Murray Rothbard Versus the Koch Libertarians (Cato Institute)

The following is an overview and summary, with little contribution of my own, of David Gordon’s three part series (part 1part 2part 3) on the relationship that Murray Rothbard had with the Koch Brothers. To understand the libertarian movement is immensely beneficial for the libertarian at all stages of development. It teaches the nuances in theory and strategy that have developed over the years and it explains where the present state of the liberty movement came from. The Gordon essay is classic Gordon. Extremely helpful, packed full of incredible detail, and uses the past struggles of Rothbard to explain current themes in the liberty movement.  The only problem, of course, is that it is long: three essays. I have tried hard to make the following overview engaging, short, and complete; and of course, true to Gordon’s telling of the story. Murray Rothbard was the founder of the modern libertarian movement, the chief developer of the theory and the synthesizer of libertarianism as an ethical-political theory with Austrianism as a value-free science of economic thought. His story needs to be told; not just because of what happened to him –for old wounds can and do heal– but because it explains why and how libertarianism as a movement is not just a uniform thing. There are factions. There are lessons. There are very good reasons why the libertarianism of mainstream approval is not the Rothbardianism of the 1970s, 80s, and 90s. Something happened. Here is the story. __________________________ Why is it that, among “beltway libertarian” Cato Institute leaders, there seems to be a sense of hostility toward the Mises Institute? Many new to libertarianism have even asked why Ron Paul, who is well known to be closely associated with the Mises Institute, is almost never even mentioned favorably at the Cato Institute, Reason Magazine, and so on. Apparently, these two factions (see my piece here for more on the characteristics of the two types) of libertarians don’t get along very well. And yet, as David Gordon writes, “someone acquainted only with these facts would never suspect that Rothbard was a principal founder of Cato and that the organization had been established to promote his distinctive variety of libertarianism.” That’s right; Murray Rothbard’s thought was the reason and motivation for the establishment of the Cato Institute, which now almost never mentions him, much less his work. And indeed, amongst Cato’s directors and decision makers, there is a flavor of bitterness not only against Rothbard, but also against Lew Rockwell and the Mises Institute. To explain what happened, we will start, as Gordon does, with the Koch brothers (for more on the intriguing– and it really is intriguing– story of the Koch family, I highly recommend Daniel Schulman’s book from last year Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty). The “Koch brothers,” commonly refers to Charles and David Koch. They are the two of four sons who inherited and vastly expanded the business started by their father, Fred. For our story, only Charles and David are important. As Gordon notes, the two brothers got their interest in political and economic matters from their father who was heavily involved in the establishment of the (in)famous conservative John Birch Society and in various anti-communist activities before he died. During his schooling, Charles stumbled upon the work of Murray Rothbard and eventually decided to use a piece of his billion-dollar wealth to fund an organization dedicated to promote libertarian ideas. In fact, Charles was so enthusiastic about Murray that Murray was one of the four original stockholders of the organization, along with another important character of the story, Ed Crane; of course, Charles was the majority stockholder. It should also be mentioned that the Koch empire was behind the creation of Reason Magazine, Institute for Humane Studies, Students for Liberty, George Mason University’s economics think tank “The Mercatus Center,” and Americans for Prosperity.** Due to Koch money and influence behind so many nominally libertarian groups, this empire soon began to be referred to as the “Kochtopus.” Nevertheless, the organization that the Kochs started for the advancement of Rothbardianism and Austrianism was founded as the Cato Institute in 1977. The name, which was Rothbard’s idea, was based on the 18th century Cato Letters. Rothbard, naturally, was thrilled. Here was the reward for decades of tireless and lonely efforts to carry forward the dying flame of Misesian economics. For years Rothbard was nearly alone in his appreciation for the Austrian school and his gloriously stubborn dedication to the strict property rights theory of liberty. But, finally, an organization which could host him and advance the message to the next generation. Unfortunately the problems started early. Charles Koch had hired Ed Crane to run the day to day operations of Cato, and Rothbard to lead the intellectual and academic development. Crane’s pragmatism-over-principle mentality on growing Cato led him to both downplay the organization’s goal of developing the intellectual content of a libertarian think tank (the reason Cato was started in the first place) and, later in the story, to dismiss the academic contributions of Rothbard and his scholars as a mere distraction. The head of Cato’s Inquiry magazine Bill Evers, was berated by Crane for focusing too much on the development of ideas and not enough on gaining influence in Washington. Here, we see a glimpse into the future of the pragmatist vs. principled debates that flourish in the libertarian movement even today. While Murray Rothbard, intellectual that he was, put far more emphasis on the ideas and therefore sided with Evers, Crane was on the phone daily with Charles Koch back in Wichita, who, having the money and the majority ownership, called the shots. To understand the severity of the tension between Evers/Rothbard and Crane/Koch, consider Gordon’s comments: I later learned that Crane’s impatience with intellectuals extended to Rothbard himself. Crane evidently believed that books were like automobiles, to be produced assembly line fashion. Rothbard had received a grant to write Ethics of Liberty, but Crane was not satisfied with Rothbard’s progress. Rothbard was an incredibly fast writer, but, as Crane did not grasp, it takes time even for someone of Rothbard’s speed to read and think about the relevant material. He demanded results; on one occasion, I have been reliably informed, Rothbard had to seek refuge in a closet to escape his verbal barrage. Was not Ethics of Liberty worth the wait? In the context of this tension, things began to break when Rothbard discovered that the decision had been made to hire David Henderson, who was not an economist in the Austrian School, but rather, leaned far to the Chicago School. This was a very important event in the unfolding of Rothbard’s relationship with the Cato Institute because the entire mission of Cato in the first place was to give Rothbard an outlet to advance the Austrian vision. Thus, with one hire, the purity of the entire academic message of Cato became heavily compromised and contradictory. Of course, fast forward decades after and, as Gordon notes, “[i]n the years since Rothbard’s break with Cato, the Institute has no longer supported the abolition of the Fed. Quite the contrary, the Institute now endeavors to attract high officials of that organization to participate in its seminars and conferences. The aim now is to influence policy in Washington. Legislators who wish to restore the gold standard, Ron Paul chief among them, are shunned and defamed.” The next step in the flaring tensions were the political efforts of Crane and Koch in 1980. They went all in for LP candidate Ed Clark (Ed Clark not Ed Crane–confusing, I know). With Koch’s money behind him (David Koch joined Clark on the LP ticket so that the entire campaign could be paid for using the Koch’s own money), Clark sought to make libertarianism go mainstream. To this end, Koch and “Crane believed that he had to conceal aspects of the libertarian program that many voters would consider extreme” in order to achieve much more popular support. Gordon: Under [Crane’s] guidance, Clark campaigned for a reduction in government welfare spending rather than its total elimination. Rothbard saw matters differently. For him, libertarianism was a coherent system of ideas that a libertarian candidate ought fully to embrace. He had his own political group, the Radical Caucus, on which Evers and Justin Raimondo were leading lights. As its name suggests, the Radical Caucus favored a much more confrontational approach to politics than did Crane. For Rothbard, the last straw was Clark’s depiction of himself as a “low-tax liberal.” Rothbard in his privately printed publication Libertarian Forum assailed this as a betrayal of libertarian principle: Clark, after all, was campaigning as an explicit libertarian. Rothbard would not have objected to a self-consciously “moderate” policy of tax and welfare reform had these been part of a Constitution Party platform. But the candidate of the Libertarian Party, he thought, must embrace libertarianism in uncompromising form. In short, it was due to the positioning of Koch and Crane, through the person of Ed Clark, that Gary Johnson is now misconstruing libertarianism as “fiscally conservative and socially liberal.” Herein lie the roots. Rothbard was furious. And understandably so! Here were the big dogs of the Cato Institute, an organization that was meant to promote Rothbardian Austro-libertarianism, preaching a false and distorted version of libertarian ideas. The underlying differences here are obvious and therefore the problem was festering far deeper than just a disagreement over a silly campaign. Rothbard emphasized and stressed the need for scholarship and developing the ideas; Crane and Koch, however sought to “secure the audiences” of power groups and those closely knit to Washington’s culture. The brewing fight was journaled in Murray Rothbard’s own and separate newsletter that was in print from 1969-1984: The Libertarian Forum. Here was Rothbard’s independent outlet, free from the chains of the Kochtopus and Charles’ strict oversight of PR related matters. It was here that Rothbard was able to announce to the libertarian world the true roots of the problem between the Koch/Crane faction and the Rothbardians. As Rothbard became frustrated with the “low tax” liberalism of Ed Clark and the corruption of the wonderful libertarian message, it was quickly revealed the extent to which Koch and Crane much more preferred the popularity goals of libertarianism and less the ideas themselves. In fact, as Gordon reports, Crane himself seemed unable to care less at times about the development of the scholarship; often being annoyed at the amount of energy Rothbard put into understanding the material and developing the system compared to zipping out sub-par content like a machine in order to attract more funds. The dynamic between Crane and Koch too fostered the problem. Crane wanted power and acceptance in Washington; Koch wanted control over the organization’s every decision — this became the perfect setup to allow a variety of compromise of libertarian principle and theory. After all, Crane would deny any Rothbard suggestion that compromised popularity among status quo political opinion and Koch ensured Rothbard didn’t have any authority to “mess things up.” As things got worse between the Rothbardians and the “Kochtopus,” Rothbard was removed from his position at Cato and no longer invited to speak. As for the legal problem –namely, Rothbard’s stockholder status in Cato– it soon became apparent to Rothbard that battling the billionaire brothers was beyond question going to result in tragedy for Rothbard. After Crane informed Rothbard that his shares had been arbitrarily voided and Rothbard could no longer participate in Board meetings, Rothbard knew it was over. As Rothbard later accounted: “Crane, aided and abetted by Koch, ordered me to leave Cato’s regular quarterly board meeting…. The Crane/Koch action was not only iniquitous and high-handed, but also illegal, as my attorneys informed them before and during the meeting. They didn’t care. What’s more…, in order to accomplish this foul deed to their own satisfaction, Crane/Koch literally appropriated and confiscated the shares which I had naively left in Koch’s Wichita office for safekeeping, an act clearly in violation of our agreement as well as contrary to every tenet of libertarian principle.” And so Rothbard was wiped clean of his stake in Cato and was no longer welcome. His uncompromising mentality and dedication to the libertarian system, over and above his dedication to popularity had, once again, done him in. Rothbard, however, was not alone this time and neither would he be “homeless” for long. 1982 saw the establishment of the Ludwig von Mises Institute due to the tireless and historical efforts of Lew Rockwell. One must imagine the shot in the gut this group was to the Kochtopus. Gordon notes: The new group was a standing reproach to Koch and Crane, since its consistent defense, encouragement, and development of a Rothbardian program were exactly the program that the Cato Institute had betrayed. The Koch forces endeavored to strangle the new group in its cradle. Rockwell received a telephone call from George Pearson, Koch’s Wichita lieutenant in charge of libertarian programs. He screamed at Rockwell that he must on no account found a group named after Ludwig von Mises. Pearson informed him that Mises was an extreme and polarizing figure who should be downplayed. When Rockwell nevertheless proceeded as planned, Koch and his minions actively sought to discourage contributions to the new group. And so it was that Rothbard was quite right when, upon leaving Cato, he opined that the issues at Cato– and not only at Cato, but also throughout the entire Kochtopus empire– would continue to get worse. After all, if maintaining consistency of principle and of theory was, in Rothbard’s eyes, far down the totem pole for the Koch/Crane strategy, then libertarianism itself would quickly fracture into a thousand incoherent pieces. And this is exactly what has come to pass. As Gordon overviews in his story, George Mason University’s Mercatus Center is chock full of non-austrians operating under a “New Austrianism” label; the leaders of which vocally oppose the “extremism” of Mises and Rothbard, preferring instead parts –and the worst parts!– of Hayek and the “moderate” Austrians. They are openly critical of realist-praxeology in the Misesian-Mengerian tradition, they put little merit in the Austrian Business Cycle Theory, and they oppose Mises’ famous Socialist Calculation critique of central planning. As Gordon writes: The current Austrian program at George Mason, headed by Peter Boettke, stresses a combination of Austrian theory with other approaches, especially game theory, public choice, and institutional economics. Since Rothbard was critical of all of these movements, it is safe to say he would not have completely approved of this program. Indeed, those nominally libertarian outlets supported and funded by the Koch enterprise have since the age of Rothbard published articles and hosted speakers that have deviated from Austro-libertarianism on a variety of different fronts, all in the name of being popular (why else would the Cato Institute have the Milton Friedmanite and architect of the post-crisis money printing scheme Fed Chairman Ben Bernanke keynote the 25th Annual Conference?). At Cato, they remain anti-gold standard, pro-central banking, anti-non-interventionism (indeed, even some of their principle leadership still support the Iraq War.), and anti-Ron Paul.  All this because they remain anti-Rothbard. Gordon writes: As mentioned in Part I, the Kochtopus strongly opposes the Mises Institute, which aims to continue the Rothbardian policy of Austrian economics, laissez-faire, and peace that Cato was established to promote. The opposition continues to the present day. Reason, now under Koch patronage, did not react to Ron Paul’s The Revolution: A Manifesto with the praise one would expect for this best-selling libertarian book. David Weigel, in a post of April 30, 2008 on the Reason website, took the occasion to attack Lew Rockwell and other so-called “paleos.” The Kochtopus cannot forgive those who continue to champion Murray Rothbard. Is it any surprise why the Mises Institute and those associated with it (Ron Paul, Tom Woods), remain hesitant and unenthusiastic about the Libertarian Party? It’s a socially progressive entity with few members having any idea what libertarianism actually is. And as I have written in a variety of other places, it is these Koch-backed outlets that continue to misrepresent libertarianism as a socially liberal framework for society; they completely deny the Rothbardian nature of libertarianism, which rests on the idea that physical coercion is not to be applied to those individuals who have not first engaged in aggression themselves. See my Things that Don’t Make a Libertarian. This justice and legal-oriented libertarianism of pure property rights, has been cast aside by the Kochtopus as too stodgy and not attractive enough to gain popularity. But Rothbard put principle above popularity, he followed his logic to the end. And for that, the Kochians rejected him completely. The good news, however, is that because of this, the Mises Institute became what it was and, of course, Rothbardianism lives (here is my overview of his works). ___________________ **While on this topic, let me be perfectly clear: I do not oppose the Kochs for the reasons that the Leftist Media does; as it sees in the Kochs some sort of capitalist conspiracy. Almost every attack on the Kochs by the left have made me want to like them even more –including and especially the lefties fright of the wealth held by the Koch family. My frustration with the Kochs has to do with the story above and various compromises they have made with Washington. Their billionaire status has been attained on the free market, and for that, they are to be commended. CJay Engel Creator and Editor of Austro Libertarian. Lives in Northern CA, runs several businesses, spends time with his family, and reads as much economics and political theory as possible. Source:

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