Economics and politics - comment and analysis
21. January 2018 I Will Denayer I Economic Policy, General, General Politics

James McGill Buchanan. The man who served the plutocrats, wrecked countries and brought victory to the radical right

Buchanan (1919-2013) is not as well remembered as his fellow Nobel laureates Hayek and Friedman, but his effect on politics has been as least as harmful. Within the radical right, his star is rising more than Hayek’s, who is now considered a suspicious centrist. Buchanan, more than anyone else, is the intellectual father of the Tea Party. In contradistinction to Hayek and Friedman, who were mere university professors, and Ayn Rand, who remained a psychologically damaged immigrant, Buchanan’s image is that of the true American embattled outsider, a “revolutionary” of the “counter-intelligentsia,” transforming how people think about government. When Buchanan won the Nobel prize in 1986, he commented that it represented a victory over the “Eastern academic elite,” achieved by someone who was “proud to be a member of the great unwashed” (see here).

Last year, Nancy MacLean, a history professor from Duke University, published Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. Maclean’s analysis is first class (all too predictably, she ended up in a storm of protest and accusations (see here)). The filth that she managed to dig up is near unfathomable. It all started in 2013, when she stumbled across a deserted clapboard house on the campus of George Mason University. It was stuffed with Buchanan’s archives, who had died a couple of months before. MacLean found a stack of confidential letters proving the transfer of many millions of dollars to the university by the billionaire Charles Koch. When Buchanan urged for the privatisation of social security and many other state functions, Koch, currently the seventh richest man in the US, donated millions. As Monbiot writes, Koch considered Milton Friedman and Alan Greenspan as “sell outs”, as they sought to improve the efficiency of government, rather than to destroy it altogether (see here). Koch and other billionaires employed the professor to select a revolutionary “cadre” that would implement their programme. Buchanan devised the strategy. Social security could be best destroyed by claiming that it had to be saved. In order to save it, a series of radial “reforms” were necessary. Gradually they would build a “counter-intelligentsia,” allied to a “vast network of political power” that would become the “new establishment”(see here).

Buchanan is, often but incorrectly, considered to be the father of public choice theory – as far as such epithets make sense, this honour should (presumably) go to Duncan Black. Public choice theory is not all right wing. There is serious science in it, as the work of, for example, Mancur Olsen and Elinor Ostrom prove. Buchanan used public choice as one of his theoretical vehicles to destroy democracy.

The scientific part of public choice deals with the interactions of ‘self-interested’ actors (voters, politicians, civil servants, lobbyists) seen through the lens of ‘rational’ market behaviour. While self-interest is laudable in the economic sphere (this is the Austrian influence), it comes at the cost of efficiency and democracy in the political sphere. Buchanan argued that the behaviour of voters and politicians could be analyzed in ways that yield insights into the tendencies of governments to grow, increase spending, borrow money, run large deficits and proliferate regulations.

The theory is often used to explain how political decision-making leads to outcomes that conflict with the preferences (and the interests) of the general public. Policy-makers and civil servants (“bureaucrats”) serve specific private interests for several reasons – for personal gain or because of concern for their constituency, because of ideology, because it increases the power of the state apparatus. Lobbies gain ‘favours’ worth millions or even billions for relatively small investments. Tax payers, even if a majority disagrees with specific policies, realise that the collective cost of defeating government would be very high.

In short, the final outcomes of policy-making are suboptimal, inefficient and undemocratic. While the costs of such inefficient policies are often dispersed over all citizens, the benefits are shared by special-interest groups with a strong incentive to perpetuate these policies by increased lobbying. Apart from rational ignorance, although voters may be aware of special-interest lobbying efforts, this may merely select for policies which are even harder to evaluate by the general public, rather than improving their overall efficiency. Even if the public were able to evaluate policy proposals effectively, they would find it infeasible to engage in collective action in order to defend their interests, either because they lack effective entrance to the political domain (i.e. power) or because their interests are too diffuse. The process ultimately results in government failure.

Buchanan also wrote about “entitlements.” Courting voters at election time, politicians approve tax cuts and increase spending for projects and entitlements that the electorate favours. This combination, he wrote, leads to ever-rising public debt burdens and increasingly large governments (see here). To Buchanan, the solution was clear. But this was only the beginning. He would go a lot further. Buchanan argued for smaller government, lower deficits and fewer regulations — a mix of policy objectives that were ascendant in the 1980s conservative agenda of the Reagan years. He blamed Keynesian economics for what he considered a decline in America’s fiscal discipline. According to Keynes, budget deficits were not only unavoidable. They were also necessary in fiscal emergencies as a means to increase spending, create demand and cut unemployment. According to Buchanan, this reasoning achieved nothing, except to allow politicians to rationalise deficits over long periods (see here).

Ever since the New Deal, conservatives had tried to push back against the expanding federal government. They had met with little success. The reason is, as MacLean explains, that the public was grateful for social security and the post-war boom (see here). Buchanan grew increasingly desperate. At last, in the early sixties, there was some success. Buchanan understood that, in the South, not only the economic order was being questioned. The way of life – the “folkways” – favoured by the Jim Crow defenders was too. Buchanan saw his chance. He argued that public (“state run”) schools had become a “monopoly” which had to be broken: privatise schools and each parent would be able “to cast his voice in the marketplace and have it count” (see here). The argument impressed Friedman and the southern policy-makers looking for non-racial arguments for maintaining Jim Crow in a new form. The conservatives teamed up with the segregationists and won. The result is worthy of note. In the most egregious example, Prince Edward County, from 1959 to 1964, white children went to tax-subsidised private schools while most black children stayed home—roughly what some politicians had in mind all along, MacLean writes (see here).

But all of this – including all the suffering and the inhumanity – was only a sideshow. The real enemy were not poor black people, but the unions (“the labour monopoly movement”), leftish policy-makers and Keynesian economists who had become a “ruling class.” They were waging a war against “freedom” and “the marketplace” (see here). The Calculus of Consent (1962) explains the “error” of the New Deal legacy. It portrayed and glorified elected policy-makers and civil servants (“career bureaucrats”) as idealistic and disinterested servants of the public good, while, in fact, the effects of the programs they put into place were coercive and tyrannical. The truth, Buchanan wrote, was way more prosaic: politicians, policy-makers and administrators were nothing more than self-interested actors who were constantly trying to maximize their own utility— win the next election or enlarge their budgets (see here). The New Deal had effectively been a coup d’etat (although supported by a majority – Roosevelt won four presidential elections). Hardworking citizens had no defence against this usurpation. To Buchanan, it was nothing but licensed theft on a gigantic scale, reinforced by steep gradations in income-tax rates (see here).

Still, MacLean writes, Buchanan was losing the battle. The 1960s saw the War on Poverty and even Nixon called himself a Keynesian. Nixon created more government agencies (like the Environmental Protection Agency), institutional mechanisms for wage and price controls and social welfare programs kept expanding. The (neo-)conservatives changed their song. Now it was about “dependency” of social benefit claimers. But Buchanan realised that the war would not be won so easily. The problem lay deeper. The enemies were no longer only the Keynesians, the unions and the leftists who had grown the state into a parasitic, pseudo-socialist, moloch – no, the public itself was the enemy, as it expressed itself though the tyranny of majority rule (see here). Democracy, Buchanan explained, allowed the have-nots to prey on the rich and live off them. The parasites were led the usual conglomerate of traitors, benevolent corporations and politicians falling over themselves, ever promising more and more. In short, “politicians were wrecking American capitalism.” Democracy, therefore, had to give way. That is the conservative counterrevolution.

The Reagan years proved to be another disappointment. It looked good for the conservatives at first. The problem was that their insane plans would be equal on declaring war on social benefits claimants, veterans, farmers, teachers, scientists, state and local officials, developers, scientists, factories, pensioners and many, many more people. No politician would dare to go for it, not even a right wing Republican. And so Buchanan learned a further lesson: it was not sufficient to merely elect right wing politicians. The rules of the government itself had to change (see here).

In what is – probably – the most despicable episode of all, Pinochet showed how it should be done. His coup against Salvador Allende had succeeded with the help of friends in the US and to the great delight of the free market radicals in Chicago. Buchanan travelled to Chile in 1980, in the midst of an enduring scandal about executions, disappearances, deportations, torture and many other human rights violations, to assist the junta in writing up a new constitution and to advise on economic policy (see also here). Buchanan recommended austerity. The Chilean economy went down the hole two years later. But, as Monbiot writes, none of this troubled the Swedish Academy, which, through his devotee at Stockholm University, Assar Lindbeck, in 1986 awarded James McGill Buchanan the Nobel memorial prize for economics (see here). “It is one of several decisions that have turned this prize toxic,” Monbiot wrote (see here).

Lindbeck, from his part, made career by publishing studies on “self-destructive” welfare state dynamics, in which the welfare system erodes norms relating to work and responsibility: change in the work ethic is related to a rising dependence on welfare state institutions (see here). That story is as old as the welfare state itself. A change in ‘work ethic’ took place in Sweden – people just got tired of working, the over-protective welfare state had made them too lazy, too sick or too stupid. Suspiciously, it happened at the precise same moment that the Swedish economy got into crisis because of financial mismanagement (see here). The contrary of what Lindbeck argues is true: ‘generosity’ in social welfare correlates positively and significantly with shorter periods of unemployment and with higher productivity. But this didn’t play a role. It never does. This was a war and truth itself had nothing to do with it.

The current ideology of the radical right is textbook Buchanan. Social security is nothing but a “Ponzi scheme”, ripping off the rich, making them pay for the lazy and the stupid. As democratic majorities cannot be trusted, the true guardians of freedom and liberty are enlightened elites. If this implies shutting down government altogether, so be it (as the Republicans did when Obama was president) (see here). Now that they are in power, they don’t know what to do. There is not much left they did not destroy yet. The radical right and the neoconservatives – and what, really, is the difference, except for flags and uniforms? – sing this same song everywhere. Buchanan called it an example of good Samaritanism. Social security “reform” helps the unlucky cushion them against the consequences of their bad choices. Buchanan’s ‘constitutionalism,’ as MacClean explains, is a mix of this new ultra-conservatism and the property supremacism of John C. Calhoun, who argued, in the first half of the 19th century, that freedom refers to the absolute right to use property (including slaves) exactly as its owner sees fit. Any institution that infringes this right is nothing but an agent of oppression, exploiting men of property on behalf of the undeserving (this argument was taken up and developed further by Robert Nozick in the 1970s). Calhoun argued that a society could not be considered free, unless every citizen has the right to veto its decisions (see here).

According to Buchanan, the rich were being exploited by people who use their votes to demand money that others have earned. Allowing workers to form trade unions and imposing graduated income taxes were forms of “differential or discriminatory legislation” (see here). If reform didn’t work, despotism remained the only viable organisational alternative. Or, in more concrete terms, a “constitutional revolution,” creating irrevocable restraints to limit democratic choice (see here). Let’s give the last word to MacLean:

“Without Buchanan’s ideas and Koch’s money, the libertarian right would not have succeeded in its stealth takeover of the Republican Party (…). Now, with Mike Pence as Vice President, the cause has a long time loyalist in the White House, not to mention a phalanx of Republicans in the House, the Senate, a majority of state governments, and the courts, all carrying out the plan. That plan includes harsher laws to undermine unions, privatizing everything from schools to health care and Social Security, and keeping as many of us as possible from voting” (see here).

The Koch’s, the billionaires and the academics they buy are the enemies of the human race. They demand the freedom to pollute and destroy the world their fossil fuels. If the situation becomes too bad, Koch buys more academics who will deny and ignore reality. If the “traitors” – the Keynesians and leftists – would be in power, capitalism would function as it is supposed to – companies would compete, innovate and invest. Higher productivity growth would reflect itself in worker’s wages. There is no trace of that left. According to the 2018 World Inequality Report, the middle class in the developed world has hardly seen any rise in real wages for the last forty years. Under the mom of patriotism, the dispossessed and the middle class attack one another. Sectors of the academia are increasingly being transformed into hamster wheel factories. Beneath it all is an ocean of arrogance, incompetence, emptiness, inhumanity, misanthropy, psychopathic egoism and sheer stupidity.