[Marxism] Big Money Rules

Louis Proyect lnp3 at panix.com
Sun Nov 19 09:50:45 MST 2017

NY Review of Books, DECEMBER 7, 2017 ISSUE
Big Money Rules
by Diane Ravitch

Democracy in Chains: The Deep History of the Radical Right’s Stealth 
Plan for America
by Nancy MacLean
Viking, 334 pp., $28.00

The One Percent Solution: How Corporations Are Remaking America One 
State at a Time
by Gordon Lafer
ILR/Cornell University Press, 259 pp., $29.95

I grew up in the 1950s, an era when many believed that our society would 
inevitably progress toward ever greater economic equality. Desperate 
poverty would recede, it was assumed, as new federal programs addressed 
the needs of those at the very bottom of the ladder and as economic 
growth created new jobs. The average CEO at the time earned only twenty 
times as much as the average worker, and during the Eisenhower 
administration the marginal tax rate for the highest earners was 91 
percent. Today, the goal of equality appears to be receding. The top 
marginal tax rate is only 39 percent, far below what it was during the 
Eisenhower years, and most Republicans would like to lower it even more. 
Employers now make 271 times as much as the average worker, and half the 
children in American schools are officially classified by the federal 
government as low-income and eligible for free or reduced-price lunch. 
Union membership peaked in the mid-1950s and has declined ever since; 
the largest unions today are in the public sector and only about 7 
percent of private sector workers belong to a union.

Despite these alarming developments, however, politicians who support 
the deregulation of business and champion pro-employer legislation—from 
state legislators to members of Congress—have a firm electoral foothold 
in most states. During the 2016 presidential campaign, candidate Trump 
promised to support basic government services like Medicare and pledged 
to bring back jobs that had been outsourced to other nations. However, 
once he was president, Trump endorsed health care bills that would have 
left millions of low- and lower-middle-income Americans without health 
insurance, and his insistence on reducing corporate tax rates suggests 
his determination to act in the interest of wealthy elites.

Two recent books—Nancy MacLean’s Democracy in Chains: The Deep History 
of the Radical Right’s Stealth Plan for America and Gordon Lafer’s The 
One Percent Solution: How Corporations Are Remaking America One State at 
a Time—seek to explain several puzzling aspects of American politics 
today. Why do people of modest means who depend on government-funded 
health care and Social Security or other supplements to their income 
continue to vote for candidates who promise to privatize or get rid of 
those very programs? Why do people who are poor vote for politicians who 
promise to cut corporate taxes?

Both books follow in the path of Jane Mayer’s Dark Money: The Hidden 
History of the Billionaires Behind the Rise of the Radical Right (2016), 
which documented an astonishing effort by the Koch brothers, the DeVos 
family, and other billionaires to purchase politicians in support of 
such goals as the elimination of welfare programs and the privatization 
of health care and education. Lafer’s describes how in recent years 
those goals have been achieved in state after state. MacLean’s 
book—which set off a heated dispute among historians and economists when 
it appeared in June—aims to describe their historical, theoretical, and 
academic underpinnings.

At the center of Democracy in Chains is the work of the Nobel 
Prize–winning economist James M. Buchanan, who died in 2013. Buchanan is 
associated with the doctrine of economic libertarianism: he is widely 
credited as one of the founding fathers of the “public choice” model of 
economics, which argues that bureaucrats and public officials serve 
their own interests as much as or more than the public interest, and he 
was the leading figure in the Virginia School of economic thought. He 
trained many economists who came to share his libertarian views, and his 
acolytes have protested MacLean’s view that he had “a formative role” in 
the evolution of an antidemocratic “strand of the radical right.”

MacLean discovered Buchanan by chance. About a decade ago, she began 
researching a book about Virginia’s decision to issue state vouchers 
that would allow white students to attend all-white schools, avoiding 
compliance with the Brown v. Board of Education decision of 1954. While 
studying the writings of the voucher advocate Milton Friedman, she came 
across Buchanan’s name. She started reading his work and visited a 
disorganized archive of his writings and papers at the Fairfax, 
Virginia, campus of George Mason University, where she found materials 
scattered in boxes and file cabinets. In uncatalogued stacks of papers 
she came across personal correspondence between Buchanan and the 
billionaire Republican donor Charles Koch.

What she pieced together, she writes, was a plan “to train a new 
generation of thinkers to push back against Brown and the changes in 
constitutional thought and federal policy that had enabled it.” This was 
indeed a bold project: most mainstream economists in the postwar era had 
long accepted Keynesian doctrines that affirmed the power of the federal 
government to regulate the economy and protect the rights of workers to 
organize in unions. Buchanan’s rejection of governmental actions that he 
thought infringed on individual liberty and his defense of states’ 
rights gave intellectual ammunition to those who opposed both Keynesian 
economics and federal interventions in the states to enforce desegregation.

In 1956 Buchanan founded a research-and-design center at the University 
of Virginia to combat what he called “the powerful grip that 
collectivist ideology already had on the minds of intellectuals” and the 
“increasing role of government in economic and social life.” Three years 
later, as the state of Virginia sought a way to avoid racial integration 
in schools, Buchanan and a colleague proposed using tax-funded vouchers 
to avoid compliance with the Brown decision. This would destroy public 
education and preserve racial segregation, since white children could 
use publicly funded vouchers to attend all-white schools.

During his years at UVA, Buchanan collaborated with such “old-fashioned 
libertarians” as Frank Knight of the University of Chicago, F.A. Hayek, 
Ludwig von Mises, and other partisans of the Austrian School who railed 
against socialism and championed the virtues of individual self-reliance 
and economic liberty. In 1969, after a brief and unhappy stint at UCLA, 
he took his center—now called the Center for Study of Public Choice—with 
him to Virginia Tech. Thirteen years later he brought it to George Mason 
University, where it remains today.

GMU had been founded in 1957 in a shopping mall in suburban Washington 
as a two-year college. Buchanan was its prize catch. When he was hired 
in 1982, he came with a team of colleagues and graduate assistants and 
attracted what the school’s senior vice-president later called 
“literally millions of dollars” in funding from corporate-friendly 
political interests, such as Charles Koch and the Scaife Family 
Charitable Trusts. The economics department and the law school of GMU 
were devoted to advancing his ideas.

By the mid-1980s, MacLean argues, the center had become a channel 
through which scholars were funneled into “the far-flung and purportedly 
separate, yet intricately connected, institutions funded by the Koch 
brothers and their now large network of fellow wealthy donors,” notably 
the Cato Institute (whose founding seminar Buchanan attended) and the 
Heritage Foundation (which gave him a welcoming reception when he 
arrived at GMU). Stephen Moore, the research director for Ronald 
Reagan’s Commission on Privatization who later served on The Wall Street 
Journal’s editorial board, was one of GMU’s early master’s degree 
recipients. Three of Buchanan’s first doctoral students at the school 
went on to work in the Reagan administration, which made the reduction 
of federal authority one of its primary goals.

In MacLean’s account, Buchanan was responding to the threats that 
democratic institutions posed to the preservation of wealth in America. 
Early American democracy had limited this threat by confining the 
franchise to white male property owners. But as voting rights were 
extended, the nation’s elites had to reckon with the growing power of 
formerly disenfranchised voters, who could be expected to support ever 
more expensive government programs to benefit themselves and ever more 
extensive ways to redistribute wealth. MacLean asserts that Buchanan 
supplied his benefactors with arguments to persuade the American public 
to go along with policies that protect wealth and eschew federal 
programs reliant on progressive taxation.

If everyone is motivated by self-interest, he argued, government can’t 
be trusted to do what it promises. Indeed, it cannot be trusted at all. 
Bureaucrats can be expected to protect their turf, not the public 
interest. Every politician, Buchanan wrote, “can be viewed as proposing 
and attempting to enact a combination of expenditure programs and 
financing schemes that will secure him the support of a majority of the 
electorate.” For Buchanan, this was reason enough to endorse economic 
liberty, freedom from taxes, and privatization of public services, such 
as schools, Social Security, and Medicare. In MacLean’s view, those 
proposals promised a return to

the kind of political economy that prevailed in America at the opening 
of the twentieth century, when the mass disenfranchisement of voters and 
the legal treatment of labor unions as illegitimate enabled large 
corporations and wealthy individuals to dominate Congress and most state 
governments alike, and to feel secure that the nation’s courts would not 
interfere with their reign.

Charles Koch well understood the power of academic experts, and he 
directed millions of dollars toward developing what are now called 
“thought leaders” to defend his self-interested political and economic 
vision. Buchanan was one of those academics. Koch bypassed Milton 
Friedman and his “Chicago boys,” MacLean writes, because “they sought 
‘to make government work more efficiently when the true libertarian 
should be tearing it out at the root.’” Instead, in the early 1970s, he 
funded the Libertarian Party and the Cato Institute, designed to 
advocate for what MacLean summarizes as “the end of public education, 
Social Security, Medicare, the U.S. Postal Service, minimum wage laws, 
prohibitions against child labor, foreign aid, the Environmental 
Protection Agency, prosecution for drug use or voluntary 
prostitution—and, in time, the end of taxes and government regulations 
of any kind.” Koch also funded the libertarian Reason Foundation, which 
advocated for privatizing all government functions. Another Koch-backed 
organization, the Liberty Fund, hired Buchanan to run summer conferences 
for young social scientists.

Buchanan’s challenge was to develop a strategy that would enlist the 
public’s support for the ideas he shared with Charles Koch. This 
challenge was especially daunting in the case of Social Security. 
Overwhelming majorities of Americans supported Social Security because 
it ensured that they would not be impoverished in their old age. In an 
influential 1983 paper, Buchanan marveled that there was “no widespread 
support for basic structural reform” of Social Security “among any 
membership group” in the American political constituency—“among the old 
or the young, the black, the brown, or the white, the female or the 
male, the rich or the poor, the Frost Belt or the Sun Belt.” Pinochet’s 
Chile—which Buchanan visited for a week in May 1980 to give what MacLean 
calls “in-person guidance” to the regime’s minister of finance, Sergio 
de Castro—had privatized its social security system, and libertarians 
hoped to do the same in the United States. We now know that the 
privatization of social security in Chile was a disaster for many, but 
the libertarians were unshakable in their enthusiasm for market 
solutions and ignored the risks.

Buchanan laid out the strategy needed to divide the political coalition 
that supported Social Security. The first step was to insist that Social 
Security was not viable, that it was a “Ponzi scheme.” If “people can be 
led to think that they personally have no legitimate claim against the 
system on retirement,” he wrote in a paper for the Cato Institute, it 
will “make abandonment of the system look more attractive.” Then those 
currently receiving benefits must be reassured that nothing will change 
for them. “Their benefits,” as MacLean puts it, “would not be cut.” 
Taxpayers, in turn, would have to be promised, as Buchanan says, “that 
the burden of bailing out would not be allowed to fall 
disproportionately on the particular generation that would pay taxes 
immediately after the institutional reform takes place.” Cultivating 
these expectations would not only make taxpayers more ready to abandon 
the system; it would also build resentment among those who expect never 
to get payments comparable to those receiving the initial bailout.

After they announce the insolvency of Social Security, Buchanan argued, 
the system’s critics should “propose increases in the retirement age and 
increases in payroll taxes,” which would, MacLean writes, “irritate 
recipients at all income levels, but particularly those who are just on 
the wrong side of the cutoff and now would have to pay more and work 
longer.” Calls for protecting Social Security with progressive taxation 
formulas would emphasize the redistributive character of the program and 
isolate progressives. “To the extent that participants come to perceive 
the system as a complex transfer scheme between current income classes 
instead of strictly between generations,” Buchanan predicted, “the 
‘insurance contract’ image will become tarnished” and its public support 
will be compromised.

Critics of MacLean claim she overstates her case because Buchanan was 
merely presenting both sides of the issue. But it is indisputable that 
Cato and other Koch-funded policy centers favor privatization of 
government programs like Social Security and public education. The 
genius of their strategy was in describing their efforts to change 
government programs as “reforms,” when in fact they were intended from 
the outset to result in their destruction. This rebranding depended on 
think tanks amply funded by Charles Koch, his like-minded brother David, 
and other ideologically friendly sponsors. Charles Koch funded the James 
Buchanan Center at GMU with a gift of $10 million. The libertarian 
philosophy funded by Koch and developed by Buchanan has close affinities 
with the Tea Party and Freedom Caucus of the Republican Party, which 
oppose federal spending on almost anything other than the military and 
has placed its members at the highest levels of the Trump 
administration, including Vice President Mike Pence and Mick Mulvaney, 
the director of the Office of Management and Budget.

MacLean’s argument that Buchanan knowingly engineered a strategy for the 
wealthy to preserve their hold on American democracy has prompted 
intense resistance. She has been repeatedly attacked on libertarian 
blogs, historical websites, and even in The Washington Post. The attacks 
are sometimes personal: Steve Horwitz, a libertarian economist who 
called MacLean’s book “a travesty of historical scholarship,” earned his 
degrees at GMU, where Buchanan was one of his professors. Most of her 
prominent critics—Michael Munger, David Bernstein, Steven Hayward, David 
Boaz—are libertarians; some receive funding from the Koch brothers. They 
accuse her of unjustly berating a legitimate area of economic inquiry 
and overstating the evidence against Buchanan in support of her 
position. Other critics have come from the political center. The 
political scientists Henry Farrell and Steven Teles, for instance, have 
argued that MacLean overstates the extent to which Buchanan and his 
supporters were “implementing a single master plan with fiendish 
efficiency.” MacLean has replied to her critics that her book 
demonstrates that Buchanan was part of a much larger movement.

MacLean’s reputation will no doubt survive. She has written a carefully 
documented book about issues that matter to the future of our democracy 
and established the close and sympathetic connections between Buchanan 
and his far-right financial patrons. However fierce they might be, her 
critics have been unable to refute the central message of her important 
book: that the ongoing abandonment of progressive taxation and the 
social benefits it gives most people is undergirded by a libertarian 
economic movement funded by wealthy corporate benefactors. The 
dismantling of basic government functions by the Trump administration, 
such as Betsy DeVos’s efforts to privatize public education, shows the 
continuing influence of Buchanan’s libertarian ideas.

Gordon Lafer’s The One Percent Solution is a worthy companion to 
Democracy in Chains. Lafer does not write about Buchanan and the 
Virginia School, but he meticulously demonstrates how the Koch brothers 
and the Supreme Court’s Citizens United decision of 2010 have influenced 
elections and public policy in the states. He opens his book with a 
revealing anecdote about Bill Haslam, the Republican governor of 
Tennessee. In 2015 Haslam wanted to expand his state’s Medicaid program 
to include some 200,000 low-income residents who had no health insurance 
under the Affordable Care Act. He had just been reelected with 70 
percent of the vote. Republicans, who controlled both branches of the 
state legislature, approved of Haslam’s plan. The public liked the idea. 
But then the Koch brothers’ advocacy group Americans for Prosperity sent 
field organizers into the state to fight the expansion, ran television 
ads against it, and denounced it as “a vote for Obamacare.” The Medicaid 
expansion proposal was defeated by the legislature.

Lafer reviews bills passed in the fifty state legislatures since the 
Citizens United decision removed limits on corporate spending in 
political campaigns. He identifies corporate influences on state-level 
decision-making and finds that those same policies provided a template 
for corporate lobbying in Congress. His most striking discovery is the 
“sheer similarity of the legislation—nearly identical bills introduced 
in cookie- cutter fashion in states across the country.” What Lafer 
documents is a coherent strategic agenda on the part of such business 
lobbies as the National Association of Manufacturers and the National 
Federation of Independent Business to reshape the nation’s economy, 
society, and politics—state by state.

The many goals of this agenda can be summed up in a few words: lower 
taxes, privatization of public services, and deregulation of business. 
The lobbies Lafer studies oppose public employee unions, which keep 
public sector wages high and provide a source of funding for the 
Democratic Party. The tobacco industry opposes anti-smoking legislation. 
The fossil fuel industry wants to eliminate state laws that restrict 
fracking, coal mining, and carbon dioxide emissions. The soft-drink 
industry opposes taxes on sugary beverages. The private prison industry 
advocates policies that increase the population of for-profit prisons, 
such as the detention of undocumented immigrants and the restriction of 
parole eligibility. Industry lobbyists oppose paid sick leave, workplace 
safety regulations, and minimum wage laws. They support “right to work” 
laws that undermine unions. They oppose teachers’ unions and support the 
privatization of education through charter schools and vouchers.

These are not sporadic efforts to affect state policy. There is an 
organization that coordinates the efforts of industry lobbyists and 
turns their interests into legislation. It is a secretive group formed 
in 1973 called the American Legislative Exchange Council (ALEC). It is 
sponsored by scores of major corporations, which each pay a fee of 
$25,000 (or more) to be members. Lafer lists the group’s current and 
past corporate members, including Alcoa, Amazon, Amoco, Amway, AT&T, 
Boeing, BP, Chevron, Coca-Cola, Corrections Corporation of America, CVS, 
Dell, Dupont, Exxon Mobil, Facebook, General Electric, General Motors, 
Google, Home Depot, IBM, Koch Industries, McDonald’s, Merck, Microsoft, 
Sony, the US Chamber of Commerce, Verizon, Visa, and Walmart. In 
addition to these corporations, two thousand state legislators are 
members of ALEC—collectively one quarter of all state legislators in the 
nation. They include state senate presidents and house speakers.

ALEC writes policy reports and drafts legislation designed to carry out 
its members’ goals.* It claims, Lafer writes, “to introduce eight 
hundred to one thousand bills each year in the fifty state legislatures, 
with 20 percent becoming law.” The “exchange” that ALEC promotes is

between corporate donors and state legislators. The corporations pay 
ALEC’s expenses and contribute to legislators’ campaigns; in return, 
legislators carry the corporate agenda into their statehouses…. In the 
first decade of this century, ALEC’s leading corporate backers 
contributed more than $370 million to state elections, and over one 
hundred laws each year based on ALEC’s model bills were enacted.

The keynote speaker at ALEC’s lavish annual conference in Denver earlier 
this year was Betsy DeVos, who used the occasion to belittle public 
schools and unions and to tout the virtues of school choice. She quoted 
Margaret Thatcher that “there is no such thing” as “society,” only 
individual men and women and families. This position supports a vision 
of America in which the country’s citizens express themselves 
individually as consumers rather than collectively as, for example, 
voting majorities or empowered unions. When they fall victim to fires, 
hurricanes, or earthquakes—or, for that matter, when the economy 
collapses—these individual men and women and families can expect to be 
on their own.

Lafer contends that ALEC and its compatriots are engineering what he 
calls “a revolution of falling expectations.” They have cynically played 
on the resentments of many citizens, purposefully deepening antagonism 
toward government programs that benefit unspecified “others.” Many 
people are losing their economic security while others are getting 
government handouts. Why should others get pensions? Why should others 
get health insurance? Why should others have job protections? Why should 
unions protect their members? “We are the only generation in American 
history to be left worse off than the last one,” reads a post from the 
Kochs’ advocacy group Generation Opportunity urging young people in 
Michigan to vote down a ballot proposal to raise the state’s sales tax. 
“We are paying more for college tuition, for a Social Security system 
and a Medicare system we won’t get to use, $18 trillion in national debt 
and now an Obamacare system—all that steals from our generation’s 

It is ironic that this fraudulently populist message, encouraging 
resentment of government programs, was funded by billionaires who were, 
Lafer writes, “willing to spend previously unthinkable sums on 
politics.” The Citizens United decision allowed a tiny percentage of the 
population, the richest, to direct vast amounts of money into political 
campaigns to promote privatization, discredit unions, and divert 
attention from the dramatic growth of income inequality. “For the first 
time ever,” Lafer writes, “in 2012 more than half of all income in 
America went to the richest 10 percent of the population.”

This concentration of wealth has produced a new generation of 
megadonors: “More than 60 percent of all personal campaign contributions 
in 2012 came from less than 0.5 percent of the population.” In 2010, 
Republicans swept state legislatures and governorships; they used their 
resulting advantage to gerrymander seats and attack the voting rights of 
minorities. Even state and local school board elections became the 
target of big donors, like the anti-union Walton family, the richest 
family in America, who poured millions into state and local contests to 
promote charter schools, more than 90 percent of which are non-union.

ALEC and likeminded organizations are particularly interested in 
discrediting labor unions. Lafer gives much attention to understanding 
why this is. Corporations want to eliminate unions to cut costs. 
Republicans resist them because they provide money and volunteers for 
Democrats. Getting rid of them also reduces employee health care costs 
and pensions. But, Lafer argues, the greatest threat posed by unions is 
that their very existence raises the expectations of those who are not 
in unions. When they function well, unions have the power to raise 
wages, reduce working hours, and demand better working conditions. 
Stifling this power and making every worker an at-will employee lowers 
the expectations of the nonunionized workforce.

Quite simply, Lafer argues, labor unions are the only political bodies 
that can impede the efforts of ALEC’s members

to roll back minimum-wage, prevailing-wage, and living-wage laws; to 
eliminate entitlements to overtime or sick leave; to scale back 
regulation of occupational safety; to make it harder for employees to 
sue over race or sex discrimination or even to recover back wages they 
are legally owed; and to replace adult employees with teenagers and 
guest workers.

In education, technology corporations are using their influence to 
replace teachers with computers as a cost-saving device, a move opposed 
by parents and teachers’ unions. Corporations, libertarians, and 
right-wing politicians pursue these goals even in states where unions 
are weak or nonexistent. The rise of the “gig economy,” in which every 
employee is a self-employed contractor with no collective bargaining 
rights, advances this trend, empowering big employers who put a 
monopolistic downward pressure on labor costs.

Reading these two books together is not a happy experience. They give 
reason to fear for the future. But they also remind us why it is 
important to join with others and take action. An informed public is a 
powerful public. The best counterweight to the influence of big money on 
politics is the ballot. When you see the strategy that libertarians, 
billionaire donors, and corporations have devised, you understand why 
low voter turnout is their ally and why high voter turnout is the only 
way to save our democracy.

Since 2011 the Center for Media and Democracy has maintained a website, 
ALECexposed.org, that tracks the organization’s activities. It features 
lists of corporations involved with ALEC, politicians associated with 
it, and the full texts of hundreds of “model” bills and resolutions ALEC 
has sponsored. ↩

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