Murray and the Rothbardians versus the Koch Brothers

Below is part 1 of a three part series discussing the split between Charles Koch and Murray Rothbard. -RW 

The Kochtopus vs. Murray N. Rothbard
By David Gordon

The "Kochtopus" is a derogatory name coined by the late Samuel Edward Konkin, III, an anarcho-libertarian, for the group of libertarian organizations funded by billionaire Charles Koch. (Konkin, a gifted wordsmith, also is responsible for the term "minarchism" for the libertarian view that accepts a minimal state.) Murray Rothbard often used this term when referring to organizations within the Koch ambit, with the Cato Institute foremost among them. To say the least, Rothbard's enthusiasm for Cato was not unbounded; and employees of the Kochtopus often treat Rothbard with hostility and contempt. Further, the Kochtopus has displayed unremitting hostility toward the organization with which Rothbard was associated from 1982 until his death in 1995, the Ludwig von Mises Institute.

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. From this beginning, how did it come about that Cato shifted course and now takes Rothbard to be an enemy?

To understand what happened, one must begin with Charles Koch.
He and his brothers inherited an oil business from their father, Fred Koch, a stalwart of the John Birch Society and long active in rightwing causes. They developed and massively extended the family business, to the extent that Charles Koch and his brother David rank among the wealthiest people in the United States. On the current Fortune 400 list, the brothers are 9^th and 10^th, each with $17 billion; if the net worth of the brothers is taken together, the Kochs are second only to Bill Gates and Warren Buffett.

Charles, influenced from an early age by the pro-capitalist beliefs of his father, became interested in libertarianism. He attended Robert LeFevre's Freedom School and became acquainted with the work of Murray Rothbard. He met Rothbard and was so impressed with him and his ideas that he decided to endow an organization to promote libertarian theory and policies.

In this endeavor of his, Rothbard was a main collaborator.It was not widely known, but stockholders, who had the power to dismiss the Board of Directors, controlled the Cato Institute. The original stockholders were Charles Koch, Rothbard, an employee of Koch, and Edward Crane, whom Koch hired to run the day-to-day operations of the Institute. Koch, by his control of the majority of the stock, had absolute control of the newly formed group. Of course, he would have possessed a large measure of influence anyway, because he was by far the largest donor; but he wanted to ensure complete dominance.

Rothbard had some misgivings: might it not be unwise to rest so much on the good intentions of a single donor, however extensive his benefactions? Nevertheless, he embraced the new group with enthusiasm. Who would not be happy if one of the wealthiest men in the country embraced one's views and offered to set up an institute to promote them?

It needs always to be kept in mind, to reiterate, that the Cato Institute was at its inception distinctly Rothbardian in orientation. I first encountered the Cato Institute at a summer program held in Eugene, Oregon, in June 1979. Most of the lecturers were committed Rothbardians. The speakers included, besides Rothbard himself, some of his closest intellectual associates: Ralph Raico, Ronald Hamowy, Leonard Liggio, and Walter Grinder. The conference was designed to appeal especially to historians, but participants received a thorough grounding in the Austrian economics that Rothbard favored. Nor did the conference shy away from the most controversial parts of Rothbard's intellectual system. Rothbard, like almost all libertarians, supported a non-interventionist foreign policy. "War is the health of the state," as Randolph Bourne presciently remarked; those opposed to a powerful state must then shun foreign quarrels. But Rothbard had the courage of his convictions; unlike all too many others, he refused to make an exception for World War II, "the good war." The conference featured the well-known historian James J. Martin, who presented a strong defense of both World War I and World War II revisionism. This was no isolated occurrence. The Institute published a pamphlet by the dean of revisionist historians, Harry Elmer Barnes: Revisionism, a key to peace , in which Barnes made clear his opposition to American entry into both world wars.

After the conference, I was offered a job at the Institute, and I arrived in San Francisco in the fall of 1979. I was eager to work with a group centered on Rothbard, whose great work Man, Economy, and State

 I had read when it was published in 1962. There was much to admire in the activities of Cato as it was then. In particular, Ralph Raico, in charge of the book review section of Inquiry magazine, a public affairs magazine that Cato published, had somehow managed to persuade world-renowned scholars, including Noam Chomsky, Peter Strawson, Maurice Cranston, and Donald Davie, to contribute.

But already problems were developing. A number of the executives did not get along with one another. Crane was for long periods barely on speaking terms with the Vice President, David Theroux. More important for our purposes, Crane and the editor of Inquiry, Bill Evers, were at odds. Evers and Crane differed on libertarian political strategy. Further, Crane, primarily interested in campaign organizing and influencing public policy, regarded intellectual affairs as of secondary significance, and Inquiry accordingly he viewed as little more than a distraction. He berated Evers because of Inquiry's budgetary problems. Evers was at this time Rothbard's closest political associate, and Rothbard supported him over Crane in these disputes.

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 The 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. After the break, Crane claimed that Rothbard had received an $80,000 grant for a book on the Progressives but produced nothing. One may be confident that, had the breach between Rothbard and Cato not occurred, Crane would once again have been proved unreasonable and impatient. Was not Ethics of Liberty worth the wait?

I have jumped ahead of the story, referring to the break that I have not yet explained. But one more background matter should be mentioned in order to grasp the issues. Charles Koch has made a great fuss about "market-based management." The key to business success, in his opinion, lies in reliance on initiative from below rather than on rigid control from the top. Yet at Cato all important decisions were made only in consultation with Koch: Crane was constantly on the telephone to him in Wichita.

Three main issues led to the irreparable rupture. First, as I have already mentioned, Austrian economics was central to Rothbard's system. He did not embrace all economists who more or less favored a free market: quite the contrary, he wished sharply to differentiate Austrian economics from the Chicago School. This is not the place to discuss the theoretical differences between the two approaches, but one issue in dispute assumed great importance later. Austrian economics is in itself a value free science, but Austrian economists, like Rothbard, fully committed to a free society, rely on Austrian monetary theory to demand a return to the gold standard and abolition of the Federal Reserve System. The Chicago School strongly disagrees. The greatest representative of Chicago economics, Milton Friedman, thought that the monetary authority should follow a fixed rule of moderate expansion and held a diametrically opposed theory of the causes of the Great Depression of 1929 to Rothbard's.

Rothbard was thus not pleased when Cato hired David Henderson, who leaned toward the Chicago School, as an economist. Rothbard had no personal animosity toward Henderson. Quite the contrary, he liked him, and Henderson has gone on to produce excellent work. (I'm sure that Rothbard would have liked his penetrating articles critical of the Iraq war.) But to hire a non-Austrian was hardly in keeping with the original mission of Cato.

Rothbard, as usual, saw something before everyone else. In 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.

If we ask how it came about that Henderson was hired we immediately arrive at the second main incident leading to the split. Roy Childs, the editor of Libertarian Review, and Henderson were friends, and Henderson secured his post largely through Childs's recommendation.

Childs was a gifted theorist and writer, largely self-taught. He and Rothbard had once been close, but he did not get along well with Evers. Childs was given to sudden enthusiasms from which he could not be dissuaded. One such concerned nuclear power. Childs and some of his followers, such as Milton Mueller, the head of Students for a Libertarian Society (another group within the Kochtopus) fell under the influence of John Gofman, a Berkeley medical physicist associated with the Lawrence Livermore Laboratory. Gofman had once strongly supported nuclear power, but he switched course and became its leading opponent. In his view, nuclear power plants emitted levels of radiation unacceptably dangerous to health. Childs maintained, relying on Gofman's data, that emitting nuclear radiation violated the libertarian non-aggression principle and ought to be forcibly curtailed. An issue of Libertarian Review featured Gofman on the cover and contained a long interview with him.

Rothbard rejected this position. The strict application of Childs's approach to aggression, he maintained, would cripple economic production. All of our physical actions emit particles of some sort or other. Does anyone who objects to having a subatomic particle impinging on his body have the libertarian right to forbid the activity that generates it? Such a consequence is absurd, but as Rothbard often noted, for many libertarians this is no problem. If one took the less radical view that only dangerous radiation could be prohibited, Rothbard's response was that Gofman had not made out a good case for his alarmist assertions.

Rothbard made no secret of his disapproval of the anti-nuclear position, and doing so estranged him from Childs. Bill Evers circulated a letter critical of Gofman's contentions, which about one dozen people, including Rothbard, signed. The letter infuriated Crane. I do not think he held strong views on the nuclear question. Rather, as was his wont, he saw the issue as a power struggle, in this case between Evers and Childs. He was upset that the letter had brought to public attention that dissent from a single party line existed among libertarian groups sponsored by Koch. He thought the dispute should have been kept private. Crane, before hiring me, called me on the carpet for having signed the letter. I had the strong feeling that he did not withdraw the offer of employment only because he thought that I had not grasped Evers's intentions in drafting the letter.

Childs, stung by Rothbard's opposition, became intensely critical of him. By telephone calls and letters, he incited anti-Rothbard feeling among his immensely wide circle of libertarian friends and acquaintances.

The tension might eventually have been contained had nothing else intervened, but the 1980 libertarian campaign for the presidency of Ed Clark ended all hopes of reconciliation. Both Koch and Crane hoped to transform the Libertarian Party from a fringe group to a real presence on the national scene. To this end, Koch was prepared to spend vast sums of money. His brother, David Koch, was nominated as the vice-presidential candidate in order to evade the limits the law imposed on campaign contributions from a single donor. David Koch, and Charles standing behind him, was not subject to these legal limits: David could spend all he wished on his own campaign.

In order to achieve wide popular support for a libertarian candidate, Crane believed that he had to conceal aspects of the libertarian program that many voters would consider extreme. Under his 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.

Rothbard's differences with Crane and Koch went beyond this one political campaign. He thought that Cato's primary mission should be scholarship rather than political campaigns and attempts to secure audiences with the high and mighty in Washington. His antagonists emphatically disagreed.

Crane and Koch could not tolerate what they deemed blatant disloyalty. Even though Rothbard was the leading theorist of libertarianism and the Cato Institute had been established to promote his views, they expected him to obey the orders sent down from on high. No one at all acquainted with Rothbard could have reasonably expected him to do so. He was always his own man and would agree with Dante: "Follow your own course, and let the people say what they will."

Rothbard was removed from his position at Cato, and he was no longer invited to lecture at the summer conferences of the Institute for Humane Studies, another organization under Koch's patronage. Rothbard did not go quietly. He was, it will be recalled, a stockholder in the Cato Institute; and he intended to make clear his opposition to current policy at stockholders' meetings. In addition, his public criticisms would draw attention to a fact that Koch preferred to keep hidden, i.e., that the stockholders, principally Koch himself, and not the Board of Directors, held final control.

Koch and Crane were determined to prevent Rothbard from doing so. Koch refused to return Rothbard's shares, which he had supposedly been holding in safekeeping for him. When Rothbard appeared at the Cato offices for a stockholders' meeting, Crane informed him that his shares had been voided. Though the legality of this was eminently questionable, Rothbard elected not to pursue the case further. Lawsuits against billionaires often have unhappy endings.

After Rothbard departed from Cato, he joined forces with the Mises Institute, established in 1982 by Lew Rockwell. 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 polariziong figure who should be downplayed. When Rockwell nevertheless proceeded as planned, Koch and his minions actively sought to discourage contributions to the new group. (Incidentally, Pearson, despite years of faithful service to Koch, was eventually discharged without notice. He had incurred the enmity of Richard Fink, who turned on his former mentor after supplanting him in the Koch hierarchy.)

Unfortunately, the efforts of the Kochtopus against the Mises Institute have continued to the present. The current campaign for the presidency of Ron Paul has secured for libertarian ideas a greater public hearing than ever before. But owing to Paul's long association with Rothbard and Rockwell, his campaign had little appeal to Cato. High officials of Cato cooperated with James Kirchick's malicious smears against him in The New Republic. (After his losing Senate campaign to Phil Gramm, Paul had been employed by Koch as chairman of Citizens for a Sound Economy, but his contract was not renewed. Like Rothbard, Ron Paul is a man of principle and would not compromise on his advocacy of the gold standard and opposition to the Federal Reserve System. Charles Koch did not want this: such measures would hardly help him gain influence with the Republican Party, to which, if I am not mistaken, he and his brother are the largest private contributors.Further, Paul would have no part of Koch's efforts to have the CSE, beneath free market rhetoric, lobby to promote legislation beneficial to his business interests.) It should come as no surprise that Matt Welch, the new editor of Reason, has published a viciously negative piece against Rockwell and Paul. Koch is a large funder of the magazine, and, as Murray Rothbard learned to his cost, he expects those he funds to obey his dictates.

Part 2
Part 3

David Gordon  is a senior fellow at the Ludwig von Mises Institute.