Democracy in Chains

by Nancy MacLean

  In the view of the libertarian economist, Jesus was mistaken. Conscripting the Good Samaritan story, Buchanan made his case that “modern man [had] ‘gone soft’”: he lacked the “strategic courage” needed to restore the market to its proper ordering. 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. Buchanan used as an analogy the spanking of children by parents: it might hurt, but it taught “the fear of punishment that will inhibit future misbehavior.”58

  Similarly, “the potential parasite” needed curbing to prevent efforts to “deliberately exploit” society’s “producers.” More than any other piece, this article captured the stark morality of libertarianism, offering, as it were, the cause’s prescription for how America’s third century could reverse the “soft” errors of its second. The trick, though, was to figure out how to bind the foolish Samaritan, qua government, from giving out perverse incentives—how to shackle the Samaritan, so to speak. As Buchanan noted in conclusion, “welfare reform” was “only one of many applications, and by no means the most important.”59 It was true: his eyes were set on much bigger game.

  While Cato advocated a wide-ranging libertarian policy agenda in the late 1970s, another Koch-supported think tank, the Reason Foundation, concentrated on making the case for selling off public property and outsourcing public services to private corporations. The effort built on the popularity of a countercultural libertarian magazine called Reason that was started in 1968 by an Ayn Rand devotee in a dorm room with a ditto machine.60 It was then taken over by Robert W. Poole Jr., an MIT-trained engineer of a cohort after Koch’s who learned of libertarianism in high school. In college, he joined Young Americans for Freedom and went door-to-door for Barry Goldwater in 1964 as he “devoured Atlas Shrugged” and converted to radical libertarianism. He moved to Santa Barbara, California, and took a job “with a local ‘think tank,’” the phrase being new enough in 1972 to merit quotation marks. For years he published Reason out of his home as a hobby.61

  But as stagflation set in at mid-decade, Poole grew more serious about influencing public policy. He published a practical how-to pamphlet in 1976 called Cut Local Taxes—Without Reducing Essential Services. It took dead aim at the growth of public sector employment as a cause of increasing taxes and spending, and called for contracting out to private companies to contain costs.62 Ron Paul, a Libertarian Party member of Congress, recommended Poole’s approach as wiser than the old “ideological purity” that simply called taxation “theft.” To make the appeal nonpartisan, Poole also secured a blurb from U.S. senator William Proxmire, who called the piece “must reading” for public officials. The Wisconsin Democrat had just begun giving Golden Fleece Awards each month to embarrass government agencies for foolish spending.63

  In the wake of the pamphlet’s success, Poole began reading about the Fabian Society in Edwardian England, whose public-debate-changing members included H. G. Wells, George Bernard Shaw, and Virginia Woolf. Poole was taken with the Fabian strategy of effecting small changes that would in time lead to socialism, but he gave the idea a Buchanan-like spin to the right. “I figured that if you could gradually build up to socialism, you could probably undo it, dismantling the state step by step,” he later told an interviewer. You could hack away at government, that is, “by privatizing one function after the other, 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.”64 “Selling” was perhaps the key word.

  Why wait for popular opinion to catch up when you could portray as “reform” what was really slow-motion demolition through privatization? On the tenth anniversary of Reason, in 1978, Poole convened a strategy session. Every man in the room looked to Charles Koch when talk turned to funding an infrastructure of “professional libertarians,” for who else could? The Wichita CEO was willing to commit the resources needed, he said, but with one condition: “that libertarians must remain uncompromisingly radical.” They had to forswear “the temptation” to “compromise” with those currently in positions of power. Any such conciliation, Koch warned, would “destroy the movement.”65

  With Koch’s backing, Poole “started working full-time for the cause,” enlisting “economic reasoning and evidence.”66 Poole recruited an advisory board of some two dozen libertarian scholars, including F. A. Hayek, and set to work to advance privatization. The advocacy was no-holds-barred, as Koch had demanded: a sample press release was headlined “Abolish—Don’t Reform—Regulatory Agencies.” The enterprise’s biggest splash was a full-length 1980 book by Poole called Cutting Back City Hall, which recommended outsourcing to private corporations and imposing new user charges for access to public goods such as parks. The Reason Foundation was emerging as the nation’s premier voice for privatization, not only of public education, through voucher plans like Virginia’s, but also for every conceivable public service, from sanitation to toll roads.67

  • • •

  Meanwhile, as the Cato Institute and the Reason Foundation set to work, Buchanan was hired by yet another Koch-backed organization, the Liberty Fund, to run what became annual summer conferences for the recruitment and training of young talent (defined as under age thirty-five, later upped to forty) in the social sciences. In essence, he was being asked to identify and begin preparing the intellectual cadre that Koch now believed was so critical to the cause’s success.68

  Buchanan relished the role of gatekeeper. The evaluations he submitted for who had promise and who did not were highly detailed. One participant was “a highly articulate speaker, with basic instincts you and I share,” he reported, although “a bit ‘slick’” for “the country boys.” Another, despite a “poor expository style” and annoying “soft-left” reflexes, was still “interesting” and worth watching. The rankings were blunt: the judge divided the prospects into “Very Strong, Medium, [and] Weak.” At the best sessions, he could boast new “camaraderie” and “no misfits.”69 Like Koch, Buchanan was not squeamish about throwing flotsam overboard. Anyone unsound in doctrine or lacking in promise was unlikely to be invited back. He tried to “insure that no bad apples get into the barrel, for such can spoil the whole thing.” He required “explicit recommendation by those we trust for potential participants.” And he rewarded himself and his recruits in high style. The man who still called himself a country boy and railed against liberal “elitists” did not stint on frills, personally preselecting wines such as a 1966 Château Lafite-Rothschild that today would retail between $300 and $1,000 per bottle.70

  Even as Charles Koch was assembling scholars and underwriting think tanks on two coasts, he was also testing electoral politics. Neither of the two main parties was demolition-minded enough for his tastes. He seemed to hold the Republican Party in greater contempt, though, because of what he took to be its leaders’ dishonesty. Their claim to stand for free markets was manifest fraud: the GOP was the party “of business accommodation and partnership with government,” sneered Koch. “If this is our only hope then we are doomed.”71

  And so he backed the nascent Libertarian Party instead. Its numbers were tiny, and it was less a real party than a protest party, one being kept in the ring by a cluster of quirky characters. But it had chugged through the decade in a way that impressed Koch enough that he decided to invest in the 1978 Golden State gubernatorial race of Ed Clark, associate counsel for an oil company and “a long time dedicated libertarian.”72

  The race excited Koch, he said, “because California is the center of libertarian activity, with the potential for explosive growth.” He contributed $5,000 and urged friends to do so, too. Ed Clark, Koch advised, was “ideal because he will not compromise our principles but, at the same time, projects a mature, responsible image,” and he “comes across as attractive and articula
te on TV,” by now such a prime platform. Clark had also pledged to Koch that he would highlight “the need for and benefits of private education,” so as to capitalize on the spreading “discontent with public schools.”73

  Koch knew the party had no hope of becoming “a political force.” Still he explained, “I didn’t see any [other] mechanism to get these ideas out in political discussion.” Clark drew more than 5 percent of the state’s vote, helped along, no doubt, by another measure on California ballots that year, Proposition 13, the first loud shout of revolt against rising taxes, which he vocally backed. Nationwide, Libertarian Party candidates, who got on the ballot in thirty states, attracted 1.2 million votes.74 The excitement was palpable: was California’s election an augury of a new age of liberty in America?

  The faithful went all in to back a run by Ed Clark for president in 1980, against California’s own Ronald Reagan and Jimmy Carter—at a much greater cost. Since they could do the math on how a party with fewer than five thousand members would fare in a presidential contest, the strategists sought a way to get around campaign finance laws. They found one: because candidates faced no limits on how much they could contribute to their own races, they could run David Koch for vice president on the ticket with Clark. In the end, Koch contributed $2 million to the $3.5 million campaign. The ticket drew more than nine hundred thousand votes, 1 percent of the overall turnout, much better than any libertarian electoral effort had ever achieved.75

  But even that small success at the polls came at a troubling cost. Clark so compromised libertarian principle to win votes that he split the fledgling party. Murray Rothbard, as usual the most scathing guardian of orthodoxy, condemned the candidate’s campaign promises as “treacle.” His ceaseless carping so irritated Charles Koch, who was becoming more pragmatic about tactics if not about his endgame, that Rothbard found himself fired from Cato. He fumed at a libertarian institution being run “like a corporation, where orders are given, dissidents are fired, etc.” Never having held a normal job in his lifetime of advocating unalloyed capitalism, he seemed gobsmacked by the experience of being treated as just another hired hand who could be let go at the whim of his boss. Rothbard’s pleas went unheeded. And, after the Kochs withdrew their backing, the Libertarian Party all but crashed. How could a party grow with neither masses nor money?76

  • • •

  While Charles Koch and his younger brother were experimenting politically, James Buchanan wasted no time on a quixotic third party. Sequestering himself in the mountains of southwestern Virginia, he produced The Limits of Liberty, the book he would later describe as the single best statement of his intellectual vision. It was his magnum opus for the cause, the summation of his distinctive revolutionary vision for “America’s third century.”77 More a work of political philosophy than of economics, it searched for a balance, as the subtitle expressed it, “between anarchy and Leviathan.”

  Because “both markets and governments fail,” the challenge was how to sort out what each arena did best, to find some middle ground in theory between pure laissez-faire (what he called anarchy) and dreaded socialism. Wrestling with the reality that a modern world required some form of state power to apply rules and adjudicate claims, Buchanan sought to limn out a political order in which no state could impinge more than absolutely necessary upon individuals’ “freedom from the coercion of others.”78

  He rued that the cause might already be doomed: the “failures in political and institutional structure” that had so eviscerated liberty might be irreversible by conventional means. He blamed the Great Depression for the rise of unacceptable intrusions on liberty; it had ended what he called the “fortuitous circumstances” that had produced a sixty-year reign of economic freedom, between the end of Reconstruction and the Great Depression. At no point did he address the possibility that if economic inequality had not been so extreme in that era and if the stock market had been regulated, the Depression might not have been so devastating. (Such considerations would lead in the dangerous direction of Keynes.) But Buchanan did observe that the developments of the Depression era might have made it virtually impossible to change direction through the electoral process.79

  One has to wonder if the seeds of the final addition to his program were taking root in his mind at this moment—the search for unconventional means to achieve the desired reversal. Could a way be found to upend the normal order long enough to rewrite the governing rules of democracy, to separate it from the commitment to majority rule?

  Indeed, that was exactly where he was going. But he would take his time getting there, and move from intellectual argument to emotional appeal to reach that destination. Initially, he seemed to be shooting for small changes. He told his readers that the challenge ahead was to develop strategies for “keeping collective action within limits”—not, as one might expect from his previous history, for eliminating collective action. He went on to explain that as an economist, he believed the expanding public sector to be unsustainable.80 Yet he wanted to address the reader at the level of ethics, too, and so he turned to semi-emotional argument.

  As a philosopher, he told his readers, he believed that what was required to support an expansive public sector was profoundly unjust: a system of progressive taxation that would ask more of the wealthy. Buchanan’s early work was in public finance, and his first book addressed the growth of public debt. But his concern grew as the baby boom generation moved through its life cycle. With school populations growing and retired people organizing, and calls mounting for new government support and action of all kinds in the 1970s, public coffers became strained, with no relief in sight.

  To be fair, Buchanan wasn’t the only one worried about this problem. One 1973 book, James O’Connor’s The Fiscal Crisis of the State, noted that the capitalist system, in order to survive, had to tack between the economic need for corporations to profit and reinvest to remain competitive in a changing market and the political need to rein in that accumulation so as to keep the system from losing legitimacy. Leftists like the author saw an emerging legitimation crisis, as some defined it. A case in point: By 1975, New York City had lost its equilibrium. Spending more than it took in through taxes, the city faced the prospect of default—but cutting services to the people set off revolt. Nationally, too, deficits were mounting. All Americans liked at least some government programs, yet few seemed eager to pay the higher taxes needed to keep the growing number of programs in the black.81 The pattern was hard to ignore. In fact, some members of the liberal establishment founded the Trilateral Commission in 1973, in part from concern that democracies around the world were becoming too demanding and unruly.82

  But for Buchanan, once again the issue was personal. “Why must the rich be made to suffer?” he asked pointedly.83 If “simple majority voting” allowed the government to impose higher taxes on a 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 distinguished 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 “criminal”?84

  The problem was not, Buchanan took pains to clarify, one of bad or misguided people in power, but of the normal functioning of institutions without built-in guardrails, whichever party was in charge. It was not even a matter of one ideology versus another. The George Wallace voter who complained about his tax rate refused to give up his own “special benefits” (things like government-funded highways and unemployment benefits when out of work, a more empirically minded reader could add). So, too, Buchanan pointed to “the suburbanite who is most vehement in his oppos
ition to cross-city bussing of his children,” yet never thinks about whether it is fair to “levy taxes, coercively, on all families to finance the schooling of children for some families.”85

  The West’s current operating rules exacerbated the trouble, Buchanan argued, by failing to establish ironclad rules for “curbing the appetites of majority coalitions.” The Limits of Liberty never provided actual examples. But like-minded readers could infer these coalitions from the daily news: unionized public school teachers or health care workers, say, joining with school parents or health care recipients to demand better services and higher taxes to fund them. Buchanan often noted that public employees could enlist the political process to their advantage; this really bothered him. In fact, he concluded, “there are relatively few effective limits on the fiscal exploitation of minorities through orderly democratic procedures in the United States.”86

  Yet even as the theorist projected exploitive motives onto others, it was Buchanan’s own understanding of his fellow humans and their relations in society that was truly predatory. “Each person seeks mastery over a world of slaves,” he intoned, clarifying that in his view every man desired maximum individual personal freedom of action for himself—and controls “on the behavior of others so as to force adherence with his own desires.” As the political theorist S. M. Amadae has painstakingly and luminously shown, Buchanan was breaking with the most basic ethical principles of the classical liberalism he claimed to revere, of the market order as a quest for mutual advantage based on mutual respect. Instead, he was mapping a social contract based on “unremitting coercive bargaining” in which individuals treated one another as instruments toward their own ends, not fellow beings of intrinsic value. He was outlining a world in which the chronic domination of the wealthiest and most powerful over all others appeared the ultimate desideratum, a state of affairs to be enabled by his understanding of the ideal constitution.87