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The Hidden History of the Billionaires Behind the Rise of the Radical Right
By Jane Mayer
Nineteen eighty was a year of hope for conservatives in America, but it was a hope diminished by decades of consistent failure at the grass roots. Republicans hadn't controlled either chamber of Congress, or a majority in state legislatures, for a quarter-century. Most governors were Democrats, as had been true since 1970. Not only was the Republican Party overmatched at winning elections, but those with the strongest ideological convictions - 'movement conservatives,' as they liked to call themselves - were a faint voice even within Republican ranks.
But at the end of that year two things happened. One, as we all know, was the election of Ronald Reagan as president. The other was an utterly private event whose significance would not be noticed for years. Charles and David Koch, the enormously rich proprietors of an oil company based in Kansas, decided that they would spend huge amounts of money to elect conservatives at all levels of American government. David Koch ran for vice president on the Libertarian ticket in 1980, but when the campaign was over, he resolved never to seek public office again. That wouldn't be necessary, he and his brother concluded; they could invest in the campaigns of others, and essentially buy their way to political power.
Thirty years later, the midterm elections of 2010 ushered in the political system that the Kochs had spent so many years plotting to bring about. After the voting that year, Republicans dominated state legislatures; they controlled a clear majority of the governorships; they had taken one chamber of Congress and were on their way to winning the other. Perhaps most important, a good many of the Republicans who had won these offices were not middle-of-the-road pragmatists. They were antigovernment libertarians of the Kochs' own political stripe. The brothers had spent or raised hundreds of millions of dollars to create majorities in their image. They had succeeded. And not merely at the polls: They had helped to finance and organize an interlocking network of think tanks, academic programs and news media outlets that far exceeded anything the liberal opposition could put together.
It is this conservative ascendancy that Jane Mayer chronicles in 'Dark Money.' The book is written in straightforward and largely unemotional prose, but it reads as if conceived in quiet anger. Mayer believes that the Koch brothers and a small number of allied plutocrats have essentially hijacked American democracy, using their money not just to compete with their political adversaries, but to drown them out.
A staff writer for The New Yorker, Mayer spent five years working on 'Dark Money,' which originated with an article on the Koch family she published in the magazine in 2010. Neither Charles nor David Koch agreed to talk to her, and several of the most important figures in their political network were unavailable. But she reached hundreds of sources who did want to talk: longtime conservative campaign operatives, business associates, political opponents and political finance scholars. Some of these sources spoke on the record and some did not, but all in all 'Dark Money' emerges as an impressively reported and well-documented work.
A great deal has already been written about the Koch brothers and the money their network has invested in American politics. The importance of 'Dark Money' does not flow from any explosive new revelation, but from its scope and perspective. Mayer writes of the early lives of the key players, the origin of their fortunes, their personal obsessions and quirks, and the role the operation was able to carve out. It is not easy to uncover the inner workings of an essentially secretive political establishment. Mayer has come as close to doing it as anyone is likely to come anytime soon.
What the Kochs and their allies have created, in her view, is a private political bank capable of bestowing unlimited amounts of money on favored candidates, and doing it with virtually no disclosure of its source. They have established a Republican Party in which donors, not elected officials, are in charge. In 2011, when House Speaker John Boehner was desperate for Republican votes to prevent the government from defaulting on its debt, he went to see David Koch in Manhattan to plead for help. 'It had taken years,' Mayer writes, but the brothers 'were becoming a rival center of power to the Republican establishment.'
'Dark Money' relates the personal story of the Koch family in considerable detail - an engineer father who made a fortune building oil refineries, then spent the last years of his life as an angry member of the John Birch Society; an early conversion by Charles and David Koch to the radical libertarian economics of Friedrich Hayek and Ludwig von Mises; a web of sibling rivalry among all four of the family's brothers, ending in painful legal confrontations that dragged on for years.
Mayer also sheds some useful light on the co-conspirators who helped the Kochs build a movement that spread far beyond electoral politics. Richard Mellon Scaife, heir to the Mellon banking fortune and to much of the wealth of Gulf Oil, was the financial presence behind the Heritage Foundation. John M. Olin, whose family chemical corporation was a major beneficiary of federal weapons procurement, focused on the creation of faculty positions for conservatives at prestigious university campuses. The Bradley brothers, Harry and Lynde, used proceeds from the merger of their family electronics firm with Rockwell International to underwrite a whole array of publishing and research ventures.
But the main goal was to win elections, and in that crusade the Kochs and their allies had the benefit of federal laws that they played no part in promulgating. One was the section of the Internal Revenue Code that allows for 501(c)(4) organizations, ostensibly devoted to 'social welfare' but permitted to engage in electoral politics in an essentially unregulated way. A 501(c)(4) is not required to disclose the sources of its funding, and that provision alone has brought in huge amounts of money from donors eager to contribute but reluctant to identify themselves. The 501(c)(4) loophole has been around since the early 20th century, but it was given new vigor in 2010 by the Supreme Court's Citizens United decision, which removed virtually all limits on corporate campaign funding and fostered its anonymity.
What were all these organizations and donors promoting, other than the election of Republican candidates to office? Free-market orthodoxy, to start with. “Market principles have changed my life,” Charles Koch declared in the 1990s, 'and guide everything I do.' That seems as true in 2016 as it was when he said it. Closely related to free-market faith is the hatred of regulation, federal, state or local. 'We should not cave in the moment a regulator sets foot on our doorstep,' Charles once wrote. 'Do not cooperate voluntarily; instead, resist wherever and to whatever extent you legally can.'
This ideology helps to explain one of the most important Koch crusades of recent years: the fight to prevent action against climate change. The Koch-sponsored advocacy group Americans for Prosperity has been at the forefront of climate-change opposition over the past decade. When the Republicans took over the House of Representatives in 2011, Americans for Prosperity lobbied lawmakers to support a 'no climate tax' pledge, and by the time Congress convened that year, 156 House and Senate members had signed on.
As ferocious as they have been in defense of free-market ideas, the Koch brothers are also acting out of tangible self-interest, Mayer argues. The Kochs made their money in the carbon business; they have diversified far beyond it over the years, but a stiff tax on carbon could have a significant impact on their bottom line. Mayer reports that an E.P.A. database identified Koch Industries in 2012 as the single biggest producer of toxic waste in the United States. The company has been in and out of federal court over the years as defendants in cases alleging careless and sometimes lethal flouting of clean-air and clear-water requirements. Several have paid tens of millions in fines to settle these cases. It is plausible that the Kochs and some members of their network are participating in politics largely to keep their fortunes intact. 'They said they were driven by principle,' Mayer writes of the Koch-led network, 'but their positions dovetailed seamlessly with their personal financial interests.'
She makes a formidable argument, though it is a circumstantial one. As is always true with political money, there is no easy way to delineate where ideology ends and where self-interest and corruption begin. The founding fathers were accused by some historians of writing the Constitution to protect their landed wealth. Subsequent research largely disproved that allegation. Mark Hanna's close-knit network of manufacturers and railroad tycoons invested huge sums at the start of the 20th century to procure high tariffs and business-friendly Republican governments; they largely got what they paid for. When he was House speaker in the 1950s, Sam Rayburn - according to Tip O'Neill - kept large bundles of oil company cash in his office desk and doled it out to secure the loyalty of favored Democrats. Loose and unregulated campaign cash from wealthy donors was the dark money that made Watergate possible.
One is tempted to say that since plutocrats have been pulling political levers since the start of the American Republic, the current concentration of ideology, money and power is not a uniquely dangerous development. But that may be to dismiss Mayer's warnings too quickly. Hanna bought the votes of politicians, but he didn't have a collection of think tanks, a nationwide network of pressure groups or a collection of subsidized university programs to propagandize on his behalf. The business lobbies of the postwar years knew what they wanted and generally got it, but theirs was a limited agenda that stuck to a relatively narrow set of demands. And for parts of the past century, wealthy players were restrained, however imperfectly, by campaign finance laws aimed at keeping the process open and aboveboard. Sinister as much of the system was, one could entertain the idea that a new regulatory regime might someday bring it under greater public scrutiny and control. In the aftermath of the Citizens United decision, that no longer seems a realistic prospect. This alone may make the indignities that Mayer writes about a departure from the ones that have gone before.
How the Kochtopus Went After a Reporter
Lots of American industrialists have skeletons in the family closet. Charles and David Koch, however, are in a league of their own.
The father of these famous rightwing billionaires was Fred Koch, who started his fortune with $500,000 received from Stalin for his assistance constructing 15 oil refineries in the Soviet Union in the 1930s. A couple of years later, his company, Winkler-Koch, helped the Nazis complete their third-largest oil refinery. The facility produced hundreds of thousands of gallons of high-octane fuel for the Luftwaffe, until it was destroyed by Allied bombs in 1944.
In 1938, the patriarch wrote that 'the only sound countries in the world are Germany, Italy and Japan'. To make sure his children got the right ideas, he hired a German nanny. The nanny was such a fervent Nazi that when France fell in 1940, she resigned and returned to Germany. After that, Fred became the main disciplinarian, whipping his children with belts and tree branches.
These are just a handful of the many bombshells exploded in the pages of Dark Money, Jane Mayer's indispensable new history of the billionaires behind the rise of the radical right in the US.
A veteran investigative reporter and a staff writer for the New Yorker, Mayer has combined her own research with the work of scores of other investigators, to describe how the Kochs and fellow billionaires like Richard Scaife have spent hundreds of millions to 'move their political ideas from the fringe to the center of American political life'.
Twenty years after collaborating with the Nazis, Fred Koch had lost none of his taste for extremism. In 1958, he was one of the 11 original members of the John Birch Society, an organization which accused scores of prominent Americans, including President Dwight Eisenhower, of communist sympathies.
In 1960, Koch wrote: 'The colored man looms large in the Communist plan to take over America.' He strongly supported the movement to impeach chief justice Earl Warren, after the supreme court voted to desegregate public schools in Brown v Board of Education. His sons became Birchers too, although Charles was more enamored of 'antigovernment economic writers' than communist conspiracies.
After their father died, Charles and David bought out their brothers' shares in the family company, then built it into the second largest privately held corporation in America.
'As their fortunes grew, Charles and David Koch became the primary underwriters of hardline libertarian politics in America,' Mayer writes. Charles’s goal was to 'tear the government out 'at the root'.'
Another man who studied Charles thought 'he was driven by some deeper urge to smash the one thing left in the world that could discipline him: the government'.
Much of what the American right has accomplished can be seen as a reaction to the upheavals of the 1960s, when big corporations like Dow Chemical (which manufactured napalm for the Vietnam War) reached the nadir of their popularity.
In 1971, corporate lawyer (and future supreme court justice) Lewis Powell wrote a 5,000-word memo that was a blueprint for a broad attack on the liberal establishment. The real enemies, Powell wrote, 'were the college campus, the pulpit, the media, the intellectual and literary journals, the arts and sciences', and 'politicians'.
He argued that conservatives should control the political debate at its source by demanding 'balance' in textbooks, television shows and news coverage - themes that were echoed in inflammatory speeches by Richard Nixon's vice-president, Spiro Agnew.
The war on liberals was so effective that practically everyone reacted to it: from the New York Times, which hired ex-Nixon speechwriter Bill Safire to 'balance' its op-ed page, to the Ford Foundation, which gave $300,000 to the American Enterprise Institute (AEI) in 1972. The impact was cumulative: almost four decades later, Barack Obama was astonished by one of the first questions asked to him, by a New York Times reporter, after he became president: 'Are you a socialist?'
The AEI was one of dozens of the new thinktanks bankrolled by hundreds of millions from the Kochs and their allies. Sold to the public as quasi-scholarly organizations, their real function was to legitimize the right to pollute for oil, gas and coal companies, and to argue for ever more tax cuts for the people who created them. Richard Scaife, an heir to the Mellon fortune, gave $23m over 23 years to the Heritage Foundation, after having been the largest single donor to AEI.
Next, the right turned its sights on American campuses. John M Olin founded the Olin Foudation, and spent nearly $200m promoting 'free-market ideology and other conservative ideas on the country's campuses'. It bankrolled a whole new approach to jurisprudence called 'law and economics', Mayer writes, giving $10m to Harvard, $7m to Yale and Chicago, and over $2m to Columbia, Cornell, Georgetown and the University of Virginia.
The amount of spent money has been staggering. Between 2005 and 2008, the Kochs alone spent nearly $25m on organizations fighting climate reform. One study by a Drexel University professor found 140 conservative foundations had spent $558m over seven years for the same purpose.
The next step for the radical right was to support the creation of the Tea Party movement, through organizations like Americans for Prosperity, which was funded by the Kochs.
'The Heritage Foundation, the Cato Institute and Americans for Prosperity provided speakers, talking points, press releases, transportation, and other logistical support,' Mayer writes. As the writer Thomas Frank has pointed out, the genius of this strategy was to 'turn corporate self-interest into a movement among people on the streets'.
The last element of this multi-pronged campaign saw the direct investment of hundreds of millions of dollars in political campaigns at every level, from president to city councillor. In 1996, a last-minute $3m campaign of attack ads against Democrats in 29 races, a campaign which may have been financed by the Kochs, was considered outrageous and extravagant. But after the disappearance of virtually all restrictions on campaign contributions - another result of rightwing lobbying and the supreme court's Citizens United decision - $3m is now a tiny number.
In the 2016 elections, the goal of the Koch network of contributors is to spend $889m, more than twice what they spent in 2012.
Four years ago, because Obama had the most sophisticated vote-pulling operation in the history of American politics, and a rather lackluster opponent, a Democratic president was able to withstand such a gigantic financial onslaught. This time around, it's not clear that any Democrat will be so fortunate.
In January 2015, at a private conference in Palm Springs, Calif., the political network led by conservative billionaires Charles and David Koch announced plans to spend $889 million in the 2016 elections. The organization consists almost entirely of groups that don't register under the campaign finance laws and therefore don't publicly identify their donors.
Journalist Jane Mayer traces the growing influence of the Koch brothers and other wealthy conservative donors in her new book, Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right. According to Mayer, the Kochs and other conservatives have created philanthropic entities that enable them to aggressively pursue a libertarian agenda of lower taxes, deregulation of business and the denial of climate change.
Because they are considered charities, the philanthropic groups "don't need to disclose the names of their donors," Mayer tells Fresh Air's Dave Davies. "These are the groups that are called 'dark money groups,' and they thus become kind of secret banks that affect American politics in a huge way without most people understanding who is behind them."
It's very worrisome to many Americans to think that the whole ideal of one man, one vote might be overwhelmed by 400 of the richest people of any political persuasion picking the next leader for them.
Mayer warns that such influence and secrecy undermines democracy: "It's very worrisome to many Americans to think that the whole ideal of one man, one vote might be overwhelmed by 400 of the richest people of any political persuasion picking the next leader for them. That's just not how democracy is supposed to work."
On the Kochs' secret, semi-annual seminars
They've been so careful about the secrecy at these meetings, which take place twice a year in resorts, that at one point they even went to the trouble to erect white noise machines that would create static facing the outside, so that nobody could eavesdrop on them. They routinely refuse to disclose the names of the donors who come to these events, but at one point a guest list got left behind, which has provided the one full guest list of one of these events. What you can see from it is that there are about somewhere between 400 and 450 of the wealthiest conservatives in America getting together to plan how to use their fortunes to influence American politics. ...
I think the genius of the Kochs is the magic trick that they've really figured out, which is that it's not just their money funding this; they've created a consortium. It's a club where you've got maybe 400 people who are cumulatively enormously wealthy. I tried to figure out at one point how many billionaires were involved just in the first term of Obama's presidency, because they were funding so much of the opposition to Obama, and I got to a count of 18 billionaires who are known and whose net worth put together was $214 billion. Now, obviously they're not spending all of it on politics, but it gives you a sense of the throw-weight of this tiny, concentrated group of people.
On how the Koch brothers' father built oil refineries for Hitler and Stalin
Fred Koch, the patriarch of the family, was an expert in building oil refineries, and he and a friend named William Rhodes Davis proposed building one in Germany during 1934, '35, that period in there. In 1933, Adolf Hitler became chancellor of the Third Reich in Germany, so this meant working under the Third Reich. And in order to get permission, they actually had to go to Hitler himself, and William Rhodes Davis did the "Heil Hitler" to greet Hitler, and finally they got Hitler to greenlight this proposal so that they could build an oil refinery in Hamburg.
And the Hamburg Oil Refinery, built by the Winkler-Koch Co., became key, according to several German historians I talked to, to Hitler's war efforts. By the time they built it, it was already clear that Hitler had very major military ambitions, but one of the things he was unable to do was to refine high-octane oil for warplanes. What this plant did was create that capacity, and it eventually supplied much of the fuel that was needed for Hitler's Luftwaffe.
He was not a Nazi, and I certainly don't suggest that in the book, but what he was was an American businessman looking for a good deal, and he was looking all over the world to see how he could make some money. Oddly, and what's been known before, is before working under Hitler's Third Reich, Fred Koch had worked for Stalin, where — under Stalin's first five-year plan — Fred Koch helped build up the Russian, the Soviet oil refineries and really gave huge muscle to the oil industry in the Soviet Union.
On the four Koch brothers' upbringing
I think their parents seem to have cared quite a bit about them, but they were the kinds of parents who were gone much of the time. The father was gone doing business, and the mother was a very active socialite and was gone much of the time, and so she and the father placed the child rearing in the hands of a hired nanny.
Here again, you get this strange recurrence of a kind of little touch of Nazi Germany, because ... Charles and Frederick, the oldest sons, were put in the hands of a German nanny who was described by other family members as just a fervid Nazi. She was so devout a supporter of Hitler that finally, after five years working for the family, she left of her own volition in 1940 when Hitler entered France because she wanted to celebrate with the Fuehrer.
On three of the brothers attempting to blackmail the eldest, Frederick, when they suspected he was gay
You have to remember this was a very long time ago, when the idea of being gay was considered scandalous in a family, particularly a family of rough, self-made oil men out in Wichita, Kan. It was considered a dark secret that first-born son Frederick might have been gay. At some point, when Frederick was in his 20s, all four of the sons by then had shares in the family company. And what the three other brothers did was they created a kind of kangaroo court ... so that [Frederick] walked into a room, found his three other brothers sitting there in chairs facing him, and they confronted him and conducted an inquisition to see if he was gay. And they then said that if he was, they were going to tell their father unless he handed over his share in the company. ...
It's been rumored about for years in other write-ups about the Kochs, and there have been various descriptions of people denying it, but I actually got a hold of a sealed deposition in which one of the brothers, Bill Koch, describes the whole thing as it unfolded. The brother who they were accusing — Frederick, who was the eldest — stood up, looked at them, said, "I never want to hear about this again," and walked out of the room. It didn't work. But as a ploy, I think it gives you an idea of a family that is not the usual cozy, all-American family.
On the family company, Koch Industries, being investigated for pocketing millions in oil from Indian reservations
It was in the 1990s. Koch Industries was dragged in front of the U.S. Senate. There was a committee investigating the company, looking into accusations that it had stolen oil from Indian reservations by purposefully mis-measuring it and had pocketed millions and millions of dollars of extra money by doing so. The company didn't deny it at the time. ... They said it had happened, but they said it was an accident. But if you take a look at the Senate report, what you see is that other companies that were operating around the same time in that same oil patch didn't have this problem. They've raised eyebrows in pushing the limits of what a company can get away with for decades during this period, and to some extent it was in harmony with Charles Koch's hard-lined libertarian views, that the government just should not interfere with private enterprise.
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