Democracy in Chains: The Deep History of the Radical Right's Stealth Plan for America

by Nancy MacLean

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.

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?

But for Buchanan, once again the issue was personal. “Why must the rich be made to suffer?” he asked pointedly.

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?

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

“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.”

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.

There seemed no way to reconcile robust individual property rights with universal voting rights.

“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?”

But if not by willing consent, then how could the cause stop citizens from turning to government? Buchanan wanted to see, somehow, a “generalized rewriting of the social contract.” America needed “a new structure of checks and balances,” well beyond that provided for in its founding Constitution, itself already a very pro-property-rights rulebook, as he well knew. He advised “changes that are sufficiently dramatic to warrant the label ‘revolutionary.’”

“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.

Buchanan’s scheme, by contrast, would empower “a private governing elite” of corporate power freed from public accountability. “I shudder at the uses to which his ideas are capable of being put,” Samuels concluded, with unknowing prescience.91

Facing the reality that he and his assembled allies were destined to remain “a permanent minority” whose ideas were “widely . . . rejected,” Stigler pushed on to an “uncomfortable” question: “If in fact we seek what many do not wish, will we not be more successful if we take this into account and seek political institutions and policies that allow us to pursue our goals?”

He did not equivocate, adding that this might mean “non-democratic” institutions and policies.

“regression for the majorities and ‘economic freedom’ for small privileged groups” went together.

As the Pinochet regime became a fulcrum of human rights activism in the 1970s and a cautionary tale thereafter, many critics indicted leading thinkers of the Mont Pelerin Society for abetting the despot.

The society’s aging founder, F. A. Hayek, also visited Pinochet and shared with the dictator his own distaste for “unlimited democracy.”

But while Hayek became an apologist for the regime, there is no evidence that he left a lasting mark on Chile, either.4 The same cannot be said of James Buchanan. His impact is still being felt today. 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.

Minister of Labor José Piñera.

“the seven modernizations.”

“One simply cannot finish the job,” Piñera later explained to would-be emulators, if workers maintain the capacity to exercise real collective power.8

privatization of the social security system.

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.

(José Piñera, for his part, went on to work for Cruzat and then promoted U.S. Social Security privatization for Charles Koch’s Cato Institute.)

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. In higher education, the regime applied the counsel of Buchanan’s book on how to combat campus protest. 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.

With the seven modernizations in place, Pinochet’s appointees could now focus fully on drafting a constitution to entrench this new order behind what they hoped would be impassable moats.

In preparation, the BHC Group’s management translated James Buchanan’s recent book, The Limits of Liberty, into Spanish.

So, too, the founders of a pro-regime think tank, the Centro de Estudios Públicos (CEP), translated several works of public choice, i...

Buchanan then visited for a week in May 1980, a pivotal moment, to provi...

Cáceres, one of the most vehemently antidemocratic members of the Council of State, a body created in 1976 to advise Pinochet, was eager to bring Buchanan’s “opinions” into the regime’s discussions of the new constitution.

When Cáceres set up a meeting for Buchanan with the BHC Group, he told him directly that “our main interest in your visit” was to explore how public choice economics might help inform the “new Constitution which will define our future republican life.”

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.

Also, “the independence of the Central Bank should be enshrined in the constitution”; the government should be denied the authority to make “monetary policy because doing so would surely lead to inflation.” A last restriction he urged was to require supermajorities for any change of substance. “It must be ensured that a system exists in which only a large majority,” he said, “2/3 or 5/6 of the legislative body, can approve each new expense.”

Chile’s new constitution bore the same name as Hayek’s classic The Constitution of Liberty.

“It promised a democracy,” remarked the leading American historian of the Pinochet era, Steve Stern, “protected from too much democracy.”

The new constitution guaranteed the power of the armed forces over government in the near term, and over the long term curtailed the group influence of nonelite citizens. The document guaranteed the rule of General Pinochet and his aides until a 1988 plebiscite that might extend his term to 1997, when “a new generation,” as...

The net impact of the new constitution’s intricate rules changes was to give the president unprecedented powers, hobble the congress, and enable unelected military officials to serve as a power brake on the elected members of the congress.

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

If Jim Buchanan had qualms about helping to design a constitution for a dictatorship or about the process by which the final product was ratified, matters widely reported in the press, he did not commit them to print. Instead, he wrote Sergio de Castro with thanks for “the fine lunch you held in my honor” and shared how he “enjoyed the whole of my visit to Chile.” Mrs. Buchanan, who accompanied him, appreciated “the nice gifts, the beautiful flowers, the Chilean jewelry, [and] the wine.”25

The new Chile was free for some, and perhaps that was enough, as they were the same kind of people who counted in Virginia in the era when Buchanan pledged to his new employer that he would work to preserve liberty. It was also, always, a particular type of freedom the libertarians cared most about.

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 political economist also gained from this episode the adulation of his allies in the Mont Pelerin Society.

Exhilarated by what had been achieved, the society’s leaders chose for the site of its November 1981 regional meeting the coastal Chilean city of Viña del Mar, where military leaders had hatched the coup and President Allende’s remains lay in an unmarked grave.

Buchanan and two pro-junta Chilean colleagues together organized the program.

Among the panels were “Social Security: A Road to Socialism?”; “Education: Government or Personal Responsibility?”; and finally Buchanan’s own contribution, “Democracy: Limited or Unlimited?”

But he never mentioned the Chilean case in print as an example of the application of his thought. For someone who devoted the remainder of his scholarly career to constitutional analysis and prescription, it was a telling omission.

Looking back, though, one can only wonder what would have happened if someone had suggested to Buchanan that he apply his public choice analysis to the decision-making calculus of General Pinochet and his colleagues when they sought his counsel. Would he have been able to step back a minute and examine the military officers and their corporate allies as self-interested actors? As they set about devising binding rules to limit what other political agents could do, would he have seen that they might be using the rule-writing process to keep themselves in power? Buchanan would title one of his later books Politics by Principle, Not Interest.34 But there is no evidence that he ever recognized what was happening in Chile as naked interest-driven action, bereft of any classical liberal principle. Or that he acknowledged that his own counsel had encouraged it.

Buchanan should also have anticipated how General Pinochet—having done away with independent media, freedom of speech, political parties, and so many regulations—could easily purloin public monies to enrich himself and his family, as he did.

Pinochet had established, under false names and with the collaboration of leading banks, 125 separate accounts in seven countries to stash what became an illicit fortune of at least $15 million—this for a man who had sworn that he had only $120,000 in savings when he took power.

Yet two years later, after these exposures, James Buchanan ended his memoirs with the words “Literally, I have no regrets.”35