Home > Archives (2006 on) > 2014 > American Oligarchs

Mainstream, VOL LII, No 33, August 9, 2014

American Oligarchs

Friday 8 August 2014, by Eddie J Girdner


Sons of Wichita: How the Koch Brothers Became America’s Most Powerful and Private Dynasty by Daniel Schulman; Grand Central Publishing, New York; 2014; pages: 424.

“He who has no shame owns the whole world.” 
—Cypriot proverb

In his recent notable book, Capital in the Twentyfirst Century, Thomas Piketty has documented how America is becoming a rentier society like France in the late nineteenth century. Inequality of wealth in 2010 in America showed that the top one per cent of the rich owned some thirtyfive per cent of the total wealth. The top ten per cent owns seventy per cent of the wealth. Without a tax on capital, this inequality is certain to grow as the returns to capital are far higher than the rate of economic growth. The logic of capital accumulation noted by Karl Marx in the nineteenth century is increasing inequity by leaps and bounds in the old mature capitalist countries. Indeed, the bottom half of the population owns virtually nothing, less than five per cent of the total wealth.

How long the population will tolerate such a system in countries which claim to be demo-cratic is an interesting question. The number of billionaires in America has grown to 492 in 2014 while the great majority of Americans are barely able to make ends meet. The youth today, if lucky enough to get a university degree, are usually saddled with a large amount of student loans upon graduation. Their opportunities to buy a house and start to get a foothold in life have greatly eroded. Large swaths of America are being turned into a virtual Third World sunk in poverty. As one of my former professors, Patrick Peritore, recently wrote, “America is awash with public stupidity.” After enjoying relative prosperity from the end of World War II until the l970s, they have come to blame the govern-ment for their declining standard of living. Meanwhile the big private corporations are laughing as their profits and accumulation soar. Americans are looking for scapegoats and blaming President Barack Obama, the Mexican immigrants, the Chinese, gays, the United Nations, socialists, and the government, while corporate power and wealth increases by leaps and bounds.

The truth is that most Americans would not know socialism if it hit them in the face, but they would enjoy the hell out of some of the benefits for a change. That is, as long as they did not know it was “socialism”. It would be a great relief to their worries to get a good dose of government help for their basic housing, education and medical needs.

America has become a one-dollar one-vote system that has allowed the big corporations to buy and own the politicians and the government. In 1910, the United States Supreme Court decided the case Citizens United vs. Federal Election Commission 558 US 310. The United States Supreme Court held that the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations, or labor unions. This decision opened the floodgate of corporate money being spent for TV ads promoting certain candidates. The decision was based upon the principle of “free speech”. Since a corporation is a person, legally, in America, restricting the amount of money it spends producing political propaganda is a violation of its free speech rights. This is the logic of the court. In the 2012 Presidential elections Americans were virtually choked to death by the massive flood of corporate lies on TV channels under the rubric of “free speech”. In America, legally and officially, money is speech. It means that if you are broke, like most Americans, then keep your mouth shut. What you have to say does not cut any ice in a corporate oligarchy.

The billionaire corporate oligarchs may not always be able to buy the politicians and politics that they want, but they can come pretty damn close. That is where America has come at this point in the twentyfirst century.

One of the wealthy families of oligarchs targeted by the Occupy Wall Street is the Koch Brothers (pronounced coke brothers). Koch industries is the second largest private corporation in America. The Koch Brothers have funded many Right-wing groups, sometimes racist, and are the main source of funding for the Tea Party Movement. While promoted as a “grassroots” populist movement, this is only partly true. The Tea Party has been floated by the financing of the Koch oligarchs since they jumped on the populist bandwagon. They fund Right-wing ideological think-tanks like the Cato Institute, Right-wing University Economics Departments, and many front groups for big corporate interests. George Mason University Economics Department is the most prominent example today.

For many years, the Koch oligarchs tried to stay below the radar and remain unknown, but their funding of causes, which a majority of Americans do not want, and which serve the interests of the rich, has put them in the spotlight. They try to bust public sector trade unions, interfere in public schools, get rid of Social Security and welfare, fund lies about global warming, abolish the minimum wage, abolish environmental regulations, and abolish income taxes.

The Koch Brothers oligarchy began with the Koch brother’s father, Fred Koch, in the l930s. Today Koch Industries has $ 115 billion in annual revenues and one-hundred thousand employees. It operates in sixty countries. The company has made most of its money in oil, chemicals, timber, and cattle. Today, the two brothers running the firm, Charles and David Koch, are both worth more than $ 40 billion each. They are tied for sixth on the Forbes list of the world’s richest individuals in 2014. A third brother, Bill, who has his own companies, is 329th on the Forbes list. A fourth brother, Frederick, wealthy in his own right, is not in the company but spends his time collecting art and buying old mansions. His money, of course, came from the family.

The Koch Brothers also own three ranches in the US with 425,000 acres. They are large commodities traders. The company processes 725,000 barrels of oil a day. The brothers own Georgia Pacific, which had 50,000 employees when it was purchased.

The Koch Brothers are driven by the Right-wing libertarian philosophy of Ayn Rand. While they would like to see both the Republican and Democratic parties abolished, they have become a major force in the pro-business Republican Party. Their funding of the Tea Party has resulted in some prominent Republicans losing office and has practically paralysed the government. The Koch Brothers work to spread the libertarian ideology. They spent a huge amount of money in 2012 to get President Obama defeated, but failed. People just did not buy their poison cool-aid. Not enough of them, anyway.

There is only one thing one needs to know to vote in America. If you are rich, vote for a Republican. If you are not, vote for a Democrat. Either way, you will get screwed, but if you are poor, you will not get screwed quite as badly by a Democrat. As the old anarchist, Utah Phillips, used to say, the difference between a conservative and a liberal is that a liberal will also hang you, but from a lower limb.

The background to the story is Fred Koch from Wichita, Kansas, who started an oil company in the l930s. In l932, the Winkler-Koch Engineering Company was hired by Josef Stalin to set up oil refining equipment in the Soviet Union. Here, the company made millions of dollars while Fred Koch was becoming convinced that communism was evil.

On the family farm in Kansas, the Koch Brothers were instilled with the work ethic, baling hay in the summer. Their father tried to teach them to be tough and fighters, although he failed with the first son, Frederick, who he did not like and who was thought to be gay. Maybe he just didn’t like to punch others in the face. He was not cut out to be a businessman.

Fred Koch became a Right-wing looney in the l950s. He saw commies crawling out of the woodwork and from under carpets. This sort of dementia was typical of the McCarthy era in America. In l958, he helped found the John Birch Society, an anti-communist outfit.

I had an English teacher in High School who sometimes spoke against the Birch fanatics in the early 1960s. Most Americans did not even know who they were. Just being this politically conscious made her a sort of social renegade and Lois Mabe was thought to be a little wild in her views. America was an incredibly square society in the 1950s, especially in small towns in Missouri.

As far as Fred Koch was concerned, socialism and communism were taking over the world and the only decent countries were those that had been taken over by the fascists, such as Germany, Italy, and Japan. Here, he figured, the workers had a good deal, unlike other countries. Of course he was not a worker there, so this might have influenced his opinion. These were the successful and “sound” countries, for Fred.

The Birchers saw a communist conspiracy taking over the world like a giant octopus with tentacles everywhere. This was clear from the rise of trade unions. Taking a secret approach, very American, the Birchers founded Christian Science Reading Rooms around the country.

Robert Welch, a candy company executive, was the leader. William F. Buckley and his magazine, National Review, were associated with the Birchers for a while.

But who was John Birch? According to a l954 biography, he was a young Baptist preacher and an American Army captain. He was shot dead by Chinese Communists in l945. Welch said he was the first martyr in the Cold War.

Fred Koch and other big businessmen founded the John Birch Society in the l950s. They organised anti-communist letter writing campaigns. Fred Koch was afraid that Russian and Chinese troops would be marching in American streets in a few years.

In 1969, Fred Koch published a small 39-page book: A Businessman Looks at Communism. It was based on a talk that he gave and warned of a communist takeover in America. He blamed Americans for going about their business and not listening to his warnings.

How did Fred Koch know that communism was taking over America? He saw the evidence everywhere. American foreign aid was part of a communist plan, as was tax-free nonprofit organisations. Youth were being ruined by communist ideas on university campuses. There was also evidence in the churches, where he said that ministers did not become Communists, but Communists became ministers. He thought modern art was also being influenced by communist ideas. He hated Pablo Picasso because he was a Communist. The Civil Rights Movement was also seen as a communist plot to mix Blacks and Whites together in the same schools. Such clap-trap would sell well in the cretin backwaters of Mississippi and Alabama. Welfare for Blacks was also seen as communist, and a way of bringing Blacks and Puerto Ricans to American cities. He thought the Communists were going to start a race war and seize the American cities. Labour unions were also communist and a way of destroying the country. They were seen to be infiltrated by Communists. He thought that communications workers who controlled the wire traffic to and from the Pentagon were handing over information to the Soviets. Koch’s small book was reprinted until 2.6 million copies had been given away in America to individuals, libraries and newspapers. Some people were alarmed at the book and asked FBI Director J. Edgar Hoover if it could be true. Hoover himself was involved in the McCarthy era witch-hunts for Communists.

Koch gave commencement speeches at universities. He claimed that communism was like a morphine addiction, creating a desire for government hand-outs and making people dependent. There was a lot of “red-baiting”. The decisions of the Earl Warren Supreme Court were seen to be communist. Particularly, the 1954 decision of Brown vs. Board of Education was said to serve the communist cause. This decision said that separate schools for Blacks and Whites were unconstitutional.

Koch and friends engaged in busting labour unions in Kansas, in organising a group called Kansans for the Right to Work. The United Nations was also seen as evil and trying to take over the world. It would destroy US indepen-dence.

The second Koch son, Charles, who would take over the company, joined the John Birch Society. A conservative organisation, called Young Americans for Freedom, was helped by Charles Koch.

The Koch Brothers were students at the Massachusetts Institute of Technology (MTI), from where their father had graduated. Their father made financial contributions to the school. But then, it was discovered that one of the Mathematics Professors, Dirk Jan Struik, from the Netherlands was a Communist. Koch cut off his gifts to the university and Professor Struik was suspended and made to testify in Washington before the House Committee on Un-American Activities. He had been indicted by the state of Massachusetts for conspiring to teach and advocate the violent overthrow of the government. He was not allowed to teach his own textbook until the charges were dropped in l956. He was then reinstated as a Professor. Koch tried to get him fired but failed; so he stopped giving money to the school.

Professor Struik said that the US was half-Nazi and half-Alice in Wonderland in those days.

The John Birch Society reached 100,000 members at one point. Their ideas and members began to infiltrate the Republican Party. The Birchers went after librarians and boards of education in the schools. Finally fluoridation of the drinking water was another communist plot. That is pretty obvious. The President of the United States, a former General, Dwight D. Eisenhower, was labelled as a “dedicated, conscious agent of the communist conspiracy”. Welch said that “democracy is a weapon of demagoguery and a perennial fraud”. Politicians were charged with treason.

The loonyness of all this was starting to get on the nerves of some supporters and fellow-travellers, who at some point had to throw in the towel and part ways with Welch. William F. Buckley used the National Review to write an article denouncing the tactics of Welch. The Birchers were simply too far on the Right fringe to play well in national party politics.

In l964, conservatism began to seriously rear its head when Barry Goldwater was nominated as the Republican Presidential candidate. Goldwater’s small book, The Conscious of a Conservative, was a manifesto against big government. Fred Koch bought 2500 copies of the book and distributed them. I read the book in high school, and didn’t think very much of it. Goldwater needed the votes of the John Birch Society members, so did not denounce them. He said they were the type of people needed in politics.

This was also the time when the ideas of Friedrich Hayek and Ludwig von Mises of the Austrian school of Economics began to rear their head more prominently in America, as conservative economists attacked Keynesianism. Hayek had argued in The Road to Serfdom that the British Labour Party was bringing totalitarianism to Great Britain in the l940s. It was patently absurd, of course, but as noted by economist John Kenneth Galbraith, being wrong never stopped an idea from spreading and becoming firmly established. Especially true among economists, perhaps.

Charles Koch and a friend, Bob Love, opened a John Birch book store in Kansas and began to promote the works of Hayek, von Mises and others of the Austrian school.

After his father died in the l960s, Charles Koch took over the company and expanded it by taking over other companies. He went into the chemical industry, natural gas, liquid gas, transportation, trucking, animal feed, agriculture, highway building, and the telecommunications industry. After leaving MIT, his brother David joined the company.

By the l970s, besides being big businessmen, the Koch brothers, Charles and David, became serious libertarian ideologues. The Koch Brothers got intoxicated on the libertarian dope. Or the Ayn Rand coke.

There was an outfit called Robert LeFevre’s Freedom School. This was a Libertarian camp near Denver, Colorado. It brought in Ayn Rand types and conservative Chicago School economist Milton Friedman to lecture. Charles and David Koch attended the school which taught against Social Security and the income tax. They began to read Hayek, von Mises, Friedman and Joseph Schumpeter. Schumpeter had believed that socialism was inevitable and would destroy the entrepreneur. The Koch Brothers were most influenced by von Mises book, Human Action.

Another book by F.A. Harper, Why Wages Rise (1957) forwarded the argument that real wages could not rise with the help of the government or labour unions, but only with the increase in labor productivity. He argued that child labor laws cause juvenile delinquency. Charles bought the arguments and criticised businessmen for asking for welfare for the rich in government subsidies. He was essentially an anarcho-capita-list pushing Austrian economics.

The next step was to form his own nonprofit organisation, the Charles Koch Foundation. The Koch money would be used to “groom the intellectual classes”. He wanted to get rid of the idea that government could solve problems better than the market. By funding libertarian organisations, he would turn libertarianism into a mass movement. He recruited a Right-wing Economics Professor, Murray Rothbard, a student of von Mises, to brainstorm how to approach this enterprise. A new organisation would be founded.

To help in the organisation, they recruited the National Chairman of the Libertarian Party, Edward Crane. They would set up a think-tank, similar to the Brookings Institute and the American Enterprise Institute. This became the Cato Institute founded in l977. It would operate first in San Francisco and then move to Washington. The idea was to promote “freedom from government tyranny”. This would be a Koch outfit and they would control the ideology by appointing the Board members.

It seemed to libertarians on the Left that the Koch Brothers were trying to buy the libertarian movement and began to call them the “Kochtopus”. In l980, it was a high water-mark for the Libertarian Party when the party got one million votes. David Koch was the Vice-Presidential candidate. The party platform called for the abolition of most government agencies, including the Department of Energy, the Environmental Protection Agency, the Food and Drug Administration, the Occupational Health and Safety Administration, the Federal Communications Commission, the National Labour Relations Board, the Federal Bureau of Investigation, the Central Intelligence Agency, and the Federal Reserve Board. Also on the chopping block would be Social Security, welfare, public schools, and taxation. It is unlikely that the Koch Brothers have changed their minds about doing away with most of the Federal Government.

By the l980s, the company had grown to giant size and faced criminal prosecution from the Department of Energy and the Internal Revenue Service. In the oil business, Koch Industries were stealing oil, having their workers manipulate the measurements at the pumps. This was called “working the oil”. The workers said Koch stood for “keeping old Charlie happy”. The Federal Bureau of Investigation (FBI) found that they were stealing oil from the Native Americans. They would later be fined in a federal law suit.

A family feud in the l980s left Charles and David in charge of the company. Bill and Frederick were bought out. There were major problems with the company. While huge profits were made, maintenance was neglected on hundreds of miles of pipelines for natural gas in Texas. Two teenagers were burned up in a pickup truck when gas leaked from a pipeline. Storage facilities leaked, violating the Clean Water Act. There were more than 300 spills as the company neglected to repair its junk pipelines and other facilities. One leak left 100,000 gallons of crude oil in Corpus Christie Bay in Texas. The Koch Company tried to cover up the evidence. It was corporate greed.

There were huge fines, such as the $ 296 million wrongful death award in the two teenager’s death in the pickup truck. For stealing $ 230 million worth of oil, a court ordered a fine of $ 200 million. There were other fines for illegal dumping of waste water. This was usually done after dark. The company began to get a reputation as a corporate outlaw. By the l990s, the Koch Brothers decided to try to clean up their image by complying more closely with the laws.

In 2004, the Koch Brothers became the owner of Georgia Pacific. With 50,000 workers and        $ 20 billion in annual revenues, this doubled the size of the company. Inside the company, for many employees it was hell. Market-based management was Charles Koch’s way of running the company. It worked in growing the company and making a huge profit. Some executives in the company were getting million dollar bonuses. On the other hand, some employees said that it was a “cut-throat culture”. Middle-aged managers were pushed out and replaced by aggressive young White males. Economic buzz-words were tossed around, such as comparative advantage (David Ricardo), creative destruction (Joseph Schumpeter), and fatal conceit (Friedrich Hayek), but the managers had no idea what they were supposed to mean in practice. They did what they wanted and justi-fied it with these shibboleths. In an effort to measure the performance of every employee, it had to be shown that they made a contribution to profits every month. This sometimes led to people getting killed for lack of needed repairs to equipment.

After 2000, the heavy political stuff was about to begin. The Koch Brothers had a huge amount of money to push ideology and shape American politics and they began to go after it. Since the l950s, conservative economics had been emerging in American universities, from Hayek, von Mises, Schumpeter, Milton Friedman and others. There was the Austrian School, the Chicago School, and the Virginia School. Out of this emerged the Public Choice School and New Political Economy, which emphasised the evils of rent-seeking. It laid the ideological foundation for neoliberalism which is riddling countries around the world today, including the US itself.

It all began to come together at George Mason University after the Public Choice School at Virginia was moved there. The Koch Brothers were funding the Institute for Humane Studies (IHS) which moved to George Mason University. This was so-called free market research. Richard Fink, Charles Koch’s advisor established a centre at George Mason called the Mercatus Centre. Koch would provide the money and it would greatly influence the Economics Department and who got hired. Successful candidates would have to be in the free-market Austrian school. The Koch Brothers would have control of hiring new professors. The Koch Brothers poured in money by the millions. All this was starting to look more like Right-wing totalitarianism than a university academic department. But then, that seems to be the way that universities are going in this day and age.

Then in 2008, Barack Obama was elected President. This was a sort of wake-up call, given that Obama wanted to do something for the common people. Richard Fink, more like a Rat Fink from my perspective, decided to call a holy Austrian economic war, a Jihad against Obama. The Koch Brothers would shovel in the millions of dollars. Especially, they would fight against Obama’s public health care plan.

They had a model for establishing ideological hegemony but it was almost a lucky accident that the Tea Party, as a vehicle to go after Obama, fell into their lap.

Fink had put together a three-step model as a basis for his political jihad. It was called “The Structure of Social Change” and involved production, packaging, and marketing. It was just like producing any other commodity for the market. In the first phase, the professors would produce the ideas and concepts. In five years, Charles Koch put $ 31 million into free-market economics programmes in universities. At Florida State University he had control over hiring of the Faculty in Economics.

In the second packaging phase, think-tanks and policy institutes would apply the ideas to real world problems. They would write op-ed pieces for newspapers advocating privatisation of Social Security and getting rid of public employee labour unions. They would debunk climate science. They would advocate the slashing of funds for health care. They would appear as talking heads on TV programmes. In the third phase, organisations would be set up as citizen’s groups to build a coalition. These would actually be fake grassroots groups, as they would be front groups for corporate interests. However, the corporate funders stay behind the scenes. So it appears that the movement is being driven by citizens, when the real agenda is being driven by big corporations. This was the perfect model for the Tea Party. Another front group for the Koch Brothers was Americans for Prosperity.

In early 2009 after President Obama had taken office, people were angry in general about the huge bailout of the banks. People were losing their homes to bank foreclosures. Obama was planning to launch a $ 75 billion plan to help homeowners in debt save their homes. In February a CNBC reporter attacked Obama’s plan from the floor of the Chicago Mercantile Exchange on TV. “We’re thinking of having a Chicago Tea Party,” Rick Santelli said. People were already angry at the banks. From the perspective of the political Right, this seemed to reward those who had taken out loans which they could not afford. Of course the banks were largely responsible for this. The original Tea Party in Boston Harbour had been a revolt against the British tax on tea. Now this was to be a revolt against more taxes.

The Koch group and Cato Institute saw a chance to turn this into a wider revolt against Obama and the government in general. They organised “tea parties” across the country and invited people to come. It started as a grass-roots movement, led by Libertarian Senator, Ron Paul, but came to be funded by big corporate billionaires. On the other hand, it struck a chord with people who were angry with the government in general. It also provided a vehicle for fringe groups who did not like Obama because of racism, or who thought falsely that he was a socialist, a Communist or a Moslem. There were shades of the old John Birch Society of the l950s. Indeed, some people called Obama “the new face of Hitler”, and said he was “plotting white slavery”. They said it would lead to a “one-world government”. Wanted posters for Obama appeared on the internet.

Ironically, the corporate backers of the Tea Party wanted to get rid of Social Security, while many who joined the movement depended upon Social Security retirement payments just to live. Most were not libertarians. They did not want to get rid of the government. Most were just old and tired and pissed off at the government and the lies of politicians. But they needed the government to do something for them.

The Koch Brother’s moment had finally arrived where they could stir up revolt against President Obama’s proposed public health plan. They attacked labour unions, environmental regulations, and other government programmes. Charles Koch had given $ 25 million to groups that opposed the science of global warming. It was mostly orchestrated from behind the scenes by the Koch front groups, Americans for Prosperity, Cato Institute, and Mercatus Centre.

The big battle came in the 2012 Presidential Campaign. America’s rich poured hundreds of millions of dollars into the election hoping to get Obama out of office. They would flood the TV screens with unprecedented levels of cheap political propaganda. But the Obama campaign exposed the Koch group funding from early on. People found out that Americans for Prosperity was a front for the Koch Brothers. This attempt to buy the government also took some of the wind out of the sails of the Tea Party, although some Tea Party candidates won under the Republican Party banner.

One Tea Party candidate, Scott Walker, became the Governor of Wisconsin and proceeded to attack the trade union of public sector workers. This led to a big fight that is still ongoing. Similar struggles are happening in other states. Funding for public health programmes is being cut.

In spite of the hundreds of millions of dollars from secretive oil billionaires and other big corporations around the country, they failed to get President Obama out of office. Guys like Donald Trump and Charles Koch spent some time licking their wounds. But one should not feel sorry for them. They will be back and even more angry and vicious the next time.

Maybe the Republicans will have to pull a “George Bush” and fake the election to get back in power in the 2016 election. That is one possibility. There has been a large demographic shift in the American population and the Republican Party is behind the times. Whether changing their tunes will get the Republican billionaires back in power again, one cannot say.

One hopes that the Americans have learned about the Koch Brothers and who they are by this time. The positive side of Libertarian think-tanks like Cato is that they are strongly to America’s imperialist wars. This aspect is not brought out in the book, so one gets a somewhat distorted view of Right-wing anarchists who are opposed to the American empire. Daniel Schulman’s book, however, is a beautiful piece of investigative reporting that is highly instructive to read.

Eddie J. Girdner lives in Fethiye, Turkey. He can be contacted by e-mail at: eddiegirdner@gmail.com