What makes it so hard for Chile to address these pressing problems is precisely the constitution that still, even after multiple waves of reform, grossly favors wealthy, conservative interests at the expense of others.49 In the wake of the student struggle, the center-left candidate Michelle Bachelet, running for president in late 2013, promised vast reforms in education, social security, health care, and taxation, as well as additional reform of the 1980 constitution. She won almost two-thirds of the vote, yet she still found it difficult to carry out the platform. “Democratic processes are held back by authoritarian trammels,” President Bachelet complained in 2014. “We want a constitution without locks and bolts.”50
• • •
But durable locks and bolts were exactly what James Buchanan had urged and what his Chilean hosts relied on to ensure that their will would still prevail after the dictator stepped down. And today the effectiveness of those locks and bolts is undermining hope among citizens that political participation can make a difference in their quality of life. Frustrated by how the junta’s economic model remains so entrenched nearly three decades after Pinochet was voted out, many are disengaging from politics, particularly the young, who have never known any other system. Some legal scholars fear for the legitimacy of representative government in Chile as disgust spreads with a system that is so beholden to corporate power, so impermeable to deep change, and so inimical to majority interests.51
For his part, Buchanan came home from his consultation in Chile with a hunger to see radical change in his own country and a new sense of efficacy. He was finished with “the classic American syndromes, incrementalism and pragmatism.” It was time for “changes in the whole structure of social and economic institutions.”52 The challenge, he soon learned, would be securing them in a functioning democracy.
CHAPTER 11
DEMOCRACY DEFEATS THE DOCTRINE
Fairfax County, Virginia, just across the Potomac River from Washington, D.C., was little more than a mass of dairy farms on land long ago ruined by tobacco plantations when a group of entrepreneurial developers set to work to make something more of it. To anchor their plan, they convinced the state to open a two-year college that was given the name George Mason. Housed in a shopping mall, it opened in 1957 to an enrollment of seventeen students.1 But the developers knew it could be more. They envisioned it as a magnet for the kind of high-tech businesses they wanted to attract.2 Twenty-five years later, George Mason, now a university, recruited its first marquee professor: James McGill Buchanan. Over time, especially with Buchanan’s talent for fund-raising with businessmen, the institution found a purpose that it never announced publicly, but which enabled its ambitious administrators to realize their dreams of expansion in a tight-fisted state. The campus—or rather, members of its economics department and law school—created the research and design center of a right-wing political movement determined to undo the modern democratic state.
For all their talk of an overweening federal government intruding on states’ rights, Virginia’s legislature and the businessmen attempting to make a fortune from Fairfax County property were elated to be the beneficiaries of a new federally funded Capital Beltway that connected Fairfax with the nation’s capital. Feeder highways would carry drivers to the Pentagon; the CIA headquarters at Langley, Virginia; and Washington National Airport in just minutes (at least before the traffic came). By the late 1960s, more and more of the employees hired by the federal government, many of them highly educated staff in its dreaded regulatory bureaucracy, brought their families to Fairfax to enjoy large and still relatively inexpensive houses, not to mention the state’s low property taxes, the result of its continuing efforts to protect the wealth of its richest residents.
As Fairfax grew, so did George Mason. In 1978, the university hired a new and highly entrepreneurial president, George W. Johnson, who avidly cultivated “relationships with the CEOs” of the area and then helped them convince the federal government to outsource work to local corporate contractors. “Johnson knew,” reports a history of Fairfax commissioned by the developers themselves to tell their story in their own way, “that if these [Beltway] ‘bandits’ could band together, they could help combat the anti-contractor bias that was rampant in many Washington circles.” It became a source of great pride to the Fairfax movers and shakers that, as their palace history reports, “these corporate leaders were able to work in ways that would have been impossible without the cover of the university.”3
Whether or not James Buchanan knew anything of this plan by the president and local CEOs to feast off the government table (an unambiguous example of intentional rent-seeking, in public choice terms) is unclear. Probably not, because while all this was going on, Buchanan was still at Virginia Tech. But by 1981, after a dozen years there, he was ready to leave and eager to do so quickly. Once again, as it was at UVA, his arrogance and obliviousness to the reasonable needs and concerns of others caused his scholarly enterprise to implode.
Convinced that he was meant, like an Ayn Rand hero, to be the dominant force in whatever he did, even going so far as to suggest at one point that his “embodiment of authority” was “genetically determined,” he didn’t have that many options when disagreement arose.4 Certain that ultimate control should belong to him, Buchanan was shocked when others wanted to negotiate important matters that affected them, too. His department chair at Virginia Tech, Daniel Orr (himself no liberal), described Buchanan as “the sort of person who has to have his way with everything. He will not compromise.”5
Orr’s disagreements with Buchanan were not ideological but practical. Because Buchanan’s program was based on his theories, not on research as academic economists defined the term, Orr was rightly concerned that its graduates would not be marketable for faculty positions because they lacked the mathematical skills and technical training that most economics departments valued. Orr respected Buchanan’s work, yet argued on behalf of a balance of approaches when it came to hiring new faculty. But Buchanan refused to allow any dilution of his enterprise.6
Worse, when challenged, he became, by Orr’s telling, not simply “unrelenting,” but “explosive” and “unforgiving.” (Even among his comrades, Buchanan’s red-faced rages were the stuff of legend.) His insistence on having his way, other colleagues also reported, wrecked the give-and-take on which communal life depended. It set off an internal “war.” Of course, as he had in Charlottesville, Buchanan saw his downfall in Blacksburg differently. Why should he share power? His team had built an international reputation, so “we felt our opinions should count for more.”7 To his own shock, his secret behind-the-scenes effort to have Orr fired failed. Once again, even administrators who appreciated Buchanan’s contributions lost patience with his bullying.8
Denied what he believed was his due, and realizing his welcome had again worn out, he started to look elsewhere. In his own terms, he “exercised the academic exit option” so as to block “those who might have tried to modify the direction” of his program. Through relocation, he was able to protect his minority rights from the majority will in a manner he would soon suggest to corporations for the avoidance of taxation and regulation. Some might call it secession; Buchanan did.9
Humbled momentarily, Buchanan depicted himself as underappreciated to allies when he attended the annual meeting of the American Economic Association in December 1981. At a cocktail party, he let one of his mentees in the Liberty Fund conferences know that he and his team were interested in making a move. Karen Vaughn, of the George Mason University economics department, was stunned that Buchanan would even consider the underfunded and, as she later put it, “spectacularly undistinguished” school. Knowing what a difference a hire like this could make to her department and the university administration, Vaughn discussed it with an ally and then “jumped on the chance.”10 She assured Buchanan that with “no entrenched interest groups to oppose the public choice agenda . . . they could pretty much run the
place.”11
At GMU, Buchanan marveled at how everyone “from the lowest janitor to the [university] president moved heaven and earth” to lure his program. His starting nine-month salary of $103,000 was more than most university presidents were paid and more than the state’s governor made. So as not to ruffle feathers, Johnson arranged for a large chunk of it to be paid by a local banker. He and Vaughn also arranged for the hire of six other Blacksburg economics professors and, of course, Buchanan’s cherished assistant, Betty Tillman. They also secured the “separate quarters” Buchanan always insisted on for his centers. The new hire would never teach undergraduates, in a school where other faculty taught four courses each semester, and so would have more time to hobnob and fund-raise. Before the year was out, Buchanan had brought in $800,000 in corporate contributions for his center’s research, graduate student training, and outreach programs (over $2 million in 2016 dollars).12
The phrase “corporate university” is often used by critical faculty and students today to evoke the sweeping and troubling changes taking place in higher education, most dramatically in public institutions, as university presidents who want to build up the reputations of their schools yet know they can no longer expect much help from parsimonious legislatures actively court corporate donors. And more and more, those corporate donors, particularly the ideologically driven ones, seek in exchange for their contributions a voice in the content of the academic programs they fund and even in the overall direction of the university. For their part, state legislatures are often pleased to have private donors keep an eye on the university to make sure it serves the interests of the corporations that supply many of the jobs and taxes that sustain the state. (Faculty members are typically less enamored of the expanding external influence.)13
An entrepreneurial president can also pole-vault a university up the national rankings that now obsess nearly all university governing boards. “Literally millions of dollars” came to George Mason in the 1980s owing to Buchanan’s “presence,” the university’s then senior vice president later reported. He specifically noted that the incoming economist’s “very strong support from corporations and foundations” enabled the school to start producing economics doctorates, among other things.14
Charles Koch was among those taking an interest in George Mason’s economics program even before Buchanan’s arrival. He paid expenses for participants in Karen Vaughn’s Austrian Economics Forum, which studied the ideas of his idols Ludwig von Mises and F. A. Hayek, among others. Vaughn also helped arrange the deal that brought a newly minted assistant professor named Richard H. Fink to join the Austrian team GMU already had. “Richie,” as he was known, was a macher—only the Yiddish word can capture his brash way of getting things done. He had reached out to Koch when still in graduate school in the nation’s sole Austrian economics Ph.D. program, at New York University, and talked the CEO into funding a small training program, which he brought to GMU upon joining the faculty.15
Fink did his best to get the George Mason graduate students “hyped up,” as one fondly put it—more militant, that is, in their advocacy. “We’re gonna be like Malcolm X,” Fink goaded them. Except where Malcolm X promoted Black Power and pride, the GMU alumni would be “Austrian and proud.” He urged that they be “in your face with the Austrian economics.” It was the style Koch had longed for when he warned that in order to excite smart young people, the cause must never compromise. Buchanan predicted to the patron, more aptly than he could have imagined, “Richie Fink will make his mark in the years ahead.”16
But without Buchanan’s intellectual leadership, professional stature, and pragmatic vision, success was “inconceivable,” said Vaughn. “Our biggest problem has been the shortage of talent,” Koch had earlier complained; the GMU team was building a pipeline to remedy that problem. Before long the program attracted more than two hundred graduate students, most of whom would go on to apply what they learned for hire outside academia. Indeed, summer writing workshops trained some students to write journal articles and others to carry out policy studies for think tanks. With Washington, D.C., so near, Buchanan solved the employment problem that had worried his former chair: his program’s students might not land teaching jobs, but they could find eager buyers for their counsel in the corporate-funded libertarian milieu. “We had to make our way in policy circles instead” of universities, one of them explained.17
Buchanan gave a wink to the growing politicization of his program, pointing out to one of his longtime funders, the Scaife Family Charitable Trusts, how its new location “will surely make us more accessible to where things happen and will allow us to provide solid academic input to the more applied emphases of our friends in the area.” Among those friends in Washington that his team could now better assist in applying public choice ideas were the Cato Institute and the Heritage Foundation. Both hosted receptions to welcome Buchanan.18 In the meantime, he coached his new colleagues in the economics department: “Of course, we cannot be revolutionaries in the overt sense.” But by combating the “ruling orthodoxies,” he counseled, they could contribute to the cause.19
Indeed, within a few years of Buchanan’s arrival, a Wall Street Journal writer dubbed George Mason “the Pentagon of conservative academia.”20 The university had “built a stable of economists who have become an important resource for the Reagan administration,” another reporter noted, helping with its plans to spur economic recovery by cutting taxes, regulations, and domestic programs, and its promise to return authority to the states.21 Three doctoral students who were trained in Buchanan’s first program—James C. Miller III, Paul Craig Roberts, and Robert D. Tollison—would be tapped to play important roles in the administration, while the new George Mason master’s degree students would find jobs with think tanks and work their way up, particularly with the Koch-funded Cato Institute and the Scaife- and Coors-funded Heritage Foundation and the American Enterprise Institute.22
Yet despite their high hopes for the Reagan administration, ambitions for radical transformation ran aground far sooner than anyone expected. Except Buchanan. Never a backslapper, James Buchanan had sought to tamp down the euphoria that swept the Mont Pelerin Society after the elections of Ronald Reagan, and Margaret Thatcher in the United Kingdom. In his address at the Viña del Mar meeting in November 1981, Buchanan warned his comrades, “We should not be lulled to sleep by temporary electoral victories of politicians and parties that share our ideological commitments.” Success at the polls, while heartening, must not “distract attention away from the more fundamental issue of imposing new rules for limiting government.” Much as he admired Reagan—and he did, greatly—Buchanan understood that even such an ideologically driven president could succumb to the pressures of modern majoritarian democracy.23 That proved a prophetic reading.
Still, most on the right believed that Ronald Reagan would deliver on his word to make tax and spending cuts large enough to undo the mode of government the Mont Pelerin Society had condemned since its founding in 1947. Reagan certainly wanted to, having told the American people in his inaugural address that “in this present crisis, government is not the solution to our problem; government is the problem.” But the actual work of coming up with a proposal for which programs to cut and which tax cuts to authorize fell to the revolution’s field general, budget director David A. Stockman.
Stockman had come to his work in the White House as an avid libertarian. Like Buchanan, he believed that “the politicians were wrecking American capitalism. They were turning democratic government into a lavish giveaway auction” and “saddling” those who created wealth with “punitive taxation and demoralizing and wasteful regulation.”24
But something went terribly awry in the heady rush of the first year. The budget director, it turned out, had failed to make clear to the president and his political advisers—much less to the American people—that the colossal Kemp-Roth tax cut, as it came to be known, would necessitate tearing up t
he social contract on a scale never attempted in a democracy. To this day, it is unclear how such a consequential misunderstanding occurred. Was it that the electoral wing of the Republican right had for so long racially coded “special interests” and “government spending” that they genuinely failed to realize that slashing on this scale would hurt not only poor blacks but also the vast majority of white voters, among them many millions of Republican voters?25 However it happened, it spelled the end of the libertarian dream of lasting change under Reagan.
“A true economic policy revolution” of the size Reagan and the right had requested, David Stockman explained in the wake of its rout, “meant risky and mortal political combat with all the mass constituencies” who looked to Washington for help. They would have to fight “Social Security recipients, veterans, farmers, educators, state and local officials, [and] the housing industry,” with its mass market of middle-class buyers who relied on their mortgage tax deductions. The president could rail all he wanted about “welfare queens” and government “waste,” but Social Security, veterans’ benefits, and Medicare “accounted for over half the domestic budget”—and were dear to his followers. “Minimalist government” would “dislocate and traumatize” not a minority but the vast majority of Americans, in a “ruthless”—indeed, “bone-jarring”—way before delivering any of its promised benefits. And that was the summary not of a critic but of the policy’s primary salesman.26
“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 economic 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.”27
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