Cato Institute: Corporatist Libertarianism

What is the Cato Institute? Who funds it? Who has been on its board? What are the connections? What is their agenda?

“My contact with [Cato] was strange. They’re ideologues, like Trotskyites. All questions must be seen and solved within the true faith of libertarianism, the idea of minimal government. And like Trotskyites, the guys from Cato can talk you to death.”
~ Nat Hentoff, columnist

The Cato Institute was founded with Koch money just as the John Birch Society was during an earlier generation. As Koch money turned the Tea Party into astroturf, Koch money has turned the libertarian movement into astroturf. David H. Koch, Executive Vice President of Koch Industries, currently sits on the Board of Directors at The Cato Institute. Rupert Murdoch, the worst corporatist and media propagandist in US history, was on the board of the Cato Institute. The ties are numerous between the Cato Institute, the Koch family, and Rupert Murdoch. The Koch’s and Murdoch have been major players controlling the direction of the Libertarian Party, and both participated in creating the Tea Party astroturf. Murdoch took it a step further by using Fox News to align the libertarian ‘movement’ and the Tea Party with the neocon Republican Party.

You might think it’s all about what brings in the advertising dollars for Rupert Murdoch, CEO of Fox’s parent company, News Corporation. But it runs much deeper than that, involving key players at the Wall Street Journal, News Corp.’s crown jewel. The informal partnership between billionaire David Koch, whose campaign dollars and astroturf group, Americans for Prosperity, have fomented the Wisconsin crisis, and billionaire Rupert Murdoch, is profoundly ideological — the ideology being the exponential enrichment of the two men’s heirs, all dressed up in the language of libertarianism and free enterprise. Together with his brother, Charles — also a big donor to right-wing causes –David Koch runs Koch Industries, the conglomerate that sprang from the oil and gas company founded by his father.

Notice how the Cato Institute has been hiding it’s funding sources for years. Hiding this information implies a dishonest agenda. If they weren’t afraid of the truth, why would they hide it? Why trust a think tank that refuses to disclose basic facts behind its agenda?

Some of the key financial information on the Cato Institute‘s finances, based on returns submitted to the Internal Revenue Service, is:(based on IRS 990 returns)

Year Total revenue Program services Total Expenses Net assets
1993 6,085,321 [1] Not Available Not Available Not Available
1994 6,421,265[1] Not Available Not Available Not Available
1995 9,338,834[1] Not Available Not Available Not Available
1996 9,473,622[1] Not Available Not Available Not Available
1997 11,160,734 6,321,351 9,814,776 11,055,652
1998 15,874,852 6,788,006 10,576,951 16,353,553
1999 13,349,590 7,559,568 11,794,075 17,909,068
2000 12,401,337 7,702,965 12,219,864 18,035,650
2001 17,631,255 8,593,972 14,045,306 21,602,805
2002 16,975,806 10,933,980 17,582,455 20,996,283
2003 12,975,701 12,583,901 15,630,490 18,341,494
2004 14,530,419 11,887,101 17,002,063 15,869,850
2005 22,656,851 11,228,618 17,065,056 21,461,645

Let me clear up one point. As with everything, this issue is complex. It’s not as if the Cato Institute is a front for all big biz. Some of their public positions are actually contrary to the interests of some corporations in some industries (SourceWatch):

“Cato’s corporate fund raising may be hampered by its scholars’ tendency to take positions that are at odds with some of the interests of some large corporations. Cato has published numerous studies criticizing what it calls “corporate welfare,” the practice of funneling taxpayer money to politically well-connected corporate interests.[76][77][78][79][80][81][82] For example, in 2002, Cato president Ed Crane and Sierra Club executive director Carl Pope teamed up to write an op-ed in the Washington Post calling for the abandonment of the Republican energy bill, arguing that it had become little more than a gravy train for Washington lobbyists.[83] And in 2005, Cato staff Jerry Taylor teamed up with Daniel Becker of the Sierra Club to attack the Republican Energy Bill as a give-away to corporate interests.[84]

The Cato Institute only represents certain corporations and only defends certain corporate interests. However, there is an undercurrent of corporatism in that Cato is supportive of global warming denialism, near-monopolies, deregulation, nondisclosure, corporate personhood, and the destruction of grassroots democracy. Basically, they are for anything that makes corporations more powerful and makes government (by and for the people) less powerful. Anyway, they certainly don’t lack corporate funding (e.g., energy companies that donate as part of their lobbying effort to stop environmental regulation) and most of the individual donations probably come from the richest of rich (i.e., the plutocratic class).

It’s confusing in the way all politics is confusing. Many corporations will fund a libertarian think tank like Cato Institute while funding a neocon politician. It’s the same reason they’ll fund a neocon Republican while funding a ‘liberal’ Democrat. Corporations like to cover all bases. So, the ‘principled’ rhetoric of a think tank or a politician is meaningless, just nice-sounding fluff, just political spin to obfuscate the issues, just faux ideology to manipulate the public. Political rhetoric is simply what corporations call marketing. Like the corporations it represents, the Cato Institute is selling a product and any means are justified in that agenda. Are there deeper agendas? Of course. But those deeper agendas wouldn’t be publicly disclosed just as their funding isn’t publicly disclosed.

Corporate libertarianism (AKA establishment libertarianism, libertarianism for the privileged) is a lot closer to neocon politics than it is to grassroots libertarianism. There are some very basic shared interests. For example, take the close connection between the libertarian Cato Institute and the neocon Heartland Institute:

Lindzen and Singer are both associated to the Heartland institute and Cato Institute, extreme-rightist think-tanks and eager defenders of the big coal, oil, tobacco, arms, chemicals and asbestos industry – and funded by these. Heartland institute promotes the extreme neo-conservative approach to economy and regards any efforts by the government to restrict free market forces and big (American) multinational corporations as a nuisance, and perceives e.g. President Obama as a kind of a muslim communist. Government is regarded as an evil force that intrudes on private citizens and puts restrictions on private initiatives (read American multinational corporations). Governments should therefore be kept as small as possible to ensure “freedom”.

Some of the scientists associated to Heartland institute and other similar think tanks were witnesses for the American tobacco industry, claiming that it was not possible to prove a clear connection between lung cancer and smoking. The parallell between the tobacco industry and the big coal and oil industry is striking. It is now evident that smoking cigarettes is addicting and deadly. When the tobacco corporations understood in the 1980’s that they were facing a court trial with compensation claims to the tune of hundreds of billions of dollars, they invented the term ‘Junk science” about mainstream medical science, and mobilised “the merchants of doubt”. They had previously bought medical doctors to recommend cigarette smoking, and to claim that the purported hazards of smoking were hysterical. They bought spin doctors and connected these to PR-firms and think tanks. They gave the impression that the government is scaring the public to accept taxes on tobacco by making the warning texts on tobacco products mandatory. The message is that the government just pretends to protect us while in reality they manipulate us and extort our money.

– Again we see that the American coal and oil industry repeat history. – Even according to president George Bush, we all “are addicted to oil”. Lindzen and Singer defended the tobacco industry 20 years ago and still do, e.g. by claiming that passive smoking is harmless. They claim that the government is again trying to scare us through their “hysterical doomsday prophecies” – in reality just to increase taxes. Again scientists are bought and spin-doctors allied with PR-firms and lobbyists are deceiving the public: “there is no danger! Everything is natural! The big government and the UN are just after more taxes”.
-These persons act more like lawyers than scientists, defending their clients by any means.
It seems that if you are a very big polluter making very big money, spin-doctors from the Heartland-, Cato-, and George Marshal institutes will be there to defend you.
George Marshall Institute, Cato Institute, Heartland Institute, “Americans for prosperity” are all financed by oil-multibillionaires such as the Koch brothers, media moguls like Robert Murdoch with Fox news and other media forming his empire. In addition these think tanks have financial support from Exxon Mobile, Chevron, Philippe Morris and other tobacco giants and the big American coal industries:

The typical climate skeptic prefers to present himself as the underdog; the small, ordinary but concerned person, taking a stand against impersonal and corrupt bureaucracies, the “mighty UN” and oppressing, big governments that will do anything to increase taxes. (That there is a tremendous, ongoing transfer of power and capital from democratically elected representatives to closed boardrooms in multinational corporations is of no concern). He prefers being perceived as David fighting the Goliaths. However, when checking his sources of information – and money – you usually end up with ideas and support from wealthy American ultra-right think tanks, PR groups financed by big multinational corporations in coal, oil, tobacco, arms, GMOs, chemicals etc and lobbyist groups financed by the Arab-American-Canadian oil and coal cartels. For some reason the typical skeptic has never read the IPCC reports he claims to be so skeptical to, and he is never skeptical to the “information” disseminated by the Heartland institute.

Funder of Like-Minded Think Tanks

Aside from its own advocacy efforts, the Cato Institute has become a substantial funder of other “like-minded” think tanks around the U.S. In its 2006 annual report Cato lists 26 organizations and one individual it provided grants totaling $1,243,00 to. Groups the benefited from Cato’s generosity wereAgencia Americana ($30,000 “to help fund study on S.A. corruption”); the Philanthropy Roundtable ($5,000); the Manhattan Institute ($5,000); the American Enterprise Institute ($5,000); the Fund for American Studies ($10,000); the Bluegrass Institute ($50,000); the Cascade Policy Institute($25,000); the Ethan Allen Institute ($50,000); the Evergreen Freedom Foundation ($100,000); the Grassroot Institute of Hawaii ($40,000); the Illinois Policy Institute ($50,000); the James Madison Institute ($100,000); the John Locke Foundation ($20,000); the Maine Heritage Policy Center ($50,000); the Maryland Public Policy Institute ($40,000); the Nevada Policy Research Institute ($50,000); the Oklahoma Council of Public Affairs ($50,000); the Rio Grande Foundation ($50,000); the Show-Me Institute ($50,000); the South Carolina Policy Council ($90,000); the Sutherland Institute ($40,000); the Tennessee Center for Policy Research ($50,000); the Texas Public Policy Foundation ($100,000); the Virginia Institute for Public Policy ($25,000); the Yankee Institute ($68,000); and the Independent Institute ($60,000). In addition Jim Powell received $25,000 as a Hoiles Fellowship.[12] (note, the Cato annual report refers to the “South Carolina Policy Institute” when the correct name of the think tank is the “South Carolina Policy Council”. Similarly, the Maryland Public Policy Institute was misidentified as the Maryland Public Policy Center.)

[ . . . ]

Call for elimination of ballot referendum disclosure requirements

In March 2007, Cato, along with the Institute for Justice, called for eliminating disclosure requirements for those who contribute funds in support or opposition of ballot measures. One of the primary reasons the two groups cited was the high costs associated with disclosure requirements. At the time, these requirements were already weaker than those required for contributions to a candidate’s political campaign.[56][57]

Howie Rich, a real estate investor and Cato Board Member, had helped to sponsor sixteen different ballot initiatives in 2006. His major effort was the so-called “Taxpayer Bill of Rights” or TABOR, which Rich attempted to place on the ballot in eight states. Courts in five of the states ultimately stripped TABOR from the ballot for numerous reasons, including what one Montana judge called a “pervasive and general pattern of fraud” by Rich and others in their campaign to pass the referendum.[56][58]

The Ballot Initiative Strategy Center, an advocacy group in support of ballot initiatives to reach progressive political and policy goals, believe that donor disclosure protects both the voters and the process of direct democracy from secret money and hidden goals. In response to Cato’s position, Kristina Wilfore, the group’s executive director, stated “The problem with being a front group for corporate fat cats like Exxon, Enron, and Howie Rich, is that you are always a little out-of-touch with the public…CATO aligning itself with more corruption in political giving is taking the side of the powerful against the people – and they call themselves libertarian?” [56][59]

[ . . . ]

Cato and Climate Change

Patrick Michaels, a former Professor of Environmental Sciences at the University of Virginia, is a Senior Fellow at the Cato Institute and an outspoken global warming skeptic. On its website, Michaels is listed as Cato’s only speaker on global warming. (Three others are also listed in the “Energy and Environment” category — Jerry Taylor on “gas and oil prices, energy policy, energy conservation and regulation”, Peter Van Doren and on “energy regulation, gas and oil prices” and Randal O’Toole on broader environmental policies.)[62] Pat Michaels represented the Cato Institute as a reviewer on Working Group III of the fourth Assessment Report of the IPCC[63]

Michaels is Editor of the World Climate Report, a blog published by New Hope Environmental Services, “an advocacy science consulting firm”[64] he founded and runs. (Michaels biographical note on the Cato Institute website does not mention his role with New Hope Environmental Services).[65]

In an affidavit in a Vermont court case, Michaels described the “mission” of the firm as being to “publicize findings on climate change and scientific and social perspectives that may not otherwise appear in the popular literature or media. This entails both response research and public commentary.”[66] In effect, New Hope Environmental Services is a PR firm. Michaels’ firm does not disclose who its clients are[67], but in 2006 a leaked memo revealed that Michaels firm had been paid $100,000 by an electric utility, Intermountain Rural Electric Association (IREA), to counter concern about global warming.[68] An affadavit by Michaels also stated that “public disclosure of a company’s funding of New Hope and its employees has already caused considerable financial loss to New Hope. For example, in 2006 Tri-State Generation & Transmission Association, Inc., an electric utility, had requested that its support of $50,000 to New Hope be held confidential. After this support was inadvertently made public by another New Hope client, Tri-State informed me that it would no longer support New Hope because of adverse publicity.”[66]

On a 2007 academic CV, Michaels disclosed that prior to creating his firm he had received funding from the Edison Electric Institute and the Western Fuels Association. He has also been a frequent speaker at events organized by leading coal and energy companies as well as coal and other industry lobby groups.[69]

In 2009, Bob Burton noted that “in its returns, Cato reports that since April 2006 they have paid $242,900 for the ‘environmental policy’ services of Michaels’ firm. (In preceding years, New Hope Environmental Services was not listed amongst the five highest paid independent contractors supplying professional services to Cato.) In response to an email inquiry, Michaels stated that the Cato funding “largely supported the extensive background research for my 2009 book, ‘Climate of Extremes,’ background research on climate change, mainly in the areas of ice melt and temperature histories, and background research required for invited lectures around the world.” (Climate of Extremes was published by the Cato Institute in January of this year [2009].) Asked whether the funding came from a specific company, donor or foundation, Michaels wrote via email that there wasn’t “for this or for any of my activities.” (In case the Cato Institute knew of dedicated funding sources for Michaels work that he was unaware of, I also emailed an inquiry to the think tank’s media office. They did not respond.)”[70]


[ . . . ] In their 1996 book No Mercy, University of Colorado Law School scholars Jean Stefancic and Richard Delgado describe a shift in Cato’s patron base over the years. “Early on,” they wrote, “Cato’s bills were largely paid by the Koch family of Wichita, Kansas. Today, most of its financial support from entrepreneurs, securities and commodities traders, and corporations such as oil and gas companies, Federal Express, and Philip Morris that abhor government regulation.”[74] Though diversified, Koch Industries amassed most of its fortune in oil trading and refining. [75]

See the interactive map at the following link:

Cato Institute

Muckety news stories featuring Cato Institute
Koch money is finding its way to Madison.
February 23, 2011

People related to Cato Institute:

K. Tucker Andersen – director
Frank Bond – director
Edward H. Crane – president
Richard J. Dennis – director
William A. Dunn – director
Kevin L. Gentry – director
Ethelmae C. Humphreys – director
David H. Koch – director
Robert A. Levy – director
John C. Malone – director
William A. Niskanen – director
David H. Padden – director
Lewis E. Randall – director
Howard S. Rich – director
Donald G. Smith – director
Jeffrey S. Yass – director
Fred Young – director

Other current Cato Institute relationships:

State Policy Network – associate member

Cato Institute past relationships:

Whitney L. Ball – director of development

Charles G. Koch – founder
David B. Kopel – associate policy analyst
William A. Niskanen – chairman
Frederick W. Smith – director
Walter E. Williams – advisory board member

Examples of Mainly Corporate Funded Think Tanks: Cato Institute

Founded in 1977 the Cato Institutes 1998 budget made up US$ 11 million. Its funding consists of corporate and private donations (especially from corporations and executives in the highly regulated industries of financial services, telecommunications and pharmaceuticals industries) and sales of publications.

Catos corporate donors include tobacco firms: Philip Morris (Rupert Murdoch sits on Philip Morris board of directors) and R.J. Reynolds. Financial firms: American ExpressChase Manhattan BankChemical BankCiticorp/Citibank, Commonwealth Fund, Prudential Securities and Salomon Brothers. Energy conglomerates: Chevron CompaniesExxon Company, Shell Oil Company and Tenneco Gas, as well as the American Petroleum InstituteAmocoFoundation and Atlantic Richfield Foundation. Furthermore the Cato Institute is funded by pharmaceutical firms: Eli Lilly & CompanyMerck & Company and Pfizer, Inc.,foundations, like Koch, Lambe and Sarah Scaife and companies from the telecommunications sector: Bell Atlantic Network Services, BellSouth Corporation, Microsoft, NYNEX Corporation, Sun Microsystems and Viacom.

There have been several articles written lately about the involvement of Koch industries with state Governor’s, particularly most recently with Wisconsin’s Governor Scott Walker.
Here are some good articles:
Below is a pdf document put out by the Cato Institute that clearly shows their objective of decreasing the power of Unions because of their ability to lobby and spend money for Liberal and Progressive issues and candidates.

“Labor unions play a diminishing role in the private
sector, but they still claim a large share of the public-sector
workforce. Public-sector unions are important to examine
because they have a major influence on government
policies through their vigorous lobbying efforts. They are
particularly influential in states that allow monopoly
unionization through collective bargaining.
Collective bargaining is a misguided labor policy
because it violates civil liberties and gives unions
excessive power to block needed reforms. To provide
policymakers with greater flexibility and to improve
government efficiency, states should follow the lead of
Virginia and ban collective bargaining in the public sector.”

Click Picture to See Full Size

I would expect that there will be other conservative governors, from states other than Wisconsin, that will be trying to do away with collective bargaining too. There have been protests in Ohio and Indiana has a bill very similar to Wisconsin’s, See Indiana Senate Bill 0273.

From the article: Wisconsin Leads Way as Workers Fight State Cuts by Michael Cooper

“In Tennessee, a law that would abolish collective bargaining rights for teachers passed a State Senate committee this week despite teachers’ objections. Indiana is weighing proposals to weaken unions. Union members in Pennsylvania, who are not necessarily facing an attack on their bargaining rights, said Friday that they planned to wear red next week to show solidarity with the workers in Wisconsin.”

“In many states, Republicans who came to power in the November elections, often by defeating union-backed Democrats, are taking aim not only at union wages, but at union power as they face budget gaps in the years ahead.”

“FreedomWorks, a Washington group that helped cultivate the Tea Party movement, said it was trying to use its lists of activists to turn out supporters for a variety of bills aimed at cutting the power of unions — not just in Wisconsin, but in Tennessee, Indiana and Ohio as well.”

Criticisms of the Cato Institute.

Part of the “Critiques of Libertarianism” site.

Last updated 08/27/10.

A “libertarian” quasi-academic think-tank which acts as a mouthpiece for the globalism, corporatism, and neoliberalism of its corporate and conservative funders. Cato is an astroturf organization: there is no significant participation by the tiny libertarian minority. They do not fund it or affect its goals. It is a creature of corporations and foundations.

The major purpose of the Cato Institute is to provide propaganda and soundbites for conservative and libertarian politicians and journalists that is conveniently free of reference to funders such as tobacco, fossil fuel, investment, media, medical, and other regulated industries.

Cato is one of the most blatant examples of “simulated rationality”, as described in Phil Agre’s The Crisis of Public Reason. Arguments need only be plausibly rational to an uninformed listener. Only a tiny percentage will notice that they are being mislead. That’s all that’s needed to manage public opinion.


A Critical Assessment of “Lies, Damned Lies, & 400,000 Smoking-Related Deaths”.
The Cato Institute, heavily funded by tobacco companies, hired Levy and Marimont to denounce statistics about smoking related deaths. This article refutes their key arguments, finding them unscientific and inflammatory.
Media Moguls on Board: Murdoch, Malone and the Cato Institute
An Extra! (the magazine of FAIR, Fairness & Accuracy In Reporting ) article that describes how media giants use Cato to lobby Congress for corporate welfare and legal monopolization.
Why Privatizing Social Security Would Hurt Women
An Institute For Women’s Policy Research rebuttal to Cato Institute proposals and claims about Social Security privatization.
An Analysis Of The Cato Institute’s “The Case Against a Tennessee Income Tax” 
Senate finance panel examines Cato report, recognizes propaganda
Citizens For Tax Justice lay open the shoddy errors behind this typical example of the claims Cato makes. The Tennessee Senate finance panel also identified a large number of other errors.
Who knew? The Swedish model is working.
Paul Krugman points out that CATO and other conservatives were dead wrong in their predictions for Sweden, and that big welfare states do sometimes work well. From The Unofficial Paul Krugman Archive.
Libertarian Think Tanks
Tom Tomorrow’s “This Modern World” gives credit where it is due.
Do Windmills Eat Birds?
David Case, executive editor of, exposes a quotation out of context by CATO in a case of pretend environmental concern.
Millionaires One and All
(PDF) Details the fallacies underlying the CATO Social Security Calculator. Under realistic assumptions, you’d accumulate 1/10th to 1/30th of what CATO estimates. Part of The Social Security Network.
Rethinking the Think Tanks
Sierra Magazine’s article detailing the corporate financing of anti-environmental propaganda from thinktanks like Cato.
Internet Bunk: The Junk Science Page
The CATO Institute is a corporate front that employs Steven Milloy to tarbrush opponents scientific arguments as “Junk Science”. Robert Todd Carroll’s excellent The Skeptic’s Dictionary details Milloy’s unscientific part in this PR campaign.
Zogby Polling For Cato Institute, Other Clients, Manipulates Findings To Misrepresent Public Opinion About Social Security
A poll based on spin, rather than real alternatives, yields more spin. From Campaign For America’s Future.
Cato Institute: “Libertarian” in a Corporate Way
Norman Solomon of the Institute for Public Accuracy details how the CATO Institute represents its anti-regulation corporate funders, not libertarian individuals. The goal is to give corporate propaganda an air of objectivity by concealing its source.
The ‘freest economies in the world’.
John Berthelsen of the Asia Times points out that the Cato Institute’s ‘economic freedom’ index seems to have no idea of the reality of government intervention and market oligopoly in Hong Kong and Singapore.
NEW 5/06: Dogmatic Libertarians
John Fonte (in National Review) writes a conservative response to the dogmatic Cato position on open borders. He points out the obvious that somehow libertarians seem to miss: borders are important to self-governance for basic reasons of security.
NEW 5/06: The Cato Hypocrisy
David Brin describes “truly grotesque hypocrisies, putting shame to any pretense that these Cato guys are “libertarians,” let along honest intellects.”
NEW 1/07: Comments on “Has U.S. Income Inequality Really Increased”
Gary Burtless of The Brookings Institution severely criticizes the analysis of Alan Reynolds of the Cato Institute in the Reynold’s paper Has U.S. Income Inequality Really Increased? The answer is yes, contrary to Cato propaganda.
NEW 3/07: The Denialists’ Deck of Cards: An Illustrated Taxonomy of Rhetoric Used to Frustrate Consumer Protection Efforts
Chris Jay Hoofnagle details the public relations methodology of CATO and other anti-consumer, business-funded organizations. Count how many of these you’ve heard on your favorite topic: global warming, for example.
NEW 2/08: CFP’s Laffer Curve Video
Law Professor Linda Beale debunks the latest Laffer Curve propaganda video from the “Center for Freedom and Prosperity” and CATO’s Dan Mitchell.
NEW 11/08: Politics Compromises the Libertarian Project
Matthew Yglesias takes the Cato Institute to task for corporate shilling in it’s own “jornal”, Cato Unbound .
NEW 8/10: Covert Operations: The billionaire brothers who are waging a war against Obama.
Jane Mayer’s The New Yorker article on Charles and David Koch. They have financed libertarian propaganda with more than 100 million dollars over more than 30 years. They founded and control the major libertarian think tanks Cato, Reason, Mercatus, and others. See: Koch think tanks at SourceWatch.

Print References

The links here are to, through their associates program, primarily because of the review information. Books without links are generally out of print, and can often be easily found at AddAll Used and Out Of Print Search. Good sites for bargain shopping for sometimes expensive new books are Online Bookstore Price Comparison and AddAll Book Search and Price Comparison. Both of those list applicable coupons. Another is

Sheldon Rampton and John Stauber “Trust Us, We’re Experts: How Industry Manipulates Science and Gambles With Your Future”
Details of the public relations and brownlash manipulations of CATO, Steven Milloy, and others.
Jean Stefancic and Richard Delgado “No Mercy: How Conservative Think Tanks and Foundations Changed America’s Social Agenda”
(Temple Univ. Press 1996). The influence of Cato and Heritage Foundations.

Copyright 2007 by Mike Huben ( ).
This document may be freely distributed for non-commercial purposes if it is reproduced in its textual entirety, with this notice intact.

18 thoughts on “Cato Institute: Corporatist Libertarianism

  1. Strange question, but have you ever considered why the non- neo-liberal models are working?

    – the East Asians grew very rapidly from one of the most primitive nations to one of the most advanced for example.

    It’s the kind of thing that you will not see in the West.

    • I could speculate about reasons. But I must admit I haven’t given it a lot of thought. From what I understand, their governments tend to be heavily interventionist which allows for quick large-scale changes. Even their capitalism is very much controlled and more centralized, which I’d assume relates to the high economic inequality. Also, those countries also might have kinds of social capital that a country like the US lacks.

  2. I posted it else where, but here it is on this blog (mostly relating to Japan):

    Officially of course, the answer for China goes something like this. China suffered greatly under Mao (which it did in many ways), then it embraced Western neoliberal economics and prospered. Wages in the West are not sustainable so jobs are being outsourced. Problem is, it’s not true. Chinese “state capitalism” is very different from that of Western capitalism. This of course, is not what is really happening.

    Eamonn Fingleton is perhaps the best writer when it comes down to what really happened, but here is a breakdown. It’s a long story, but here it is.

    During WWII, Manchuria was a Japanese colony. They experimented with Manchuria and did quite a few terrible things but one thing they succeeded at was building up in some ways the economy through the Manchuria model, which they tried on Japan after in a desperate effort to fill in the gap. It did not succeed, but it was a lesson. After WWII, the leading military leaders in Japanese tradition resigned. Many committed suicide, disappeared in public life, and some were executed by the US.

    After that, a new generation of leaders took power. They decided to form a single party state (this became the LIberal Democratic Party and you can read about their electoral successes), while giving the appearance of a democracy. They then wiped out the fortunes of the wealthiest families and gave real control to METI and the Japanese Ministry of Finance. A very servile media was established where freedoms were generally restricted but in a “soft” manner. It is essentially a “soft authoritarian state”. The Ministry of Finance and METI, really ran the country combined with the Keiretsu (large companies).

    Of course the above is not radically different from the US, save for the fact that there is one party in control, and that they wiped out their wealthiest families. That’s where they diverge. The Ministry of Finance you see, and the Japanese companies are very long-term oriented. They do not care for profit for the sake of profit. They are interested more in having advanced manufacturing.

    In the 1950s, Japan undertook a series of efforts to improve quality, which has since become a national obsession. Ironically many of the methods were pioneered by an American, W. Edwards Deming, but US companies turned them away. Anyways, the Japanese aggressively took these on. How did they get the money? It is often said that the thing that they lack is capital. They suppressed consumption. The same way that everyone does in World Wars. Why is there suddenly so much money for military if there is a World War? A lot of it is due to debt. But much of it is because consumption is being suppressed. Note the very high savings rate in China and the East Asian economies today. The same idea is at work in China – perhaps as much as 30% of consumption is being suppressed. Essentially they’ve suppressed consumption in peacetime for decades the same way the West did in wartime, only they’ve done it for decades on end.

    Suppressing consumption though is not enough. That merely lowers short-term living standards. The money is invested towards certain industries. During the post-WWII era, in the case of Japan, that was in the fields of electronics, shipbuilding, and automobiles. They made consistent incremental improvements with the money from suppressing consumption, thereby allowing for much greater capital investment. Japanese companies are rarely profitable – they are going to try to max out revenue. The reason for maxing out revenue is because they want the work, to them the jobs, the technical know-how is the most valuable thing. Advanced manufacturing is not of course men working on an assembly line, it is very capital-intensive and labour un-intensive. Japan today dominates many of the producers goods, like robotics, machine tools, and similar areas. Only Germany compares among the Western nations in manufacturing leadership.

    Much has been press has been said of the end of Japan’s employment for life. There never was that. During the 1920s and 1930s, it was concluded that a Western employment system around “free markets” was not productive. Japan developed a system where people would work at the same company for many years. Bonuses would be awarded to those who performed each year, and for the very bad employees, they could be cut. The Japanese have a very strong work-ethic in that regard. At the same time, people were employed for long periods, under unions. These unions are not like those in the West – they are very long-term oriented too, with interests closely aligned with the employer. They know that their long-term interest is with employer success. At the same time, there is a very high degree of equality in Japanese society – comparable to that of the Scandinavians in fact. Management rarely if ever lays off employees in return and keeps the most valuable work in Japan (the low tech stuff being outsourced to Korea, Taiwan, and later China).

    There are advantages to this system. Employers are much more willing to invest in employees knowing that they will not leave. They are also willing to invest in capital advancements. In times of company difficulty, they do not layoff unless the company is in a dire situation. There are also equal pay rises (relatively) with some cultural limits on executive compensation. In return, employees rarely do anything disruptive to the company. They also do not resist things like automation, knowing that they will not be laid off, and turnover is low.

    One of the key purposes of this system is to gain lots of exports. When an industry is targeted, the Japanese would pay for the know-how on how to do things from the West, sacrificing short-term profits in exchange for transfer of knowledge. This happened in the automobile, electronic, and shipbuilding in the 1970s. Today it is happening in the field of aerospace technology. Exports are then sold abroad. If you were to go to Japan, you’d find that the Japanese pay higher prices for the same cars, electronics, and items that we buy in the West. Often the highest quality goods are not even found – they are exported to the West. A good example of this is Lexus automobiles, which started purely for export and only years after were introduced in Japan. This is the result of the suppression of consumption. They sell things at around variable cost abroad and often at a loss – all for the purpose of getting trade surpluses. That is also why they have managed to break the West’s domination on these industries. They also tend to aggressively subsidize these industries. This ideology ironically is looked down upon in the West – mercantilism.

    They have also excluded foreign imports as much as possible – foreign cars for example make up less than 4% of market share. Finally, to allow their domestic car makers as much power, they developed a system where you’d have to replace your vehicle (if you owned a car) every 3 years or pay a very expensive inspection. At the same time, they’ve tried to play the image that their markets are “open”. They have found non-tariff ways to keep people from buying non-Japanese too. Korea does the same thing – they have 98% autos being Korean. You see what happens is, if you buy a foreign vehicle, the government will do things like tax-audit you.

    By the 1980s, this system was becoming a threat to the US and Japan was rapidly ascendant. You can read about the rate of economic growth. It was clear that the US might react. So what did the Japanese do? They had a crash internally (that was purely their fault from unregulated finance, not unlike the West), but with a manufacturing based economy they recovered within a couple of years. They then exaggerated the consequences into a “Lost Decade” and made up stories like “end of unemployment for life”. At the same time, they’ve kept their currency, the Japanese Yen artificially low. Suffice it to say, the US has not complained about this since reading about the severity of the recession and since the 1990s, Japan’s surplus with the US has tripled. Abroad they have transferred some of the technologies to the other East Asians. Electronics and shipbuilding for example are areas that Japan deliberately transferred the know-how to South Korea and China. Japan has moved up the production ladder to more advanced things. They kept only the most advanced stuff for themselves.

    If you were to look elsewhere, you’d find other statistics. Japan has been deliberately understating its GDP. Other metrics tell the truth. Look at life expectancy for example. For a nation enduring a recession comparable to that of the 1930s, this would not make sense. Electricity consumption has gone up 30% per capita since the 1990s, but since then the Japanese have concealed there other data. I cannot find any more recent data past the late 2000s on electricity consumption. Japan also spends close to 4% of its GDP on R&D, among the highest. In the West, only the Scandinavian nations match that. In truth this may be an underestimate, much of their R&D is in the field of advanced manufacturing.

    Abroad, the Japanese have told their people to keep a low profile, sometimes feigning stupidity, and to be deliberately modest. They do not want to draw attention to themselves. They’ve also bought a lot of debt. Officially, Japan has a disaster on its hands, the GDP to debt ratio. Unofficially, much of that debt is because they have been financing their exports to the West through their raising debt. The Japanese hold 95% of their own debt. This is also useful for propaganda to fool the West into thinking they are in serious trouble. You will notice if you research that Japan holds one of the largest percentages of US debt. China is the largest debt holder abroad. Japan also has a very servile media, which keeps a lid on these things.

    The reason why this is done is because they do not want the West to understand what has really happened. South Korea, and Taiwan saw rapid growth under authoritarian leaders as well. The same thing is happening on a large scale now in China.

    This is not what you will hear in the Western world, suffice it to say. Officially, they are a Western-style democracy, they have embraced neoliberal economics, and they are still desperately trying to recover from the 1990s recession, while being deeply in debt. Not quite. I suspect they’ve fooled a great many people. The other thing they’ve done is used the Pentagon – the Pentagon gets to occupy Okinawa and a few bases, in exchange they got trade surpluses.

    Let me know what you think. This is mostly a summary of Eamonn Fingleton’s excellent work. It is not how economists will say what happened in the West, but it would explain a lot more than any of the neoliberal explanations.

    • Sounds intriguing. It isn’t the type of book I normally read. Most economics books bore me. I do like economic books, though, that emphasize the human side and the social impact. I’ll keep Fingleton’s book in mind. I’ll look at some reviews of it.

  3. In the Jaws of the Dragon is the book you are looking for.

    But I’ve basically summarized Japan above. Can you see why this system has led to an astonishing level of growth and living standard since WWII compared to the neoliberal Western system?

    If you want to understand how this “transfer” of technology works, please read this:

    Not quite the article type you’ll see in a mainstream media piece is it?

    Suffice it to say, the same thing that happened to the automotive, shipbuilding, and electronics industry appears to be happening now in aerospace.

    • Thanks for the link. The conclusion says it all:

      “In discussions of the unintended consequences of globalism, the transfer abroad of valuable production technology is the elephant in the room. It is consistently ignored in all standard theoretical accounts of free trade. In an era when information can move around the world at light speed, this is an oversight of epochal importance. Almost everyone assumes that no matter how fast American industrial know-how leaks abroad, an abundance of new production methods and new industries will keep bubbling up to provide additional sources of prosperity. Not only do people not stop to consider whether this assumption is valid, they don’t even realize they are making an assumption.

      “Many of America’s most sophisticated competitors do not run their trade policy on a free-market basis, argues Ralph Gomory. By intelligent use of trade barriers, among other things, they can hope to finagle advanced production technologies out of the United States. Employers in such nations are often under considerable pressure—political, economic, and societal—to keep their own most advanced production technologies at home and well away from the risk of theft by foreign rivals.

      “A historic ratchet effect is at work. With high-value jobs disappearing never to return, America’s imports and current account deficits rise with each succeeding economic cycle. The deficits have to be financed—and this means ever greater reliance on major creditor nations, not least China and Japan, but also Saudi Arabia, Russia, and Germany. On present policies, the United States is continuing down a spiral of indebtedness similar to that of the late Ottoman Empire. The tale can end only in bankruptcy—or a drastic change of course.”

      • You know all that talk of how America’s last great manufacturing is in aircraft? Well … now you know what is happening.

        The other thing that I should note that the author implied but did not state was that Boeing has been under-investing in its Research and Development spending. Boeing apparently now spends half as much as a total percentage of revenues compared to Airbus in Europe.

        Fingleton’s article references a warning by Hart-Smith of the dangers to Boeing of outsourcing.

        Click to access 2014130646.pdf

        There is one other matter. Boeing has been waging a pretty long war on their unions. They moved their headquarters to Chicago for tax reasons and open a plant in South Carolina in an effort to break their unions.

        Sad thing is, when (and I emphasize the “when”) the US aerospace industry faces more serious problems, the right in the US will blame unions.

        The 787 rollout, if you have been following the news has been very problem plagued. Internally, there have been other issues at Boeing that have caused problems too, mostly due to poor management.

        In any event, if in a few decades, Boeing and the other aerospace firms end up in a situation not unlike that of Detroit’s automakers, well now you know.

  4. So what do you think?

    Likely to end up like Detroit’s big 3? Or worse even with Airbus a strong competitor?

    It seems that this short-term mentality in corporate management has wrecked the US.

    • I’m not sure it is exactly a short-term mentality. I suspect that many of them more or less understand the implications and likely results of what they are doing.

      They simply don’t care about the US. They don’t care about the US economy, the US government, or the US citizenry. If the US goes under, they will remain rich.

      They easily can move their money and assets to other countries. If other countries take over markets, they will invest in those companies instead. This is a global plutocracy that just doesn’t give a fuck about anything but profit and power, wherever and however it is to be had.

    • Other countries have plutocracies as well, but it is different in some of those more successful countries. In many countries, the plutocracy is either kept in line by the government or in alignment with the government. Those countries still have a ruling elite and an economic elite who feel identified with and loyal to the country.

      In the US, on the other hand, the plutocracy owns and controls the government, just like owning any other business and it means nothing more than that. They will sell America to the highest bidder if it suits their agenda.

      • Something like that.

        I get the impression that the US top plutocrats never accepted the idea of social responsibility, to them it’s just PR. It’s all about maximizing their own wealth. The same can be said about their nation. They have no allegiance to anyone.

        The US financial elites never really accepted the ideals of the New Deal – they refused to accept the idea that it might have saved them from themselves. They resented even more the idea of sharing prosperity.

        It seems to be a moral failing more than anything else. It’s also a failure of American values.

        Contrast this with the Japanese companies. They recognize that the goal should not be profit, but the national interest. Even at the height of growth in the 1970s and 1980s, Japanese companies were never very profitable. They also tend to pass cost savings onto customers as well.

        Similar thoughts about many European companies. They may not like the idea of sharing prosperity or allowing workers to sit on their boards, but they’ve accepted the concept.

        I think that as far as what is happening, it’s shocking how self-inflicted this all is.

        • The U.S. has the kind of complex past that is typical of many post-colonial countries. It was founded on both empire and slavery. And largely within a British tradition, although with plenty of non-British influences to make it even more complex.

          Some of the founders and other British aristocracy shared an European belief in noblesse oblige. The idea was basically that to those who have been given much, much is to be expected. They idealized social responsibility, espeially the Virginia slaveholders with their Cavalier vision of a disinterested aristocracy. It was based on a clear demarcation between labor and leadership, between econoics and politics.

          In the colonies, Washington took this ideal of moral leadership deadly seriously and Jefferson aspired to it as well. In Britain, Burke was a strong proponent of a chastened aristocracy that was responsible for and accountable to the public, an aristoccracy that has to regularly prove the social worth for maintaining its wealth and power. This Anglo-American tradition remained mainstream through the Roosevelt presidencies.

          Drew Maciag has some interesting things to say about this tradition and how Americans have interpreted and applied it. In his book Edmund Burke in America, he has a chapter with the title, “Theodore Roosevelt: Blazing Forward, Looking Backward”. He compares Burke and TR. Quite fascinating. That chapter helped me understand the enigma of Burke better than anything else I’ve read, and I unexpectedly came to respect Burke.

          Many of the founders were highly wary of the opposing ideals of unregulated capitalism and enlightened self-interest. They believed in a government that strongly regulated markets and strongy intervened in the economy. Even later on with the great Adam Smith, this wariness lived on. Smith is one of the greatest advocates of a strong government and well-regulated markets. Like Burke and the founders, he worried about the corrosive and self-destructive effects of capitalism when it leads to such things as too high of economic inequality and too solidified of division of labor.

          Much of this was grounded in the Christian traditions that took hold in America. The Quakers and Shakers, for example, held extremely high moral and community standards for businesses. They would have seen freewheeling laissez-faire capitalism as one of the greatest dangers and corruptions of a genuinely good society.

          Southerners, in particular, originally had an uneasy relationship with capitalism and what it was becoming. Rural communities in the South maintained subsistence farming and bartering well into the 20th century. A major divide preceding the Civil War involved Southern resistance to industrialized capitalism and wage labor as a replacement for the noble independent family yeoman farmer.

          On the other hand, many Southerners were quick to embrace or adapt to modern capitalism. Even some of the disintered aristocrat wannabes found themselves forced to be more concerned about profits because of how in debt most of them were. Jefferson began experimenting with industrializing his plantation. Prior to the Civil War, slaves were increasingly being sent to the big cities to work in factories.

          Slavery ended up leaving a very large mark on American capitalism. Along with being an immigrant nation of cheap imported labor, slavery is one of the major contributing factors to the unique labor relations here, unique compared to other Western countries not founded on slavery.

          I just came across another book that was recently published: The Half Has Never Been Told by Edward E. Baptist. It is about this very influence of slavery on American capitalism. That the two merged together quite smoothly.

          Put the lack of ethnic and cultural homogeneity on top of all that. American is a very complex and divided country in so many ways. The country was barely coming to a stabilized social order when the doozies of the 20th century hit. The Roosevelts were the last gasp of what came before. Americans became ungrounded even from our own past. Far from places like Japan, Americans didn’t have well entrenched systems and traditions of social capital to fall back on. The social restraints that exist in other countries just aren’t all that powerful here.

          If our country had another century or so of development before the 20th century or if we had never had large-scale slavery, maybe things would have been different.

  5. I would agree that the level of social capital in society is weak.

    The Northeast, parts of the Midwest have stronger social capital by comparison, and arguably the West Coast does too, at least among many Whites.

    It is even stronger though in Canada, and the pace of social development has been comparable.

    But it’s still very weak compared to say, the Scandinavian nations. I think that may be one of their biggest advantages – being a high trust society.

    • The US is an ungrounded society. Americans have little sense of the past and so little sense of long-term consequences. This is what makes America so dynamic and innovative. But it is also what makes our culture naive, arrogant, and reckless. Either American society will crash and burn or will eventually gain cultural maturity.

      • Right now the former seems to be unfortunately, a very likely outcome, particularly seeing that many Americans have as one of their most cherished ideals, the idea that America is exceptional in ways that other nations are not.

        History is an early warning system in that regard and the US is not the first civilization to hold those dangerous beliefs.

  6. A libertarian linked to this piece:

    It amuses me. Libertarians are supposed to be above average in intelligence. But this guy doesn’t come across as all that smart.

    He thinks just because he is a lower class loser, therefore, that proves that the Libertarian Party isn’t funded and controlled by corporatists like the Koch brothers. I’m sure the corporatists are fine with lower class losers supporting their agenda and voting for their candidates.

    The Koch brothers don’t need to give these desperate ideologues a Koch check for their submission and subservience. Ideologues, in their groupthink, do it for free. This guy sucks Koch cock simply because he likes the taste.

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