission” left him with “no moral doubts about the duplicity of the plan” (194).

Areas especially targeted by Koch Network [195-196]

In the aftermath or Koch’s $10 million gift to the James Buchanan Center in 1997 and in the glow of the Mont Pelerin Society’s golden anniversary, Buchanan and Henry Manne (George Mason Law School) strategized on how to advance Koch’s—and their—libertarian vision of a better society. They “identified several barriers to economic freedom to be overcome” (195):

  1. Excessive governmental regulation of business, especially the environmental movement.
  2. Government-backed health and welfare, “which impaired ‘the normal workings of labor markets.’ Social Security, Medicare and Medicaid, employer-provided pensions and insurance: all those needed to be phased out—or, rather, over time, converted to individual savings accounts” (195-196).
  3. Graduated income tax must be replaced with a single-rate flat tax. “’Any modern democracy’s tax policy’ was likewise trouble, because the voters’ ‘inevitable egalitarian instincts’ would lead them, if unobstructed, to ‘redistribution’” (196).
  4. Education (“’the most socialized industry in the world’” (196). Public schools nurtured ‘community values, many of which are inimical to a free society’ (196).
  5. Feminism (“found to be ‘heavily socialistic for no apparent reason’” (196).

Theenemy was not “liberalism” but rather “socialism”:

Socialism, as the Mont Pelerin Society members defined the term, was synonymous with any effort by citizens to get their government to act in ways that either cost money to support anything other than police and military functions or encroached on private property rights. By that definition, socialism was indeed alive and well in the 1990s. (196)

Chile under Pinochet: Buchanan’s model for putting democracy in chains

Chapter 10, “A Constitution with Locks and Bolts” (154-168) recounts how Chile, in the aftermath of Pinochet’s right-wing coup toppling the elected socialist Salvador Allende in 1973, implemented the programs of libertarian Chicago-school economists like Milton Friedman and the constitutional changes championed by James Buchanan to transform a nation in ways that model how the Koch Network seeks to transform America:

Structural reforms: “The Seven Modernizations” of Minister of Labor José Piñero (155-6) “Through these combined measures, education, health care and social insurance, once provided by the state, ceased to be entitlements of citizens” (157).

Privatization

Social Security (individual accounts w/ private investment firms

Health care

“The opening of agriculture to world market forces” (157)

K-12 school voucher program

Deregulation

Limits on regulatory powers of central government

State-induced fragmentation of group power

Industry-wide labor unions were banned—loss of collective bargaining

Transformation of the Judiciary

Transformation of higher education:

“In higher education, the regime applied the counsel of Buchanan’s book on how to combat campus protest [see Academiain Anerachy]. As the nation’s premier public universities were forced to become ‘self-financing,’ and for-profit corporations were freed to launch competitors with little government supervision, the humanities and liberal arts were edged out in favor of utilitarian fields that produced less questioning. Universities with politically troublesome students stood to lose their remaining funding” (157).

Constitutional changes in Chile [157ff]:

Buchanan was brought to Chile (1980) to consult with leaders of the Pinochet regime; his Limits of Liberty and other public choice works were translated into Spanish. His contacts included Chilean members of the Mont Pelerin Society (Carlos Francisco Cáceras, a business school dean and “one of the most antidemocratic members of the Council of State” (158)) and government insiders (Chilean Minister of Finance Sergio de Castro). In Buchanan’s words, “We are formulating constitutional ways in which we can limit government intervention in the economy and make sure it keeps its hand out of the pocket of productive contributors” (158).

As MacLean puts it:

Chile emerged with a set of rules closer to [Buchanan’s] ideal than any in existence, built to repel future popular pressure for change. It was “a virtually unamendable charter,” in that no constitutional amendment could be added without endorsement by supermajorities in two successive sessions of the National Congress, a body radically skewed by the overrepresentation of the wealthy, the military, and the less popular parties associated with them. Buchanan had long called for binding rules to protect economic liberty and constrain majority power, and Chile’s 1980 Constitution of Liberty guaranteed these as never before” (161).

Specifics:

–Government spending is restricted by balanced budget requirement—the necessary taxes must be collected first: “no more Keynesian deficits under any circumstances” (159).

–An independent central bank must be enshrined in the constitution denying government the authority to set monetary policy “because doing so would surely lead to inflation” (159).

–Require supermajorities of legislative bodied to enact any changes of substance.

–Guaranteed power of Chile’s military over government in near term and curtailed the power of non-elite citizens over the long term (159).

–Instituted “a cunning new” electoral system that permanently “overrepresented the right wing party to ensure ‘a system frozen by elite interests’” (160).

–Labor unions restricted from political activism.

Aftermath for Chile (164ff): Economic crisis, increase in poverty and social inequality / concentration of wealth led to massive political organizing that voted Pinochet out but there remains difficulty amending constitution & continued overrepresentation of right-wing voters, loss of retirement-savings security. Despite this, “Chile is held up today as an exemplary ‘economic miracle’ by the Cato Institute, the Heritage Foundation, and others on the U.S. right” (166). The educational system was degraded, with college tuition the most expensive on the planet, relative to per capita income (167). Huge revelations of corruption by corporations benefiting from privatization of pensions (167). Buchanan’s “durable locks and bolts” built into Chile’s Constitution lie behind current demonstrations and protests in Chile, designed to reform the constitution. (New Yorker headline, 10 Dec 2019: “As Protests Rock Chile, the People Consider Rewriting Pinochet’s Constitution.”)

Koch-supported entities (partial list)

Cato

Heritage Foundation

Americans for Prosperity

Citizens for a Sound Economy

FreedomWorks

The Club for Growth

The State Policy Network

The Competitive Enterprise Institute

The Tax Foundation

The Reason Foundation

The Leadership Institute

Charles Koch Foundation

Koch Industries

Mercatus Center (George Mason U.)

Institute for Humane Studies (George Mason U.)

For complete list, see UnChainDemoracy.org

Quotations (Misc):

On John C. Calhoun, So. Carolinian, Vice President 19825-1832:

“President Andrew Jackson, the leader of Calhoun’s political party, suggested that the man be hung for treason. That was imprudent. But there was a logic to it, and not only because Calhoun was so unlikeable. His ideas about government broke sharply from the vision of the nation’s founders and the Constitution’s drafters, and even from that of his own party. He wanted one class—his own class of plantation owners—to overpower the others, despite its obvious numerical minority” (p.3).

To protect his region’s distinctive political economy, anchored in the treatment of black people as property, Calhoun had argued that state governments had the right to refuse to abide by those federal laws that they found odious. He based his case on the Tenth Amendment of the Constitution, which specifies that “the powers not delegated to the United States by the Constitution, nor prohibited by it to the State, are reserved to the States respectively, or to the people.” Fearing a rising national antislavery majority in the North and the West, Calhoun insisted that the authority for the U.S. Constitution came not from the American people collectively but from the states that consented to the Union. Therefore, he deduced, state leaders had the right to “interpose” their authority between their residents and Washington (20).

On taxation:

To Buchanan, what others described as taxation to advance social justice or the common good was nothing more than a modern version of mob attempts to take by force what the takers had no moral right to: the fruits of another person’s efforts. In his mind, to protect wealth was to protect the individual against legally sanctioned gangsterism (xxiv).

On “coercion of the minority”

Buchanan believed . . .that if what a group of people wanted from government could not, on its own merits, win the freely given backing of each individual citizen, including the very wealthiest among us, any attempt by that group to use its numbers to get what it wanted constituted not persuasion of the majority but coercion of the minority, a violation of the liberty of individual taxpayers” (xxiv).

How Senator Byrd & Virginia’s ruling oligarchy kept order:

Virginia’s oligarchs maintained their control not with night rides but with carefully designed rules. They showed little tolerance for the vigilantism freely practiced in the Deep South. In fact, when Byrd was governor [1926-1930], the state effectively outlawed the Ku Klux Klan and all but ended lynching. The rulers understood, better than others, how clever legal rules could keep the state’s voter participation among the lowest in the nation relative to population, and its taxes among the lowest in the nation relative to wealth. Above all, the rules served to hold in check the collective power of those who might want their democracy to do more (p.23).

For forty years, in fact, the Byrd Organization had to win only about 10 percent of the potential electorate to hold on to power (p.23).

Buchanan’s exposure to Knight’s philosophy of economics at Chicago:

Buchanan took from Chicago school economics a conviction that socialism in any form—that is, any group or government meddling with the market—was a sentimental and dangerous error. For the newly minted libertarian economist, far-reaching individual marketplace freedom was the fairest and surest route to prosperity. Each person should be allowed to pursue his or her self-interest without interference from those with different values and goals and without direction by governing elites who flattered themselves that they knew what was in others’ best interests (36).

Hayek’s Road to Serfdom’s thesis:

Hayek took pains to persuade readers that the free market was not simply an efficient way of producing economic progress. Rather, the price signals of supply and demand provided the only means yet discovered of coordinating the desires and actions of millions of freely acting individuals, without government compulsion, in what Hayek called a “spontaneous order.” Without “freedom in economic affairs” there could be no lasting “personal and political freedom.” There was no other choice; then: “socialism means slavery” (p.39).

Buchanan’s evolving view of markets and government (in line with Hayek and von Mises):

Buchanan in particular wanted to help others see that the market could coordinate millions of individual projects far better than the government could. The market was not simply the most efficient means of allocating goods and services but also the best social decision-maker, one that might allow escape from the contentious political realm. To look to politics to promote one’s interpretation of fairness, Buchanan came to argue, was to enable an establishment-controlled economy and coerce others. But how to spread that view in an era in which Americans—indeed, people the world over—distrusted markets after the Great Depression and the global conflagration it set off, and found government protection beneficial for more and more? (41).

How did the right-leaning business class view Roosevelt’s legacy and the structure of the post-Depression economy? MacLean gives this in her discussion of Univ. of Virginia President (and former congressman) Colgate Darden, son in law of plutocrat Irenee DuPont:

Colgate Darden was less socially right-wing than his father-in-law, but he shared [Buchanan’s] disdain for how powerful labor unions, civil rights ][ organizations, and others were looking to the federal government to bring about what they depicted as social justice. As a congressman, Darden himself had voted against a core component of “collectivism”: the Social Security Act. Darden understood—indeed, could recite chapter and verse of—the mantra of right-leaning business leaders regarding the encroachment of the federal government into their private business affairs. To their minds, they, not the federal government or their employees, had made the U.S. economy into a world powerhouse. It made them irate to be taxed—at higher rates than others, no less—for programs they viewed not only as bad for the economy but also as infringements on their personal liberty. How dare federal officials tell them how to manage their employees? Why should they pay into unemployment and retirement funds to support those who failed to save in personal accounts? Such matters should not be the business of the federal government. They were for men of property to decide as they saw fit (46-47).

Related Reading: Heather Cox Richardson:

Historian and daily blogger Heather Cox Richardson, in her “Letters from an American 22 Dec. 2019” explains the ideological divide that pits the Koch network against much of the rest of America:

One of the things that flew under the radar while we focused on impeachment in the last few days was that on Wednesday, a federal court struck down the central pillar of the Affordable Care Act (Obamacare). Two justices, one appointed by Republican George W. Bush, and one by Republican Donald Trump, said that the part of the law requiring people to have insurance—the “individual mandate”—was unconstitutional. A third, appointed by Democrat Jimmy Carter, disagreed. The issues surrounding this decision are complicated, but at stake is whether or not the fact the court found this aspect of the law unconstitutional will lead to the entire law being declared unconstitutional. 

This has a much larger meaning. 

It is, in fact, a question about the role of government in American society.

In the 1930s and 1940s, after the unregulated capitalism of the 1920s had sparked the Great Depression, Americans rallied around the idea that the government had a duty to keep the economic playing field level between those at the bottom of society and those at the top. Under Democratic President Franklin Delano Roosevelt, the government began to regulate business, provide a basic social safety net, and promote infrastructure. It regulated our financial system to guarantee no one could game it based on whom they knew. We got new laws to regulate minimum wages and maximum hours for workers, workplace safety, Social Security and welfare relief. We got bridges and roads and schools and libraries. 

Under this “New Deal for the American people” as FDR put it, the nation thrived. Business boomed, wealth became far more evenly distributed than it had been in the 1920s, and standards of living rose. Americans of all parties liked the new activist government that had restored American prosperity after the Depression. This way of looking at the world became known as the “liberal consensus,” and virtually all Americans thought that government intervention in the economy to keep the wealthy from abusing their workers and taking the majority of the nation’s capital, as they had done in the 1920s, was a good thing. 

But not everyone agreed. Some clung to the system of the 1920s, in which businessmen had run the government. These folks worried that government intervention in the economy would keep men from running their businesses as they saw fit. Between regulations and taxes they would be unable to accumulate capital as they otherwise would be able to, and would be less able to invest in new technologies and endow museums and libraries. They saw themselves as enlightened patriarchs protecting their workers—so long as those workers behaved—and believed government intrusion into their affairs was essentially a form of communism that would destroy American individualism.

So they set out to destroy the liberal consensus. Gradually they took over the Republican Party. Now they control it. 

Americans have not been able to wrap their heads around this ideological conflict. They assume that the policies of the liberal consensus which have underpinned our lives since the 1930s– Social Security, well-maintained bridges, and food safety laws, for example– will always be here. The people who hated the liberal consensus have always been a small minority: most Americans like government regulations, a social safety net, and infrastructure. We disagree about how those things should be done, but generally we agree that they should exist. Even anti-government activists famously say things like “Get your government hands off my Medicare.” 

The people in charge of today’s GOP reject this premise altogether. They believe that an activist government, supported by tax dollars, weakens American individualism and sets the nation back. Even if voters want things like national healthcare, they oppose such activism on the grounds that anything not expressly set out in the Constitution is off limits. This strict construction, as it is called, severely limits the role of the government in national affairs. 

In addition to strict constructionism, GOP leaders combat government activism through tax cuts, like the ones Trump’s Republicans passed in 2017. Tax cuts keep the national budget deeply in the red, enabling them to accuse Democrats of being fiscally irresponsible when they want money for national programs. The plan is not to balance the budget, as they argue; it is to guarantee that we get rid of the activist government they believe is weakening America. 

Most people don’t recognize that there is a larger ideology behind the policy debates over taxes or health care or business regulations that we hear about. I have written here before about the recent Gundy v. United States decision, in which Supreme Court Justice Brett Kavanaugh signaled his willingness to help the other four conservatives on the Court dismantle the delegation doctrine, adopted by the Court during the New Deal, saying the government can delegate policy making to bureaucracies. Overturning that doctrine would destroy the modern administrative state. Congress, rather than departments and bureaus, would have to debate every single aspect of every single regulation. 

The reexamination of the delegation doctrine, like this latest court decision over the Affordable Care Act, is a front in the struggle between two ideologies: the one saying that the government has a role—any role— in keeping the playing field level in the American economy, and the other, saying it absolutely does not and that we must trust our leaders to do what is best for all of us. 

——

Source: https://heathercoxrichardson.substack.com/p/december-21-2019

Notes: 

Not impeached: https://www.cbsnews.com/news/is-donald-trump-impeached-white-house-considers-arguing-no-articles-of-impeachment-not-delivered-to-senate/?ftag=COS-05-10aaa0g&taid=5dfeb65130ffb60001e66d30&utm_campaign=trueAnthem:+Trending+Content&utm_medium=trueAnthem&utm_source=twitter

Document dump: https://www.documentcloud.org/documents/6590667-CPI-v-DoD-Dec-20-2019-Release.html#document/p45/a541209

Witnesses: https://www.cnn.com/2019/12/15/politics/democrats-senate-impeachment-trial-structure-letter/index.html

Paywalled, but a synopsis: https://www.nytimes.com/2019/12/21/us/politics/white-house-pentagon-ukraine-aid.html

ACA: https://www.nbcnews.com/think/opinion/obamacare-ruling-voiding-part-health-care-law-joke-s-really-ncna1104976

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Trails to pursue

James Buchanan, Better Than Plowing and Other Personal Essays, Chicago 1992.

B. tells of his background & early days. (see p.29ff).

David Daley, Ratf**ked: The True Story Behind the Secret Plan to Steal America’s

Democracy ( xxx and footnote 25 on 243)

F.A. Harper, Why Wages Rise, 1957. Free-market primer that inspired the thinking of the

young Charles Koch (130;

Steven Kelman, “’Public Choice’ and Public Spirit,” in The Public Interest 87 (March

1987) (xxxii and footnote 31, p.244) –Source on Buchanan’s anti-government stance. “Buchanan believed that government failed because of bad faith: because activists, voters, and officials alike used talk of the public interest to mask the pursuit of their own personal self-interest.” (xxxii)

Jane Mayer, Dark Money and “Covert Operations,” New Yorker Aug.30, 2010 (see footnote

8 on p. 241)

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