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eXiled Alert! / Investigative Report / September 29, 2011

“Ha-ha! Those suckers will believe anything! “

This article appeared in the October 17, 2011 edition of The Nation

There’s right-wing hypocrisy, and then there’s this: Charles Koch, billionaire patron of free-market libertarianism, privately championed the benefits of Social Security to Friedrich Hayek, the leading laissez-faire economist of the twentieth century. Koch even sent Hayek a government pamphlet to help him take advantage of America’s federal retirement insurance and healthcare programs.

This extraordinary correspondence regarding Social Security began in early June 1973, weeks after Koch was appointed president of the Institute for Humane Studies. Along with his brothers, Koch inherited his father’s privately held oil company in 1967, becoming one of the richest men in America. He used this fortune to help turn the IHS, then based in Menlo Park, California, into one of the world’s foremost libertarian think tanks. Soon after taking over as president, Koch invited Hayek to serve as the institute’s “distinguished senior scholar” in preparation for its first conference on Austrian economics, to be held in June 1974.

Hayek initially declined Koch’s offer. In a letter to IHS secretary Kenneth Templeton Jr., dated June 16, 1973, Hayek explains that he underwent gall bladder surgery in Austria earlier that year, which only heightened his fear of “the problems (and costs) of falling ill away from home.” (Thanks to waves of progressive reforms, postwar Austria had near universal healthcare and robust social insurance plans that Hayek would have been eligible for.)

IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”

A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago and had paid into the program for ten years. He was eligible for benefits.

On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay at the IHS, hard-selling Hayek on Social Security’s retirement benefits, which Koch encouraged Hayek to draw on even outside America. He also assured Hayek that Medicare, which had been created in 1965 by the Social Security amendments as part of Lyndon Johnson’s Great Society programs, would cover his medical needs.

Koch writes: “You may be interested in the information that we uncovered on the insurance and other benefits that would be available to you in this country. Since you have paid into the United States Social Security Program for a full forty quarters, you are entitled to Social Security payments while living anywhere in the Free World. Also, at any time you are in the United States, you are automatically entitled to hospital coverage.”

Then, taking on the unlikely role of Social Security Administration customer service rep, Koch adds, “In order to be eligible for medical coverage you must apply during the registration period which is anytime from January 1 to March 31. For your further information, I am enclosing a pamphlet on Social Security.”

* * *

The private correspondence between two of the most important figures shaping the Republican Party’s economic policies—billionaire libertarian Charles Koch and Nobel Prize–winning economist Friedrich Hayek, godfather of today’s free-market movement—were obtained by Yasha Levine from the Hayek archives at the Hoover Institution at Stanford University. This is the first time the content of these letters has been reported on.

The documents offer a rare glimpse into how these two major free-market apostles privately felt about government assistance programs—revealing a shocking degree of cynicism and an unimaginable betrayal of the ideas they sold to the American public and the rest of the world.

Charles Koch and his brother, David, have waged a three-decade campaign to dismantle the American social safety net. At the center of their most recent push is the Koch-funded Americans for Prosperity, which has co-sponsored Tea Party events, spearheaded the war against healthcare reform and supported Wisconsin Governor Scott Walker’s attack on public sector unions. FreedomWorks, another conservative group central to the rise of the Tea Party and the right-wing attempt to dismantle Social Security and Medicare, emerged from an advocacy outfit founded by the Koch brothers called Citizens for a Sound Economy. FreedomWorks now exists as a separate entity that champions the “Austrian school” of economics.

Hayek, a founder of that school of thought, is primarily known for two major works. The first, The Road to Serfdom (1944), grudgingly accepts the possibility that some “free” countries might find it necessary to set up a bare-minimum catastrophic social insurance program limited to the very neediest, so long as the benefits do not incentivize productive members of society to abandon free-market retirement savings or medical insurance.

Hayek’s comparatively liberal attitude toward social insurance hardened considerably by the time he published his 1960 opus, The Constitution of Liberty. Despite privately spending the intervening years paying into Social Security, Hayek devoted an entire chapter—titled “Social Security”—to denouncing the modern welfare state as a gateway to tyranny and moral decay. Ironically, one of Hayek’s main objections to government programs like Social Security was the “fundamental absurdity” of using tax dollars to promote their benefits. In other words, Hayek publicly objected to the kind of brochure that Charles Koch sent him. In their private correspondence, however, we could find no objection to this “fundamental absurdity.”

By the mid-1970s, Hayek had fully distanced himself from the modest benefits he’d originally conceded to in The Road to Serfdom. In his preface to the 1976 edition, he explained his “error”: “I had not wholly freed myself from all the current interventionist superstitions, and in consequence still made various concessions which I now think unwarranted.”

Publicly, in academia and in politics, in the media and in propaganda, these two major figures—one the sponsor, the other the mandarin—have been pushing Americans to do away with Social Security and Medicare for our own good: we will become freer, richer, healthier and better people.

But the exchange between Koch and Hayek exposes the bad-faith nature of their public arguments. In private, Koch expresses confidence in Social Security’s ability to care for a clearly worried Hayek. He and his fellow IHS libertarians repeatedly assure Hayek that his government-funded coverage in the United States would be adequate for his medical needs.None of them—not Koch, Hayek or the other libertarians at the IHS—express anything remotely resembling shame or unease at such a betrayal of their public ideals and writings. Nowhere do they worry that by opting into and taking advantage of Social Security programs they might be hastening a socialist takeover of America. It’s simply a given that Social Security and Medicare work, and therefore should be used.

* * *

Shortly after this exchange, in 1974, Hayek won the Nobel Prize in economics. The next year he went on something of a victory tour of the United States, which ended at the IHS, where he spent the summer as a resident scholar. Hayek returned to Menlo Park again in the summer of 1977. The Nation has filed a Freedom of Information Request with the Social Security Administration to discover if, in fact, Hayek received Social Security payments or used Medicare during his residencies at the institute or at any other time. At press time, these requests have not been answered.

Meanwhile, in 1974, Charles Koch founded the Cato Institute (called the Charles Koch Foundation until 1977). This think tank has done more than any other to push for an end to Social Security. In 1983 the Cato Journal published a blueprint of how to destroy Social Security, “Achieving a ‘Leninist Strategy,’” by Stuart Butler and Peter Germanis. The authors acknowledged that a strong coalition of Americans backed Social Security and thus saw the need for “guerrilla warfare against both the current Social Security system and the coalition that supports it.” Victory could be far in the future, “but then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform,” they write.

As part of Cato’s campaign, the institute has launched various groups and projects, including the Project on Social Security Choice, whose co-chair is José Piñera, architect of Augusto Pinochet’s controversial pension privatization scheme in Chile. Cato Institute members and alumni also dominated President George W. Bush’s commission on Social Security in his first term and spearheaded Bush’s failed attempt to privatize the program in the early months of his second term.

Thanks in part to Hayek’s writings and to the Koch brothers’ decades-long war on the social safety net, Americans are among the Western world’s few citizens without universal healthcare. Not surprisingly, life expectancy here has fallen to forty-ninth place in the world, while medical costs are double those of other Western nations. By contrast, Hayek’s native Austria, which has a public health plan that covers 99 percent of the population, boasts a healthcare system ranked ninth in the world by the World Health Organization.

* * *

When Texas Governor Rick Perry, a front-runner in the Republican primary for president, derides Social Security as a “Ponzi scheme” or a “monstrous lie,” that rhetoric can be traced back to the work of Hayek and Koch. And yet we now know that in private practice, Hayek was perfectly content to pay into Social Security and that Koch encouraged him to draw upon both Social Security and Medicare. Did they really believe what they wrote? Or were these attacks just scare-talk meant for the rubes, for you and us, “the public”?

Calling this mere hypocrisy downplays the seriousness of their fraud. Koch and Hayek are no more hypocritical than the used-car salesman who knowingly sells a lemon to a gullible buyer, or the financial agency that rates “AAA” instruments it knows are crap. This is a grand swindle played on a trusting, gullible public, a scam whose goal is to con America’s dying middle class into handing over their retirement money to the richest 0.1 percent, convincing them that in doing so, they’re “empowering” themselves and protecting their “individual liberty.”

Another question hangs over all this: Why didn’t Charles Koch offer to put up some of his enormous wealth to pay for Hayek’s temporary medical insurance? One obvious answer: because the state had already offered a better and freer program. But perhaps Koch’s stinginess also reveals the social ethic behind libertarian values: every man for himself; selfishness is a virtue.

Read this story at TheNation.com.

Mark Ames is the author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.

Click the cover & buy the book!

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31 Comments

Add your own

  • 1. Dan in Euroland  |  September 29th, 2011 at 3:40 pm

    Ye Mighty eXiled Censor feels pity for the many millions of suckers and shills who have carried the water for Master Koch and Friedrich von Hayek. Therefore, out of mercy from the Almighty eXiled Censor, we present the following un-improved comment in its entirety:

    Meh. What is socially optimal and what is individually rational are two separate things. For an economist to act in this way confirms the validity of the discipline.

    You got nothing but outrage dudes. No substantive arguments. So your anger is ultimately banal.

  • 2. jonnym  |  September 29th, 2011 at 3:41 pm

    This is an awesome find and I’m glad you published it, but I dunno if it’ll change anyone’s minds.

    If the right-wing/libertarian crowd isn’t getting it yet that semi-socialist, regulated markets are actually good for everyone but the very wealthy (because it keeps them from getting even wealthier), then this isn’t gonna change any minds.

    Most of what they believe actually doesn’t work, and is mostly crap fed to them by the rich to convince non-rich people to let them do whatever the fuck they want. These little bits of gossip exposing their hypocrisy isn’t going to help much.

    Libertarianism is essentially a religious belief; you wouldn’t convince a devout Christian to renounce their faith by proving Jesus didn’t exist, and you won’t convince the worshippers of Hayek and Von Mises that free markets do not create more freedom with any amount of facts or figures. Both things are taken on faith, and faith is often strengthened when it’s challenged.

    Excellent bit of investigative journalism, nonetheless.

  • 3. Flatulissimo  |  September 29th, 2011 at 4:03 pm

    The Nation? The same rag that published that Melissa Harris-Perry bullshit article about how Obama was losing support because people who don’t like his total failure of a presidency are racists? They’ll still publish your shit, too?

    Oh, well, too bad they won’t unleash the eXiled comment moderator over there, the libertard sock puppets are going to be out in force on this one.

  • 4. Ganryu  |  September 29th, 2011 at 4:13 pm

    If nothing else is achieved by this, I’m sure you’ll have been the cause of the Koch bros spending at least $50 million to try and “handle” all of this. You gentlemen will end up being a great stimulus during this time of economic difficulty. I salute you!

  • 5. Fissile  |  September 29th, 2011 at 4:14 pm

    Good find!

    Hayek and Mises are the saints of a modern slave religion preached by the likes of Mush Limpblow, Sean Insanity, and Glen Dreck. Unlike the slave religions of old that promised paradise after death, this new slave religion actually gets the slaves to blame themselves for being slaves. “Are you poor? It’s your fault. You don’t work hard enough, you’re not smart or talented enough.”

    Unfortunately, your evidence of hypocrisy on the part of the slave masters will probably not resonate with the modern slave. Another important component of the modern slave religion is, “One rule for the slave masters, another for the slave.”

  • 6. Duarte Guerreiro  |  September 29th, 2011 at 5:19 pm

    Sweet, sweet nectar.

    When you are a little kid and the teacher first tells you about the French Revolution, you kind of wonder if their victims deserved what they got. Were the “elites” really such terrible creatures to invite such violence?

    More and more I understand. More and more I feel it is right to hate. The amoral animals deserved it then, and they deserve it again.

  • 7. Mike C.  |  September 29th, 2011 at 5:32 pm

    It goes to show that the distinctions scum like the Kochs draw between good/bad people aren’t moral or ideological.

    They’re fans of Hayek because he spreads nonsense that serves their purpose, true; but that purpose isn’t to live up to those absurd principles, but to confuse the masses into undermining and destroying themselves willingly.

    The only group the Kochs really want to defend are the Kochs, and a few useful idiots like Hayek.

  • 8. the other Jon  |  September 29th, 2011 at 6:12 pm

    “What is socially optimal and what is individually rational are two separate things.”

    So socialism benefits the individual? And by “socially optimal,” you must mean for people like the Kochs, who are in the enviable position of being able extol the virtues of, while simultaneously remaining completely sheltered from, their hyper-capitalistic fantasies. Because I can tell you that living and dying by the whims of the market sure as hell isn’t optimal for people who actually live in society.

  • 9. The Dude  |  September 29th, 2011 at 6:34 pm

    Derp Derp

    My Libertard Koch-Whore positronic brain can’t comprehend this…

    Reboot, Reboot, Reboot…

  • 10. super390  |  September 29th, 2011 at 6:43 pm

    It’s been obvious that the real financial elites are planning to shift their base of operations to the next great capitalist empire, as their forebears did from the Netherlands to London and then to New York. There are maybe only two great public treasures left to ransack before it’s time to abandon America: the privatization of all our public infrastructure, and the conversion of Social Security into a stock fund scam.

    The question is, are the Kochs intending to leave with the corporations, or have they and other fascist family fortunes and their religious and militia allies always intended to lord over the ruins like the 400 families in El Salvador? If nothing else, we could follow their financial contributions into the sordid snake pit of Dominionist and neo-Confederate thinkers to see what they’re planning for our future. Koch’s ALEC allies are already expanding prison labor, and we know from the Jim Crow days that those labor camps will be stocked by grabbing any black guy off the street. The theocrats are talking about a “Great Transfer” of wealth that will accompany their takeover of all of America’s institutions. Their colleges hand out degrees called “Commissions”, which sound like a reference to the supposed Great Commission to conquer the world. So these young Christ-bots are the new Commissars. The Blackwater creeps clearly view their alums as Christian knights-in-waiting.

    All we need to create neo-feudalism is a way to establish titles of nobility with separate codes of law.

    Ironic that Hayek’s book was called “The Road to Serfdom”.

  • 11. Fatty Arbuckle's Ghost's Pants  |  September 29th, 2011 at 8:06 pm

    I’ll admit it…. I really hate libertarians for being idiotic fools.

    Q. What’s the difference between libertarians and Ebeneezer Scrooge?

    A. Scrooge had redeeming qualities.

    They’re such fools who don’t understand the principles of no regulation. It’s just sad. At times I want to scream at them, but they’re just so retarded, they wouldn’t understand any argument I’d scream at them.

  • 12. matt  |  September 29th, 2011 at 8:52 pm

    On the nation website comment section the sockpuppets are out in force already….seriously go there and read the third and fourth comment. They should at least be honest and say: “yeah, I’m a lackey for the oligarchy that is ruining america, but I just wanna know, when are you going to write an article about George Soros?” Fuck these people. What Hunter Thompson wrote about Bush and his administration applies to the Kochs and all libertards: “I piss down the throat of these Nazis.”

  • 13. helplesscase  |  September 29th, 2011 at 10:49 pm

    You know what’d be great right now? Violent authoritarian leftism.

  • 14. bulfinch  |  September 30th, 2011 at 1:41 am

    Dan says: “Meh. What is socially optimal and what is individually rational are two separate things.”

    Yeah? What a weird attempt at painting such a colossal example of cognitive dissonance as a mere matter of practicality. Damn, you can get away with murder with this sort of tortured logic. For example, you might suggest eugenics as a socially optimal means for population control, while simultaneously condemning it as an infraction upon basic human rights on a personal level. We could probably do the same with genocide, slavery, polygamy, cannibalism or really any other egregious shit one might care to contrive as the next great nostrum.

    What you are saying is that it’s all fine and well to preach and impose your ideals with the ultimate goal of effectuating policy based upon them, but at the end of the day, if your own convictions aren’t as equitable for your own situation, then don’t worry about adhering to your own dogma; guys like Dan will come along and say things like meh…how banal…and all face will be saved. There’s a Dan for every motherless mother out there. It’s kinda beautiful, I guess.

    “You got nothing but outrage dudes. No substantive arguments. So your anger is ultimately banal.”

    You should try some outrage. Chicks dig it, and it’ll put hair on your chest.

  • 15. Arthur  |  September 30th, 2011 at 4:35 am

    WOW. You guys do great work. I could kiss you. Golf clap.

  • 16. matt  |  September 30th, 2011 at 10:57 am

    I see no contradiction.

    This is completely consistent with Hayek’s conservative ideology.

    And that ideology says; rich libertarians can do anything they want and that is objectively rational and free-markety, and the rest of us are a bunch of welfare-bums who should pull ourselves up by our bootstraps.

    See? If you don’t you’re not thinking Objectivo – positively

  • 17. matt  |  September 30th, 2011 at 10:58 am

    …Now get back to work peasant.

  • 18. Cum  |  September 30th, 2011 at 1:16 pm

    I love hearing that there’s an inverse relationship between economic efficiency and a humanitarian distribution of resources within a society. It’s similar to the statement that socially optimal decisions and individually rational choices are mutually exclusive. It’s a silly belief, given that the individually rational choice is typically the socially optimal choice.

    You sperglords who might be reading this can use Game Theory to figure that one out! Ponder that, armchair behavioral economists!

  • 19. noblackbox  |  September 30th, 2011 at 4:10 pm

    “Ha-ha! Those suckers will believe anything! “

    This article appeared in the October 17, 2011 edition of The Nation

  • 20. Diet Koch  |  September 30th, 2011 at 5:18 pm

    Aren’t there any living people you can hate, Ames?

  • 21. Ashcroft  |  September 30th, 2011 at 5:23 pm

    No wonder the new right thrives on shills and sockpuppets, the slightest scrutiny always reveals a welfare junkie.

  • 22. Petkov  |  September 30th, 2011 at 10:43 pm

    people really ought to learn what Communism, Socialism and Capitalism REALLY mean before opening their stupid mouths and talking about “Liberals”. It’s Capitalism that doesn’t work, NOT Socialism.
    I’d rather live in Canada or Norway or Denmark or Holland than USA ANY day of the week. But yes, Socialism doesnt work, indeed!
    Yet China just gave another enormous loan to the EU a few days ago. Marx is having an enormous belly laugh together with Lenin right now.

  • 23. boogie mama  |  October 1st, 2011 at 3:01 pm

    “What is socially optimal and what is individually rational are two separate things”

    yes behaving in a way that is individually rational but socially suboptimal is called ‘selfishness’ and it does not really work out well very often much at al

  • 24. boogie mama  |  October 1st, 2011 at 3:02 pm

    also i like cock and i resent it being associated with a couple of shitty plutocrats :(

  • 25. Dave  |  November 15th, 2011 at 6:59 am

    Hi, I am a troll. You can find me under this troll-name trolling message boards on behalf of my Masters. What I want to know, because I’m pretty sure I’m on to something REALLY BIG here, is this: Have the authors heard back from the Social Security Administration as to whether Hayek actually drew SS benefits? This is important to the hypocrisy thesis is it not? The SSA says on its site it typically takes 20 days to respond to FOIA requests. It has been more than 40 days since publication. How about some follow up, Mark and Yasha. Sorry it I missed it elsewhere.

    So, how d’ya like me pretending to be totally sympathetic and all? I bet you can’t even see the trap I’m laying for you, you poor fools Yasha and Mark. Oh boy, my Masters will be so happy! I’m going to save both Charles Koch and Friedrich von Hayek singlehandedly! Man, am I smart a super-smart sleuth what?! I wonder if my Master will give me a paid vacation day off for saving them. Or at least a pat on the head. O how I love a pat on the head from Master Koch!

  • 26. Whedonfreak976  |  November 15th, 2011 at 8:30 am

    Yeah i love seeing the liberturds get all pissy and try and straw man the hell out of something like this, that exposes one of their gods as an absolute phony piece of shit. Hayek thought it was o k for people like him to take it, but not others. What a load of bull shit.
    Also the socks are out in force, and that only shows that deep down, they know when someone gets it right. Great job :D

  • 27. Dave  |  November 15th, 2011 at 9:33 am

    Hi. Dave (the “troll”) again. Not sure who has admin rights to this message board, but I really want to thank the Almighty Exiled Monitor for improving this troll’s comments? I will certainly be donating my funds and my children’s children’s funds to your site for doing charity work. Every waking hour of my life I worry, how do you legitimize your organization? I guess your answer to that is, “Because Vanity Fair says so, and you are a mere message board troll.” And since I suck up to Masters and Power, I will have to agree.

    As to my question…aw fuck it, who really cares.

    Thanks, and feel free to change my comments again as you see fit. And by saying this, by taking the “high road” here, I hope to shame you into thinking, “Golly, maybe changing this retarded troll’s comments really isn’t the right thing, you know? Maybe he’s just being earnest and fair, and we too should be earnest and fair. Maybe this world would be such a better place! Yeah, and maybe Koch-monkeys fly out of Dave Fairchild’s pee-hole.”

  • 28. Dave  |  November 15th, 2011 at 9:47 am

    I give good rim job. Just ask Master Koch.

    And now that SLUUUURPRPRP have SLLUUURURPRPRPRPR my SLSLSLURUURRRRPP and know my SLSLLLUUURPRP (but not yet responded), care to share your anus? Mark, Yasha, one of their lackeys? M’m-m’m!

    Thanks, Dave (the “Troll”)

  • 29. s. nachalo  |  October 4th, 2012 at 7:01 am

    Great and important article, I would love to know whether Hayek had indeed used SS benefits while in the U.S. when the info becomes available. I bet he milked that SS for all its got!

  • 30. CounterSpace  |  October 15th, 2012 at 9:46 pm

    Huh….

    Ayn Rand died on the social security dime.

    She had a home nurse and everything. Hypocritical shitbag. Rand died abandoned by her boy toy and Greenspan but she well deserved to die homeless on the street, as any proper John Galtard would have had it.

    Fruit flies are easier to get rid of than societal leeches like Any Rand, Friedrich von Hayek, the Kochs, politicians, et al.

    How do we start up some classes teaching children how to ‘Spot the Psychopath’ and ‘Don’t Feed the Psychopath’ 101 and up?

  • 31. Robert  |  February 17th, 2013 at 5:26 am

    I should probably stop trolling this site and get a life, h’m?


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