It Took Decades, But The Anti-New Deal Crusaders Have Triumphed

A decades-long campaign by a handful of well-heeled foundations has succeeded in laundering ideas through academia into law.
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The American judiciary has been transformed over the past generation. Until recently, liberals were accustomed to thinking of the Supreme Court as an ally. Under Chief Justice Earl Warren in the 1950s and 1960s, the Court struck down school segregation in Brown v. Board of Education (1954), cemented the doctrine of one person, one vote in Baker v. Carr (1962), established a constitutional right to privacy in Griswold v. Connecticut (1965), along with dozens of other legal and constitutional protections that most Americans take for granted today.

But something happened, starting in the 1970s.

Between 1976 and 1999, almost half of all sitting federal judges attended the Manne Economic Institute for Federal Judges, a “training program” in economic thought. The program was the brainchild of Henry G. Manne, a conservative legal scholar and activist who was one of the founding fathers of the discipline of “law and economics,” which sought to incorporate libertarian free-market ideology into legal theory and practice. The effect of Manne’s program on American jurisprudence was profound; scholars have found that judges who attended the Manne seminars issued more conservative rulings in civil cases and imposed harsher criminal penalties in criminal cases than their non-Manne peers.

The Supreme Court, too, lurched to the right. The “liberal” Supreme Court was very much a product of the mid-twentieth century. Starting in the mid-1970s and accelerating in the 2000s, the Supreme Court issued reactionary opinion after reactionary opinion, restricting labor rights, loosening antitrust regulation, drowning American politics in corporate cash, and even restricting the very right to vote itself. None of this has been accidental.

The American legal system has been profoundly transformed from the top down by right-wing activists and institutions. New legal doctrines have been developed, which operate on assumptions at odds with the New Deal state. Originalism and original intent have been written about at length, in no small part because the late Supreme Court justice Antonin Scalia, one of the right-wing leaders on the Court, was an outspoken proselytizer of originalism. But originalism, aside from Scalia’s endorsement, has been in many respects the junior partner in American jurisprudence’s lurch to the right over the past generation to a legal doctrine that emphasized the logic of the “free market” that was first developed by a group of scholars clustered around the University of Chicago in the 1950s. This group called itself the law and economics movement.

But originalism, aside from Scalia’s endorsement, has been in many respects the junior partner in American jurisprudence’s lurch to the right over the past generation to a legal doctrine that emphasized the logic of the “free market” that was first developed by a group of scholars clustered around the University of Chicago in the 1950s.

Law and economics relied on the financial generosity of right-wing donors and philanthropic foundations in order to survive and flourish; by the 1980s, even some liberals began to tacitly support the law and economics approach as an alternative to left legal analysis. But law and economics as a scholarly approach would have had a much more limited impact if it were not for another product of right-wing philanthropy: the Federalist Society, a club for right-wing law students that would produce reliable ideological cadres to staff positions in the courts and state and federal bureaucracies to help put these ideas into practice.

The result has been a remarkably effective long-term campaign to roll back the hated New Deal state. We now live in the America these movements have created.

Law and economics as a legal theory is predicated on a relatively straightforward idea. Transparently, it’s in the name: Adherents of the law and economics school of thought support using economic theory for legal analysis. This approach isn’t inherently right wing. There are ways to ground legal scholarship on economic theory that are not necessarily predicated on free market fundamentalism — Marxist legal theory (a tradition which has almost no adherents in the United States) stresses that the law in capitalist societies is a tool of economic domination for wealthy elites. Even the basic analytical claim of law and economics — that laws and regulations should be assessed based on their economic efficiency — does not automatically imply a radical deregulatory and pro-monopoly agenda. But that claim was never the purpose of law and economics — from its very beginnings in the 1940s and 1950s, the discipline had a clear political thrust: regulation is bad, markets are good.

Law and economics was, from its beginnings down through to today, understood to be a tool by right-wing opponents of socialism, communism, and New Deal liberalism to reverse the hated “collectivist” administrative state. Its wealthy adherents ponied up the dough to subsidize the spreading of its gospel in law and public policy schools across the United States. The John M. Olin Foundation, the William Volker Fund, the various Koch family foundations, even the Charles R. Walgreen Foundation — founded by drug store magnate Charles Walgreen in the early 20th century — have all helped to shape the very foundations of American jurisprudence and public policy. And not for the better.

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Private foundations and philanthropic support have been integral to American higher education since the development of private foundations as a philanthropic instrument at the beginning of the 20th century. The Ford Foundation alone awarded nearly $50 million in grants to colleges and universities from 1951 through 1954, although insofar as Ford had an ideological agenda, it was quintessential Cold War liberalism. (The Ford Foundation enjoyed patronage from, among other sources, the Central Intelligence Agency.) Conservatives, too, have been attempting to use donations to influence higher education throughout much of the 20th century. William F. Buckley, Jr. famously advised Yale alumni to use the power of donations to influence curricula in a more pro-God and pro-capitalist direction in his debut 1951 book “God and Man at Yale.” Buckley was not, however, the first to try to harness the power of the purse to influence academic culture in a rightward direction.

Charles Walgreen, the drugstore magnate, forced his niece to withdraw as an undergraduate from the University of Chicago in 1935, on the grounds that the faculty there were exposing her to communism and “free love.” Walgreen’s charge sparked an Illinois state Senate investigation, which descended into a media circus and ended inconclusively. So Walgreen took a different tack. He set up the Charles R. Walgreen Foundation for the Study of American Institutions in June 1937 “to foster greater appreciation of American life and values among University of Chicago students.” The foundation’s support was initially directed towards the political science department and included funding for an endowed professorship, but the position went unfilled for nearly twenty years because the Walgreen Foundation consistently vetoed the department’s candidates on the grounds of political unreliability.

In the mid-1950s, however, the Walgreen Foundation transferred its money over to the Chicago Graduate School of Business, where economics professor George Stigler, a founding member of the libertarian Mont Pelerin Society, leveraged the foundation’s support to build up an aggressive anti-statist economics program. This was the origin of the Chicago school of economics, of which law and economics was a major constitutive component.

One of the earliest and most influential law and economics scholars, John McGee, received support from the Walgreen Foundation; his 1958 article on predatory pricing, published in the debut issue of the Journal of Law and Economics — itself founded by University of Chicago law professor Aaron Director, who was also Milton Friedman’s brother-in-law — was a landmark in the development of law and economics, and betrayed its ideological assumptions. McGee argued, based on a distorted understanding of the business history of the Standard Oil Company, that predatory pricing — the practice of undercutting competitors by charging very low prices in order to drive them out of business — was inherently economically irrational and therefore does not exist as a business practice. (A recent critical review of McGee concluded that he “presents no actual price data to support his sweeping conclusions” and that his article suffers from a “general lack of empiricism.”) McGee’s article, despite its flaws, was eventually cited by the Supreme Court in 1986 in Matsushita v. Zenith, a landmark antitrust case that limited the standards in which antitrust law could be applied. The investment of the Walgreen Foundation had finally born fruit.

The Walgreen Foundation was hardly the only source of funding for free-market academic entrepreneurs. The William Volker Fund, under the management of Kansas City businessman Harold Luhnow, began its own aggressive strategy of giving to anti-statist and anti-regulation advocates. The Volker Fund financed the American academic positions of Austrian economists Ludwig von Mises and Friedrich Hayek at New York University and the University of Chicago, respectively, and provided generous financing to the Foundation for Economic Freedom, one of the first libertarian think tanks. Volker also provided funding for the Mount Pelerin Society and the Intercollegiate Studies Institute, the latter of which was founded as a conservative and libertarian network for college students. The Volker Fund eventually collapsed in ignominy in the mid-1960s, when an increasingly right-wing Luhnow reorganized the foundation into the Center for American Studies and appointed as staffers R.J. Rushdoony, a Calvinist theologian who helped develop Christian reconstructionism, a particularly right-wing variant of evangelical Christianity that emphasizes the creation of a theocratic state, as well as David Leslie Hoggan, an outright Holocaust denier. The Center for American Studies folded by the end of 1964, but the Volker Fund’s model of financing promising free-market scholars and funding institution-building in American higher education would be influential for subsequent generations of right-wing philanthropists.

John M. Olin was a pivotal figure in consolidating this trend in right-wing philanthropy. Olin made his fortune as an arms manufacturer — ironically, for someone who would finance efforts to roll back the New Deal state, Olin’s own financial success was cemented by the government’s massive arms orders during World War II. The John M. Olin Foundation, established in 1953, was designed from its beginning to promote its founder’s political vision — unlike most other philanthropic foundations, which are chartered in theory for perpetuity, the Olin Foundation was configured to spend all of its financial assets within a generation of Olin’s death. (The foundation, true to its mission, shut its doors in 2005).

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The Olin Foundation spread its money widely. It financed a series of unsuccessful efforts by Manne, one of the early law and economics pioneers, to set up a dedicated conservative law school at several different universities in the 1960s and 1970s. But Olin also gave money to set up law and economics centers within the country’s top law schools — Stanford, Yale, Harvard, and the University of Chicago, among others. This was what Olin executive director James Piereson called the “beachhead strategy.” The idea was to embed law and economics programs into larger elite schools under the theory that the influence of these small programs would trickle down through the rest of the academy — after all, most law professors in the United States were (and are) trained at only a handful of elite programs.

Law and economics was, from its beginnings down through to today, understood to be a tool by right-wing opponents of socialism, communism, and New Deal liberalism to reverse the hated “collectivist” administrative state.

The Olin Foundation’s successful bid to establish a law and economics at Harvard Law School in the mid-1980s is particularly revealing of the dynamics that led to the strategy’s success, because the creation of the John M. Olin Center for Law, Economics, and Business at Harvard Law could not have happened without the support of non-conservative faculty. Liberal and moderate faculty at Harvard Law in effect allied with the Olin Foundation against a potentially resurgent campus left. In 1985, the Olin Foundation, with the support of moderate faculty members at the law school — including anti-trust scholar Phillip Areeda, a former Eisenhower and Ford administration official, and James Vorenberg, the dean of the school and a former clerk for Supreme Court Justice Felix Frankfurter — endowed $1 million for the new center. The goal, hashed out in meetings with Areeda, was to use the center to restrain the power of the left-leaning critical legal studies field, an approach with a growing number of adherents at Harvard that emphasized that the law is a tool that underwrites power structures in society. Harvard Law did not become a particularly right-wing law school as a result of the Olin beachhead (and for that matter most of the law school’s more controversial and political unorthodox faculty, like Alan Dershowitz, never identified with law and economics), but after the creation of the center law and economics appointments among the faculty began to outpace those of critical legal studies. The program’s success at Harvard — and on other law school campuses — was as much a product of an alliance of convenience between conservatives at Olin and liberals and moderates in the academy.

Of course, the success of law and economics in setting up an institutional presence through its beachhead strategy at the nation’s top law schools is not, on its own, enough to account for the dramatic rightward shift in American jurisprudence over the past generation. In order to actually enact policy, it’s not enough just to have an intellectual superstructure; you also have to have cadres of ideologically reliable activists in the courts and in the government to turn policy into practice. Enter the Federalist Society.

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The Federalist Society was founded as a debating club by a group of conservative Yale law students in 1982. The organization, from its very beginning, has claimed merely to be interested in “fair, serious, and open debate” about “ideas.” (“We do not lobby for legislation, take policy positions, or sponsor or endorse nominees and candidates for public service,” according to its website.) But this is rather misleading: the Federalist Society has been explicitly ideological and interested in enacting a very specific agenda since its very beginning. As documents recently unearthed by Amanda Hollis-Brusky and Calvin TerBeek have shown, the Federalist Society was explicitly dedicated to reversing the perceived liberal domination of American jurisprudence and, more importantly, rolling back the New Deal state. A January 1984 grant proposal from the Federalist Society’s executive director, Eugene Meyer, explicitly stated that the objective of the Federalist Society was “to build an effective national conservative lawyers organization” that would reverse the trend toward liberal lawyers and that would “continue to fill key positions in the modern instrumentalities of the welfare state.”

This mission attracted funding from a number of right-wing and right-leaning foundations, including the Olin Foundation, the Lynne and Harry Bradley Foundation, the Scaife family foundations, and the Smith Richardson Foundation. Seed funding from these philanthropies made the Federalist Society a sustainable project. Today, the Federalist Society can rely on support from wealthy alumni, but in the early 1980s it was essentially reliant on right-wing foundation funding for its survival. This was an efficient investment for conservative philanthropy. The Federalist Society raised around $100,000 in its first year from six different conservative foundations — a mere drop i n the pot when in came to their respective grant budgets, but one that would reap dividends in the near future.

Support from right-wing philanthropic networks opened up doors for the growing Federalist Society. The group played a key role in the power struggle between law and economics and critical legal studies — a largely left-wing form of legal analysis that emphasizes that the legal system reflects the power dynamics of society at large — at Harvard Law School. Federalist Society-affiliated writers blasted critical legal studies as a field in articles and op-eds in the mid-1980s — right at the same time as the Olin Foundation was establishing its center on the Harvard Law campus. The Society also cultivated allies in Washington, D.C. The Reagan administration was keen to staff federal appointments with ideologically reliable personnel, and the Federalist Society within a few years had set up a Washington, D.C. chapter, not just for law students, but for practicing lawyers.

The key to the Federalist Society’s political influence has been how it functions as a key conduit in the conservative career pipeline. Advancing through that ideological pipeline can open up opportunities to gain influential positions even in non-partisan institutions. (A similar conduit exists in the media, and helps to explain the charmed career of conservative writers like Bret Stephens.) The power of this pipeline is sharply evident today. All five of the serving right-leaning Supreme Court justices — Brett Kavanaugh, Neil Gorsuch, Clarence Thomas, John Roberts, and Samuel Alito — are currently or have been affiliated with the Federalist Society. Five-sixths of the judges President Donald Trump has appointed to federal appeals courts are also current or former Federalist Society members. And this network has expanded exponentially; there are some 70,000 active Federalist Society members as of 2019.

The Federalist Society’s vice president, Leonard Leo, has built his public reputation as the maker of right-wing legal careers. The Washington Post dubbed him a “judge whisperer,” who pushed for the nomination of both Gorsuch and Kavanaugh to the Supreme Court and served a similar function in promoting the careers of less well-known Republican staffers. (He was reportedly an advocate for, among others, Matthew Whittaker, the former acting attorney general who ran the Department of Justice for three months after Jeff Session’s resignation in 2018.)

The political winds are indeed shifting. Leftists and even liberals are putting forth serious proposals to pack the Supreme Court, an echo of Franklin Roosevelt’s aggressive stance against a reactionary court in the 1930s.

By helping to reshape the federal courts and the Department of Justice, the Federalist Society has had an outsized impact on American law and public policy. Federalist Society alumni on the Supreme Court alone helped make possible the installation of President George W. Bush in 2000 thanks to Bush v. Gore; ushered in a flood of corporate money into state and federal politics thanks to Citizens United v. FEC; sought to cripple unions by stripped away agency fees with Janus v. AFSCME; and even rescinded key provisions of the Voting Rights Act with Shelby County v. Holder. This power was built over a generation, and was made possible through the funding the Federalist Society received from its financial angels in right-wing philanthropic foundations in the 1980s.

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Still, there is cause, for those on the left, for hope. Right-wing philanthropy may have made the Federalist Society possible and popularized law and economics as a discipline, but it ironically also helped to nurture the careers of one of its greatest political opponents in the early 21st century.

Elizabeth Warren was a young law professor at the University of Houston in 1981 — only a few years out from her J.D. at Rutgers Law School — when she was invited to attend a glitzy and well-funded law and economics seminar at the University of Miami. The organizer of the seminar was none other than Henry Manne, who received support from the Olin Foundation for his attempts to organize a dedicated conservative law school. (Manne would eventually become dean of the George Mason University Law School, which has since been renamed for Antonin Scalia.) Warren was greatly influenced by the seminar — she even met her current husband there — and came away a firm believer that the market was a more efficient distributor of resources than the government. She sided regularly with industry on regulatory questions in her legal scholarship. Warren was a true believer.

Irving Kristol, the doyen of the neoconservatives in the 1970s and 1980s, quipped that he was actually a liberal who had been mugged by reality. Elizabeth Warren could be accurately described as a law and economics scholar who had been mugged by evidence. Law and economics has notoriously promoted the use of specious thought-experiments in its scholarship — Richard Posner, a leading law and economics practitioner, famously wrote a largely evidence-free article in the late 1970s proposing that new parents be allowed to buy and sell unwanted children on a free market as opposed to state adoption agencies — and John McGee’s 1958 article on predatory pricing, later cited by the Supreme Court, heavily distorted the evidence of Standard Oil price undercutting in the early 20th century in order to justify its conclusion that such a practice does not, in fact, exist in business.

Warren, on the other hand, was driven by evidence. While conducting research on bankruptcy law in the mid-1980s, Warren and a team of researchers compiled stories from thousands of bankruptcy cases filed in the Western District of Texas. Rather than find stories of irresponsible debtors trying to cheat their creditors, she and her colleagues found patterns of predatory lending that undercut one of the basic intellectual claims of law and economics: that individual persons are best understood as rational economic actors. The emperor, Warren discovered, has no clothes.

American conservatism was built by left-wing apostates. James Burnham and Frank Meyer, founding editors of National Review, were both former Marxists. Aaron Director, the founder of the Journal of Law and Economics at the University of Chicago, was also a former radical — he taught labor history at Portland Labor College and courted controversy by inviting Communist Party members to speak at the school. Warren has come full circle: a left-wing apostate of the right-wing apostates, with an understanding of just how important administrative and legal power is when making political change. And she could be the next president of the United States.

The political winds are indeed shifting. Leftists and even liberals are putting forth serious proposals to pack the Supreme Court, an echo of Franklin Roosevelt’s aggressive stance against a reactionary court in the 1930s. A former law and economics prodigy is now running for president on a left-liberal platform. If the history of law and economics and the Federalist Society have proven anything, it’s that there is no permanent settlement in American public policy.

David Austin Walsh is a PhD candidate in the history department at Princeton University.

Image at top: TPM Illustration / Getty Images



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