More on this book
Community
Kindle Notes & Highlights
Read between
September 10 - October 4, 2018
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?
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
yet another Koch-backed organization, the Liberty Fund,
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
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.
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
“Despotism may be the only organizational alternative to the political structure that we observe.”90 There was no sense glossing over it anymore: democracy was inimical to economic liberty.
On September 11, 1973, General Augusto Pinochet led a successful coup that overthrew the elected socialist government of President Salvador Allende in Chile. Ruling in the name of economic liberty, the Pinochet junta became one of the most notorious authoritarian regimes in recent history. With mass killings, widespread torture, and systematic intimidation, Pinochet’s forces crushed the trade union movement, vanquished the rural farmers seeking land reform, stifled student activism, and imposed radical and unpopular changes in schooling, health care, social security, and more.
The military officers who led the coup concluded that, once in power, not only did they have to reverse the gains that had been made under elected governments, but they also wanted to find a way to ensure that Chileans never again embraced socialism, no matter how strong the popular cries for reform.3 The solution they came up with was to rewrite the nation’s constitution to forever insulate the interests of the propertied class they represented from the reach of a classic democratic majority.
despot. Milton Friedman was widely condemned for advice he provided on a visit to Santiago in 1975 about how to bring down the country’s soaring inflation. That advice resulted in draconian policies that inflicted mass hardship, to be sure.
F. A. Hayek, also visited Pinochet and shared with the dictator his own distaste for “unlimited democracy.”
For it was Buchanan who guided Pinochet’s team in how to arrange things so that even when the country finally returned to representative institutions, its capitalist class would be all but permanently entrenched in power. The first stage was the imposition of radical structural transformation influenced by Buchanan’s ideas; the second stage, to lock the transformation in place, was the kind of constitutional revolution Buchanan had come to advocate.5 Whereas the U.S. Constitution famously enshrined “checks and balances” to prevent majorities from abusing their power over minorities, this one,
...more
Under the new labor code Piñera promulgated in 1979, for example, industry-wide labor unions were banned.
Individual wage earners were granted “freedom of choice” to make their own deals with employers. It would be more accurate to say that they were forced to act solely as individuals. “One simply cannot finish the job,” Piñera later explained to would-be emulators, if workers maintain the capacity to exercise real collective power.8
Piñera designed another core prop of the new order: privatization of the social security system. This freed companies of the obligation to make any contributions to their employees’ retirement and also greatly limited the government’s role in safeguarding citizens’ well-being.
Ending the principle of social insurance, much as Barry Goldwater had advocated in 1964, the market-based system instead steered workers toward individual accounts with private investment firms. As o...
This highlight has been truncated due to consecutive passage length restrictions.
In short order, two private corporations—BHC Group and Cruzat-Larrain, both with strong ties to the regime—acquired two-thirds of the invested retirement funds, the equivalent, within ten years, of one-fifth of the nation’s GDP.
Other “modernizations” included the privatization of health care, the opening of agriculture to world market forces, the transformation of the judiciary, new limits on the regulatory ability of the central government, and the signature of both the Chicago and Virginia schools of thought: K–12 school vouchers.
the regime had begun a mass purge of teachers from the nation’s public universities, firing those considered “politically unreliable,” reported the New York Times.13
new constitution that would make public dissatisfaction irrelevant—or at least sharply curtail the public’s ability to reverse the transformation he and his junta colleagues had imposed by force.
Buchanan understood what his hosts were asking for: a road map. He thus explained that the constitution needed “severe restrictions on the power of government.”
He instructed that “the first” such restriction “is that the government must not be free to spend without also, at the same time, collecting the necessary taxes to offset expenses”—Harry Byrd’s sacred pay-as-you-go principle.
The devil is in the details, goes the old adage, and it is true: the wicked genius of Buchanan’s approach to binding popular self-government was that he did it with detailed rules that made most people’s eyes glaze over. In the boring fine print, he understood, transformations can be achieved by increments that few will notice, because most people have no patience for minutiae.
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.”21
To seal the elite control, the constitution forbade union leaders from belonging to political parties and from “intervening in activities alien to their specific goals”—defined solely as negotiating wages and hours in their particular workplaces. It also barred advocating “class conflict” or “attack[ing] the family.” Anyone deemed “antifamily” or “Marxist” could be sent into exile, without access to an appeal process.22
Election rules forbade electioneering by “no” activists.
What’s perplexing is how a man whose life’s mission was the promotion of what he and his fellow Mont Pelerin Society members called the free society reconciled himself, with such seeming ease, to what a military junta was doing to the people of Chile.
But perhaps above all, for Buchanan, the end justified the means: Chile emerged with a set of rules closer to his 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 political parties associated with them.
The process needed to overturn the Electoral College is similar.
After the North Carolina senator visited with Pinochet in 1986 and came home defending the junta from critics, the Raleigh Times mockingly urged a public collection to buy him better glasses and a hearing aid, because the senator was “deaf, blind, and dumb to official policies of corruption and torture.”33 Whatever the reason, Buchanan’s enduring silence spoke loudly.
From this we can only conclude that he was well aware of the Pandora’s box he had helped open in Chile for the genuine, not merely metaphorical, corruption of politics, but 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.
Buchanan had surely noticed that Milton Friedman never lived down having advised the junta on how to combat inflation: protesters disrupted the 1976 award ceremony in Stockholm at which he received the Nobel Prize and hounded his speaking engagements thereafter.36 Whereas Friedman’s name became permanently and embarrassingly paired with Pinochet’s, Buchanan, the stealth visitor, largely escaped notice for the guidance he provided. But, then, unlike Friedman, Buchanan never craved the spotlight. He was content to work in the shadows.
Pinochet replaced the ideologues with individuals who were willing to enlist government to right the ship. That November, the state took control of four banks and four finance companies to prevent “the collapse of the entire banking system.”
voters refused General Pinochet the additional term he sought by a margin of 55 percent to 43 percent. Ten of the nation’s twelve regions voted no, leaving the erstwhile potentate “humiliated.” As the new constitution stipulated, Pinochet held on to power for another year, until, in July 1989, after tireless work from activists, Chileans elected a president and a congress for the first time in nearly twenty years.40
From the very beginning, then, the pro-democracy forces saw their task as twofold: mitigating the injustices the dictatorship had left and reducing the authoritarian aspects of the constitution. That first elected government proposed and won overwhelming approval of fifty-four amendments, among them one to eliminate the requirement that supermajorities of two successive sessions of the congress must approve any future constitutional amendments. Yet the skewed electoral system still remains in place, with its provision effectively granting the one-third minority of right-wing voters the same
...more
It is deeply troubling, then, that Chile is held up today as an exemplary “economic miracle” by the Cato Institute, the Heritage Foundation, and others on the U.S. right.
After the toppling of Saddam Hussein, National Review senior editor Jonah Goldberg went so far as to announce, “Iraq needs a Pinochet.”
Admitting that they lack the “social and political freedom” of other countries, he stresses what matters to him: “the greatest economic freedom” and “thus some of the greatest opportunities.” For whom, he does not specify.45
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—and the worst of the thirty-four member states in the Organization for Economic Cooperation and Development (OECD).
The imposition of nationwide school “choice” had dire effects as well. Pupil performance diverged sharply, owing to “increased sorting” by income, which naturally took place with the voucher system. Meanwhile, college tuition costs now equal 40 percent of the average household’s income, making a higher education in Chile the most expensive on the planet, relative to per capita income.
In 2015, prosecutors charged leaders of the Penta Group, among the top beneficiaries of pension privatization, with massive tax evasion, bribery, and illegal financing of right-wing politicians. The prosecution found that the company, with some $30 billion in assets, had become “a machine to defraud the state.”
2016. “Public interest has been subordinated to private interest, and when there is no clear distinction between them, it opens the door to endless opportunities for corruption.”48
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.
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.”
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,”
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.
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
Charles Koch was among those taking an interest in George Mason’s economics program even before Buchanan’s arrival.
“We had to make our way in policy circles instead” of universities, one of them explained.17
