Hostile Takeover

How the Koch brothers and their libertarian allies pushed their way into Texas Tech — and used public funds to do it.

by and

A version of this story ran in the October 2016 issue.

Hostile Takeover

How the Koch brothers and their libertarian allies pushed their way into Texas Tech — and used public funds to do it.

As gamblers worked the slot machines and blackjack tables downstairs, a group of wonks and professors gathered in a 26th-floor conference room at Bally’s Casino in Las Vegas to discuss, what else, the wonders of free-market capitalism. The occasion was the annual meeting of the Association of Private Enterprise Education, a 53-year-old organization that has as its mission “Revealing the Invisible Hand Through Education.” Like most academic conferences, there was a lot of schmoozing and vita-comparing and sitting through talks with titles such as “Hayek and Rand on the (Ab)Use of Reason” and “Is Law Needed for Order?” and “Millennials: How to Engage them in the Study of the Free Market?”

But for this crowd of libertarian economists largely on the margins of mainstream American university life, the conference was also a chance to rub shoulders with their benefactors, right-wing think tanks and funders in the Charles and David Koch network. Beneath the veneer of abstruse Austrian economic theory, this was a place to make a sales pitch — a sort of free market for free-market ideologues.

Benjamin Powell’s talk seemed particularly savvy in that regard. Powell is the executive director of the Free Market Institute (FMI) at Texas Tech University, a 3-year-old organization largely bankrolled by the Koch network and other conservative interests and individuals. Most of the FMI staff had decamped to Vegas for the conference. Powell was preceded by Bruce Benson, who as chair of Florida State University’s economics department defended an agreement that allowed the Charles Koch Foundation to have final say in faculty hiring. Powell’s talk, “The Global Spread of Think Tanks and Economic Freedom,” had a simple hypothesis: The rise of free-market think tanks had made “the world more free.” Now he just needed to get his hands on the data that would show the connection.

The idea that free-market think tanks — largely supported by corporations and wealthy ideologues — are bringing a love of unbridled markets, deregulation and small government to the world would certainly have an appeal for this crowd.

Charlie Ruger, an official with the Charles Koch Foundation, told the attendees in Vegas the next day, their work “isn’t about elections, it’s not about short-term outcomes,” according to recordings of the conference by the advocacy group UnKoch My Campus. “Our job, our goal, our mandate is to help build long-term culture change in order to choose better well-being in society for everybody, through freedom,” Ruger said. (Members of UnKoch My Campus registered for the conference using their real names, but did not disclose their true affiliation.)

That was the same ambitious mandate that gave rise to the Free Market Institute.

Started at Texas Tech in 2013, the institute is backed by more than $11 million in funding from entities and individuals in the Koch network, a review of records by the Observer found. Donors include the Charles Koch Foundation and DonorsTrust, which has given millions to anti-science organizations, as well as other groups with similar political leanings such as the John Templeton Foundation. In a rich irony, Powell has also leveraged the private dollars to tap about $1.4 million in state funding through an incentive program intended to boost research at some Texas public universities. That kind of largesse has paid for faculty, conferences and visiting researchers.

One of about two dozen similar institutes housed in public universities, the Free Market Institute is part of an expensive campaign by the Kochs and their allies to remake higher education — one that detractors fear is eroding academic freedom. In 2013, Charles Koch alone spent more than $19.3 million at colleges across the country, according to a 2015 Center for Public Integrity analysis. For their money, the Kochs and their allies sometimes get to influence decisions relating to research, the hiring of faculty and the course of study.

A close examination of the Free Market Institute’s funding shows how often such funding comes with strings attached. In a 2013 grant application for $1.7 million from the John Templeton Foundation, a philanthropic organization that advocates reconciling religion and science, Powell suggested that the institute staff could monitor how students changed their views as a result of their teachings. The funding, he wrote, would also further the foundation’s mission — to build a “freer and more prosperous society” — and change the way “supporters of private enterprise and free markets agitate for more freedom.”

Grafting the Koch cause to public universities has not always been easy. At Texas Tech, faculty resisted what they saw as a heavy-handed attempt to force the Free Market Institute upon them. Seeing what happened at other universities when the Kochs came calling, professors in three Texas Tech departments rejected Powell. The problem was, the faculty weren’t just up against billionaires; they also faced a millionaire businessman-politician who happened to be the chancellor of the Texas Tech University System.

October 2016 cover story Koch University
Former Texas Tech Chancellor Kent Hance speaking at a Texas Public Policy Foundation event.  YouTube/Texas Public Policy Foundation

Before he left Texas Tech, Chancellor Kent Hance had two last things he wanted to accomplish: He wanted to raise $1 billion in a capital campaign, part of an effort to boost Tech’s profile as a research school. And he wanted to establish a hub for the study of free markets.

A consummate West Texas political hand with a knack for the folksy joke, Hance had plenty of friends and business associates to call upon. He’d served in Congress as a “boll weevil” Democrat in the mold of Phil Gramm, winning his seat in 1978 against George W. Bush — the only election Dubya was to ever lose. In 1985, Hance switched parties and became thick with the ascendant Republicans, including Bush. Over the next decades, Hance showed an acumen for mixing business and politics, even while he was chancellor. In the ’90s and ’00s, he was a major investor, lobbyist and booster for Waste Control Specialists, the company that operates a for-profit radioactive waste dump near Andrews, northwest of Midland. Waste Control was owned by the late Harold Simmons, a Dallas billionaire who is probably best known for funding the 2004 Swift Boat ads that questioned John Kerry’s military bravery. The dump, which state geologists and engineers have warned will leak into the groundwater, could make its investors billions.

When Hance needed seed money for the Free Market Institute, he knew where to turn. Simmons chipped in and so did Bob Perry, the late homebuilder who was once the No. 1 source of political cash for Texas Republicans, and who convinced the Legislature to set up a disastrous state agency to hear complaints about shoddy home construction. Hance also collected a cool $4 million from John Matthews, an under-the-radar rancher who heads the Kickapoo Springs Foundation in Abilene. The foundation has given to several groups in the Koch network, including the State Policy Network and the American Enterprise Institute.

“I did that with private money,” Hance said at a 2015 luncheon hosted by the Texas Public Policy Foundation, a right-wing think tank funded by corporations and wealthy individuals. “We did it so no one could criticize us. If I had asked for a special line item [in the state budget], the fight would’ve been on.” Hance did not respond to the Observer’s multiple requests for comment.

Alex Nabaum

Although the institute wasn’t set up with state funding, it has gone on to secure $1.4 million in taxpayer money through the Texas Research Incentive Program (TRIP), which was created by the Legislature in 2009 to help boost emerging research universities.

“There is no comparable collection of donors that is getting this kind of bang for their buck,” said Ralph Wilson with the advocacy group UnKoch My Campus.

Even with the large influx in funding, Hance and the Texas Tech administration struggled to find a tenure home for Powell, who they’d handpicked to head the institute. First, they approached the economics department, where Powell’s research interests fit in best. But the department’s tenured faculty, who vote on hiring decisions, came to a near-unanimous decision: Powell and the Free Market Institute were not a good fit.

The Observer spoke to five Texas Tech faculty members, some of whom requested anonymity because they didn’t want to hurt relationships with their colleagues. The faculty said they were concerned about Powell’s flimsy resume and ideological bent, and worried that the Free Market Institute would hijack their departments.

“These people in every case are associated with the right-wing political system,” said one Texas Tech professor who was involved in discussions about offering Powell a tenure position in the economics department. “In [the] economics [department], we understood a lot more than the administration. We have a full grasp of who these people are and we never had any interest.”

In a rich irony, Powell has also leveraged the private dollars to tap about $1.4 million in state funding through an incentive program intended to boost research at some Texas public universities.

Powell “didn’t satisfy the minimum criteria for a tenure position,” the economics professor said. “He had a weak vita, and the libertarian Austrian bent that these people have just wasn’t consistent with the culture in our department. We are mainstream economists. In all likelihood this money was coming from a crackpot right-wing group somewhere who was going to expect the research output demonstrate an ideological orientation.”

Powell got his Ph.D. in economics from George Mason University, a favorite of the Kochs that received more than $48 million from the billionaire brothers from 2011 to 2014. An occasional guest on Fox News, Powell has earned minor notoriety for defending sweatshops in his research as being the best of a bad situation for farmers driven off their land. “Activists naively assume that demanding better working conditions will improve the lives of workers,” he wrote in his book Out of Poverty: Sweatshops in the Global Economy. “Unfortunately they are wrong.” He’s also argued that “laws that effectively eliminate sexual harassment would lower wages,” and that women are in effect paid “wage premiums” for their duties.

Texas Tech administrators then approached the political science department and later the agricultural economics department. But faculty in both balked, primarily because they worried that Powell and any other future hires at the institute would take over the department, faculty members told the Observer. Tenured faculty in a department make crucial decisions about hiring, course offerings and syllabi. Adding even two or three Free Market Institute staff could drastically change the department’s culture. Many worried that they would see a repeat of events at Florida State University, where the Koch foundations pledged $1.5 million to the economics department in exchange for being able to have the final say in hiring faculty for a new free-markets program.

“Among some on campus there is suspicion about what the goal of the Free Market Institute is,” said Frank Thames, a political science professor at Texas Tech. “Is it like in Florida State where the economics department was taken over by one of these? Or would they like an academic home to just do some research? We don’t really know what their motives are.”

October 2016 cover story Koch University
Benjamin Powell from a video series called “Free to Exchange” posted to FMI’s Facebook page.  Free Market Institute via Facebook

Faculty members also fretted over the fact that administrators were asking them to give tenure to an academic they’d never even met. Typically, the administration would present faculty members with three candidates to choose from. Candidates seeking tenure also usually present their research plans before faculty, and faculty members are given an opportunity to interact with candidates. In Powell’s case, administrators presented faculty with his resume and asked them to vote on whether they’d hire him or not. That added to the suspicion of faculty members. They surmised that the funding party, Matthews’ Kickapoo Springs Foundation, was likely pulling the strings behind the scenes.

“The faculty was a combination of irritated that they weren’t better informed and concerned about the ambiguity of what they were buying into,” said Michael Farmer, an agricultural economics professor who served on the senate faculty.

Powell rejected his detractors’ characterization of the institute as fringe and said researchers at the institute have published in highly respected journals.

“Our academic research is squarely within the mainline of economic thought that studies the self-organizing tendencies produced in markets and how variations in institutional environments impact various markets’ ability to coordinate social cooperation,” Powell wrote in an email. “In addition, the Free Market Institute accepts donations from all rational sources regardless of their political or ideological views.”

“In all likelihood this money was coming from a crackpot right-wing group somewhere who was going to expect the research output demonstrate an ideological orientation.”

While Texas Techs faculty continued their hand-wringing about the implications of the Free Market Institute’s presence on campus, Powell was pitching the John Templeton Foundation on research and the “outcomes” it could promise the foundation. His main idea was to study what might cause the spread of free-market thinks tanks, naming the Koch-funded Atlas Network and the State Policy Network as examples of organizations that could be analyzed.

“Evidence of an enduring impact from this research could include observing free-market think-tanks change their strategy of promoting social change to more closely mirror the findings of our research,” Powell wrote in the Templeton grant application. “Other evidence may include pro-freedom policy makers changing their strategies to mirror the findings of our research.”

The Templeton funding comes with very specific requirements. The Free Market Institute is required to produce at least four Ph.D. candidates and three post-doc fellows. Their research is to be published in “a quality journal” and Ph.D. candidates must find “tenure-track jobs at high-quality universities.” These professors, groomed at the institute, will then go on to reach 1,050 students per academic year, assuming they teach six courses per year and an average of 25 students take each class, the application states.

“We could measure how much they change their students’ views by administering a quiz on the students’ public policy beliefs at the beginning and end of each semester to see how their views change after having been exposed to these faculty members (I’ve done this in some of my own classes),” the application states.

Powell told the Observer that the institute’s professors have not conducted any such quizzes at Texas Tech and that donors “do not determine the scope or focus of FMI’s research.”

“Each faculty member retains full academic freedom to execute any research program they feel appropriate,” he said.

But detractors contend that even if donors don’t play an active role in everyday operations or make demands regarding the type of research being conducted, there is an implicit expectation about the kind of work that will be acceptable to funders and result in future grants.

“What we see is this network of think tanks seeding campuses, where you have academics going through the university and a donor shows up and funds the work,” said Wilson with UnKoch My Campus. “The [funders’] political expectations are being carried out top down and bottom up.”

October 2016 cover story Koch University
The Jerry S. Rawls College of Business Administration at Texas Tech University.  Free Market Institute via Facebook

The institute eventually landed in the business college at Texas Tech, and its staff members now have tenure positions in the agricultural economics department, the business college and the school of medicine. Faculty members suspicious of the Free Market Institute’s presence on campus still argue that the group’s teachings and detachment from the rest of the university will hurt Texas Tech’s reputation in the long run.

But for the university’s administrators, the institute has provided a lucrative advantage. Over the last two decades, state funding for higher education has dwindled, prompting universities such as Texas Tech to seek more funding from private donors. In 1993, Tech received more than $8,000 (in 2016 dollars) per student from the state. Today it receives about $5,000.

Texas Tech is also competing to be part of the so-called Tier 1 universities, an elite category of research universities that spend at least $100 million on research and produce 200 Ph.D. students each year.

“I know that getting grant money is extraordinarily important to [the university’s administrators],” said Thames, the political science professor. “That’s how lots of decisions are made. So it was going to be very difficult for them to refuse that kind of money.”

Over the last three years, the institute has thrived. It has hired several researchers who graduated from George Mason University and West Virginia University, both bastions of libertarian economics. It has set up a high school summer program, started college reading programs, invited researchers from around the country to present at the institute, and has continued to see its funding grow.

In March 2015, the institute held a three-day seminar at Texas Tech billed as a “weekend exploring liberty, freedom, entrepreneurship and innovation.” It attracted a few dozen students and a handful of researchers from the Free Market Institute, as well as from similar outfits at Baylor and Southern Methodist University (SMU).

Attendees were treated to breakfast, lunch and dinner and put up at the swanky MCM Eleganté nearby. At the reception area, pamphlets from the Institute for Humane Studies, a Koch-funded group at George Mason University similar to the Free Market Institute, were neatly arranged. Sponsored by the Institute for Humane Studies and McLane Company, a supply chain service company headquartered in Carrollton, the event kicked off with a lecture from SMU’s Robert Lawson titled “Why Do Leftists Hate Economic Freedom?”

In his talk, Lawson pondered whether perhaps liberals just despise people in general.

“I normally wouldn’t say that in a lecture or conference because I wouldn’t want to offend anyone, but I don’t think that’s going to be an issue here,” Lawson said.

There was a general sense in the room that they were part of a vanguard on left-leaning college campuses, righteous warriors confronting a stronghold of liberal tyranny. Later, a student from SMU asked Peter Boettke, a researcher at George Mason University, how he could counteract progressives at his school.“Be a gadfly,” Boettke said, and join up with “good people” like Lawson.

After the lectures, some of the students and scholars decamped to Nick’s, a local sports bar, for beer and pizza. But as Milton Friedman, the libertarian economist, was fond of saying, there’s no such thing as a free lunch; everything was paid for by Students for Liberty, a Koch-funded organization.

Clarification: An earlier version of the story stated that Charles Koch gave $19.3 million to colleges across the country. That amount was Charles Koch’s spending in 2013 alone. 

When Texas is at its worst, the Texas Observer must be at its best. But we need your support to do it. To tackle the toughest stories in 2024, we must raise at least $317,000 by December 31. Become a member now during our Fall Drive to help us close this critical revenue gap. JOIN NOW.