Conspiracy theories usually turn out to be just that – theories. That doesn’t mean conspiracies don’t happen. Nancy MacLean, a social historian, uncovered one by chance. It’s a big conspiracy with potentially catastrophic consequences for most of us. You can read its well-documented history in her book Democracy in Chains (there’s a review here). This post is about the ideas behind it.
Friedman to Buchanan
Nancy MacLean is William H Chafe Professor of History and Public Policy at Duke University, North Carolina. In 2013, she was researching the use of education vouchers during the somewhat chequered history of public education in Virginia. In Milton Friedman’s papers on the subject, she noticed a couple of footnotes referring to James McGill Buchanan, a Nobel prize-winning economist who’d died earlier that year. MacLean became curious about Buchanan’s contribution and visited the archive of his work at George Mason University (GMU) in Virginia, where he’d been based. ‘Archive’ usually means shelves of carefully organised, neatly labelled papers. Instead, Buchanan’s work had simply been stacked in his former office. MacLean started at the door and began to work her way round the room…
Buchanan to Koch
What she first discovered was letters referring to Charles Koch’s investment of millions of dollars in Buchanan’s research centre at GMU, The Center for Study of Public Choice. Koch, a brilliant engineer who became a multi-billionaire via the family’s oil business, wanted a ‘climate of liberty’ in which entrepreneurship could flourish, but that wasn’t likely to happen in a world where entrepreneurs were ‘drastically underappreciated and overcontrolled’ (p.132). Koch wanted to change all that. His financial support of politically conservative research organisations was no secret. What wasn’t clear until MacLean read Buchanan’s papers, was how the organisations that Koch supported were connected, how they influenced the Republican party, or that Buchanan was the missing link.
Calhoun to Buchanan
To understand Buchanan’s views, we need to take a closer look at the ideas held by a man who inspired him. He was John C Calhoun, a contemporary of John Quincy Adams and Andrew Jackson, who became 7th Vice President of the United States.
John Calhoun’s grandfather, Patrick, had migrated to Pennsylvania from County Donegal. Calhoun’s father (also Patrick) had settled in South Carolina in the mid-18th century. When the younger Patrick died in 1796, the 14 year-old John found himself in charge of a group of local farms. This interrupted his studies but his brothers eventually paid for him to attend Yale College. He went on to read law, was elected to the House of Representatives in 1810, and by 1824 was a Presidential candidate.
Calhoun was renowned for his robust opinions. He had especially strong views about taxation – taxes were of course a sore point at the time and had been a major factor in the United States declaring independence. What Calhoun objected to was governments having the power to tax wealthy citizens to fund public projects (roads, canals, bridges, schools etc) over which the citizens in question had no direct control. He objected particularly to other groups of less wealthy citizens being able to put pressure collectively on politicians to raise taxes to fund such projects. Calhoun felt the US Constitution didn’t go far enough to prevent the majority limiting the liberty of a minority. MacLean summarises his view as “if something must be sacrificed to square the circle between economic liberty and political liberty, it was political liberty” (p.4).
Calhoun drew attention to a fundamental difficulty with democracy as a political system. Democracy is supposed to defend the liberty of all citizens. But one-person-one-vote means that the majority prevails, and can restrict the liberty of a minority. (Brexit being a case in point.)
It’s easy to see why Calhoun’s ideas appealed to a wealthy minority in the Southern states. MacLean points out that in 1860 two-thirds of Americans with wealth exceeding $100k lived south of the Mason-Dixon line (p.2). Like Calhoun, they saw themselves as self-made men, and objected to governments being able to appropriate their hard-earned cash. What they and Calhoun conveniently overlooked was that most of their wealth had accumulated as a result of the labour of another minority – slaves. The slaves’ contribution was viewed merely another means of production, alongside horses and the cotton gin.
Calhoun’s ideas took a back seat following the defeat of the Confederates at the end of the Civil War, but they were never forgotten in the Southern states, and were revived in the 1950s by the economist James McGill Buchanan.
public choice economics
Buchanan called his field of research public choice economics. He was particularly interested in government incentives. He’d observed that whatever their political persuasion, governments tend to behave in very similar ways. Buchanan wasn’t an impartial, disinterested academic, but one with a political agenda. He was especially bothered by how organised groups of people could control government policy by threatening not to vote for representatives who didn’t support their demands. And like Calhoun he objected to individuals being taxed to pay for public projects they didn’t necessarily approve of.
Buchanan decided that the only way to stop what he considered to be legally sanctioned gangsterism (p.xxiv) was to dismantle the institutions causing it, and to do so in a way that would make it very difficult to reinstate them in future. Koch had been told that Lenin had written the playbook for social and political change (p.xxviii), and proceeded to take some leaves from that book. He knew his economic and political model would be unpopular, and that change would need to be stealthy, piecemeal and gradual. Buchanan knew how to implement those changes.
change in Chile
Buchanan had the chance to test his plan following a visit to Chile in 1980. Augusto Pinochet, commander-in-chief of the Chilean Army, had declared himself President in 1974 following the military coup during the previous year. In 1978 he appointed José Piñera as Secretary of Labor and Social Security. Piñera was one of the ‘Chicago Boys’, a group of Chilean economists who’d studied under Milton Friedman at the University of Chicago. (Buchanan and Friedman had both studied at Chicago and were contemporaries there from 1946 until Buchanan moved to the University of Virginia).
Piñera’s gift to the Chilean people was ‘the seven modernisations’ (pp.156-7):
- ban industry-wide unions
- privatise social security
- privatise healthcare
- open agriculture to market forces
- transform the judiciary
- limit regulation
- introduce k-12 school vouchers.
Friedman had visited Chile in 1975, and has since defended his role as an economic adviser to Pinochet. Buchanan visited in 1980, shortly after a purge of ‘politically unreliable’ university teachers. He had been invited to advise on a new national Constitution. Buchanan advocated (p.159):
- severe restrictions on the power of government
- no spending without prior taxation
- a balanced budget
- an independent central bank
- new expenses to be approved by a ‘supermajority’ – 2/3 or 5/6.
The stealthiest of Buchanan’s reforms was the apparently innocuous use of fine print. The level of detail of Chile’s Constitution of Liberty (named after Hayek’s book) rendered it ‘virtually unamendable’ (p.161). The Pinochet regime was ousted in 1989, but Michelle Bachelet, elected President in 2013, still struggled to implement the changes she planned due to the Chilean Constitution’s ‘locks and bolts’ (p.168).
For Charles Koch, Buchanan not only leant academic weight to his mission, but had figured out a way of bringing about the kind of world Koch envisaged. In 1997 Koch supported the James Buchanan Center at George Mason with a gift of $10m. It’s important to note at this point that we’re not talking here about ideas that are merely ‘right wing’. Buchanan didn’t want a right wing takeover; he wanted to demolish the institutions integral to liberal democracies. His plan for doing just that was implemented in Chile and according to MacLean, is currently being rolled out for the rest of us. MacLean tells the compelling and well-documented story in Democracy in Chains. What intrigued me is why Calhoun’s and Buchanan’s ideas had such appeal.
the appeal of ideas
The logical outcome of Calhoun’s and Buchanan’s ideas is a plutocracy – control by the wealthy. It’s been argued that the USA had become a plutocracy after the ‘Gilded Age’ following the Civil War, when a handful of very wealthy men had considerable influence in the Senate. It was a phenomenon that greatly exercised President Theodore Roosevelt – who used antitrust legislation to break up the largest corporations.
A related outcome is oligarchy – control in the hands of a few. Robert Michels, a German economist who eventually joined Mussolini’s fascist party, argued that oligarchy was the natural outcome of any large organisation, because only a few people involved could possibly have access to all the information they needed to run it. Michels called this outcome an ‘iron law’ and pointed out that many ostensibly democratic institutions were in fact oligarchies. Plutocracies and oligarchies might be the natural outcomes of human societies but a description isn’t a prescription.
Human beings have a tendency to lie, cheat, steal and fight each other, but such behaviour is seriously detrimental to us, so we have laws to limit it. And it was problems with oligarchy that resulted in the first recorded democracy in ancient Athens. Democracy is by no means problem-free, but as Churchill is reputed to have said “Democracy is the worst form of government, apart from all the others.” Democratic institutions are swimming against the tide of natural outcomes, so are in a constant struggle to find the checks and balances to keep democratic systems democratic.
It’s easy to see why Calhoun’s ideas appealed to wealthy plantation owners, and Buchanan’s appealed to wealthy business owners. What’s puzzling is why anyone would consider those ideas a suitable foundation for a political/economic system. After all, slaves are rarely happy about being slaves, even if the alternative is begging on the streets. And the poor don’t usually like being poor – especially if they’re being kept poor by the wealthy. History demonstrates that oligarchies and plutocracies aren’t sustainable and usually end in tears, often those of the plutocrats and oligarchs as well as everybody else. So why did Calhoun’s and Buchanan’s ideas catch on amongst the political/economic movers and shakers?
I think there are several reasons, all to do with the way human cognition works. Over millennia, our brains have developed default cognitive strategies that maximise our chances of survival. If faced with an immediate threat to life or limb, we don’t have time to gather all relevant information, work through decisions logically and systematically, and weigh up the possible outcomes. We stand a much better chance of surviving if we process only information that’s immediately relevant, take the first decision that makes sense, and prioritise our own interests.
The problem with these strategies is that they are default strategies. They’re the ones we tend to use first and fast and that result in plausible – and often premature – conclusions. And they’re the opposite of the strategies needed for long-term, sustainable political and economic planning. Here are some of the default strategies key features:
Our working memories can handle only a small amount of information at any one time; we have a low cognitive load. That protects us from being overwhelmed by information and paralysed by choice. But when dealing with complex matters like public policy, it means we have to make a conscious effort to consider all relevant information, not just the first three bits that spring to mind.
Due to the limitations of cognitive load, we make many decisions based on incomplete information. The planters represented by Calhoun liked the Athenian idea of direct democracy – citizens voting on every decision, with women, children, slaves, freed slaves and foreigners excluded. But the fledgling American republic was trying an experiment; a representative democracy with a broader franchise. No one could have known at the time how that would pan out.
If we’re making decisions based on incomplete information, even the most altruistic of us have more information about ourselves than about others, so our own interests tend to carry more weight.
ingroups and outgroups
First noted by Henri Tajfel when researching social identity, people tend to identify with others whom they perceive as like them (ingroup), and differentiate themselves from people they perceive as different (outgroup). Outgroups are often viewed as more homogeneous than they actually are, and are often viewed negatively.
aversion to loss
People prefer avoiding a loss to making a gain of equivalent value. Representative egalitarian democracies that redistribute wealth do result in significant losses for slave owning planters or billionaire businessmen. Their aversion to prospective losses despite their considerable wealth isn’t surprising. Even if the plantation owners and billionaires were the most compassionate, altruistic and public-spirited persons imaginable, they would still have to work at not focussing on a few issues only, seeing other demographic groups as negative ‘others’, and seeing their contribution to the common good as a loss.
Calhoun and Buchanan
I think we can cut Calhoun a bit of slack because neither he nor anyone else could have predicted how the American experiment with representative democracy would pan out. Buchanan is a different matter. He would have been aware of the plutocracy that emerged from the Gilded Age, the need for Theodore Roosevelt’s antitrust legislation and the Wall Street crash – its impact mitigated by Franklin D Roosevelt’s New Deal. But his interpretation of events wasn’t the orthodox one.
Although Calhoun and Buchanan paid considerable attention to detail, they paid less attention to the framework within which they were working. Although ostensibly concerned about the tyranny of the majority, their focus was on the threat a representative democracy represented to the wealth and property of a small number of individuals, and on the risks of corruption and freeloading by government officials. What they glossed over was the contribution to the wealth of individuals made by the slaves and the poor, the misery caused by slavery and poverty, and corruption and freeloading in non-democratic governments.
Liberal democracies are by no means problem-free, but the last 200 years shows they’ve had better outcomes overall than plutocracies and oligarchies. Dismantling the democratic institutions that limit corruption and offer protection to the most vulnerable is likely to have catastrophic consequences. But if Nancy MacLean is right, dismantling democratic institutions is exactly what Buchanan’s followers are intent on doing.
MacLean, N (2017). Democracy in Chains: The deep history of the radical right’s stealth plan for America. Penguin.
Cartoon by By Joseph Ferdinand Keppler – http://www.senate.gov/artandhistory/art/artifact/Ga_Cartoon/Ga_cartoon_38_00392.htm, Public Domain, https://commons.wikimedia.org/w/index.php?curid=24889994