Tag Archives: fascism

F&L Blog – Functional Democracy

Functional Democracy: Polanyi's Forgotten Antidote to Fascism and neoliberalism

Janek Wasserman

11.09.2025

As Professor of History at the University of Alabama, Janek Wasserman specializes in modern Central European history and the development of economic thought, in particular, Austrian economic thought. In this short essay he traces the formation of Karl Polanyi’s ideas during his Vienna years (1919-1933), especially his theories relating to democracy, liberalism, and fascism. Prof. Wasserman puts forward that Polanyi’s pragmatic and humane proposal for a Functional Democracy – emphasizing the need for transparency and participation in economic and political decision-making – carries important lessons for today, and offers a powerful basis for rethinking economic, political, and social relations in the twenty-first century. 

Polanyi’s quest for a new, non-Marxist socialism ​

"The intervention of fascism...means the practical salvation of capitalism. It is not a return to liberal ‘laissez-faire’ but a planned economy that is led not by an anti-entrepreneurial democratic state but by ‘titans-of-industry’ capitalists themselves.”
Karl Polanyi

When Karl Polanyi emigrated from Hungary to Austria in 1919, he threw himself into the intellectual debates roiling Central Europe, infusing a distinctive blend of Christian spirituality, philosophical idealism, and liberal socialism.  He was disaffected by Communism after the failed Hungarian Revolution—and debates with his friend, the Marxist György Lukács—yet unconvinced about the efficiency or merits of free market capitalism. He argued instead for a system that honored the dignity of the individual.  

His first public Viennese intervention came during the Socialist Calculation debate of 1922. He had no interest in reigniting the dispute between free market liberals (such as Ludwig von Mises), Communists (the Bolsheviks), and the various socialists (Otto Neurath, Karl Kautsky). He agreed with liberals that a centralized bureaucracy could not solve the accounting and pricing problems of a modern economy. However, he disagreed that a capitalist economy was the only – or best – answer. A “practical” third way, pioneered by Otto Bauer, G.D.H. Cole, and Vladimir Lenin, suggested a better solution.  Building on this, Polanyi advocated for a “functional, guild-socialist-organized” form of socialism that opened space for democratic governance within the economy. This approach required democratic participation and transparency in all decisions as part of an “oversight” (Übersicht) apparatus. This functionalism necessitated a new, non-Marxist socialism.  

Morality as the common missing link between collectivist and capitalist approaches ​

Polanyi believed liberals, conservatives, and Marxists had failed to theorize an efficient and moral economy. Both liberals and collectivists were myopically focused on accounting as the basis of a functioning economy. While the former emphasized market prices and profits for decision-making; the latter stressed state statistics and production quotas. As he wrote in his essay “Sozialistische Rechnungslehre” (Socialist Accounting Theory), neither could justify their decisions based on social or moral principles: “Whether these goals are ‘theoretically’ right or wrong, possible or impossible, moral or immoral, contradictory or logical, accounting must remain indifferent (gleichgültig).” 

In Polanyi’s view, this moral agnosticism doomed both approaches as the foundation for a humane economy. A humane system must marry productive efficiency and social justice. Collectivism had failed to maximize technical output and achieve positive social outcomes, as the Bolshevik regime had already revealed. In the Capitalist model, too, technical production lagged because zero-sum competition hindered the efficient allocation and utilization of productive resources in various sectors, while the boom-and-bust nature of finance capitalism led to production gridlocks and bottlenecks. These technical failures left the common interest (Gemeinnützigkeit) by the wayside. 

The capitalist system had no means for understanding (or calculating) the social relations between people that—as opposed to prices— undergirded all economic production. Channeling the earlier Viennese reformer Josef Popper, Polanyi argued that this condition, “…contradicted the right to live that every member of society possesses.”

Centering democratic and transparent decision-making in a functional democracy ​

Polanyi’s termed his alternative the ‘functionally organized society’ (or ‘functional democracy’). Such a system would place democratic representation and transparent decision-making at the center of production and consumption decisions. Associations for producers and industries would co-exist alongside consumer societies. The political nature of these open negotiations ensured their effectiveness and ethics: “The commune is not only a political organ but the actual carrier of the higher goal of the common good.” Ongoing negotiations would assure just wages and prices, a reasonable distribution of goods and profits, an equitable allocation of productive resources, and acceptable levels of capital reinvestment. They would also engage people as active participants in economic and political processes. 

While liberals such as Ludwig von Mises objected that “functional socialism” lacked a clear executive power and remained “nebulous and vague” for Polanyi, the lack of a single basis of power was precisely the point. Functional socialism (or functional democracy) was not about naked power relations (Machtverhältnisse) but relationships of mutual recognition (Anerkennungsverhältnisse).

A need for empathy in economics ​

Polanyi saw oversight as the pathway to a transformed human order. Oversight concerned moral questions as much as material ones. Grappling with such disparate sources required empathy. As he wrote in “New Reflections Concerning Our Theory and Practice”: “Means of production are visible, tangible aspects of the external world, which are countable, measurable and externally ascertainable. The needs and hardships of another person, by contrast, we can only envision in some fashion, through mentally putting ourselves in his situation, through an empathetic experience of his needs and hardships, through entering into them within ourselves.” Only through interpersonal interactions could human beings understand one another’s needs. Administrative bodies and unions could assist with external (material) oversight, but inner (intersubjective) oversight required democratic self-organization.

How neoliberalism’s 'cruel rationality' paved the way for fascism ​

“Never and nowhere did Hitler promise to his followers the abolition of the capitalist system. Rather, the essential thrust of his program consisted in a belief in the healthy functioning of the capitalist system within the nationalist state.”
Karl Polanyi

Polanyi would later link the failures of liberal economics with the rise of fascism—the twin causes of the crises of the 1930s. His critiques of contemporaries such as Mises, Friedrich Hayek, and Walter Lippmann, not to mention classical British political economists, formed the core of his analysis of early neoliberalism, which culminated in his 1944 The Great Transformation

He utilized the young Marx’s ideas of alienation to critique liberal categories of goods, labor, land, and capital. In “Community and Society,” Polanyi lamented the cruelty that passed as rationality in liberal society: “Grotesque perversions of common sense take on the semblance of rationality under the way of what is supposed to be an economic law.” Labor became, “a commodity to be bought and sold, like cucumbers. That to this commodity a human being is attached is treated as an accidental feature of no substantial relevance.” The use of money exacerbated alienation, obscuring the reality of human relations behind the seemingly objective notion of value. The fetish of capital was, “the most disastrous to the emancipation of mankind,” because it effaced the accumulated human labor in capital goods.

Countering fascism required reconceptualising freedom, from individual to 'social' ​

Recasting Marx’s thought in a humanist vein allowed Polanyi to imagine a popular front against fascist capitalism. It opened the door to a “sphere of the personal.” In “On Freedom” Polanyi conceptualized a new theory of social freedom: “[It] is based on the real relation of men to men… Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility.” Our reimagined communities would not be the realm of individual freedom imagined by liberals, nor the völkisch dystopias of the fascists. They would rest on mutual dependence, empathy and social freedom. 

In their quest for stability, neoliberals embraced illiberalism ​

The specter of fascism increasingly haunted Polanyi’s thoughts. He saw it as an atavistic reaction against the failed promises of liberalism, even as it entrenched capitalist relations. Polanyi associated fascism with the growing rift between liberal economics and democracy. Contemporary liberals such as Mises disparaged parliamentarianism and sided with conservatives and fascists in a quest for economic stability, thus destroying the very freedoms they claimed to support. Fascists responded to the spiritual needs that liberalism had betrayed. Politically, fascism was anti-democratic and illiberal; it supported authoritarianism and dictatorship. Economically, it opposed democratic socialism and capitalism, preferring a corporatist economy. Its “anti-capitalism” focused on finance capital (with an antisemitic stamp) rather than economic inequality or property relations. Ideologically, it emphasized ideas of race, blood, myth, and empire against reason, humanity, law, and democracy.

For Polanyi, fascism failed as a solution because it destroyed individual freedom and re-entrenched capitalism. This was his major contribution to fascist theory and an important note on modern capitalism: “The intervention of fascism in this sense means the practical salvation of capitalism, and indeed with the help of revolutionary transformations of the entire state and social system. It is not a return to liberal ‘laissez-faire’ but a planned economy that is led not by an anti-entrepreneurial democratic state but by ‘titans-of-industry’ capitalists themselves.” Polanyi saw fascism’s total subordination of the state and society to the economy as the culmination of liberal economistic fantasies. Fascism and the market fundamentalism of neoliberalism had much in common. 

Polanyi saw national socialism as capitalism rooted in a nationalist state ​

By the time Polanyi left Vienna in 1933 he had developed powerful critiques of fascism, liberalism and capitalism. Polanyi’s analysis of Othmar Spann’s universalism, the Austro-Fascist Constitution of May 1934, and National Socialism laid bare their claims of “true democracy” and anti-capitalism. For Polanyi, Spann was an intellectual pioneer whose system anticipated the Fascists and Nazis. But Spann’s corporatist system left economic control in the hands of the elites.  In  “Spanns faschistische Utopie,” Polanysi concluded, “His utopia confirms that the essence of fascism guarantees the control of property owners and managers of the means of production over the economic chamber, establishing the power of that chamber over society as a whole.” 

Polanyi made the same point about Austro-Fascism, whose leaders paid lip service to Catholic social theory yet rooted their power in capitalist economics. Polanyi disparaged the May Constitution as, “an embodiment of religious and racist fundamentalism,” and, “the arrival of theocracy.” The corporate bodies in the Austrian state had no democratic representation; everyone was appointed.  

National Socialism failed Polanyi’s test even more egregiously. Within months of gaining power, Hitler abjured attacks on the wealthy and promised an end to economic experimentation. Polanyi declared acidly in “Hitler und die Wirtschaft,” “Never and nowhere did Hitler promise to his followers the abolition of the capitalist system. Rather, the essential thrust of his program consisted in a belief in the healthy functioning of the capitalist system within the nationalist state.” Nazi leadership clearly had no interest in the “S” in the NSDAP. 

No alternative? Revisiting Polanyi's powerful call for a functional democracy ​

“[Social freedom] is based on the real relation of men to men… Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility.”
Karl Polanyi

Recasting Marx’s thought in a humanist vein allowed Polanyi to imagine a popular front against fascist capitalism. It opened the door to a “sphere of the personal.” In “On Freedom” Polanyi conceptualized a new theory of social freedom: “[It] is based on the real relation of men to men… Being free therefore no longer means, as in the typical ideology of the bourgeois, to be free of duty and responsibility but rather to be free through duty and responsibility.” Our reimagined communities would not be the realm of individual freedom imagined by liberals, nor the völkisch dystopias of the fascists. They would rest on mutual dependence, empathy and social freedom.

Ninety years later, Polanyi’s lessons endure. Fascism and far-right populism pose renewed threats to the world order. Capitalist individuals and corporations once again accommodate illiberal politicians in the name of shareholder value and profit. Meanwhile, participatory democratic proposals and democratic socialism are dismissed as utopian: there is no alternative to capitalism.  

Yet as centrist political parties struggle to mobilize their eroding bases—thanks to failed neoliberal policies which offer little to most citizens—we would be wise to revisit Polanyi’s critiques, and ideas. His positive program for functional democracy is a powerful alternative to both the sclerosis of neoliberal centrism and an emboldened far-right populism.

Janek Wasserman is Professor of History at the University of Alabama.

Further Reading

  • Dale, Gareth. Karl Polanyi: A Life on the Left. New York: Columbia University Press, 2016. 
  • Polanyi, Karl. Chronik der großen Transformation. Artikel und Aufsätze (1920-1945). Edited by Michele Cangiani and Claus Thomasberger. 3 vols. Marburg: Metropolis, 2003. 
  • Polanyi, Karl. Economy and Society: Selected Writings. Edited by Michele Cangiani and Claus Thomasberger. Cambridge, UK: Polity, 2018. 

Related Posts

F&L Blog – A Perpetuum Mobile of Cynicism

A Perpetuum Mobile of Cynicism: on the Symbiosis of Neoliberal and Fascist Views of Humanity

Natascha Strobl

28.08.2025

Economic liberalism and fascism often present themselves as opposites. Fascist forces claim to represent an anti-capitalism that is actually an anti-modernism and economic liberalism sees itself as a bulwark against totalitarianism but, in reality, means anti-communism. Despite all the alleged and actual contradictions, there is a decisive common source of these two ways of thinking: they share a negative image of humanity. Neoliberal capitalism sees individuals in constant struggle with each other. Only through eternal competition can something like innovation or progress come about at all. This idea of competition originates from the structure of the work process and the associated performance ideology and is transferred from there to all areas of society. Starting with the earliest competition for educational places from kindergarten onwards, through living space to relationships and the health sector – every area of society is permeated by acts of competition, selection and the creation of winners and losers.

In neoliberalism, it is important to see the situation of the losers as morally justified and, as a result, to ostracize them from society. Those who do not manage to be among the winners do not deserve to receive any help from society. This is how a neoliberal society produces few winners and many losers. Economically, this can be clearly seen in the ever-increasing concentration of wealth. But it is also visible in the rising potential for frustration in society. The promised goals and markers of prosperity (being able to afford a house, vacation, car) are achievable for fewer and fewer people. In consequence, there are not only more and more people who can be considered ‘losers’ of neoliberalism, they also increasingly feel like such. 

The neoliberal, hegemonic ideology frames this as people’s own failure and argues that they don’t deserve it any other way. This neoliberalization of everyday life goes hand in hand with a weakening of democratic institutions, which appear powerless in the face of business and industry influence and consequently act solely in their interests. What remains is a loss of trust in democratic institutions, as well as in (public) media and science. According to sociologist Wilhelm Heitmeyer “authoritarian temptations” thrive, as can be seen in the increasing success of far-right parties and movements.

Life as Constant Struggle

Neoliberalism shares this cynical view of humanity with fascism. Fascism also sees people as beings to be harassed and sanctioned, and who live in constant struggle with each other. The ethnic element adds a further level: Not only individuals, but also peoples, cultures or “races” are in competition with each other and have to assert themselves against each other. Both concepts of humanity are thus united by an essentially Malthusian or Social Darwinist view of humanity. It is about eating or being eaten. Applying this view of humanity to a society means living in constant fear and insecurity of all other people. Solidarity, community and cooperation are not only impossible, but they are also undesirable and portrayed as harmful.

Neoliberalism and Fascism – a Perpetuum Mobile

In countries such as Austria and Germany, the post-war consensus consists of a fragile agreement on democratisation, the promise of political equality, and an economic system based on inequality. Political intervention in the first post-war decades contained the social Darwinist roots of this system. However, from the implementation of neoliberal policies in the 1980s onwards, these roots began to reappear openly. This was accompanied by attempts to reduce democracy, particularly in the world of work. Trade unions and workers’ representatives were disempowered. Neoliberal think tanks and lobbies have formed a kind of state within the state, pursuing opaque policies under the guise of neutrality. Since the 1970s, they have also funded biased research through donations to universities. At the same time, they have set up astroturf organisations and engaged in disinformation and culture war campaigns. Neoliberal protagonists are therefore guilty of the very things they accuse others of. This neoliberal ecosystem is a prime example of how socio-political, authoritarian, right-wing extremist and even fascist agendas naturally accompany their hard economic liberal agendas.

Neoliberalism thus prepares the ground for fascism by hegemonizing a cynical and negative view of humanity. Once it is generally accepted that nothing is guaranteed and that any minimum standard is considered decadent, it is much easier to curtail or abolish regulating institutions. This means rolling back state control and that everyone is being

pitched against everyone else. This is precisely the essence of undertakings like DOGE. They dismantle democracy, both discursively and institutionally. The result is a world in which there is no longer any security or trust. Experiences of solidarity are becoming increasingly rare. Everyday life becomes a constant struggle for survival in competition with other people. The tenor is clear: there is not enough for everyone, and you must make sure that you are one of the winners. Nobody is looking out for you, so you don’t have to look out for anyone either.

Fascist Promises

Fascism pushes this precarious state further by affirming and reinforcing it. Our experiences with neoliberalism confirm the fascist view that the world really is as bleak, ruthless and harsh as it has always been claimed to be and at the same time opens up the opportunity to dismiss the left (or what one considers to be the left) as naive dreamers. Neoliberalism destroys the existing order and security, each of which is democratically underpinned. Fascism, on the other hand, offers a promise of order and an authoritarian, hierarchical and elitist security – the authoritarian temptations mentioned above. Without the prior destruction of liberal democracy through neoliberalism, however, fascism would not be possible. Fascism could not prevail on its own, as it has neither the roots nor the resources to do so. It absolutely needs the upheavals and crises of (neoliberal) capitalism in order to gain a mass base at all.

Fascism obtains this mass base through a promise of order, security and value through belonging. In its basic social Darwinist-genocidal attitude, this order can only be achieved through an act of purification. This purification means the ethnic selection of undesirables, be they ethnic, religious or social groups. This selection promises the exclusion of those elements that cause insecurity. These are scapegoats. But even for those who are part of the new order, authoritarian security actually consists of permanent insecurity. You are integrated into a national community from which you can be excluded at any time. In a state of security created through fascism you have to live in constant fear of everyone around you. This shows the negative, cynical and social Darwinist view of humanity shared by neoliberalism and fascism. Everyday life is characterized by insecurity and fear.

Fascism and Capital

However, none of this happens in a vacuum. Fascism becomes an option for capital factions when their own business model, and thus their ability to accumulate capital, is disrupted and cannot be saved democratically. This, for instance, currently applies to the fossil fuel economy: Oil and gas have no future – and that is why these very industries are now pumping money into the neoliberal-fascist ecosystem. Fascism thus becomes a strategy for the persistence of declining or emerging business models. There are also industries that need the support of an authoritarian state because their ability for profit-making is much lower in a democracy. This, for example, also includes the tech industry – be it the social media giants who desire to end all regulation, the surveillance industry or corporations who want to silence debates on the (un)ethical use of artificial intelligence – these business models cannot fully develop in a functioning democracy.

Whether fascism prepares people for capitalism or vice versa is somehow irrelevant — both statements are equally true. Fascism and capitalism are symbiotic systems. They have their own logic and can exist independently, but they benefit from each other and share a common basis. This basis is the education of humans to be compassionless. This lack of compassion is directed towards others, who consequently deserve to die. However, it is also directed inward, meaning, from a neoliberal point of view, one never deserves a life without fear or the right to simply live with dignity. The core of neoliberalism and fascism is therefore a negative view of humanity that does not grant individuals any dignity in their own right but instead categorises and evaluates them according to their performance and usefulness, as well as their ancestry and genetic characteristics.

Natascha Strobl is a political scientist and journalist. She is an expert on right-wing extremism and the New Right. Her book "Radikalisierter Konservatismus. Eine Analyse" was a bestseller and was awarded the Bruno Kreisky Prize for Political Books.

Further Reading

  • Heitmeyer, Wilhelm: Autoritäre Versuchungen (2018)
  • Horkheimer, Max: Die Juden und Europa. Authoritarian State. Reason and self-preservation 1939-1941 (1967)

  • Polanyi, Karl: The Great Transformation. Political and economic origins of societies and economic systems (1944/1973)

Related Posts

F&L Blog – Enchaining Democracy

Enchaining Democracy: The Koch Network’s Stealth Crusade for Free-Reign Capitalism

Nancy MacLean, edited by Solveig Degen

21.08.2025

In the past decade, it has become ever more obvious that US politics are in profound crisis. A government that once claimed to be of, by, and for the people has been captured by oligarchs and corporations whose agendas are driving unmatched inequality and planetary crisis. With the first and now second presidency of Donald J. Trump, even elementary norms of civic decency were imperiled. Anyone who follows US politics knows this – however, what you may be struggling to figure out is how things have come this far and what the rise of the US Radical Right means for the wider world.

The full-fledged attack on democracy we are witnessing at the moment has been fed by many streams, of course. They include long-growing movement conservatism, the Religious Right, as well as the white Supremacist Right that has resurfaced with a vengeance of late. All of these are important, and have yielded votes to effect radical policy change, but, in this blog piece, I want to discuss another, often overlooked piece of the puzzle: the billionaire-funded libertarian right.

Over the past decades, Charles Koch, CEO of the fossil heavy-weight Koch Industries and 22nd richest man in the world and his late brother David have assembled a vast network of over 600 like-minded wealthy donors into what is now the largest private political network in the world. It spans research institutes, think tanks, and advocacy organizations, and far exceeds the size and sophistication of any national party. This network has become a powerful delivery vehicle for its libertarian and increasingly authoritarian agenda. We’ve seen its fingerprints in the Brexit campaign, in billionaire support for fascist parties in Europe, in the growing collaboration of far-right parties and neoliberal think tanks, and in the ascent of the Trump administration itself.

In this piece, however, I do not want to talk about the scale and audacity of the Koch network’s bid for power, but closer examine the underlying ideology and ideas this network has weaponized to climb from utter marginality to breathtaking power. Why do I think understanding these ideas and their origin matter so much? Because there is an unmarked hazard in our current situation in how the noisiest threats are getting the most attention. Donald Trump – whom I’ve come to think of as the Distractor in Chief – draws nearly all media attention, but not enough attention is paid to the plan which is moving along apace out of the spotlight: In the 30 states now dominated by the Republican party, the Koch network – which has bent the Republican party to its purposes in federal departments, agencies, and in the courts – aims to permanently rewrite the rules of US society. This is important to understand: The dismantling of the US democratic system is not led by a president with a limited attention span and bad temper, but by a highly strategic network that is archly determined, breathtakingly well-funded, and acting globally.

Forget Chicago: The Crucible of Buchanan‘s Virginia School

In recent years, much ink has been spent on exposing the rise, ideas, and machinations of the so-called Chicago School of Economics. People such as Naomi Klein with her influential book The Shock Doctrine, Philip Mirowski in his book Never Let a Serious Crisis Go to Waste, or Quinn Slobodian’s Globalists and Hayek’s Bastards provide detailed and insightful accounts of how the ideas of the Chicago School have gained traction in policymaking and slowly reshaped global economic policy. However, through my research on the Atlas Network in Democracy in Chains and my archival work at George Mason University, I learned that it was another – so far mostly unacknowledged – strand of

economic thinking that has had far more influence on the Koch network’s development and political strategy. I learned that it was the Nobel laureate and public choice economist James M. Buchanan whose work supplied the strategic path that the Koch network pursues.

Buchanan, who grew up in Tennessee, completed his PhD at the Chicago School of Economics and was president of the Mont Pelerin Society. In 1986, he won the Nobel Prize for Economics for having pioneered a new way of thinking called public choice economics. Public choice economics also became influential in political science and law – and, as I learned through my research, among activists and elected officials on the Right. What made Buchanan’s work new was – in his phrase – that he developed an economic analysis of politics. He applied Chicago-style and Austrian-style libertarian economic assumptions to political actors to argue that they should only be understood as individuals rationally seeking their personal self-interest – not the common good as they claimed.

With public choice economics, Buchanan turned new attention to what he liked to call ‘the rules of the game of politics’: to the taxing and spending incentives of the political process, and to how altering the rules of the process might yield different outcomes. That theoretical premise led Buchanan to a new explanation of deficits because he made sense of why the governments would overspend in times of prosperity, not just depression or recession as Keynesian economics would predict. As a thinker who specialized in public finance and who identified with the political Right in the South, often criticizing “Eastern elites”, Buchanan made it his mission to find ways to reduce taxes and shrink the expanding public sector, then in its heyday of expansion.

In this way, his ideas were closely aligned with Milton Friedman and the liberal economic Chicago-school agenda, but Buchanan’s subset school – the Virginia School of Political Economy – was always distinctive and tendentious from Chicago-school ideas: Buchanan himself said, looking back, that his goal was ‘to tear down’ the very idea of ‘the public interest’ and economics for the ‘common good’ as Chicago followers proclaimed. For libertarians like Buchanan, there is no common good. Any such notion of shared purpose of democratic governments violates the individual liberty of the minority. The minority he was concerned with was that of wealthy taxpayers who do not share the majority’s view of the public interest. And government, Buchanan and his colleagues argued, all but steals their property, if it taxes them for purposes they do not share.

Indeed, even in his scholarly work he made this point very agitationally. In what he viewed as his master work, The Limits of Liberty, written during the 1970s crime panic, Buchanan compared government ‘coercion’ of the unwilling taxpayer to ‘the thug who steals his wallet in Central Park’. He spoke of net tax recipients as ‘parasites on the productive’; he warned of ‘predators and prey’. His very vocabulary made fellow citizens appear as menaces, not even truly human. It is a vocabulary that is disinhibiting, one that licenses hostility. And it, too, is rife on the Right today and mirrored in claims such as made by Elon Musk that “the fundamental weakness of Western civilization is empathy”.

But Buchanan did not stop with developing theory that he hoped would undermine the legitimacy of the modern welfare and regulatory state. Believing fiercely in the rightness of his cause, he moved in the 1970s from scholarship to organizing to apply that theory, urging right-wing donors to help build a ‘counterintelligentsia’. How? By creating what he called ‘a gravy train’ to bring men into the libertarian fold and train them for intellectual battle with Keynesians and social justice advocates.

Buchanan taught Charles Koch that for capitalism to thrive, democracy must be enchained: not overthrown in a coup, but rather quietly rigged so that it can no longer provide what citizens expect of it – from workers’ rights and retirement benefits to protection from discrimination and environmental destruction. Beginning in the early 1970s, Buchanan and Charles Koch allied to transform the model of government that Western capitalist nations built up over the twentieth century seeking a way to make the US – and the world, in fact – conform to an arch vision of economic liberty, a kind of free-reign capitalism beyond the reach of voters and their governments. As Charles Koch once put it “I want to build the kind of force that propelled Columbus to his discoveries”.

Libertarian Model Constitutions and Regulatory Test-Labs

As Buchanan started organizing, he also shifted from diagnosis to prescription; he began developing the field he called constitutional economics. In the belief that all existing constitutions were ‘failures’ as far as protecting the wealthy minority from the grabbing majority was concerned, Buchanan set out to design a new legal regime – one that would protect capitalists from government. He took pride in being an ‘academic entrepreneur’, and his venture into constitutional economics showed his acute sense of timing: For he turned to constitutional design in the mid-1970s just as the military junta of General Augusto Pinochet in Chile was facing intense international pressure to return to representative government.

Pinochet’s regime wanted to lock in the radical transformation of the political economy it had forced upon the country, including the privatization of social security and education. In 1980, the dictatorship’s corporate allies invited Buchanan to Santiago to try out his ideas for how to devise a constitution that would protect capitalism from government; the result, Chile’s so-called ‘Constitution of Liberty’ – ratified in a rigged plebiscite – is still achieving that purpose: In 2019, 20 people lost their lives in the massive struggle for a new constitution that might again be responsive to the will of the vast majority.

Sadly, the Chilean experience is not a detour of purely historical interest, but rather, a case of past as prologue. That kind of constitution – a constitution not of checks and balances, but of locks and bolts – has been coming to the United States for several years and is now on the verge of national government take-over with the second presidency of Donald Trump. The first moves in these directions were already visible in 2010, when in North Carolina a radicalized Republican Party, dominated by Koch-backed Tea Party figures, won majorities in both houses of the state legislature and introduced the same prescriptions Buchanan advocated for. What unfolded in North Carolina was a stunning barrage of radical rules changes on the Chilean model: These included extreme gerrymandering, union suppression, attacks on public education, rejection of Medicaid expansion, and environmental regulation rollbacks. “Getting dramatic economic change at the federal level is very difficult”, Tim Phillips, President of the Koch organizing enterprise Americans for Prosperity, later explained “[so] a few years ago, the idea we had was to create model states. North Carolina was a great opportunity to do that”.

To appreciate the nature of this ‘shock and awe’ strategy of libertarian warfare, it helps to know that Buchanan had long urged his teammates on the Right to stop focusing on who rules and study the rules. He explained to like thinkers and those who funded them – including Charles Koch – that if you did not like the outcome of public policy over a long period of time, you must focus laser-like on systematically changing the rules of governance.

Activists mobilising against such policy changes have long focused all their efforts on demonstrating to elected Republican representatives the massive impact these reforms have on the welfare of the general population and especially the poorer segments of society, often believing that showcasing the detrimental effects they have on people would sway officials to revert them. However, what these activists often do not realise are that the men pushing this agenda are not misinformed about the likely consequences – they fully understand that the policies they introduce inflict harm on many of their fellow citizens . but, it is crucial to realise that they truly believe that their endgame is worth that price. To wit: the libertarian morality deems it better to have people die from lack of health care than receive it from government, from taxes paid by others. This, really, is what they mean, ultimately, by personal responsibility: you should be on your own, for all your needs. And if you fail to anticipate and save for

those future needs, you deserve your fate. Not only that your suffering will have instructive value for others in the new world the libertarians are ushering into being: watching what happens to you, as government no longer helps you, will teach others that they must save. What they seek, in short, is a world in which we are kept from using government to help ourselves and one another: by ironclad new rules.

The Koch Network’s Promotion of Libertarian Transformation on Every Continent

The Koch project, as a project of social and political transformation, is so radically new in human history – in its scope, audacity, and strategic sophistication – that the social sciences lack even a concept for it. The Koch donor network funds an infrastructure of literally hundreds of organizations – all working to radically alter government and society in a quest to bring unfettered free-reign capitalism into being. Just as Marxists know a workers’ revolution will have to be international to succeed, so have the members of the Koch network reached the same conclusion: Their vehicle is the so-called Atlas Network, which at this writing claims over 400 affiliates in 95 countries, their operations partly funded by Koch and allied capitalists, with heavy support from fossil fuel-based fortunes.

In fact, Atlas can now claim to be the largest think tank network in the world. Yet, the organization is all but unknown to most scholars and trackers of neo-liberalism. Atlas presents itself to the global public as a non-profit body “strengthening the worldwide freedom movement”. Its mission, according to its website, is to “[increase] global prosperity by strengthening a network of independent partner organizations that promote individual freedom and are committed to identifying and removing barriers to human flourishing”

As in the case of the Koch network’s operations in the US, the rhetoric of freedom packages a cause which does more than simply compete in the marketplace of ideas to win converts. Even from the very limited investigations undertaken to date, numerous Atlas affiliates have been found to sway public opinion with disinformation, operate in secrecy, violate tax laws on charitable endeavors, and more. Most concerning here is the key role several of its affiliates have played in the rise of right-wing populism, the topic with which I will end.

Nowhere is the application of the whatever-it-takes-to-win ethos of Atlas more chilling than in Central Europe, the original spawning ground of Nazism. Some Atlas participants are building cosy relationships with neo-Nazi parties in Germany, Austria and other EU countries. As the European economic historian Janek Wasserman explains “the transnational emergence of the ‘New Right’ demonstrates an alarming degree of interaction between rightists and “Austrian” supporters of free markets and economic liberty”. Where one side brings numbers and street energy, the other brings wealthy donors, highly placed political and intellectual allies, and a coherent policy agenda.

In Austria itself, two organizations that got most of their seed money from the Koch Foundation and the Atlas Network, the Friedrich Hayek Institute and the Austrian Economics Center, saw some of their leading members join the Freedom Party of Austria (FPÖ). A right-wing populist party par excellence, it is anti-immigrant, ethnonationalist, and hostile to the European Union. In other words, a seed bed of incipient neo-Nazim. The Director of the Friedrich Hayek Institute, Barbara Kolm, has served the (FPÖ) as an economic advisor, denouncing the EU and trumpeting the US Tea Party, all in the name of Hayek and Austrians. But, then, she succeeded in bringing the FPÖ to embrace the economic agenda of the arch-capitalist donor network: including deregulation, privatization, decreased corporate and income taxes, and decreased social services.

To conclude, the Koch network’s project is unprecedented in scale and ambition. It is a global, strategic, and well-funded assault on democracy, aiming to chain popular power in the name of capitalist freedom.

To understand our crisis – and act on it – we must unmask the ideas behind this project, name the networks that sustain it, and build coalitions that defend our existing democratic systems, as well as promote the economic strategies that are needed to sustain them: anti-austerity measures, stronger redistribution mechanisms, resilient social systems, and effective environmental protection guidelines. The stakes are nothing less than our collective ability to decide our future and prevent a reign of billionaires who see empathy as humanity’s biggest weakness.

Nancy K. MacLean is an American historian. She is the William H. Chafe Professor of History and Public Policy at Duke University. Her research focuses on race, gender, labor history and social movements in 20th-century U.S. history.

Further Reading

  • MacLean, Nancy. 2017. Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. London, UK: Penguin Books.
  • Slobodian, Quinn. 2025. Hayek’s Bastards: Race, Gold, IQ, and the Capitalism of the Far Right. Brooklyn, NY: Zone Books.
  • Wasserman, Janek. 2020. The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas. New Haven: Yale University Press.

Related Posts

F&L Blog – Untangling Donald Trump

Untangling Donald Trump: Between Liberalism and Fascism

Fred Block

13.08.2025

The relentless series of shocks in the first five months of Donald Trump’s second administration has left most observers stunned and confused. One horrendous set of policies has followed another. There is the destructive march of the Department of Government Efficiency (DOGE) team through government agencies, the abrupt ending of U.S. foreign aid programs, the on-again, off-again, on-again tariffs, the push for a major budget bill that will cut taxes for the rich while throwing millions off of medical coverage, the war against major institutions including the National Institutes of Health, the legacy news media, Ivy League Universities, the largest corporate law firms, and the disregard of the courts in sending noncitizen detainees to overseas Gulags. And now we have the U.S. Marines on the streets of Los Angeles in response to minor acts of violence. How can we make sense of these changes?

Trump’s initiatives are part of an authoritarian playbook. Trump is using every ounce of executive branch power to cow potential opponents into submission.  Arresting pro-Palestinian campus activists and deporting people without due process is sending the signal that public dissent is dangerous. The attacks on big law firms, universities, and legacy media are intended to force these major pillars of civil society to acquiesce in whatever MAGA policies Trump chooses to pursue.  

During the first Trump Administration, Adam Serwer made the cogent observation that “the cruelty is the point.” That continues to be true in the second Trump Administration with the abrupt cessation of food aid overseas, the shipping of Venezuelan immigrants to concentration camps in El Salvador, and the huge cuts in social programs in the President’s “big beautiful” budget bill. 

For Trump, the actual consequences of the tariffs for the economy are largely irrelevant; he is not doing it to accomplish anything other than the exercise in dominance. To be sure, if the economic, political, and foreign policy consequen-ces are too negative, he will “coward out” and move on to another display of dominance. He has the threatened conquest of Greenland, Canada, or the Pa-nama Canal in reserve as future exercises in the unilateral exercise of irrational authority.

Trump’s commitment to irrationality is not unique. Richard Nixon and Henry Kissinger tried something similar back in the 1970’s with the “madman” strategy vis-à-vis their former communist adversaries. The idea was to convince North Vietnam, the Soviet Union, and China that Nixon was so crazy that he might further escalate the war against North Vietnam by using nuclear weapons or by deliberately bombing the dikes on the Red River to create catastrophic flooding.  But this ploy ultimately proved ineffective.

n contrast, Trump’s version of the madman strategy has been effective at home. His threats that he will defy legality and take direct revenge against universities, corporate law firms, legacy media companies, and other businesses that refuse to bend the knee has produced a wave of subservient surrenders. He success-fully intimidated Republicans in the House of Representatives to vote for a cartoonishly awful and electorally indefensible budget bill.  

The Neoliberal Agenda

It is also true that much of what Trump has been doing is completely consistent with a long-term right-wing Republican agenda that has considerable support from the business community. He has been faithfully delivering on the wish list compiled by the Heritage Foundation’s Project 2025 which is basically a more radical version of the neoliberal agenda pushed by Ronald Reagan and Margaret Thatcher four decades ago.

Trump’s Administration has crippled government regulation of business including measures for environmental protection, protections against financial fraud, and efforts to assure product safety. He has also dismantled the government infrastructure that protects racial groups, women, and others from discrimination.  Huge personnel cuts at the Internal Revenue Service undermine effective tax collection. Trump has further escalated the historic right-wing campaign against the regulation of business by firing the heads of independent regulatory agencies who previously could only be terminated for cause.  Thus far, the Supreme Court seems ready to rubber stamp this reversal of doctrine that had been in place since the 1930’s.

Trump with his DOGE allies has been shrinking the civilian side of the federal government by mass firings across a wide range of government agencies. While many of these firings are still being contested in the courts, tens of thousands accepted voluntary buyouts. At the same time, proposed cuts to Medicaid, Medicare, and SNAP (food stamps) benefits will shrink these key safety net programs.

Finally, there are the enormous proposed tax cuts benefiting the wealthy that the House passed even though hardly anybody still claims that they will produce future prosperity. The justification seems to be that the very rich, including the Trump family, deserve every penny that they have garnered, and trying to make them pay taxes is basically immoral.

While these Trump measures are in line with a long-term right-wing business agenda, this agenda does not unify the capitalist class. The group of people who make up the capitalist class—those who have amassed great wealth and those who run major business firms—have become deeply divided in their political outlook. While some are militant supporters of the rightward trajectory of the Republican coalition, others have allied themselves to the Democratic Party.

Most media attention has focused on the network of right-wing billionaires and multi-millionaires who have been fervent supporters of Donald Trump since he came down that famous escalator. This includes key actors in finance who have made fortunes in hedge funds, private equity and cryptocurrencies. They have been joined more recently by tech-based oligarchs including Elon Musk, Peter Thiel, and Marc Andreesen who have seen the second Trump Administration as an opportunity to fundamentally reshape the federal government.

However, Kamala Harris’ campaign and associated groups raised nearly $2 billion—much of which came from very rich people. Forbes reported in late October 2024 that they had identified 83 billionaires who were supporting Kamala Harris and only 52 who were backing Trump. Of course, Elon Musk’s $288 million contribution to the Trump campaign more than made up for this imbalance in billionaire support.

Some of the big money contributors to Harris did so in the hope that once elected she would abandon some of the less business-friendly policies of the Biden Administration. They wanted an end to Biden’s aggressive antitrust policies and greater restraint on deficit spending. However, many also supported her because of deep distrust of Trump for his corruption, his disregard for norms and laws, and his embrace of the radical right’s agenda.

In short, there is little substantive agreement in the U.S. capitalist class over the best policies needed to make the U.S. economy and society work effectively.  There is an important and influential faction that wants to roll back not just the New Deal but most of the reforms of the Progressive Era as well.  But there is also a substantial group who look back at Bill Clinton’s Administration with considerable nostalgia. He pursued a balanced budget, ended welfare entitlements, and presided over an economic boom. Finally, there is even a group who has come to believe that the inequality in income distribution is now too extreme, and that steps must be made to improve the living standards of working class and poor people. A group called, Patriotic Millionaires, has been lobbying for higher taxes on themselves.

Whatever these divided preferences, Trump’s madman performance has effectively intimidated those members of the ruling class who run actual organizations.  Whether they manage a legacy media outlet, a university, a law firm, a bank, or a medium-sized or giant corporation, the risks are great of offending a President obsessed with vengeance against his opponents. He can cancel federal contracts, impose negative regulatory actions, and pursue criminal or tax evasion charges.   The safest strategy is to keep one’s head down and one’s mouth closed and avoid conflict.  If he comes after you—as he has with law firms, universities, and media companies—make a quick deal and give him what he wants.

The key point is that Trump’s only means to pursue the neoliberal agenda of more tax cuts for the rich, reducing regulation, and shrinking social programs is through the exercise of his style of irrational authoritarianism.  The neoliberal policies are now deeply unpopular, even with substantial segments of Trump’s electoral base who depend on programs like Medicaid and Medicare that are scheduled for massive cuts.   Moreover, the agenda is also opposed by critical parts of the capitalist class, even as many of them are too fearful to express that opposition in public. In short, Trump has to rely on intimidation to force Republicans in Congress to rubber stamp his efforts.

The irony is that Trump’s various irrational initiatives end up further eroding his political support. The crazy tariffs, the catastrophic gutting of foreign aid programs, the assault on green energy spending, and the systematic assault on federally funded scientific research are disliked by much of the business community and by large majorities of the public.  Even the mass deportation program is upsetting to many employers and much of the public.    

This provides some grounds for hope in a terrifying political environment. Precisely because Trump’s policies have attacked so many different constituencies simultaneously, the possibility exists for political protests on a scale not seen in the U.S. since the Great Depression.  Trump and his minions will probably respond to such protests with military force, as they have started doing already in Los Angeles. But the repressive capacity of his regime is limited because in contrast to Mussolini and Hitler, Trump lacks disciplined paramilitary units eager to assault or kill their political opponents.   

How this all ends remains highly uncertain. What we do know, however, is that decades of neoliberalism have culminated in Trump’s frontal assault on democratic governance.

Fred L. Block is Professor of Sociology at UC Davis. He is widely regarded as one of the world’s leading sociologists and followers of Karl Polanyi.

Further Reading

  • Block, Fred L. (2025). The Habitation Society: Creating Sustainable Prosperity. Agenda Publishing. https://cup.columbia.edu/book/the-habitation-society/9781788217507/
  • Block, Fred. L (2018). Capitalism: The Future of an Illusion. University of California Press. https://www.ucpress.edu/books/capitalism/paper
No post found