Neo-Fascist “Constitutions of Liberty”

Marshall DeRosa, the Koch funded FAU professor who was a longtime was an early proponent of holding a U.S. constitutional convention, a political effort to change the U.S. Constitution.

Several organizations in Charles Koch’s network support the effort, having convinced 28 states to pass resolutions calling for a convention, out of the 34 total states required to by Article V of the U.S. Constitution.

There are concerns that a radical corporatist constitution could drastically limit democracy.

Meanwhile, Koch’s premiere free market academic association, the Association of Private Enterprise Education (APEE), is holding their 2018 conference on “Constitutions of Liberty: How to Bring Leviathan to Heel?” Their call for papers reads:

Friedrich Hayek conceived of a Constitution of Liberty as “a limitation of the means available to a temporary majority . . . by general principles laid down by another majority for a long period in advance.” But as Hayek was surely aware, the latter majority is never present to enforce the former’s adherence to such principles. As Douglass North and Barry Weingast have observed, “constitutional restrictions must be self-enforcing, they must serve to establish a credible commitment by the state to abide by them.”

Under what conditions will liberty-preserving limitations on state agents be self-enforcing? When will a constitution bring Leviathan to heel? This question is important and relevant not only in regard to authoritarian states. Liberal democracies are often subject to “constitutional drift” whereby particular state agents encroach upon both individual liberties and the authority of other state agents. In the latter case, the system of checks and balances is placed in threat. In the U.S., for example, instances of constitutional drift include the executive’s usurpation of authority to initiate war, the use of eminent domain to expropriate property for private use, and the increased use of executive orders as substitutes for (or the means to void) legislation.

This political tactic coming from Koch’s Austrian-inspired network gives much reason for pause, as several Austrian icons have a track record for getting involved in actually overthrowing democracy for libertarian-fascism, and capturing long term power through a radical corporatist constitution.

1930’s Austro-Fascism

Before he came to the United States, Ludwig von Mises was chief economist for the Austrian Chamber of Commerce. He also served as an advisor to Federal Chancellor Engelbert Dollfuss.

In 1933, exploiting a political crisis in pre-WWII Austria, Dollfuss seized dictatorial power, suspending parliament and abolishing Austria’s democracy.

Dollfuss banned their main conservative political opposition, the Austrian Nazi party. While it is often argued that Austro-fascism was intended to stop Nazis from taking the nation, Dollfuss did not stop political persecution after banning the Austrian Nazi party.

Using a private militia similar to the German SS, the Patriotic Front (“Vaterldändische Front”), Dollfuss initiated a civil war to eradicate his remaining political rivals, the Austrian socialists. Hundreds of socialists were murdered, and thousands were taken as political prisoners (Leeson, Hayek: A Collaborative Biography, Part II, Austria, America and the Rise of Hitler, 1899-1933, 2015).

A single-party corporatist state was created through an authoritarian constitution, the “May Constitution of 1934.” With this, Dollfuss installed what came to be known as “Austro-fascism,” which consolidated power in the hands of politically appointed representatives from a small number of “estates.”

According to recently discovered papers from Ludwig von Mises himself, he became member no. 282632 of the Patriotic Front on March 1, 1934, the Chamber of Commerce, Trade, and Industry branch (Hulsmann, 2007, pg 677).

Prior to this, Mises had written sympathetically, if hesitantly, about fascism in his 1927 book, Liberalism:

It cannot be denied that Fascism and similar movements aimed at the establishment of dictatorships are full of the best intentions and that their intervention has for the moment saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. . . But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

Despite Mises’s conclusion, he was part of Dollfuss’s fascist regime several years later, described by Hans Hermann Hoppe as “one of [Dollfuss’] closest advisers” (Hoppe, 1997).

After Dollfuss was assassinated, July 25 1934, Mises fled the country the next month. His wife’ Margit von Mises recalled in her memoir meeting up with Ludwig (“Lu”) in August to tell her he was leaving:

For Lu this had been an unusually quick decision. Lu was usually so slow in deciding important matters that I once jokingly called him Fabius Cunctator. In taking leave of absence from the Chamber of Commerce, the university - and of me - he found the courage to tell me about it only after he had decided. (M. Mises, 1976, pg 33)

Mises’s organizations and successors have retained a characteristic Dollfuss-ian antagonism towards democracy. This includes Mises’ most notable Austrian student, and Charle Koch’s late friend Koch-network darling, Friedrich von Hayek.

Chilean Dictator Augusto Pinochet

This was not the only time that free-market and Austrian economists aided fascist dictatorships. A better known example was the active role played crafting economic policy for Augusto Pinochet in Chile.

Pinochet was a Chilean general who rose to power in a U.S. backed coup that overthrew the democratically elected communist government of Salvador Allende. Pinochet famously murdered his communist political enemies, many of whom were thrown from planes and helicopters.

After Pinochet’s free-market military junta suspended the constitution, their radical pro-corporate political reforms were implemented by free-market economists trained at the University of Chicago with the help of local business and the Mont Pelerin Institute, an international society of free-market economists co-founded by Friedrich Hayek (of which Charles Koch has been a member since 1970).

Nobel economist Chicago economist Gary Becker recalled how he trained Chilean economists who “generally advocated widespread deregulation, privatization, and other free market policies for closely controlled economies. They rose to fame as leaders of the early reforms initiated in Chile during the rule of General Augusto Pinochet” (Becker, 1997).

Notable economists with relationships to Pinochet and top government officials included Milton Friedman and Friedrich Hayek. Milton Friedman provided Pinochet with direct help. After meeting directly with the regime in 1975. Friedman wrote:

Dear Mr. President: During our visit with you on Friday, March 21, to discuss the economic situation in Chile, you asked me to convey to you my opinions about Chile’s economic situation and policies after I had completed my visit. This letter is in response to that request. (Letters, April 1975)

Friedman proceeded to lay out many radical privatization reforms that he described as “shock therapy.” Pinochet wrote in response:

I am pleased to acknowledge receipt of your courteous letter of this past April 21 in which you gave me the opinion you formed about the situation and economic policy of Chile after your visit to our country. . . .The valuable approaches and appraisals drawn from an analysis of the text of your letter coincide for the most part with the National Recovery Plan proposed by the Secretary of the Treasury, Mr. Jorge Cauas. The Plan is being fully applied at the present time—a plan for which we have high expectations of advancing the Chilean economy. (Letters, May 1975)

Friedrich Hayek made several visits between the late seventies and early eighties.

His 1977 trip was coordinated by Pinochet’s Finance Minister Carlos Cáceres. In addition to presenting several lectures, he was to “visit the highest government authorities,” which included a personal meeting with Pinochet himself, where they discussed using a model constitution to limit democracy.

One Hayek historian noted the substance of his visit, quoting an interview Hayek gave to Chilean media, saying he:

talked to Pinochet about the issue of limited democracy and representative government on which he wrote a book. He said that in his work he argues that unlimited democracy cannot work because, in his opinion, it creates different forces that end up destroying democracy. . . [Pinochet] listened carefully and asked him for the documents that he had written on the issue. (Caldwell, 2014)

Caldwell noted that this was consistent with Hayek’s secretary’s recollection, that “on his return Hayek asked her to send Pinochet a copy of his chapter on ‘The Model Constitution’” (Caldwell, 2014).

The following year, 1980, Pinochet entrenched his regime using a radical libertarian constitution with the help of Chicago trained economists and members of the Mont Pelerin Society.

In 1981, the Mont Pelerin Society decided to hold their annual meeting in Viña del Mar, the Chilean town where the coup was originally launched. During this visit, an interviewer asked Hayek “should we have of dictatorships?” Hayek responded that he was “totally against dictatorships” as “long-term institutions”:

But a dictatorship may be a necessary system for a transitional period. At times it is necessary for a country to have, for a time, some form or other of dictatorial power. As you will understand, it is possible for a dictator to govern in a liberal way. . . As a means of establishing a stable democracy and liberty, clean of impurities. This is the only way I can justify it – and recommend it. (Interview in El Mercurio,1981)

He specifically defended Pinochet’s regime:

My personal impression — and this is valid for South America – is that in Chile, for example, we will witness a transition from a dictatorial government to a liberal government. And during this transition it may be necessary to maintain certain dictatorial powers, not as something permanent, but as a temporary arrangement. (Interview in El Mercurio, 1981)

Hayek acknowledges the seeming hypocrisy given that he advocates “limiting government’s powers in people’s lives” and lamenting “too much government”:

it is also possible for a democracy to govern with a total lack of liberalism. Personally I prefer a liberal dictator to democratic government lacking liberalism (Interview in El Mercurio, 1981)

As Karin Fischer noted in The Road to Mont Pelerin, the there was an incredibly close relationship between the University of Chicago before the coup.

In a program called Project Chile, “approximately thirty Chilean economists were trained in Chicago between 1956 and 1964,” who “succeeded in substantially altering the way economics was taught in the whole Chilean University system” (Fischer, pg 310).

Fischer found that many Chicago trained economists used these college campuses to create a radical “gremialista” (“guildist”) political movement that was “an essential recruitment base for the pro-coup coalition that led to the the deadly military coup.” This included “intellectual leaders of the military regime” who “sought to replace party politics with an authoritarian corporatist regime . . grounded in ultraconservative Catholicism” (Fischer, pg 312).

While sympathetic free-market historians have attempted to provide “context” for these collaborations, we can see that embracing libertarian fascism is not necessarily a new idea within Koch’s academic network.

In Chapter 3, we examine the decades old ties between the Koch family, white supremacists, and the corporate funded fight against anti-civil rights.