The Merchant of Menace

About fifteen years ago I was a normal person. I had an average job, to help pay my average mortgage and average living costs. I was of average intelligence and had received an average education. I thought I pretty much understood how the world worked, because I followed the news every day on the BBC and frequently read The Times newspaper which, as everyone knew, was the best newspaper in the whole world. If anyone had suggested otherwise I would have been slightly offended, as if I’d been called stupid. But the fact was, like most normal people I knew next to nothing about how the world really works.

I was perhaps slightly more cynical than the average person, because many years previously I read an excellent book called Bodyguard of Lies, by Anthony Cave Brown. It suggested a darker side to the business of government than the average person might suspect. Although Brown’s book was about World War Two, and suggested that the lies to which the title referred were justified because of the extreme circumstances of war, it probably made me just a little more suspicious of governments than the average person.

So when the Bush/Blair partnership frogmarched their countries into an illegal war in Iraq in 2003, I was possibly a lot more suspicious of their claims than the average person.

I actually resigned my comfortable job in protest against Blair’s terrible decision. I wanted to write a book. I had an idea for a political novel, but first I needed to do some research. I knew a bit about government, but not enough.

I’ve always been an avid reader, seldom without a book on the go since I was at school. But mostly I had read fiction. Reading fiction is sometimes better than not reading at all, but it’s actually a huge distraction, diverting attention away from the stuff we should be reading. Fifteen years ago I started reading non-fiction.

My first forays into the research I wanted to do was history. I wanted the background story. I had a vague inkling that somewhere there was a different type of history to the type I learnt at school – the history of great kings and queens, emperors and presidents, admirals and generals. Somewhere, surely, there would be histories of ordinary people. There are, of course, and what they reveal began to pour fuel on a slowly-burning fire.

Next I started reading politics, but like history, I suspected there might be two types of politics – one type that’s taught in schools and universities and which fills countless pages in newspapers and occupies countless hours of TV and radio time, the sort people can obtain university degrees in; and another type of politics which somehow remains just below the radar: mostly unseen and undiscussed, and definitely not taught in university courses. My early guides were the well-known greats – Pilger, Chomsky, Blum, Monbiot… As my range stretched slightly further afield, to include writers like Klein and Palast, and as I started trying to comprehend the world that the likes of Max Keiser and Matt Taibbi were describing, from their remote platforms of Russia Today and Rolling Stone, I realised that I needed to teach myself economics. At the heart of it all, somewhere, was money.

I first read a bit into economics many years ago. At school I’d done maths, physics and chemistry, so I was partially trained in empirical evidence-gathering and the importance of peer-reviewed research. My earliest impression of economics was that it was the purest bunkum I’d ever seen – a series of unproven, unprovable assertions dressed up with mathematical symbols to try to give it some sort of mystical credibility. Perhaps I was missing something, I thought back then. Perhaps it was me. But at the time I wasn’t interested enough to pursue the thing, so I kicked economics into the long grass – where it remained until about ten years ago, and I tried once more.

I spent a bit more time with the school textbooks, but my early impressions of the subject remained unchanged. When I read the Australian economist Steve Keen’s excellent Debunking Economics I almost jumped for joy: here was confirmation from an expert in the field that all my early suspicions about economics were well-founded – a view later reinforced when I read Balogh’s brilliant The Irrelevance of Conventional Economics – a book that preceded Keen’s by a couple of decades. Economics was indeed pure bunkum.

So I dug a bit deeper, tried the original sources. How could something that’s so important be based on so little? I read Adam Smith and Keynes. About that time I picked up a little book that I thought might be interesting: Confessions of an Economic Hitman by John Perkins. Jaw-dropping is perhaps the best way to describe my reaction to it. I couldn’t believe it was serious. I thought it was some kind of spoof. Although Perkins described a shadow-world I suspected existed, I didn’t know if I could take him seriously. After all, it was just his story, there was no other verifiable evidence. But it made me start digging even deeper.

Since then I’ve read quite a lot of economics-related books, by well-respected economists such as Galbraith and Stiglitz, but also less well-known specialists such as Prins, Rickards, Das, Baker, and Henry. About this time I also read Joel Bakan’s superb The Corporation, and another chink of light helped illuminate the darkness even more: big business was closely connected to the heart of the problem. Then I found Thom Hartmann’s superb Unequal Protection and a bit of the history of how corporations began to achieve their control of our political system was revealed.

But still the nagging question remained: how exactly did such an obviously flawed belief system come to exert so much real power over our supposedly fool-proof democracy, with its much-vaunted system of “checks and balances”?

Nancy MacLean’s recent publication Democracy in Chains pretty much answers that question. It’s a superbly researched account of how one man, the economist James Buchanan, helped the super-rich to seize control of our system of government. As I was reading her book, I was continually reminded of Bakan’s work, in The Corporation, where he showed that the “personality” of corporations is almost indistinguishable from that of psychopaths. Much of Buchanan’s work, too, could be seen as psychopathic – in my view.

The basic reasons for this, I think, are two-fold. Firstly he appeared to not only have no concern about the effects of his theories on the vast majority of ordinary human beings or the planet in general, but he appears to have shown contempt and disdain for anyone other than the super-rich or those he deemed his intellectual equals. Secondly, right from the very beginning of his rise to power and influence, he was obsessed with secrecy. He clearly knew that his work would be rejected by the wider world if it became known; he knew that it wouldn’t withstand the challenge of peer-reviewed debate. So he insisted on secrecy, living and working behind closed doors in a world of shadows.

The Beginning

This particular story really begins in the first years following the end of World War Two. Given that most of the planet was in post-apocalyptic chaos, something of an intellectual vacuum existed in planning how the new world economy would shape up. There were two powerful competing forces. On the one hand, the old order of super-rich tyrants were anxious to resume their control of the new world; but on the other hand, a brash new force, previously unknown, was strongly asserting itself. Socialism, with its new and powerful champion in the Soviet Union, was presenting a major challenge to the old world order. Its promises of social justice and economic equality were strong attractions to hundreds of millions of people who had never known either, and all around the world new socialist movements were sprouting up everywhere. The most important of these were the fledgling socialists in the powerful western nations, because those countries would determine the future course of the world.

In Britain, home of the recently-demised global empire, Clement Attlee’s Labour Party won the first general election after the war, trouncing Winston Churchill, the iconic hero of wartime Britain. Such a result was truly seismic. Attlee had promised total social reform of the decrepit and corrupt regime, and the people listened; so his new government proceeded to deliver. Massive public investment would follow, producing tens of thousands of new homes, nationalised industries, free university education, decent state pensions and the incredible National Health Service.

The United States, not yet familiar with its new role of global emperor, recognised the shift in wind direction. Its social reforms were nothing like as extensive as in Britain – mostly because it had emerged unscathed from the war and was about the only country capable of supplying the manufactured goods necessary to rebuild the world. Its economy boomed. Nevertheless, significant public spending flowed into new infrastructure, not least of which was public education, and affordable university education suddenly became accessible to countless young Americans from modest family backgrounds. It was seen as perfectly normal, by the mid-1950s, for the state to be active in the economy, and for trade unions to be active in the workplace. As MacLean puts it,

Almost all professional economists then accepted the pump-priming doctrines of Keynes to ensure demand to keep the economy growing…

[T]his refutation of the late-nineteenth century ideology of the sanctity of private property rights and the concomitant embrace of an affirmative role for organized citizens and their government as the counterbalance to corporate power, had become the new stance of virtually every western democracy. ((Democracy in Chains, Nancy MacLean, pp. 46 and 47.))

As an aside, it’s interesting to ponder the opinion of Bruce Cumings, a Korea specialist, who observes that a significant element of this “pump-priming” was down to the creation of what Eisenhower would call the “military-industrial complex” — something which had never really existed prior to the Korean War:

The military was never a significant factor in peacetime American national life before NSC68 announced the answer to how much “preparedness” the country needed, thus closing a long American debate: and in mainstream Washington, it has never returned. [NSC68 was passed through Congress in 1950, allowing a quadrupling of American “defence” spending] By 1951 the United States was spending $650 billion on defense in current dollars, and finally reached that maximum point again in the early part of this new century – a sum greater than the combined defense budgets of the next eighteen ranking military powers in 2009. ((The Korean War: A History, by Bruce Cumings, p. 217.))

So given the fact that “pump-priming” of the economy by the state was widely accepted in the 1950s and 1960s as essential, what happened after that to reverse that thinking, and produce today’s dogma of economic austerity in almost every field of government activity — barring the military and so-called “security” services?

A major contributory factor was a gradual coming-together of what at the time was a small minority of academic opinion – those on the far right of the political spectrum. In the early 1950s James Buchanan was a young economics graduate from Chicago University. He’d been tutored by Frank Knight, the only American-born economist invited to establish the Mount Pelerin Society, along with the likes of Friedrich Hayek and Ludwig von Mises. The society is an organisation of right-wing economists and other academics funded by the super-rich.

In 1956 Buchanan approached Colgate Whitehead Darden Jr., president of the University of Virginia, with a proposal to create a brand new school of economics. The two men clearly had similar views of how the Keynesian world was evolving, and they didn’t like it. Buchanan’s plan was warmly welcomed. They would establish the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy. Buchanan’s naturally conspiratorial nature was revealed in that name for his new school: he noted privately in his précis to the president that the venture “needed an innocuous name that would not draw attention to its members’ ‘extreme views… no matter how relevant they might be to the real purpose of the program”. ((MacLean, p. 48.))

He would later write that in such an era: “Our purpose was indeed subversive.” ((Ibid, p. 46.))

Buchanan appears to have applied one particularly constant principle to the way his school operated: secrecy; for MacLean records several instances of him saying so.

Years after he had established himself inside the inner circle of powerful conspirators who had started to transform the very way academics working in politics and economics actually thought, he hosted his own clandestine retreats with specially invited guests. At one such gathering he recorded that: “The key thing moving forward”, he stressed, was that “conspiratorial secrecy is at all times essential.” ((Ibid, p. 117.))

MacLean explains Buchanan’s basic strategy:

[K]ey to his plan was the creation of a small Founders Group of about ten; these men would generate what he called the Blue Book to reach another two hundred people through their own personal contacts. The centerpiece of the operation would be a Society of Fellows that would include political leaders and possible donors, along with scholars…. Remaining were such strategic questions as ‘How is respectability to be established and maintained? How much hypocrisy is necessary? How much internal criticism is to be allowed?’ The key thing moving forward was to maintain secrecy, with outsiders kept in the dark. ((Ibid, p. 120.))

Obtaining funding from a variety of wealthy donors, such as the Scaife Foundation and Charles Koch, people who well understood the value of securing academic validation for their enterprises, Buchanan’s schools sent hundreds of right wing economists out into the world for half a century. Buchanan never saw himself as an economic scientist, but rather a social philosopher, someone who was determined to “put right” the perverted thinking that believed the super-rich should pay their way. Buchanan’s economists would find work at major corporations as well as other universities who found that a good way to attract funding from the super-rich was to employ these people to ensure the Buchanan gospel could be spread even further. And so the cancer spread.

Fixing the scales of justice

James Buchanan was clearly a highly effective strategist. He understood the vital institutional changes that needed to happen before his vision of a world directly ruled by the super-rich could be securely established. Simply changing politicians through the electoral process would not be enough, and “he told his allies that no ‘mere changing of the political guard will suffice,’ that ‘the problems of our times require attention to the rules rather than the rulers.’ The project must aim toward the practical ‘removal of the sacrosanct status assigned to majority rule’.” ((Ibid, p. 184.))

To this end he formed an alliance with Henry Manne, an academic who held a very similar world-view to that of Buchanan. But Manne was a law professor, and would school his disciples to use the law to help bring about the same changes that Buchanan’s secret army of economists were fighting for. So for decades, aided and abetted by the same billionaires that paid for Buchanan’s schools, Manne produced a steady stream of right wing lawyers to match Buchanan’s output of right-wing economists. Manne’s “summer legal programs had provided intensive training in applying free market economic analyses to legal decision-making for law professors and for federal judges, luring them with luminaries and luxury accommodations. To name just one index of how successful Manne had been: by 1990, more than two of every five sitting federal judges had participated in his program – a stunning 40 percent of the U.S. federal judiciary had been treated to a Koch-backed curriculum.” ((Ibid, p. 195.))

The devastating effect of manipulating the legal system is perhaps best revealed by what happened in Chile. The story of how Chile’s economy was “made to scream” by the “Chicago boys” as a means of overthrowing the progressive government of Salvador Allende is a fairly well-known and very horrific tale. What is less well-understood is the demonic role played by James Buchanan after General Pinochet’s regime seized power.

Seemingly untroubled by the dictator’s murderous policies, Buchanan agreed to help Carlos Francisco Caceres, economic adviser to Pinochet, and who he knew from the Mount Pelerin Society, to draft a new constitution for the long-term management of Chile. This story is so important that I make no apology for quoting MacLean’s telling of it in some length.

Buchanan gave detailed advice:

[O]ver the course of five formal lectures to top representatives of a governing elite that melded the military and corporate world, to say nothing of counsel he provided in private, unrecorded conversations… He defined public choice as a ‘science’ (even though he, of all people, knew that there was no empirical research to back its claims) that ‘should be adopted’ for matters ranging from ‘the power of a constitution over fiscal policy’ to ‘what the optimum number of lawmakers in a legislative body should be’. He said of members of his school of thought, ‘We are formulating constitutional ways in which we can limit government intervention in the economy and make sure it keeps its hands out of the pockets of productive contributors’…

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 fruits of Buchanan’s counsel, would permanently overrepresent the right-wing minority party to ensure ‘a system frozen by elite interests’….

Pinochet personally reviewed the penultimate document… then announced that citizens would have to vote a simple yes or no on whether to adopt the new constitution, in its entirety, in a plebiscite to be held within a month of its release. The balloting would take place during the prolonged ‘state of emergency’ in which all political parties were outlawed, no voter rolls existed to prevent fraud (because the junta had had them burned), and no scrutiny or counting by foreign observers was to be allowed…

Chile emerged with a set of rules closer to [Buchanan’s] 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. Buchanan had long called for binding rules to protect economic liberty and constrain majority power, and Chile’s 1980 Constitution of Liberty [a title directly lifted from Hayek’s book] guaranteed these as never before. ((Ibid, p. 158 – 161.))

Although the inevitable economic turmoil the constitution created resulted eight years later in near revolution, and a rather more representative congress was formed, the legal constraints of the constitution meant that:

[T]he skewed electoral system still remains in place, with its provision effectively granting the one-third minority of right-wing voters the same representation as the typical two-thirds majority attracted by center-left candidates.

It is deeply troubling, then, that Chile is held up today as an exemplary ‘economic miracle’ by the Cato Institute, Heritage Foundation, and others on the US right.” ((Ibid. p. 166.))

Buchanan correctly identified the importance of constitutional reform for ensuring long-term control by the super-rich of government, and hence the economy. His gospel is still being followed today. An article recently published in the New Yorker reported:

Article V [of the US Constitution] allows an alternative method of proposing constitutional amendments, which cuts Congress out entirely: two-thirds of the state legislatures can call for a constitutional convention. To be in a position to do this, the G.O.P. needs to gain control of just one more statehouse, which could happen as soon as next year. (Last year, the Times reported that twenty-eight states had already adopted resolutions calling for a constitutional convention on a balanced-budget amendment, an effort supported by the American Legislative Exchange Council, which is funded by the Koch brothers, among others.) ((Jelani Cobb, Republicans and the Constitution, The New Yorker, March 13, 2017.))

MacLean’s book is a fine, well-researched overview of just how the far right bribed and manipulated the academic world to provide the philosophical justification for changes to a planet which, at the dawn of the 1950s had started to make some real progressive socio-economic advances, transforming it into today’s world of Permanent War and global economic austerity. Underpinning it all was, and is to this day, a devious secretive conspiracy – acknowledged as such by the evil genius behind it – which was utterly devoid of any intellectual substance. Buchanan’s lifelong conviction that the super-rich should have absolute control of the economy – a view that’s widely held today – was (and is) unburdened by any evidence whatsoever to support it.

Indeed, even a sympathetic economist soon cited as ‘the major deficiency’ of [Buchanan’s] Virginia School ‘the failure to search for empirical tests of the new theories’. ((MacLean, p. 79.))

Similarly lacking in any of Buchanan’s work, as it’s still lacking today in the work of his disciples, was any sense of morality or responsibility for the wider welfare of our planet generally and for the majority of humanity in particular.

The scholars were conducting, in effect, thought experiments, or hypothetical scenarios with no true research – no facts – to support them, while the very terms of their analysis denied such motives as compassion, fairness, solidarity, generosity, justice, and sustainability. ((Ibid, p. 97.))

A constitution for the people

Most people are normal people, in the same way as I was a normal person fifteen years ago. They have no idea about the depth of cynicism and downright evil to which their trusted leaders will sink in order to further enrich themselves (for they are invariably rich already), and/or seize more power. Most normal people like to sneer at their politicians and say they do not trust them, but the fact is that mostly they do – that’s why they keep on voting in a basically rigged electoral system. For all their bluster and affected contempt, they have no real inkling of just how depraved our political system is, nor how monstrous the people who control it.

James Buchanan was beneath contempt, as are all of those who share his views today. He was clearly not a nice person:

(Even among his comrades, Buchanan’s red-faced rages were the stuff of legend.) His insistence on having his own way, other colleagues also reported, wrecked the give-and-take on which communal life depended… [E]ven administrators who appreciated Buchanan’s contributions lost patience with his bullying. ((Ibid, p. 171.))

So it was possibly fitting that,

When he died in 2013, neither Koch nor Fink, nor Cowen nor Meese [whom Buchanan supported and possibly considered friends], bothered to attend his memorial service. Why should they? His days of usefulness to them had passed. ((Ibid, p. 204.))

If there’s one useful lesson to be learnt from Buchanan’s story (apart from the obvious evidence it provides of the evil geniuses who influence those who rule our lives), it’s the example of the effectiveness of constitutional reform. Buchanan understood quite early on the importance to his mission of laws generally, and constitutional laws in particular: The problems of our times require attention to the rules rather than the rulers.”

Just as he helped to write a constitution for the super-rich to control the 99%, so too could we have a constitution for the 99% to control the super-rich.

John Andrews is a writer and political activist based in England. His latest booklet is entitled EnMo Economics. Other Non-Fiction books by John are: The People's Constitution (2018 Edition); and The School of Kindness (2018 Edition); and his historical novel The Road to Emily Bay Read other articles by John.