Capitalism Defined, Part VII: The Great-Souled Minority

When I was in college, twenty years ago, the most influential economist in the United States was probably Milton Friedman, the University of Chicago professor who founded monetarism and revived laissez-faire economics. When I was in graduate school, a little over ten years ago, that title had passed to "maestro" Alan Greenspan, the libertarian chairman of the Federal Reserve. Today, it has probably passed to Greenspan's mentor, Ayn Rand (1905-82), who though not a formal economist is probably the most well-known philosopher in the English language. Rand's magnum opus, the 1,100-plus-page brick Atlas Shrugged (1957), has sold an average of 150,000 copies every year since its publication and was cited in a Library of Congress poll as the second-most influential book in readers' lives - right after the Bible. Her earlier novel, The Fountainhead (1943), was only marginally less successful, and both books were later made into movies, something one could not imagine happening with Marx's Grundrisse or Weber's Protestant Ethic. In addition to her literary and financial success, Rand acquired a cult-like following during the 1950s and '60s, and her public lectures, which graced the campuses of numerous universities, were almost invariably packed. Not bad for an obscure Jewish pharmacist's daughter from Saint Petersburg, Russia.

Rand's contribution to the modern American perception, and idealization, of capitalism can be found in her novels and a few short polemical works. In Rand's view, free-market capitalism is the only truly moral economic system in human history. It takes its power from the creative energy of free individuals, who act (in a simile that Rand acquired from from her mentor Isabel Paterson) like dynamos in a vast electrical circuit, producing goods, trading with other creators, and using money to signal their desires objectively around the world. It depends not on idealism or charity, but on human reason, willpower, and selfishness - which Rand defined as "healthy egoism" - to function. According to Rand, capitalism did not require physical coercion, unlike feudalism or socialism, which ultimately needed armed thugs to redistribute property to the undeserving. (Quotes and citations in this and the preceding paragraph are from Anne Heller, Ayn Rand and the World She Made [New York, 2009], 135, 139-140, 221-222, 286-87.)

Rand's philosophy of capitalism represents a significant, in some cases a radical, break with her predecessors in this series. Where Marx and Polanyi saw free-market capitalism as socially destructive, Rand presented it as the infrastructure of a model and moral society. Where Marx and Schumpeter believed socialism was an inevitable and progressive socio-evolutionary phase, Rand argued that it was a barbaric regression that right-thinking people should abhor. Her views hewed closer to those of Adam Smith and Max Weber, but she lacked Smith's skepticism about the morality of capitalists and Weber's appreciation of their tendency toward sociopathy.

The popularity of Rand's views today is in some ways a function of the wealthy supporters she acquired during and after her life, who established research institutes and college endowments dedicated to advancing the study of her works. In other ways, it's due to the natural appeal of her libertarian ideals to young people; Rand was not only extremely intelligent but devoted to
philosophical consistency, which older and more cynical persons can respect but not easily emulate. (Young people are, I suspect, the bulk of Rand's readers today, and they are certainly the dynamic core of libertarian Ron Paul's political crusade.) Rand's vision of capitalism is probably also appealing to many people who feel alienated from the modern political-economic order in industrialized countries, intimidated (as most of us are) by multi-trillion-dollar public debts and too-big-to-fail banks, and who seek an alternative, however unrealistic.

For there are two big ways in which Rand's vision diverges from the economic reality in which most of us countries reside. One is her assumption that free markets are self- regulating and that self-interest will compel businessmen to be honest. Rand was herself a meticulously honest person, and she probably supposed all rational people - including successful businesspeople - would behave similarly. The idea that a group of coke-addled financial whiz-kids would develop junk-quality real-estate bonds, bundle them into CDOs, bribe ratings agencies into certifying them AAA, and sell them to unsuspecting institutional investors, thereby all but ensuring an eventual crash for the sake of short-term profits, would not have occurred to her. It certainly did not occur to Alan Greenspan, who as head of the Federal Reserve repeatedly refused to exercise regulatory authority over the CDO market, and then professed genuine shock that the market had not regulated itself. (Greenspan made this admission in testimony before a Congressional subcommittee in October 2008. Day late and a dollar short, maestro.) Markets are of course essential to a capitalist economy, but they depend heavily on the mutual trust of the actors therein, and where there are profits to be made from violating that trust, governments must intervene, either in the form of regulatory agencies or civil courts enforcing contracts and tort claims. (In Atlas Shrugged, Rand acknowledged a need for the latter institution, but she and her disciples were fundamentally opposed to the former.)

The other serious flaw in Rand's vision is that she ignores the significant role that the commodification of labor plays in making most workers in a capitalist economy hate their jobs. Field hands, factory workers, clerks, telemarketers and middle managers aren't fountains of dynamic industrial energy, they are cogs in a productive machine that someone else designed. Most working and middle-class people, even if they do their jobs conscientiously, don't define themselves by their jobs; they define themselves by their leisure time, their worldly goods, and their relationships with other people, for which their jobs provide only financial support. That most jobs are unfulfilling is evidenced by the willingness of people like airline pilots and school teachers to take a lower rate of pay than other persons with comparable training in order to have a job that is meaningful or respectable. The income that the great majority of people earn has little to do with their rationality or their will (except for the willpower needed to get out of bed in the morning). It is the product of someone else's reason and will.

I've not found much evidence that Rand cared about this. She was primarily interested in the thinkers and entrepreneurs in society, and believed that the function of hoi polloi was to provide the social infrastructure for the few genuinely creative types - the trelliswork, to borrow a metaphor from her idol Friedrich Nietzsche, on which a few flowering plants could grow and blossom. She found utilitarianism, Mill's doctrine of "the greatest good for the greatest number," repellent, and probably would have thrown up if she had ever seen Spock's dying speech in Star Trek II (which came out just three months after her death). Here is another reason for Rand's appeal: she argues that only a minority of creators and builders matter, and that everyone else is conspiring to tear that great-souled minority down. The second half of this argument, at least, is untrue. The unwashed masses would rather wait patiently for the great ones' own hubris to bring them down, and then watch their self-destruction on the news or VH1.