Democracy in Chains (part 3)

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Here we turn to some efforts to implement the libertarian views discussed in the last post. Their goal is primarily to protect and expand the freedom of the private sphere by placing limits on collective action in the public sphere. MacLean sees them as potential dangers to democratic governance.

The Chilean connection

The undemocratic potential of this program is best seen in James Buchanan’s support for the Pinochet regime in Chile. In 1973 General Augusto Pinochet overthrew the democratically-elected government of Salvador Allende. Buchanan, along with some other Chicago-trained economists like Milton Friedman, became an advisor to the Pinochet regime. What he had in mind went far beyond narrow economic goals like fighting inflation. He saw an opportunity to enact the kind of broad reforms he wanted for the United States, along the lines of “privatization, deregulation, and the state-induced fragmentation of group power.”

The Pinochet regime banned industry-wide labor unions. It privatized the social insurance system, essentially replacing company contributions and government-guaranteed benefits with the expectation that workers save for their own retirement. It created a school voucher system for primary and secondary education.

The Pinochet plan for higher education sounds exactly like what Buchanan recommended in Academia in Anarchy:

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.

Buchanan also advised the regime on how to rewrite the constitution to limit the power of the majority to undo the changes. For example:

A cunning new electoral system, not in use anywhere else in the world and clearly the fruit of Buchanan’s counsel, would permanently overrepresent the right-wing minority party to ensure “a system frozen by elite interests.”…It also barred advocating “class conflict” or “attack[ing] the family.”

The economy did grow rapidly, at least for a time, but economic inequality and poverty got worse. “A nation that once stood out as a middle-class beacon in Latin America now has the worst economic inequality it has seen since the 1930s.” While voices on the right continue to hail Chile as an economic success story, MacLean and other critics see Pinochet’s main accomplishment as greater wealth and freedom for the few at the expense of the many. After being voted out of office, he would go on to be indicted on many counts of human rights abuses (thousands were tortured or killed), embezzlement and tax evasion. (He died before he could be convicted, however.)

As for the new retirement system, it:

proved so disastrous that after the dictatorship ended, a nearly universal consensus emerged on bringing back key elements of social insurance. The system of individual accounts proved a huge boon to the financial corporations that received the automatic deductions from workers’ paychecks. The companies exploited that access mercilessly, achieving an average annual profit rate of more than 50 percent over a five-year period, thanks, not least, to their taking between a quarter and a third of workers’ contributions as fees.

MacLean links these failures directly to the bias in Buchanan’s philosophy. The problem was that “he valued economic liberty so much more than political freedom that he simply did not care about the invitation to abuse inherent in giving nearly unchecked power to an alliance of capital and the armed forces.” To this day, many conservatives regard Chile as a model of freedom for other countries to emulate.

I cannot resist adding that we now have a U.S. president who also professes great admiration for an authoritarian foreign leader associated with a wealthy oligarchy. How few of today’s Republicans have a problem with that is troubling.

Organizing at home

The web of connections that has developed between the Virginia School of Political Economy and a host of far-right organizations is very elaborate, and I can only hit some of the highlights here.

During the 1970s, Buchanan and his close associates began building relationships with conservative politicians, especially then California Governor Ronald Reagan. They worked with Ed Meese, Reagan’s chief of staff and later U.S. Attorney General, to start the Institute for Contemporary Studies to connect academics, politicians and businessmen. The ICS in turn worked closely with Henry G. Manne’s Law and Economics Center at the University of Miami, which conducted summer workshops to train legal experts from all over the country in libertarian legal thought. Private foundation money was available to fund academic positions for right-thinking scholars. Some law schools, the University of Virginia being one of the first, became “bastions of Manne’s approach to the law.”

One of the financial contributors to this effort was Charles Koch. He had inherited a successful business at the age of 32 and grown it into America’s second-largest privately held company. Like his father, who was a cofounder of the John Birch Society, Charles Koch held views far to the right of other conservatives of his time. He regarded thinkers like Milton Friedman and Alan Greenspan as sellouts because they wanted, in his words, “to make government work more efficiently when the true libertarian should be tearing it out at the root.”

Koch set up his own Charles Koch Foundation in 1974, from which came the Cato Institute in 1976. According to MacLean, the arguments put forth by this libertarian think tank followed closely those of James Buchanan and his associates.

Buchanan at George Mason

In 1981, Buchanan moved to George Mason University, where his presence attracted millions of dollars in funding. He created the new Center for the Study of Public Choice, helping the university gain a reputation as “the Pentagon of conservative academia,” in the words of one Wall Street Journal writer. George Mason was in Fairfax County, Virginia, in convenient proximity to Washington, where Ronald Reagan was sworn in as President the same year.

Libertarians had high hopes that the Reagan administration would dismantle the “collective order,” but they were largely disappointed. Reagan did cut taxes and roll back some government regulations, but he did not seriously take on the many constituencies that relied on public programs. Without politically impossible cuts in domestic spending, Reagan’s tax cuts and higher military spending dramatically increased the federal deficit.  Many libertarians concluded that if they wanted to put an end to popular programs like Social Security, they would have to proceed cautiously and quietly, without publicizing their real objectives. They could, for example, undermine support for Social Security by questioning its long-term financial stability and by setting one group against another: tell the young that they are paying in more than they will ever get out, and tell higher earners that their taxes will have to be raised to support lower earners.

In 1985, George Mason University acquired a law school and brought in Henry Manne to serve as its dean. It soon became known for its advocacy of unregulated corporate capitalism and its criticism of environmental and consumer regulations in particular. By 1990, over 40% of federal judges had received Manne’s summer training in how to apply free-market principles to legal decisions.

In 1997, Charles Koch pledged $10 million to support a new James Buchanan Center for Political Economy, formed by merging the Center for the Study of Public Choice with another conservative center, the Center for the Study of Market Processes. The governing board of the new center was co-chaired by Koch and Buchanan. In later years, even Buchanan became concerned about how much partisan political activity the center was engaging in–technically it could lose its status as a non-profit charity if it went too far in that direction–but his complaints to the university administration were to no avail. He eventually lost control of the center that bore his name and retired.

As I write this, the New York Times is reporting that the Senate is considering the nomination of Neomi Rao to head the Office of Information and Regulatory Affairs, “placing her at the heart of President Trump’s politically contentious agenda to overhaul government rules and regulations.” Rao is currently a law professor at George Mason, which recently received another $10 million from the Charles Koch Foundation, one condition being that the university name the law school after Antonin Scalia, which it did. The article mentions that foundations affiliated with Koch have donated at least $50 million to George Mason in the past decade. Many faculty and students are troubled that a rich donor with a political agenda can so strongly shape the curriculum of a public university. Advocates of free markets ought to ask themselves if they want a university to be a free market in ideas, with each set of ideas evaluated on its merits, or whether they want certain ideas to prevail over others because they are better funded. That is just one aspect of the larger question of whether we want an open, democratic society or an oligarchy where might makes right.

The ascendancy of the far right

MacLean ends her book with a number of examples of how radical-right operatives backed by big money are making their mark on American government. All of the organizations mentioned below have been well funded with Koch donations.

The State Policy Network is a collection of state-level think tanks, of which Michigan’s Mackinac Center for Public Policy is the largest. It was the Mackinac Center that pushed for legislation allowing the governor to appoint emergency managers for financial troubled cities like Detroit, Benton Harbor and Flint. “The powers of these unelected managers to impose austerity measures would be vast, including the authority to unilaterally abrogate collective bargaining agreements, outsource services, sell off local resources to private companies, and change suppliers at will.” Flint’s emergency manager made the decision to save money by switching the city’s water supply to a source that was not protected from lead contamination.

The State Policy Network has also pushed for spending cuts for public education. One example is MacLean’s own state and mine. “North Carolina, which during the twentieth century, through wise investments in public education, had climbed from the poorest of southern states to one of the best-off, now ranks beneath Mississippi in per-pupil spending.”

The Cato Institute and other libertarian think tanks carried out a “misinformation campaign” to deny the scientific consensus on climate change, while the Club for Growth funded primary challenges against any Republican who failed to go along. “By 2014, only 8 of 278 Republicans in Congress were willing to acknowledge that man-made climate change is real.”

The American Legislative Exchange Council writes model laws for adoption by the states. Between 2010 and 2012, legislators backed by ALEC introduced over 180 bills putting new restrictions on voting. Republican legislators have also been passing “preemption laws” that stop cities from passing laws that businesses don’t like, such as measures to provide broadband internet access, raise the minimum wage, combat gay or transgender discrimination, or restrict fracking.

The Reason Foundation promotes the privatization of prisons, with funding from both Charles Koch and the Corrections Corporation of America. The CCA stands to profit from the construction of new private prisons and from tough sentencing laws to keep them full.

In The Limits of Liberty, James Buchanan expressed his dismay that public employees like teachers or social workers could benefit from promoting the programs from which they derived their income. Libertarians seem much less bothered by such feedback loops when they involve private enterprises. Once they are unmasked by public choice analysis, public institutions are exposed as sinister schemes for personal gain at public expense. But privatized institutions like for-profit prisons, or for-profit colleges receiving most of their revenue from student loans are okay, even if they are explicitly set up for private gain at public expense. Somehow their freedom to promote their own interest with money is more legitimate than the freedom of a public employee union to promote public services by organizing to influence public opinon. What’s “public” is really just for private good, but what’s “private” is really for the public good. This convoluted reasoning explains why someone like Education Secretary Betsy DeVos can be both unsupportive of public education and complacent about students being ripped off by private, for-profit colleges. She is currently being sued for failing to implement regulations to protect such students.

How fair a description?

In calling attention to the ascendancy of radical views within today’s Republican Party, MacLean does not make subtle distinctions among diverse perspectives. Not everyone in the academic centers or think tanks she mentions thinks the same. There is always the danger of coloring too many people with the same brush and exaggerating the extent of a far-right conspiracy. For example, MacLean has been accused of making Tyler Cowen, “the man who succeeded Buchanan and now directs the cause’s base camp at George Mason, the Mercatus Center,” sound more extreme than he is, by taking quotations from his work out of context.

Nevertheless, I think that the book gives us fair warning about a dangerous combination of great wealth and radical political thought. I agree with MacLean that this combination has moved the Republican Party farther to the right than at any time since the early 1900s. I believe that under conditions of great inequality, one group or institution’s excessive liberty can come at the expense of another’s liberation. And excessive hostility toward government can easily become hostility to the democratic majority who depend on government to protect their fundamental human rights and expand their opportunities.

In the end, MacLean convinces me of her central point. The same core ideas that supported oligarchy in the ante-bellum South and in 1950s Virginia can do so in the nation as a whole:

The United States is now at one of those historic forks in the road whose outcome will prove as fateful as those of the 1860s, the 1930s, and the 1960s. To value liberty for the wealthy minority above all else and enshrine it in the nation’s governing rules, as Calhoun and Buchanan both called for and the Koch network is achieving, play by play, is to consent to an oligarchy in all but the outer husk of representative form.



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