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Economic Charlatan: James Buchanan in the Spotlight

by

Social historian Nancy MacLean has written a political biography of economist James Buchanan – Democracy in Chains.(1)

An unlikely choice. MacLean went searching for how the reactionary State of Virginia had handled the aftermath of Brown v Board of Education, with the federal dictat that public school segregation was now a no-no. Buchanan’s name appeared indirectly in the dramatis personae, via Milton Friedman, and MacLean went from there, conveniently being ushered to a virgin archival cache. The papers had been neglected by Buchanan’s colleagues and intellectual descendants with their priority to change the world pronto.

Her book has generated sound and fury from the Buchanan fan club but we’ll pass that over as white noise.

Democracy is the pits

For Buchanan, the problem of democracy as it exists is its capacity, indeed inevitability, for the tyranny of the majority.

Buchanan resented the prospects of individuals forming ‘collectives’ (read labor unions, the elderly, social movements) that would induce politicians and bureaucrats, serving their ‘self-interest’, to expend public funds on these groups’ particular interests, the financing of which would involve the taxation of others.

Buchanan’s weltanschauung is readily discernible from material written for a broader audience – for example, his pieces collected in Essays on the Political Economy (especially ‘The Public-Choice Perspective’, and his autobiographical ‘Better than Plowing”).(2)

The ‘debt-financed spending spree’ (Essays, p.8) has to be squelched, but it can’t be done in the present (US 1950s) democratic structure. One can’t cut spending or raise taxes without creating a backlash. Another problem for democracy. The constitutional rules themselves have to be changed.

Buchanan weaves himself a fairy story

Buchanan described himself as a renegade amongst his generation of economists, holding some of their preoccupations in disdain (often rightly so). But he shared with the core of his ‘profession’ a rootedness in methodological individualism. This axiom is the source of the long term consistency and relative coherence of his agenda, but also the source of that agenda’s manifest failings.

Buchanan has as his population the species homo œconomicus. This chap was invented by some Classical Economists, by means of which they created a compartmentalized ‘discipline’ (since heralded absurdly as ‘the queen of the social sciences’), but the character did not become central until the creation of Neoclassical Economics in the late 19th Century. For its practitioners, this analytical convenience has been transformed into a sociological fact.

Buchanan and his comrades went further. The same chap is said to populate not merely the economic domain but the political domain. The political sphere is to be understood as a domain of self-interested individuals, hence the ‘economic theory of politics’. This invention, perceived as such by its early proponents, has now been re-made as a fact twice over.

I read Buchanan and Tullock’s famed The Calculus of Consent (and Anthony Downs’ An Economic Theory of Democracy) in the early 1970s and thought it misconceived – analytically silly, formally utopian, substantively dangerous. Yet this puerile stuff has generated a legion of disciples.

Said Buchanan:

“Public Choice is a perspective on politics that emerges from an extension and application of the tools and methods of the economist to collective or nonmarket decision-making.” (Essays, p.13)

There’s the rub – flawed from the get-go. Buchanan acknowledged a differentiation between the economic and political spheres, but it is a peculiar divide. The economics sphere rests on ‘voluntary exchange relations’, but the political sphere is

“… assigned the whole realm of involuntary relations among persons, those relationships involving power or coercion. …

“To the extent that voluntary exchange among persons is valued positively while coercion is valued negatively, there emerges the implication that substitution of the former for the latter is desired …” (Essays, p.15, 17).

Brilliant!

In the same breath, Buchanan acknowledges that power might be present in the marketplace, but decides that we’ll leave considerations of power aside because we have a singular and powerful tool at our disposal. Shades of Maslow’s ‘if the only tool you have is a hammer, you tend to treat everything as if it’s a nail’.

Of course, the people who populate the public service and politics have a basic ‘self-interest’ in economic survival, etc. But there are people who go into public service and politics with non self-interested motives, or whose preferred careers have a ‘public good’ outcome – such are excluded from the story.

Implicitly for Buchanan, such people are ‘elites’ who pursue their own self-interested agenda, without voice from the electorate, and whose actions, by virtue of their status alone, run counter to Buchanan’s concept of the public good. A public servant or politician is incapable of contributing to Buchanan’s views of the public good by definition. Public school teachers, librarians and social workers are killing the country’s moral fibre.

In their account of the peculiar character of the American welfare regime, Edmund Berkowitz and Kim McQuaid(3) have an insightful anecdote of ‘motivation’ in Congress. Key figures in legislating the pivotal 1990 Americans with Disabilities Act had a close experience with disability – Representative Tony Coehlo and Senators Lowell Wiecker, Tom Harkin and Edward Kennedy. Self-interest writ large? On the contrary. Personal and family experience gave them direct insight into what was a pervasive national problem, requiring federal intervention in ‘the public interest’.

Steven Kelman, now Professor of Public Management at Harvard and sometime public servant, highlighted the otherworldly claims of the public choice mob in a 1987 article.(4) Kelman noted that the school’s thesis was a ‘terrible caricature of reality’. If self-interest is omnipresent, how does one explain the shifting policy orientations across generations? For example, how to explain the takeoff of health, safety and environmental legislation in the 1960s and early 1970s (including under Nixon), not least in the face of corporate resistance?

For those public figures who do fit into Buchanan’s caricature – using their public position cynically as a hireling for particular interests – what does Buchanan’s now well-entrenched theory tell us about the priorities of the political class at any particular time? Nothing at all.

Why did the 13 colonies morph into 50 states? Why did the US declare war on Spain in 1898? Why have American governments overthrown governments elsewhere with gay abandon. Why was/is the US in Vietnam, Afghanistan, Syria, etc, etc. Why is its military footprint in Germany massive, still?

The Cold War is long dead. Why has the US Congress has just voted a $700 billion defense budget, 89 Senators for, only 8 opposed?

Why does the US give Israel billions each year. Why did President Obama decide to hand Israel an additional $38 billion in military aid, given that Israel is the dominant military power in the region? Why is Congress legislating to criminalize criticism and activism against the apartheid state of Israel?

Admittedly, Buchanan’s like-minded friends in the Cato Institute perennially cast a beady eye on the gigantic military budget, but Buchanan, it appears, did not concern himself with such detail or with its origins.

Buchanan’s public choice apparatus offers us no insight into the political process at all. Oh, correction. The economic theory of politics has burst the bubble of the state as the incarnation of the public good. Well, gee whiz, we knew that already.

Does Buchanan’s mobs’ anti-statism extend to revulsion at the endless murder of black Americans by the police forces? Or the staggering number of Americans (minorities disproportionately) imprisoned? No public good there – right up the anti-statists’ alley, but no analysis appears to be forthcoming. And remember, as long as the prison network is run by the private sector (with a handy little earner for prison owners in profitable services produced by forced labor), no comment is necessary. Market forces comprising voluntary individual exchanges are at work.

So much for politics, what about the economic sphere? Buchanan enrolls at the University of Chicago, without conviction, on the advice of a respected teacher. Once there,

“… within six weeks after enrollment in Frank Knight’s course in price theory, I had been converted into a zealous advocate of the market order.” (Essays, p.71)

Telling, this. I have no knowledge of Knight’s course and Knight was a more nuanced thinker than the typical neoclassical economist. But the ‘price theory’ genre – the core of the tertiary economics syllabus – has long preferred parlour games to real world market processes. Milton Friedman’s Price Theory: a Provisional Text, flogged to succeeding generations at Chicago, is representative. It is available on Amazon, and if it was given away it would be more than it was worth.

Buchanan possibly understands how ‘the market order’ works, but he has not been forthcoming in his exegesis. Rather, it’s all about individuals conducting voluntary exchange.

And the coordinating mechanism of voluntary exchange is ‘spontaneous order’. Buchanan again, drawing (badly) on the Austrian school (Essays, p.14):

“[The catallactic] approach to economics, as the subject matter for our inquiry, draws our attention directly to the process of exchange, trade, or agreement to contract. And it necessarily introduces, quite early, the principle of spontaneous order or spontaneous coordination, which is … perhaps the only real principle in economic theory as such.”

There is a soupçon of truth in this proposition, especially under Friedrich Hayek’s more complex exposition regarding the impersonal coagulation of the fragmented societal absorption and utilization of information.

But as an essentialist characterization of ‘the market’ this ‘spontaneous order’ stuff is just so much bullshit. Complete fucking bullshit.

Spontaneous? The Megacorp’s existence and its character is driven by the search for control, for order on its own terms. Megacorp is even compelled to overthrow governments (Guatemala, Iran, Chile, etc) or bind governments to powerlessness. But Buchanan has excluded power (and history) from his analysis, so he missed this imperative.

Order? There are three dimensions implicit here – equilibrium, stability and moral appeal. But whence the Great Depression of the 1870s – 1890s? The 1930s Depression? And so on. The secular rise in the state’s role in capitalist economies – a ratchet effect – is partly a product of its fallback role in offsetting the disorder generated by market processes.

The 2008 GFC is not a good look for the ‘spontaneous order’ legions but, hey, we have the truth a priori – the empirics are rendered methodologically nugatory.

The significant lacunae

The most remarkable absence from the Buchanan and Public Choice lexicon is the corporation. What? It doesn’t exist. In The Encyclopedia of Libertarianism(5) there is no entry for ‘Corporation’. Remember that in the market system there are only individuals engaged in voluntary exchange.

The most pronounced ‘rent-seekers’, parasites on the state, public deficit-generating tax evaders, a phenomenon that Buchanan and friends deplore in the abstract, are to be found in the corporate sector. But because the corporate sector doesn’t exist it’s not a problem.

There’s more. The word ‘capitalism’ is also anathema. Buchanan’s article ‘Afraid to be free’(6) was produced for a special issue of the journal Public Choice, with the editors requesting commentary on the Schumpeterian theme ‘capitalism, socialism and democracy in the twenty-first century’. Notes Buchanan:

“’Capitalism’, an unfortunate but widely used term again loosely described in terms of the range and scope for individual liberty of action outside collectivized direction and control …

“Capitalism (‘free enterprise’ would be a much better term here) is the institutionalized embodiment of classical liberalism. As idealized, it is best described as a system in which values are set; resources are allocated; goods and services are produced and distributed through a network of voluntary exchanges among freely choosing-acting persons and groups – a network that functions within a collectively imposed legal structure that protects persons and property and enforces contracts while at the same time financing those goods and services that are most efficiently shared among many users.”

Buchanan prefers the vacuous diverting label of ‘free enterprise’. More, capitalism isn’t the institutionalized embodiment of classical liberalism There are classical liberalist elements but the imperatives of capitalism thrive pragmatically on a variety of hosts. As for ‘as idealized’, quite – Buchanan’s ideal is a chimera.

In short, Buchanan consistently declined to attempt an investigation of the character of both the economic and political spheres and of their fusion. His generalizations are child-like in their character and in their diversion from essential characteristics of the system he claims to have captured analytically. For Buchanan, there is no such thing as society (long before Thatcher) and it shows.

And for this, the Swedish Central Bank honors him with its ersatz ‘Nobel’ prize. A transparent farce.

Truth in labeling?

The language and nomenclature doesn’t help. As MacLean notes, after Buchanan moved to the University of Virginia in 1956, his proposal to President Colgate Darden for a research centre was to avoid terms like ‘economic liberty’, even if that phrase captured ‘the real purpose of the program’ (MacLean, xxiii). Thus was born the Thomas Jefferson Center for Studies in Political Economy. Which morphed into the (Charles Koch funded) Center for Study of Public Choice when Buchanan moved down market to Virginia Polytechnic in 1969 and later further down market to George Mason University in 1983.

The label ‘public choice’ is itself a problem. Obfuscatory in its essence. If you want more obfuscation, try the early mover Baldy Harper’s Institute for Humane Studies, the Cato Institute (originally the Charles Koch Foundation), Koch’s Center for Independent Education, the Koch-supported Reason Foundation, the Koch-backed Liberty Fund, the Koch-linked Americans for Prosperity, the Koch-linked FreedomWorks, the Center for the Study of Market Processes at George Mason, and the American Legislative Exchange Council. (In Australia we have the Big Biz-funded Institute for Public Affairs and the Centre for Independent Studies.)

‘Freedom’ and ‘Liberty’ as the omnipresent labels. But freedom for who? Liberty for who?

Buchanan’s orientation behind the abstractions

In his foreword to the collection Essays on the Political Economy, Subroto Roy claims:

“Buchanan has been and remains close to the simplicity and equality that binds rural communities together. He is, in this sense, very much an egalitarian in outlook, and is in fact severely unpretentious and antielitist.”

The evidence for ‘close to equality’ and ‘egalitarian in outlook’ is hard to find.

Buchanan claimed (Essays, p.71):

“I had always been anti-state, anti-government, anti-establishment. But this included the establishment that controlled the United States economy. I had grown up on a reading diet from my grandfather’s attic piled high with the radical pamphlets of the 1890s. The robber barons were very real to me.”

Buchanan’s grandfather was a noted local populist (briefly Governor of Tennessee). Buchanan has overturned his grandfather’s brand of anti-statism without acknowledgement (c/f MacLean, p.118). There is nothing in Buchanan’s oeuvre that hints of him being anti-establishment or anti the latter day robber barons.

Rather, Buchanan’s targets appear to be the welfare state, wage labor and minorities (c/f MacLean, Chs.3 & 4).

There is no ready sign of an animosity towards the military-industrial-intelligence beast that gobbles up the bulk of the federal budget. There was a natural vehicle for Buchanan in this respect, with the establishment of Economists Against the Arms Race in the last days of the Cold War in 1989 (which became Economists for Peace and Security), enlisting numerous heavyweights of the discipline. No anti-statist libertarians joined up.

Buchanan sought to privatize the Virginian public school system, in supporting the ‘[Harry] Byrd Organization machine to inhibit federally-mandated desegregation. More fundamentally, Buchanan proposed privatization of the public school system in general because of its ‘monopoly’ character (1959, MacLean, p.66). And the privatized schools would be taxpayer-funded to boot.

Buchanan opposed “the social security system and [its threat to] individual initiative” (1956, quoted in MacLean, p.46; also Ch.11).

Buchanan opposed labor unions, also designated ‘monopolies’. This arena has been a long-time Chicago/Virginia obsession. Thus in his introductory economics lectures Buchanan has the 1935 Wagner Act licensing ‘union monopolies’ to distort the wages structure (1959, MacLean, p.59).

Buchanan’s orientation has a reactionary stamp to it. Rarely explicit, because conveyed in abstractions, in code, the orientation is nevertheless fully blown reactionary.

Wage labor, unions and the Wagner Act

This attack on the Wagner Act (the National Labor Relations Act) is a litmus test. As much as anything else, it exposes not merely the venality but the profound and calculated ignorance of the Buchanan mob and the libertarians. With all these pro-business flunkies, venality and ignorance go hand in hand – the latter presumably assuaging their lack of conscience.

The wages structure is formally presumed a product of the impersonal market mechanism (spontaneous order again), the participants all involved in voluntary exchange. The employer – employee relation is of the same character and is subject to the same impersonal laws as the selling and buying of a sack of potatoes. Employer property rights (also claimed as violated by the Wagner Act) are presumed a natural product of the same process. How the wage labor force was created historically and is reproduced is of no interest.

Economists in general refuse to understand the basics of the employer-employee relation – which is why the issue has been forcibly moved elsewhere in academia. But they refuse to concede their absence of expertise.

Industrial capitalism was born and thrived by appropriating and molding a pre-capitalist hierarchy – essentially that of master and servant. The US, supposedly free of old world structures, imported the culture and its law from England. Quoting Karen Orren (pp.70, 81, 114-15)(7):

“… the law of master and servant was at the foundation of capitalist development and industrialism, and was not their result. … judges by their ritual enforcement [of the prescriptive Common Law imported from England] held up a structure of domination that had existed since time out of mind. …

“Apocalyptic reasoning was typical of the courts’ labor rulings … what was at stake was no less than the moral order of things … Their well-known opposition to ‘class’ legislation was based not so much on a sense of insult to republican principles as on their fears that the entire system of society and politics faced imminent demolition should the relation of master and servant be upset.”

The problem then (and now) was the divide between the political realm (increasingly open to the hoi polloi) and the undemocratic realm of labor hiring and of the workplace. The American Federation of Labor labor aristocracy was self-conscious about the nature of the battle. QuotingWilliam Forbath (p.129)(8):

“In the 1880s and early 1890s, labor leaders generally hewed to a Republican outlook that held that being forced to sell one’s labor conflicted with a worker’s status as a citizen. They condemned the labor market of industrial capitalism as a system of ‘wage slavery’.”

Labor leaders wanted ‘liberty of contract’, ironically not unlike the economists’ voluntary exchange abstraction. What wage labour faced, however, was a reinforcement of ‘belated feudalism’. Master-servant structures imposed by the courts were reinforced by violent repression of any worker or worker collectivity that declined to adhere to the rules.(9)

Belatedly, labor resistance in key areas gained concessions over several decades through establishment and assertion of collective bargaining. Legislation gradually overtook judicial discretion, reaching a milestone in the Wagner Act and its 1937 legitimization by the Supreme Court in NLRB v Jones & Laughlin Steel Corp.

Significant sections of the American employer class, being used to the prerogatives of industrial feudalism, have never accepted the inroads into absolute employer prerogatives. Thus followed the 1947 Taft-Hartley Act, right-to-work laws (more obfuscation), and a hobbled National Labor Relations Board (mercilessly attacked for its supposed anti-employer bias) constraining labor to fighting over its right to be heard.

The end of the post-1945 long boom and subsequent deindustrialization was accompanied by a surge of employer intimidation and bad faith in bargaining, now entrenched.

University of Texas labor lawyer Julius Getman noted in 2005(10):

“It is far too late in the day to fundamentally change the role of the Board or the interpretation of the NLRA. The worst features of current labor law – its favoring employer property rights over collective bargaining or the right to strike, its stringent limits on union access to employees while permitting employers to make captive audience speeches, its pitiful remedies against employer violations – are all cemented into the law. They are supported by generations of Supreme Court precedents and legislative acceptance. The system of unequal access based on traditional property rights has by now been reaffirmed in four Supreme Court opinions. The Mackay doctrine [NLRB v Mackay Radio, 1938] permitting employers to hire permanent replacements during a strike has survived despite constant efforts to change or limit it by litigation or by Congressional amendment. Indeed, the doctrine has constantly been expanded.”

Getman again in 2016(11)

“When the [NLRA] was first enacted, its drafters apparently assumed that the Court would be instructed in the realities of labor relations by the newly established NLRB and its presumed expertise. That has failed to happen, in part because the expertise of the Board is largely fictional. The Board has done little to acquire significant understanding; its doctrines have been relentlessly legalistic, its vision of employee behavior patronizing, and its opinions often more shaped by politics than by commitment to the goals of the Act. But even if its expertise were genuine, the Board’s opinions and policies would necessarily remain subordinate to the courts that review its opinions.”

The language of master and servant has disappeared. But the essence remains under language fit for the times – that of ‘managerial prerogatives’. The untrammeled right to rule has essentially been reinstated. There’s something in the American drinking water that both privileges corporate feudalism but under a rubric (freedom, choice, rights) glorying its antithesis. And for the purist Buchanan, these are natural prerogatives (‘property rights’) unfortunately still sullied by compromise on the margins.

The good old days

According to Buchanan, sometime around the turn of the century in the US, things started to go bad. Curious then that the glorious American 19th Century was permeated by slavery (and post-slavery Reconstruction), wage slavery and violent repression of dissent.

Buchanan had a strong attraction to what he interpreted as classical liberalism. This from ‘Afraid to be Free’ (p.26):

“The central organizing idea of classical liberalism emerged from the Enlightenment, notably from its Scottish variants. This idea, best enunciated by Adam Smith, is that extensive collective direction and control over activity is not required at all; that, with minimally invasive institutions that guarantee person, property and contract, persons can be left at liberty to make their own choices and, in so doing, generate maximal value. The spontaneous order of the market, emergent as persons are allowed to make their own choices in a ‘simple system of natural liberty’, implies that there is only a limited role for the sovereign state.”

Here is the crudest possible parody of Smith. More fundamentally, Buchanan’s reading of classical liberalism (admittedly a protean affair) appears glib. Classical liberalism is essentially a pre-democratic doctrine – indeed, anti-democratic. And deeply racist. Indigenous peoples everywhere, the Irish, the Asian Indians, the Chinese, would be amused to hear of the supposed universalist commitment to liberty of English Whig/Liberals.

The gradual introduction of the adult franchise helped to kill off classical liberalism on various home fronts. ‘Liberal democracy’, that quaint label used as an evangelical masthead of ‘the free world’, has always been an oxymoron.

Domenico Losurdo’s Liberalism: a Counter-History (12) offers us a more jaundiced analysis of the much-hyped philosophy/ideology, citing chapter and verse of then respectable classical liberal opinions. Losurdo notes (p.341):

“… not only did the classics of the liberal tradition refer to democracy with coldness, hostility and sometimes frank contempt, but regarded its advent as an unlawful, intolerable rupture of the social contract and hence as a legitimate cause for ‘the appeal to Heaven’ (in Locke’s words), or to arms.

“… it must be borne in mind that the exclusion clauses [for those denied liberty] were not overcome painlessly, but through violent upheavals of a sometimes quite unprecedented violence. … in addition to not being painless, the historical process that resulted in the advent of democracy was quite the reverse of unilinear. Emancipation … might well be followed by dis-emancipation – that is, deprivation of the rights whose recognition and enjoyment the excluded had won.”

Buchanan’s golden age is anything but.

Getting the ‘rent-seekers’ off the public teat

Buchanan’s attraction to a structurally hierarchical age bears an uncanny resemblance to a contemporary attempt in late 19th Century Britain to stop the clock. Thus the formation of the Liberty and Property Defence League in 1882.(13) Historian Norbert Soldon notes (pp.208-09):

“An examination of [the L.P.D.L.’s] strategy and tactics reveals the difficulty of an ‘Establishment’ defending its position in a mass democracy with an ideology based on the doctrine of liberty and property. … Whig cynics charged that [demagogic] bribery and treating by money and beer had given way to richer and more dangerous lollipops – legislation which raided the National Exchequer and private individuals for the benefit of activist pressure groups.”

This mentality is straight out of the Buchanan lexicon.

Buchanan claimed that there was no alternative to the impasse than to change the rules. For decades he pushed representative measures (a constitutional amendment to require budget balance) without success. He even fancied a constitutional amendment to enforce free trade (Essays, Ch.6), because economists en bloc agree that free trade generates universal benefits, as a matter of simple logic! Good luck on that otherworldly dream. Constitutional change à la Buchanan remains in the too hard basket. At least on home turf.

But then along came Charles Koch (and related species) and his truckloads of cash. Gains proceeded to be made piecemeal on multiple fronts – disenfranchisement of undesirables, privatizations, contracting out (the Flint water supply as exemplar), dismantling of worker collective rights (Koch’s Scott Walker in the Wisconsin State House as exemplar), hobbling or dismantling of regulatory agencies, direct corporate interest writing of bills (via ALEC) for State legislatures, emasculation of antitrust, etc. It turns out that one doesn’t need constitutional change to hobble the ‘’tyranny of the majority’, merely truckloads of cash. It has always been so.

What price history?

Buchanan’s writing display no evidence of his having read any history. Buchanan diligently acquired several languages, but no history. Of course, ‘history’ is subject to appropriation for one’s cause, but Buchanan doesn’t seem to have seen the merits in the exercise. Propositions derived a priori are more compelling.

History, on any interpretation, is not kind to Buchanan’s oeuvre. His attraction to the 19th Century was evidently filtered through thick, rose-colored glasses.

Orren’s Belated Feudalism has a forceful analysis of the rise of the federal administrative state. The railroads unified the country – if chaotically, thanks to the anarchy of private enterprise. The spontaneous disorder that ensued impelled the creation of a regulatory apparatus to impose a modicum of stability on the now crucial network. But the Interstate Commerce Commission’s mediation between suppliers and railroad companies confronted a dilemma. The railroad companies’ labor force was a crucial component of the companies’ costs and rates of return, the labor force was resisting its oppressive status under the prevailing ‘master and servant’ regime, so the conditions of the railroad’s labor force ultimately had to be incorporated into the regulatory regime. Courtesy of the railroad network, labor conditions became a matter of broad public interest, increasingly removed from the domain of the judiciary and the militia to the domain of the administrative state and the legislature. The Wagner Act and the 1938 Fair Labor Standards Act were a cleaning-up exercise from this trajectory.

Berkowitz and McQuaid’s Creating the Welfare State documents the halting evolution of the American welfare state over crucial decades. The early 1930s cataclysm rendered paltry the patchwork of corporate welfarism, parsimonious State welfare and charity. The elderly, deprived of their savings by the bounty of the market ‘order’, were suddenly a political force. More, they were, at least for some in authority, the subject of an ethical concern. Beyond morality, there was a ‘self-interested’ concern that social coherence – the stability of the system itself – was at stake. The 1935 Social Security Act was a natural consequence, with a heady input from corporate leaders experienced in corporate welfare. Eastman Kodak’s Marion Folsom was representative of the corporate input, becoming Secretary of Eisenhower’s new omnibus Department of Health, Education and Welfare in 1955. Not radical change, but Capital-C Conservative (not the now conventional American use of that label) – accommodating change in order to save the system as a whole.(14) A comparable mentality accompanied the development of disability services.

These two vignettes highlight that the growth of the state through the 20th Century (and the federal state in federalisms) has been effectively inevitable. War (and military adventurism in the US case) and its aftermath augment the general tendency. There elements merely reinforced the trend of the 19th Century when the state, perennially by default, was forced to deal with epidemics, natural disasters and the provision of infrastructure. (Think the US Army Corps of Engineers!) It is an organic phenomenon. The character of evolution is, of course, halting and a product of particular cultures and balance of forces, but the general thrust was universal in ‘market’ economic societies.

Bizarre then, albeit consistent, that Buchanan could write a piece in 2005, titled ‘Afraid to be free’.(6) God was dead, claimed Buchanan, and the population needed a replacement for their undisciplined insecurity, a replacement they found in the state. This from a man cushioned by a publicly-funded salary all his adult life.

Buchanan’s claim is not merely an embarrassment, it is also contemptible. And this after his involvement in Chile. A man apparently resolutely committed to not understanding the character of the economy, society and politics in which he lived should have been better attuned to keeping the far-fetched logical consequences of his reasoning restricted to his friends.

Chile

And then there was Chile. Pinochet’s Chile (1973-89) was a laboratory experiment for Chicago/Hayek/Virginia Tech (CHVT) and what a brilliant ‘success’. The democratic inhibition to liberty was expunged overnight. Then a Buchanan-inspired new Constitution was set in place in 1980 to prevent its return.

MacLean (Ch.10) notes that so enamoured were the CHVT mob of their success that Buchanan gave the main address at the annual meeting of the Mont Pèlerin Society at the Hoover Institution in September 1980. The next year, the Mont Pèlerin Society turned the screws by meeting in Chile itself, at Viña del Mar, where Pinochet’s military coup had been hatched.

MacLean notes she alone, by virtue of her access to Buchanan’s papers, has been able to gauge the extent of Buchanan’s commitment to the Chilean project. She also notes that the self-congratulation on Chile has generally disappeared from view.

Karin Fischer, sociologist at the Johannes Kepler University Linz, has a masterly chapter on Chile in a 2009 volume on the Mont Pèlerin Society.(15) Fischer highlights that the neoliberal project in Chile was long in place to undermine the dependency theorists at the Santiago-based UN Economic Commission for Latin America and to subvert local social reforms, with US funds flowing in to counter progressive forces. The Chicago School had a long indirect influence – she claims that Latin American students made up one-third of its Economics Department enrolments during the 1960s.

Apart from the CHVT interaction with reactionary business and political leaders, a cultural ‘cement’ was the reactionary forces in the Catholic Church. Catholic academic Jaime Guzman, founder of the gremialismo movement, was a key adviser to Pinochet, was converted to neoliberalism, and played a key role in the drafting of the Buchanan-inspired Constitution.

What is telling about the Chile affair is not merely the deprivation of political and economic liberty for the bulk of the population (and of future opportunities by the privatization and purification of its public education system) but the economic catastrophe that ensued.

It turns out that the CHVT mob who praise the crude ‘market good/government bad’ dichotomy know jackshit about how the ‘market economy’ works.

Before the overthrow of Allende, Javier Vial and Manuel Cruzat were small-time local operators. During Pinochet’s deregulation and privatization bonanza, Vial and Cruzat (with establishment figure Fernando Larrain) gobbled up vast swathes of Chilean businesses, destroying the petty bourgeoisie in the bargain. They presided over a significant chunk of the privatized social security system. A revolving door of government officials and business became pandemic.

Came the 1982 recession the hot air balloon came crashing down. The Vial and Cruzat-Larrain groups went into receivership in January 1983.(16) Privatized social security proved to be neither social nor secure. The key banks of the groups were taken back under government supervision. Neoliberal ideologues were gradually marginalized.

Journalist Jackson Diehl cites a Chilean businessman in 1983(16):

“Everyone here just went a little further than they should have – and in this, the state has a lot of blame. Because nothing was ever done to stop it.”

MacLean quotes a Law Professor at the University of Chile in 2016 (p.167):

“The depth of corruption is enormous … 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.”

One would be inclined to laugh if the whole ‘enterprise’ wasn’t steeped in criminality.

Goodnight James Buchanan

There is something unsettling about opinions that James Buchanan has committed to print. There is an element of crackpottery about them. More, Buchanan’s commitment to his cause has a pathological character, exposing a deeply flawed interpretation of the grand subjects of which he is supposed to be expert and for which he has acquired much acclaim. His contribution to the Chilean debacle is unforgiveable.

Nancy MacLean has provided exposure of a hitherto hidden dimension of Buchanan’s crusade. It is not pretty. Let’s hope it contributes to a broader confrontation with the charlatanry that is ‘the theory of public choice’.

References:

(1) Nancy MacLean, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America, Viking, June 2017.

(2) Essays on the Political Economy, University of Hawaii Press, 1989.

(3) Edmund Berkowitz & Kim McQuaid, Creating the Welfare State: The Political Economy of 20th-Century Reform, University Press of Kansas, 1988.

(4) Steven Kelman, ‘”Public Choice” and the Public Spirit’, The Public Interest, vol.87, March 1987.

(5) Ronald Hamowy (ed.), The Encyclopedia of Libertarianism, Sage, 2008.

(6) ‘Afraid to be free: Dependency as desideratum’, Public Choice, 124, July 2005.

(7) Karen Orren, Belated Feudalism: Labor, the Law, and Liberal Development in the United States, Cambridge University Press, 1991.

(8) William E. Forbath, Law and the Shaping of the American Labor Movement, Harvard University Press, 1991.

(9) Some of the more heinous moments in labor repression on American soil (including Haymarket, Homestead, Lawrence, Ludlow and Gastonia/Southern Textiles) are documented in Samuel Yellen, American Labor Struggles 1877-1934, Monad Press, 1936/1974.

(10) Jack [Julius] Getman, ‘Unions and the National Labor Relations Board’, Journal of Labor and Society, June 2005.

(11) Julius Getman, The Supreme Court on Unions: Why Labor Law Is Failing American Workers, Cornell University Press, 2016, p.196.

(12) Domenico Losurdo, Liberalism: A Counter-History, 2006; translated into English by Gregory Elliott, Verso, 2011.

(13) Norbert Soldon, ‘Laissez-Faire as dogma: the Liberty and Property Defence League, 1882-1914’, in Kenneth Brown (ed.), Essays in Anti-Labour History, Archon Books, 1974.

(14) C/f Barton Bernstein, ‘The New Deal: The Conservative Achievements of Liberal Reform’, in Bernstein (ed.), Towards a New Past: Dissenting Essays in American History, Vintage Books, 1967.

(15) Karin Fischer, ‘The influence of neoliberals in Chile before, during, and after Pinochet’, in Philip Mirowski & Dieter Plewhe (eds.). The Road from Mont Pèlerin: the Making of the Neoliberal Thought Collective, Harvard University Press, 2009.

(16) Jackson Diehl, ‘Fall of the “Piranhas”’, Washington Post, 17 April 1983.

More articles by:

Evan Jones is a retired political economist from the University of Sydney. He can be reached at:evan.jones@sydney.edu.au

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