Democracy in Chains (part 2)

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Nancy MacLean argues that James M. Buchanan’s theory of political economy has provided the primary intellectual foundation for a right-wing movement that now threatens American democracy. I’ll describe that foundation here, and then in the next post go on to discuss how big donors liked Charles Koch helped translate it into political action.

The myth of the public good

In 1962, Buchanan published The Calculus of Consent: Logical Foundations of Constitutional Democracy, with co-author Gordon Tullock.

Buchanan refused to take at face value concepts like the “public good” or the “general welfare.” He wanted to know how government decisions are actually made. Who makes them? Who influences the decision-makers? Who wins; who loses? How do public decisions affect people with different economic interests? Do they really advance the cause of freedom?

These are all legitimate questions, and Buchanan’s work on “public choice” theory would eventually earn him the Nobel Prize in Economic Sciences in 1986. However, underlying his theoretical interests was a strong ideological hostility to the public sector and a deep-seated conviction that government was becoming an increasing threat to the free-market economy.

Buchanan noticed that popular support for increased government spending remained high not only in bad times, when a stronger economic case could be made for it, but in good times as well. As MacLean summarizes his concern, “simple majority voting thus ‘tend[ed] to result in overinvestment in the public sector….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.'”

Buchanan believed that the political system failed to place adequate constitutional limits on the majority’s ability to claim more and more benefits for themselves at the expense of economic liberty and economic growth. He looked back with some appreciation to the “Lochner era” of constitutional law, the forty-year period from 1897 to 1937. Then the Supreme Court had interpreted the Constitution as precluding the federal government from doing things like regulating wages and work hours.

The coercive state

In 1975, Buchanan published The Limits of Liberty: Between Anarchy and Leviathan. The main premise was reasonable enough, that human liberty depended on finding some middle ground between completely unbridled self-interest and government-imposed order. Without any government rules and protections, people could just take what they wanted instead of earning it by their labor. Too much government, and people wouldn’t be free to achieve and to enjoy the fruits of their success.

A strong anti-government bias may have prevented Buchanan from reaching a happy medium. He was most intent on limiting the power of government, since he viewed state power as inherently coercive. The economy, on the other hand, was the realm of voluntary exchange, which for the sake of liberty needed to be left alone as much as possible.

I think MacLean puts her finger on the essential problem with this reasoning when she says that “libertarians steadfastly refused to acknowledge wealth as a form of power.” As a sociologist, I would argue that power exists in some form in every social institution. It can take the form of legitimate authority if it is used on behalf of others, as when parents exert power for the good of their children; but it can take the form of domination if it is used against others. Often it is both: authority over an in-group for the purpose of more effectively dominating an out-group, as in wartime.

From that perspective, to regard public power as inherently coercive while regarding private economic power as benign is arbitrary and one-sided. Concentrating political power through voting can lead to domination, but so can concentrating economic power through corporate organization. If a business pollutes the air or water, doesn’t that force people to breathe dirty air or drink dirty water? If it discriminates against a class of workers, doesn’t that force those workers into a restricted labor market with fewer economic opportunities. If it pays subsistence wages, doesn’t that force families to go without health insurance? The economically powerful have always wanted to claim that what is good for them is good for all. By treating the power of the slave-owner as benign (since it was blessed by Providence), Calhoun could conclude that “slavery is…favorable to personal and national liberty.” Libertarians like Buchanan want to treat the power of corporations as benign (since it is blessed by the free market), and thus conclude that corporate power is favorable to personal and national liberty, no matter how concentrated and unregulated that power may be. Nowadays some multinational corporations command more resources than some national governments, but in Buchanan’s view only government is the Leviathan to be feared.

Buchanan singled out the Great Depression as the turning point when government began to infringe on liberty by over-managing the economy and allocating too much of the wealth. While many economists praise the post-New Deal era as a “golden age” when the middle-class expanded and equality increased, Buchanan praises the pre-Depression period of greater inequality as the peak of economic liberty. MacLean notes that Buchanan ignores the possibility that the extreme inequality and lack of economic regulation of those pre-Depression years might have had something to do with the severity of the Depression itself.

The threat of majority rule

One of the worst crimes of the coercive state, in Buchanan’s view, is taxing the wealthy at a higher rate than the middle class or the poor. As far as he was concerned, that is just the majority using its collective power to take something from a wealthy person who prefers not to pay for whatever the state wants to spend money on. He could see no difference between that and “the thug who takes his wallet in Central Park.”

I would say that this argument too is reminiscent of Calhoun in its portrayal of the wealthy as the real victims of social conflict. Their power is a benign expression of freedom, but the state’s attempt to curb that power in order to enhance some larger group’s freedom is coercive and unjust.

Buchanan also wrote an essay called “The Samaritan’s Dilemma,” in which he questioned any transfer from the haves to the have-nots, even for charitable purposes. The danger was that the recipients would take advantage of the givers’ good intentions by doing less for themselves than they otherwise would. “By this logic, what seemed to be the ethical thing to do–help someone in need–was not, after all, the correct thing to do, because the assistance would encourage the recipient to ‘exploit’ the giver rather than to solve his own problems.”

We have probably all heard some conservatives attributing this country’s high rate of poverty to overly generous welfare programs that encourage “welfare dependency.” If that were true, we would expect countries that provide more public assistance than we do to have even more persistent poverty. Instead, they usually have greater equality and less poverty. In my recent discussion of Viking Economics, I discussed how Nordic countries make benefits such as health insurance universal, and thus avoid giving people incentives to remain poor or unemployed. They achieve better results than we do with more generous government, not less.

Buchanan worried that the American political order had already moved so far in the direction of majority power that the changes were irreversible. Why would the majority now give up all the benefits they have voted for themselves? “How can the rich man (or the libertarian philosopher) expect the poor man to accept any new constitutional order that severely restricts the scope for fiscal transfers among groups?” he asked. He concluded his book on a pessimistic note: “Despotism may be the only organizational alternative to the political structure that we observe.” So the critic of government coercion ends up hinting that coercion may be the only way to save the democratic state from itself.

By 1975, when Buchanan published that, he was already working with Charles Koch and other wealthy donors for political changes that would curb the power of the democratic state. They would soon be achieving at least some of the results they craved.

Continued

 

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