Category Archives: Scholars Speak Out

Much has been written in recent weeks about the fight for control of the Cato Institute between the Koch brothers and Cato’s current board of directors.  Several of my Cato colleagues have offered their own views about the damage that a Koch takeover would cause the organization.  The most prominent concern is that Cato would lose its hard-won reputation for nonpartisan analysis and would either be perceived as simply another cog in a pro-Republican ideological machine or, even worse, actually become such a cog.

Both Charles and David Koch hotly deny that they harbor such intent, although the views of some members they have sought to put on Cato’s board certainly seem to validate those fears.  But the prospect of the Institute becoming a partisan shop (or the parallel scenario that scholars who refused to toe the conservative GOP ideological line would be quickly purged) is not the primary danger.  Such an ugly outcome cannot be cavalierly dismissed, but the more probable danger is more subtle.

Charles Koch and his right-hand associate, Richard Fink, have long advocated the concept of “market-based management.”  Indeed, Koch wrote a book on the topic.  The specifics of the concept have often proved elusive, and critics have made withering criticisms of that lack of clarity.  But the basic feature seems to be that organizational leaders should tailor their approaches based on feedback from their audience.  Ideally, that feedback gives useful information about whether a strategy is working or whether it should be adjusted or abandoned.

That approach makes sense for an organization in the private sector where success or failure can be determined on the bottom line each quarter.  It even makes sense for activist organizations in the nonprofit arena where success can be measured (e.g., number of candidates elected, number and importance of legislative measures passed or defeated) with some precision—again over the relatively short term.

But such an approach is dangerously corrosive for a think tank.  It creates both an activist bias and a demand for short-term results.

That is not how an effective, respected think tank should or even can operate.  Cato scholars have taken positions and built compelling intellectual cases on behalf of a host of issues.  Often, there was no chance that the position advocated would be adopted in the foreseeable future.  Those scholars nevertheless persisted in their efforts for three reasons.  One, the policy was correct on the merits; two, over the long term there was a significant chance of success; and three, moving policy toward the proper outcome on one set of issues furthered the goal of changing the entire paradigm about government’s proper role in our society.

Generating the needed critical mass of support for changing policies that have been entrenched for decades often requires the patience of Job.  Cato scholars began to advocate private Social Security Accounts more than three decades ago, for example, but it wasn’t until the administration of George W. Bush that the option became a prominent part of the political debate.

Likewise, several colleagues and I have labored over the same period to make the case against the futile, counterproductive war on drugs.  Change on that front has been agonizingly slow.  But in the mid and late 1990s, states began to pass medical marijuana laws and decriminalize possession of small quantities of drugs.  Over the past decade, several countries, most notably Portugal and Argentina, have adopted significant drug policy reforms.  And in the past three years, a growing roster of prominent opinion leaders, including two former presidents of Mexico, the former presidents of Honduras, and Brazil, televangelist Pat Robertson, and Pope Benedict have expressed opposition to the war on drugs.  A Gallup poll in the autumn of 2011 showed 50 percent of Americans now favored the legalization of marijuana—nearly double the percentage in the early 1980s.

It would be unwarranted to argue that the work by Cato scholars was entirely responsible for such a sea change in attitudes regarding drug policy.  But the several books, dozens of policy studies and journal articles, and hundreds of newspaper op-eds, magazine articles, blog posts, and media interviews undoubtedly played a role.

It would have been difficult to justify such a long-term commitment (with few visible signs of success in the early years) under the concept of market-based management.  But it is a strategy that is now beginning to pay dividends—and holds the promise of making a huge, beneficial change in public policy on a crucial issue.

The mission of a think tank to drastically alter (not just tweak) entrenched policies is akin to trying to turn around an aircraft carrier that is headed in the wrong direction.  The Koch market-based management strategy is akin to turning around a nimble speed boat.  Cato’s current management team, headed by Ed Crane, understands that important distinction and wishes to keep Cato focused on the former, ultimately more important, orientation.  A Koch-appointed board would, even with the best of intentions, almost certainly want Cato to adopt the latter approach.  That would be a loss for Cato, the public policy debate, and the cause of liberty.

Ted Galen Carpenter, a senior fellow at the Cato Institute, is the author of eight books and more than 500 articles and policy studies.  His books include Bad Neighbor Policy: Washington’s Futile War on Drugs in Latin America (2003) and The Fire Next Door: Mexico’s Drug Violence and the Danger to America (forthcoming, September 2012.)

John Blundell is one of the most successful and highly respected libertarian executives in the world. From 1993-2009, he was the CEO of London’s highly influential Institute for Economic Affairs (IEA).

In a recent email to my colleague David Boaz (excerpted here with Blundell’s permission), Blundell had this to say about the Kochs’ attempt to take over the Cato Institute:

I grew up above a shop and my mom used to say there are three secrets to success, namely location, location, location.

My elder son is now Director of Golf Operations at a major resort and he tells me that there are three secrets to success, namely drainage, drainage, drainage.

And in the time I worked with the late Sir Antony Fisher – that great think tank pioneer – he used to tell me that there are three secrets to success, namely independence, independence, independence.

Blundell’s long-standing ties to the Koch brothers and their various political operations does not blind him to what should be perfectly obvious to everyone: a think tank that is the personal property of two men is not a recipe for success no matter how well intentioned said men might be.

Mexican scholar Roberto Salinas-Leon recently sent the following note to Cato President Ed Crane (and copied me). Roberto is a prominent advocate of capitalism and limited constitutional democracy in Mexico. He is an adjunct scholar of Cato, an active participant and organizer of policy meetings among market-liberal academics and government officials at the highest levels, and one of the most effective libertarians in the public policy debate in Latin America.

Dear Ed,

I cannot tell you how saddened we are in Mexico’s pro-liberty movement to hear about the quarrels and confrontations between Cato and the Koch brothers. I do not have to reiterate how important Cato has been to Mexico’s intellectual and policy battles in the area of political economy during the past twenty years—with two outstanding and influential monetary conferences, one highly influential program on pension reform featuring José Piñera and Michael Tanner, as well as dozens of smaller initiatives. Of course, on top of all of these stands “Liberty in the Americas,” the now historic three day event in 1992 which captured the minds and the entire cultural debate around liberty and reform in Mexico—and which featured the presence of Milton and Rose Freidman, among a group of over 50 speakers from all across the world.

This was Milton’s last formal presentation in Mexico, and which he actually mentions in his memoirs, Two Lucky People. And then, we must also recall your tremendous input in securing important contributions, both financial and intellectual, in making the only Mont Pelerin Society meeting to be held in Mexico possible, in January 1996, in Cancún.

Cato is now well known across the political spectrum, its policy ideas are present in the economic debate, and it certainly stands in the forefront of independent and credible policy advocacy, whether individuals or groups are in favor or against its core of classical liberal values. I myself alluded to this phenomenon in the last Cato Benefactor Summit held in my country, in February 2009. Goodness Ed, as the attached pictures reflect: ideas have consequences, in the left, in the right, at the center, in all areas of policy life. Good ideas have even better consequences. Our current presidential candidate of the PAN party is none other than Josefina Vázquez, who participated in our first monetary conference in 1994. Here she is also featured in a panel next to Alan Walters, and on the other side, Rogelio Ramirez de la O—the would-be Finance Minister should Andres Lopez Obrador win.

Is all of this remarkably hard work south of the U.S. border now coming to end? We are heartbroken down south at this prospect—just when a new, apolitical, non-partisan push for liberty is sorely needed to keep the already remarkable changes alive.

Ed, you and your entire family of peers, true soldiers at Cato have our full fledged support in seeing this unfortunate conflict resolved. As a proud adjunct scholar, and a voice of liberty in Mexico and abroad, you have my full solidarity and support.

Best wishes, in liberty,

Roberto

I’ve had the fortune – and misfortune – of having worked on budget issues with Republican politicians who are popular with the Tea Party movement: Sen. Jeff Sessions, Sen. Tom Coburn, and Indiana Gov. Mitch Daniels. Let’s just say that there’s a big difference between perception and reality.

The Cato Institute has given me an opportunity to share that reality with the public. At Cato, I’ve been encouraged – not just allowed – to call things like I see them. Whether or not what I say benefits the short-term electoral desires of my superiors has never been an issue. That’s because, as far as I know, there are no short-term electoral concerns at the top of the Cato chain of command. That’s good because any institution that focuses too much on those goals runs the risk of forgetting what it set out to achieve in the first place.

There’s a lot of speculation as to what motivated the Kochs to file their lawsuit. I will not engage in such speculation because it’s not my place. There’s also a lot of speculation as to what the Kochs intend to do with Cato should they obtain control. I don’t know the Kochs, I haven’t worked for the Kochs, and I don’t have a crystal ball. However, the mere possibility that Cato’s mission would be taken in a different direction concerns me greatly.

Regardless of what would or would not happen, the court of public opinion has spoken, and it has overwhelmingly decided that a “Koch takeover” of the Cato Institute would be detrimental to Cato’s reputation and mission. As others have pointed out, Cato isn’t just a building and the work that’s produced in it – it’s a brand. Rightly or wrongly, fairly or unfairly, Cato’s brand – an independent, nonpartisan voice for libertarianism – will probably cease to exist if the Koch lawsuit is successful.  Therefore, even if the Koch lawsuit is successful in court, the victory will be of the Pyrrhic variety.

For the life of me, I just don’t see how that’s good for Cato, the Kochs, or the movement for liberty. Certainly, there has to be a better way to resolve this matter.

The longer this situation drags on, the greater the damage. We liberty-lovers have enough problems these days. As Ed Crane once emailed me in response to a blogging battle I was having with an ideological opponent that had become too heated: “Enough.”

I have now worked for the Cato Institute in some capacity in four different decades. I was a Cato intern in the summer and fall of 1987. Some of my fondest recollections that year are of the 10-year anniversary gala at the Willard Hotel, and a book party for P.J. O’Rourke’s Republican Party Reptile, with commentary by Christopher Hitchens. (You can imagine how fun that was.)

After interning at Cato, I went on to serve in the U.S. Navy as a commissioned officer and to earn a PhD in history. But I also wrote two papers for Cato in the 1990s. In February 2003 I joined the staff as director of foreign policy studies. Last June I succeeded my friend and mentor, Ted Galen Carpenter, as vice president for defense and foreign policy studies. I am only slightly exaggerating when I say that I’ve seen as much, and experienced as much, as almost anyone at Cato.

So I look at the struggle for the Institute’s future with a particular mix of sadness and anxiety. As I’ve read and listened to the news swirling around the Institute over the past several weeks, my thoughts go back to what I wrote in the acknowledgements from my book, The Power Problem:

I wish to thank Ed Crane and David Boaz, who have provided steady leadership at Cato for nearly three decades. In a city that treats non-conformity with utter disdain, Cato has managed to maintain its independence and creativity, and those of us who are fortunate enough to work there are all better off for it.

That message　– of Cato’s creativity and independence — has risen above all others in the ongoing saga. People who have been associated with Cato for decades have been joined by those who have been employed here for only a few months: they cherish Cato’s unique mission, and they understand that it all could be lost.

Even people who vociferously disagree with Cato scholars on policy matters have warned that the quality of debate will diminish if the Kochs succeed. Nearly all have expressed admiration for our ability to remain outside the day-to-day partisan grind. Our non-partisanship and principled (some say stubborn) adherence to libertarianism allows us to produce scholarship that is fresh and original, but also practical.

I believe that we have advanced liberty’s cause. But it doesn’t hurt to hear others say it. These recent accolades leave a bitter taste in my mouth, however, given that the threat of a hostile takeover is what prompted them.

Why do I use the term “hostile takeover?” Why do I think Cato’s defense and foreign policy studies department would change or be dissolved if the Kochs succeed? Let me give two reasons.

First, the Kochs have nominated to Cato’s board individuals who are openly hostile to the perspective of Cato’s foreign policy scholars. (Exhibit A: John Hinderaker, whose views are described here); and (Exhibit B: Tony Woodlief, whose disdain for libertarianism, but especially libertarian foreign policy, is documented here). No one responsible for these nominations has explained why these names were put forward.

An as-yet unreported incident provides further evidence of the Koch’s lack of interest in Cato’s approach to foreign policy. Last fall, the Charles G. Koch Foundation lent its support to a series of invitation-only seminars at the American Enterprise Institute. The roster of speakers and subjects is listed below. I hope it sheds some light on why we fear that a Koch-controlled Cato would not stay true to the “peace” part of Cato’s mission.

• September 27. Walter Russell Mead:　”Is There an American Strategic Culture?”
• October 17. Robert Kaplan:　”What If America Is No Longer the Sole Superpower?”
• November 1. Eliot Cohen:　”Do We Have the Military We Need?”
• November 17. Niall Ferguson:　”Can America Afford To Lead the World?”
• December 1. Eric Edelman:　”Can Diplomacy and ‘Soft Power’ Substitute for Military Hard Power?”
• December 20. Sen. James Talent:　”Can the U.S. Military Do More with Less?”

From Niall “American Empire” Ferguson to Eliot “World War IV” Cohen, all of the lecturers were strong supporters of the George W. Bush administration’s foreign policy. Cohen worked for Condoleezza Rice’s State Department, Edelman in Rumsfeld’s Pentagon, and Talent was a committed hawk in the Senate during Bush’s term.

It is unclear who championed this project at CGKF. Still, whoever was responsible does not seem terribly interested in realism, restraint, and peace, which is the current orientation of Cato’s foreign and defense policy team.

Second, at a meeting in November 2011, Charles Koch and long-time Koch lieutenant Rich Fink explained to Cato Board Chairman Bob Levy that they wanted Cato to work more closely with Koch-allied groups such as Americans for Prosperity (AFP). According to Levy, they want Cato to “become the source of　‘intellectual ammunition’ for AFP –through position papers, a media presence, and speakers on hot-button issues.” AFP, in turn, works closely with American Crossroads and American Action Network and with official Republican organizations dedicated to a narrowly partisan agenda of electing more Republicans to office. Those organizations do not work on defense and foreign policy issues.

I don’t know Charles or David Koch, personally, and I have had very limited contact with any of the Koch-appointed members of Cato’s board. I am well aware of, and have benefited from, Charles and David Koch’s support for the libertarian movement. I have given a few speeches or attended meetings sponsored by the Charles G. Koch Foundation, and my internship at Cato in 1987 was funded in part by their beneficence. They obviously were vital in helping to get Cato off the ground. But none of that history can assuage my concerns about their present intentions.

Let me close on one more personal note. All of the uncertainty swirling around Cato during this leadership fight comes at a particularly important time in the Institute’s history. The building expansion and redesign is nearly complete. We　will welcome the public to three half-day conferences in the span of one month (here, here, and here), and we have many more events planned for the rest of the year. The staff here is so grateful to the many people who contributed to the $50 million capital campaign that made it all possible.

Meanwhile, Cato’s influence and relevance is at an all-time high. Speaking just for myself, 2011 was the busiest year ever, and 2012 is already projected to be even busier. I have been flooded with calls and emails from reporters about a range of topics over the past few months. The Institute as a whole is poised to take off with the additional resources and office space that will allow us to bring in new scholars, and address new subjects. So it is truly the best of times.

It is also, alas, the worst of times. It is particularly unfortunate that all of this has coincided with the passing of our long-time chairman, Bill Niskanen. We miss him. We will be celebrating Bill’s life at a special memorial service on April 12th in the newly redesigned Hayek Auditorium. Bill was an exceptional human being in every sense of the word: a towering intellect, an invaluable colleague, and a committed libertarian. I wish that nothing would distract us from remembering Bill and his contributions to the Institute, and the country, but I have no doubt that the ongoing struggle to preserve Cato’s independence will loom large in the background.

Near as I can tell, a big part of the Koch grievance against Cato is that Cato has a different vision of how to fight the war of ideas than does Koch.

Cato’s vision has always been to work to get libertarian ideas into the mainstream of both the public discussion in the country and the policy discussion in Washington, on their own terms. We don’t pull punches, we don’t play nice, we just argue our case. We certainly don’t play on a team, although we are always willing and able to talk to those who seek our thoughts.

Cato, rightly or wrongly, works from the belief that persuading people outside the government is worth doing. Even politicians who use nice rhetoric regularly sell out the principles they espouse. Two examples: Current Tea Party hero Paul Ryan’s voted for TARP and Medicare Part D, the largest expansion of the American welfare state since Lyndon Johnson. Rick Santorum, an expressly anti-libertarian GOP presidential candidate who recently was given a stage and received fawningly by Americans for Prosperity, voted for Medicare Part D and President Bush’s No Child Left Behind act. Recently, in trying to wiggle out from underneath his support for NCLB, Santorum explained that

I have to admit, I voted for that. It was against the principles I believed in, but, you know, when you’re part of the team, sometimes you take one for the team, for the leader, and I made a mistake. You know, politics is a team sport, folks. And sometimes you’ve got to rally together and do something.

On its own terms, this is a fair enough statement. Politics is a team sport. But that is a good argument for keeping think tanks, which are supposed to be fighting the war of ideas, apart from the political process. Political winners sell out ideas people all the time. Politicians need to feel pressure to adhere to the principles they espouse. As Charles Koch put it in a 2006 interview, “the problem isn’t the people in government, it’s the system–the incentives are perverse.” If that’s right, and I think it is, the question isn’t how to change the people in government, but rather how to change the incentives. One of the ways to change the incentives facing people in government is if they feel constrained by popular opinion. Think tanks can help the public to value principles apart from politics. To the extent they do, those principles can constrain politicians’ willingness to betray those principles.

Given their recent projects, it seems like the Kochs’ view of how to move the ball forward for liberty involves electing lots of Republicans. It involves being very responsive to requests for work on particular subjects at particular times, in the hopes that the beneficiaries of that work will reward its authors with political moves once in office.

But don’t take it from me that this is what the Kochs are likely up to: Even one of the Kochs’ unsuccessful nominees to our board, Tony Woodlief, guesses that when David Koch spoke to Bob Levy last November regarding his ideas about how to change Cato,

a request was made not for Cato to alter any of its research results, but rather to focus on topics more immediately useful to citizen activists fighting to shrink government — data on tax loads, etc.

This is coming from one of their board nominees. I don’t know of anyone on our side who believed that Charles or David Koch wanted us crudely to cook the books, or otherwise manipulate our research results. Rather, we connected the dots and figured that they wanted us to be more useful to their political allies–who have as yet demonstrated no interest in civil liberties, shrinking military spending, or constraining executive power, all long-standing priorities at Cato.

The very act of circumscribing our research program to prioritize what is immediately useful to political citizen activists and de-emphasizing other projects would itself transform Cato away from what it is presently and into a spec work shop for the Kochs’ political projects–exactly what we have suggested the Kochs’ aims were.

As Tevi Troy has lamented, think tanks are becoming increasingly political. The current threat is that Cato could be transformed into a think tank controlled outright by the Kochs, who are simultaneously intensely involved in trying to influence the 2012 presidential election, which Charles Koch recently termed the “mother of all wars.”

Political wars are related to, but different from, the war of ideas. There is still value in playing the long game, and fighting the war of ideas without bowing to today’s political appetites. That is what Cato does. If it is swallowed by the Koch empire, there is significant cause for concern that Cato’s work will be influenced by their political efforts. One has to strain credulity to the breaking point to believe otherwise.

April will mark my third year as the Cato Institute’s Director of Financial Regulation Studies.  One of the primary reasons I left the staff of the Senate Banking Committee for Cato is that I believe there are too few independent voices that are knowledgeable on issues of financial market regulation.  It was my hope to fill that void.  Should Cato lose its independence to the control of any single interest, corporate or otherwise, my ability to serve as that independent voice will be compromised, if not lost altogether.

Without a doubt banking and financial market regulation is complex.  Despite this complexity, most of us have some opinions on the issue.  We all should have opinions, given the impact that mistakes in these markets can have on the rest of us.  Unfortunately the policy debates surrounding our financial markets are driven either by those with a direct financial interest, such as banks and the plaintiffs’ bar, or those with no direct interest but little actual knowledge.  The choice between knowledgeable and biased or unbiased and uninformed is an unpleasant, but real one.  What these debates are badly in need of are knowledgeable participants that lack a direct financial interest in the outcomes, other than the interest of any taxpayer or citizen.  The battle for control of Cato being waged between Charles Koch and Cato’s senior management directly impacts the ability of Cato scholars to maintain their independence.

One of the core goals of Cato is to help distinguish between being pro-market and pro-business.  They’re not the same thing.  But sadly the distinction is all too often lost.  Free markets would allow the failure of firms and reject corporate welfare.  Free markets would also, however, reject the regulation of business simply because one thinks a corporation might be too greedy or too big.  Even the appearance of Cato being controlled by a single corporation would undermine our ability to argue for pro-market, as opposed to pro-business, policies.

As someone who regularly advocates for freer financial markets, where risk and rewards are aligned, I have to constantly push back against the charge that I am advocating on behalf of banks and other financial entities.  Despite the fact that I have been among the loudest opposing bank bailouts and subsidies, this attempt to silence debate by smear remains a constant obstacle.  While it will never disappear completely, I do know that a Cato directly controlled by corporate interests would make it increasingly difficult to overcome such distortions and distractions.  For instance I have questioned the mandate for centralized derivatives clearing, as required by the Dodd-Frank Act.  Since that mandate would apply to energy derivatives, anything I say in that area would be immediately subject to question if Cato were Koch controlled.

It is not simply a question of what a Koch-controlled Cato would say–but one of how its words would be interpreted or whether such words would even get a hearing to begin with.  Many of my colleagues are rightly concerned that Koch control would see Cato abandon, or reduce, its commitment to such issues as civil liberties, the drug war, marriage equality, and a much needed reduction in our global military footprint.  Cato’s positions in these areas often conflict with those held by the Republican Party.  My area of expertise is generally in alignment with the Kochs’ perspective and the perspective of many Republicans.  I could continue to push for repeal of Dodd-Frank or advocate an end to Fannie Mae under a Koch regime.  But it is not the substance alone of these positions, but also the fact that I derive those positions from fundamental principles and not by who would be benefited by such positions.  Even if nothing I say changed under a Koch regime, the impact of what I say would.

This does not mean that corporations should remain silent.  In fact I wish more CEOs would follow the lead of Charles Koch in advocating for free markets.  One of my objectives has been to convince corporations to reject the Faustian bargain of subsidy and regulation.  Corporations should compete on a level playing field with their rivals and not seek the favor of Washington.  I welcome the support of corporations in this effort.  But this effort will ultimately be successful only if it is one of partnership and not control.

Although I am no lawyer, I have spent much of my career arguing for the respect of both contract and property.  This dispute is fundamentally about neither.  Although some have tried to frame this dispute as being about adherence to those principles, it is not. It is about whether Cato as currently constituted is a worthy combatant in the war of ideas.

I hope that Charles and David come to realize that Cato’s ability to further our mutually held goals of a free society will more advanced by an independent Cato than one controlled by them.  Letting go is hard for any parent, and Charles Koch is certainly one of Cato’s parents, but such is absolutely necessary for any entity to mature and stand on its own two feet.