Private equity firms have a bad reputation. They’re called “predators,” “job killers,” and “vultures.” Consider the recent attacks on Mitt Romney in an Obama campaign advertisement. We’re told that because of Bain Capital — Romney’s former firm — steel workers lost jobs and health care benefits. Pensions were slashed.

One worker calls Bain a “vampire” that “sucked the life out of us.” Another adds that they “walked away with a lot of money that they made off this plant.” Hurling similar accusations in his New York Times column, Paul Krugman condemns Bain for having “destroyed good jobs.”

Although focused on Bain Capital, these attacks raise important questions about the private equity business as such. Do these firms profit without caring whether their acquisitions survive? Do they eliminate good jobs?

Private equity firms typically invest in relatively mature companies, aiming to later resell their shares at a profit. In most cases, they apply their extensive knowledge of corporate and financial restructuring to improve their acquisitions, similar to how Gordon Ramsay uses his culinary expertise to save struggling restaurants on Kitchen Nightmares.

Skype was purchased by a private equity firm named Silver Lake, which subsequently recruited a new management team, resolved litigation with the company’s founders, forged strategic partnerships with key players like Verizon and Samsung, and oversaw the launch of Skype mobile and Skype Connect. These improvements allowed Silver Lake to resell Skype for a whopping gain of some $3 billion.

Domino’s Pizza is another private equity success. After buying out Domino’s, Bain refinanced the company, launched a new marketing campaign, rolled out new products, and modernized its stores. Revenues grew for the last five years that Bain was in charge, and the pizza chain went from being ranked last amongst its competitors in taste, to receiving high taste marks.

Do private equity firms focus on their own earnings at the expense of the long-term survivability of their acquisitions? To the contrary, they have every incentive to focus on their acquisition’s survivability because they want to resell it at a profit.

It’s much easier to sell a company that is in position to profit for many years than one that is likely to fail in a few months. And the fact that private equity firms have been reselling companies at a profit to willing buyers for decades demonstrates their success at improving companies.

Sure, there are examples of companies that went bankrupt after an attempted reorganization by private equity — GS Technologies, Simmons Bedding, etc. Maybe these failed because the business was unsalvageable. Or maybe the private equity firm couldn’t figure out a suitable reorganization.

Regardless, these cases are no basis to demonize the industry anymore than demonizing emergency rooms because some patients die.

Do private equity firms destroy good jobs? Well, good for whom? Retaining workers is not good for a company if it can drastically improve earnings by shrinking to a more manageable size, which may include closing unprofitable facilities and laying off hundreds.

For example, in 2002, Birds Eye — the frozen foods producer — had a loss of $131 million on $1 billion worth of sales. A private equity firm named Vestar Capital bought Birds Eye and converted it into a smaller, profitable company, which included reducing the workforce from 4,000 employees to 1,700. By 2009, Birds Eye earned a profit of $54 million while selling $936 million of products.

Eliminating jobs to increase earnings is often criticized as “putting profits over people.” But no self-respecting business employs someone unless it thinks it can increase profits thereby, and no self-respecting person demands to be employed at a loss to his employer. Jobs depend on profits.

When Vestar transformed Birds Eye from a struggling producer of commodity vegetables to a leader in branded foods and meals, it refocused Birds Eye on its core brand, sold underperforming facilities inessential to its new strategy, including plants related to a sauerkraut business and a private-label frozen vegetable business.

To stay competitive in today’s dynamically evolving economy, companies must be able to constantly adapt, and this may require substantial reorganization and downsizing.

It is a serious injustice to malign private equity firms as their critics do today. We should recognize that they’re reorganization experts who aim to improve undervalued or underperforming businesses. Their profits should be admired.

About The Author

Doug Altner

Doug Altner was an analyst and instructor at the Ayn Rand Institute between 2011 and 2014.

It’s the same old song: Wherever you go, whatever you do, if it involves making profits, President Obama will be right there criticizing you.

These days, his administration is targeting Bain Capital and the entire private equity industry for seeking to “maximize profits,” which is “not always going to be good for communities or businesses or workers.” 

Let’s be real. Anyone who’s sincerely interested in jobs for Americans needs to understand that the only source of jobs is profitable enterprises. Private equity firms are in the business of creating such enterprises — sometimes by rescuing salvageable companies, sometimes by closing down dying businesses and shifting the remaining capital to profitable firms.

A century ago, profit-seeking capitalists were shifting money out of the horse-and-buggy industry and into automobiles. Were the resulting shutdowns and layoffs painful? Sure they were. But everyone — even former buggy whip makers — had the chance to live better in a car economy. 

Today, private equity is, among other things, helping reallocate capital from steel mills that can’t compete on a global market to American high-tech companies, which are industry leaders. More broadly, Bain Capital and other private equity firms engineer the difficult structural, managerial and financial changes necessary to make long-term successes out of companies like Skype, Staples and Domino’s Pizza.

Sometimes these ventures fail, despite best efforts. But companies like Bain could not stay in business by repeatedly luring investors into multimillion-dollar failures. 

As for layoffs, employers aren’t parents and employees aren’t children. They’re grown-ups cooperating in the pursuit of profit. Employees want to profit by earning a paycheck, and businesses want to profit by selling at a price that exceeds all costs of production, including wages.

That’s the sort of win-win relationship that makes capitalism great. We don’t blame employees who quit to take higher-paying jobs elsewhere. Why should we blame companies that lay off employees to stay or become profitable? 

Businessmen who prosper in private equity earn their wealth. That’s something to celebrate, not condemn.

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Just when Apple was introducing its latest iPad, the government announced that Apple was among six companies being investigated over ebook pricing. As that investigation appears to be nearing its conclusion, here are three things everyone needs to know about the case.

1. The government is targeting voluntary agreements

What is the offense these companies are accused of committing? Apple pioneered an agreement with five leading book publishers to change the way ebooks are priced.

The old pricing model allowed sellers such as Amazon and Apple to set ebook prices. Apple suggested that the publishers switch to a so-called agency-pricing model: the publishers would set the price and Apple’s ebook store would take a 30 percent share. The one condition that Apple put on the agreement was that the publishers could not sell their ebooks for less elsewhere. (In other words, the publishers had to convince companies such as Amazon to agree to the same deal.)

So what’s the problem? It’s true that these agreements limit the pricing options of companies such as Amazon. But all contracts involve limitations and restraints. The salient issue is that Apple couldn’t force the deal on the publishers, the publishers couldn’t force the deal on other ebook sellers, and no one could force customers to pay higher prices. We’re talking about free, voluntary contractual arrangements that the government has no business interfering with.

It’s also true that ebook prices have risen somewhat since the deal. Who cares? Traditional books may be made from trees but they don’t grow on trees — and ebooks and ebook readers such as the iPad definitely don’t grow on trees. These are amazing values created by publishers and by companies such as Apple. Those companies have a right to offer their products for sale at whatever prices and on whatever terms they choose. They cannot make us buy them. (If they could, why would they charge only $15? Why not $50? Why not $1,000?)

There is no mystically ordained “right” price for ebooks — the right price is the one voluntarily agreed to between sellers and buyers. Sure, some buyers may complain about ebook prices — but they are also buying an incredible number of ebooks.

What in the world entitles a bunch of bureaucrats who have created nothing to interfere with these voluntary transactions and declare that they get to decide how ebooks should be priced?

2. The government isn’t protecting competition — it’s punishing it

Competition, in the simplest terms, is business rivalry: it’s the actions businesses take to outdo each other in the production of wealth. It requires only one thing from government: the freedom to compete.

Under freedom of competition, companies engage in all sorts of competitive actions in order to maximize their profits: they strive to innovate, to improve customer service, to lower production costs, to engage in strategic alliances with other producers, to experiment with pricing strategies.

Take the agreement that’s under fire in this case. When the companies agreed on certain pricing arrangements, this was not a limitation on competition but a form of competition. They judged that, all things considered, they could maximize profits by having publishers rather than booksellers set ebook prices.

At no point was anyone’s freedom of competition limited. No one is barred from competing by the ebook arrangement. Any publisher or distributor who chose not to sign the agreement is free to charge whatever it wants for ebooks, and any consumer is free not to buy from those who did sign.

No private action can interfere with this competitive process; the only thing that can is government force. It is only government that can stop us from engaging in free, voluntary trading relationships.

And this is precisely what antitrust laws do: they restrict freedom of competition. They stop companies from engaging in perfectly legitimate, perfectly voluntary competitive actions, such as the sorts of pricing agreements that have come under fire in the Apple case.

3. Antitrust laws punish great companies

Because antitrust laws are vague and contradictory, practically any successful business can be targeted for enforcement.

Just take the issue of pricing. Apple and the publishers are in trouble for “colluding” — setting prices in concert with each other. But antitrust also punishes setting prices “too low” — that’s “predatory pricing.” And it also punishes setting prices “too high” — that’s proof of “monopoly power.”

If the government tried to apply antitrust laws consistently, it would amount to the abolition of business. In practice, what it does is go after the most successful companies. That’s why the annals of antitrust read like a who’s who of great businesses: Standard Oil, Alcoa, GE, IBM, Microsoft, Intel, Google, Apple.

The effect of being put in the antitrust crosshairs should not be taken lightly. Throughout the eighties and nineties, Microsoft was one of the most innovative companies in the world. But over the last decade? Not so much. Joe Wilcox, managing editor of BetaNews, places the blame heavily on antitrust:

Windows innovation stagnated during the last decade, as Microsoft backed off the so-called middleware categories covered by the antitrust case and withheld integrating new technologies into the operating system that should have kept the platform vital and created more opportunities for third-party developers.

The mere prospect of an investigation is enough to rattle and discourage businessmen, even if the government never takes the case to court.

In a September 2010 interview, Whole Foods CEO John Mackey was asked about his company’s merger with the Wild Oats grocery chain. “[I]t’s been great,” said Mackey. “Our Wild Oats same-store sales were up like 16 percent in the second quarter.” But when asked whether he would do the merger again, Mackey answered with an emphatic “No.”:

We’ll never do another merger that requires FTC approval. It was the worst experience of Whole Foods’ corporate life. All my e-mails were examined by the FTC. The thirty million dollars in legal fees. . . . For what? To prove we weren’t a monopoly? Everyone knows we’re not.

Treating productive businessmen this way is a profound injustice, and the price paid — by them and us — is incalculable. Innovators such as Apple deserve thanks and they deserve freedom — not the shackles of antitrust.

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

“From cradle to grave.” So goes the motto of the entitlement state, whose creator Otto von Bismarck said: “Give the working-man the right to work as long as he is healthy, assure him care when he is sick, assure him maintenance when he is old.”

Are you bothered by the thought of government embedding itself in every aspect of your life? According to President Obama, the only alternative is “a government that tells the American people, you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own. . . . That’s not the America I believe in.”

It is, however, the America the Founding Fathers believed in. What made America great was the fact that it was the first country in history where you were on your own.

Roll back the tape a few thousand years to when every element of life was controlled by the tribe. You could not live an independent existence, you could not choose your own ideas, your own values, your own destiny. You belonged to the group. The group, in turn, gave you a certain measure of protection: so long as you obeyed its commands, kept your place, and tended to its needs, you would get your scrap of food (if there was food to be had).

The story of freedom is the story of how the individual escaped from ownership by the tribe. As Ayn Rand once observed, “Civilization is the progress toward a society of privacy. The savage’s whole existence is public, ruled by the laws of his tribe. Civilization is the process of setting man free from men.”

The Founding Fathers took a crucial leap forward in that process, declaring that the collective has no claim on you; that the government exists only to protect your right to live your own life, earn your own wealth, and seek your own happiness. Other people’s wants and needs are not your responsibility.

The corollary was that you and you alone were responsible for securing your own wants and needs. You were responsible for developing the knowledge, skills, and traits of character you needed to earn a living. You were responsible for saving to meet life’s unexpected twists and turns. You were responsible for educating your children. You could ask for help from other people — but you could not demand it as a right. You were on your own.

Did people shrink from the twin values of freedom and responsibility? On the contrary, the vast majority of Americans during the 18th and 19th centuries eagerly embraced life’s challenges and flourished under the new system. People didn’t flee from America, they fled to America. They came here poor, but ambitious — ready to carve out a life for themselves in a country that offered them the only thing they asked for: an open road.

Of course, Americans during this era were not “on their own” in the lone-wolf, asocial sense implied by Obama. Free Americans developed complex webs of association based on voluntary agreement. An unprecedented division of labor — capitalists, businessmen, and workers coming together to create wealth on an industrial scale — was a product of this newfound freedom.

Far from leaving people unable to afford life’s necessities, it was this system of voluntary cooperation that enabled the masses to afford modern luxuries — things like cars, microwaves, and air conditioning, which the wealthiest men of past eras did not own.

What Americans of yesteryear lacked was not voluntary cooperation and trade, but involuntary servitude (slavery being the glaring, deplorable exception). Starting at the end of the 19th century, however, the Progressive movement began replacing individual freedom, individual responsibility, and voluntary association with an entitlement society. They promised to keep the benefits of the industrial economy that capitalism had created, while replacing the freedom that made it possible with a modern form of tribalism. The group would take responsibility for us from cradle to grave, and we in turn would become servants of the group, burdened with responsibility for the lives of others.

The Progressives and their present-day descendants have largely succeeded at eroding freedom. But the inevitable consequence is an economy nowhere near as vibrant as before. In a free country, you would decide how to live, whom to deal with, what obligations to accept, what projects to undertake, what values to uphold. But in entitlement America, you are forced to pay for other people’s tonsillectomies, other people’s Women’s Studies degrees, other people’s retirements, other people’s business subsidies, other people’s bailouts.

Americans today face a choice: Do we want to be on our own — or continue as society’s servants?

About The Author

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

In the summer of 1921, a young Ayn Rand saw Moscow for the first time. “I remember standing on a square,” she would later recall. “And it suddenly struck me. . . . ‘How enormous it is, and how many people, and it’s just one city’ . . . . I suddenly had the concrete sense of how many large cities there were in the world — and I had to address all of them. All of those numbers had to hear of me, and of what I was going to say. And the feeling was marvelously solemn.”

Today, on the 107th anniversary of her birth, it’s hard to doubt that the world has indeed heard of Ayn Rand. Her books — including titles like “The Fountainhead” and “The Virtue of Selfishness” — have sold nearly 30 million copies, with sales of her 1,100-page opus, “Atlas Shrugged,” surpassing a million copies in the last three years alone.

Rand has clearly inspired millions. But a debate has emerged over the question of Rand’s political influence, with many commentators claiming her ideas have played a key role in shaping the political landscape. As former Maryland Lt. Gov. Kathleen Kennedy Townsend said in 2011, “Ayn Rand has a large and growing influence on American politics.”

But to gauge Rand’s influence, we need to know more about her views than the sound bites we’re typically offered.

Rand is usually thought of as a political philosopher, but that is not how she viewed herself. “I am primarily the creator of a new code of morality,” she once said. Whereas previous moral codes bestowed sainthood on those who served and sacrificed for others, Rand’s morality extolled “the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.”

This is the philosophy embodied by fictional characters such as Hank Rearden, the industrialist in “Atlas Shrugged,” who — in the tradition of Thomas Edison — creates a new metal that’s stronger and cheaper than steel, and who — in the tradition of countless entrepreneurs — struggles to produce his revolutionary product in the face of government obstacles. At one point, Rearden is brought to trial for violating the government’s economic edicts, and he proudly defends his right to produce and prosper:

“I work for nothing but my own profit,” he says, “which I make by selling a product they need to men who are willing and able to buy it. I do not produce it for their benefit at the expense of mine, and they do not buy it for my benefit at the expense of theirs. . . . I made my money by my own effort, in free exchange and through the voluntary consent of every man I dealt with. . . . I refuse to apologize for my ability — I refuse to apologize for my success — I refuse to apologize for my money.”

It is this moral outlook that underlies Rand’s advocacy of free markets, and it suggests where those looking for Rand’s influence on today’s politics can see it.

Above all, you can see it in the moral outrage of the Tea Party activists, many of whom carry signs championing Rand’s works and ideas. 

Recall the Rick Santelli rant that started it all: “This is America. How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills, raise their hand? . . . We’re thinking of having a Chicago Tea Party in July. All you capitalists that want to show up to Lake Michigan, I’m going to start organizing. . . . at the end of the day, I’m an Ayn Rander.”

But what you don’t yet see is large numbers of people who have actually grasped the moral and political position Rand defined. Even among the Tea Party activists, there exists no positive, principled platform challenging today’s status quo. 

This is why you also find at their gatherings signs like “Keep Your Government Hands Off My Medicare.” Apparently, paying for your neighbor’s mortgage is bad, but paying for his health care is just fine.

Rand has helped many people see that something has gone wrong in America. But they haven’t yet understood the source of the problem or Rand’s radical solution.

A political movement truly shaped by Rand’s ideas would not flinch, as Republicans and Tea Partiers do, from charges that it is the mouthpiece of the rich and the mean-spirited. It would declare that it is a movement for all producers, proudly embracing the innovative rich, the ambitious poor, and everyone in between. If you earn your wealth through production and voluntary trade, a Rand-inspired political movement would affirm that it is yours by right.

And instead of looking at programs like Social Security and Medicaid only from the recipients’ point of view, a Rand-inspired political movement would point to the great injustice committed against those who are forced to provide retirement and medical care to others. It would ask: by what right does the government seize wealth from some people so it can dole out unearned rewards to others? Nothing, it would declare, is more mean-spirited than depriving an individual of his property and liberty.

In other words, a Rand-inspired political movement would be a principled movement. It would champion laissez-faire capitalism — the total separation of state and economics — as the only system that fully protects the rational and productive individual, securing his moral and political right to pursue his own happiness.

To what extent has Ayn Rand shaped our political landscape? So far, not nearly enough.

About The Author

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Reacting to calls for cuts in entitlement programs, House Democrat Henry Waxman fumed: “The Republicans want us to repeal the twentieth century.” Sound bites don’t get much better than that. After all, the world before the twentieth century — before the New Deal, the New Frontier, the Great Society — was a dark, dangerous, heartless place where hordes of Americans starved in the streets.

Except it wasn’t and they didn’t. The actual history of America shows something else entirely: picking your neighbors’ pockets is not a necessity of survival. Before America’s entitlement state, free individuals planned for and coped with tough times, taking responsibility for their own lives.

In the 19th century, even though capitalism had only existed for a short time, and had just started putting a dent in pre-capitalism’s legacy of poverty, the vast, vast majority of Americans were already able to support their own lives through their own productive work. Only a tiny fraction of a sliver of a minority depended on assistance and aid — and there was no shortage of aid available to help that minority.

But in a culture that revered individual responsibility and regarded being “on the dole” as shameful, formal charity was almost always a last resort. Typically people who hit tough times would first dip into their savings. They might take out loans and get their hands on whatever commercial credit was available. If that wasn’t enough, they might insist that other family members enter the workforce. And that was just the start.

“Those in need,” historian Walter Trattner writes, “. . . looked first to family, kin, and neighbors for aid, including the landlord, who sometimes deferred the rent; the local butcher or grocer, who frequently carried them for a while by allowing bills to go unpaid; and the local saloonkeeper, who often came to their aid by providing loans and outright gifts, including free meals and, on occasion, temporary jobs. Next, the needy sought assistance from various agencies in the community — those of their own devising, such as churches or religious groups, social and fraternal associations, mutual aid societies, local ethnic groups, and trade unions.”

One of the most fascinating phenomena to arise during this time were mutual aid societies — organizations that let people insure against the very risks that entitlement programs would later claim to address. These societies were not charities, but private associations of individuals. Those who chose to join would voluntarily pay membership dues in return for a defined schedule of benefits, which, depending on the society, could include life insurance, permanent disability, sickness and accident, old-age, or funeral benefits.

Mutual aid societies weren’t private precursors to the entitlement state, with its one-size-fits-all schemes like Social Security and Medicare. Because the societies were private, they offered a wide range of options to fit a wide range of needs. And because they were voluntary, individuals joined only when the programs made financial sense to them. How many of us would throw dollar bills down the Social Security money pit if we had a choice?

Only when other options were exhausted would people turn to formal private charities. By the mid-nineteenth century, groups aiming to help widows, orphans, and other “worthy poor” were launched in every major city in America. There were some government welfare programs, but they were minuscule compared to private efforts.

In 1910, in New York State, for instance, 151 private benevolent groups provided care for children, and 216 provided care for adults or adults with children. If you were homeless in Chicago in 1933, for example, you could find shelter at one of the city’s 614 YMCAs, or one of its 89 Salvation Army barracks, or one of its 75 Goodwill Industries dormitories.

“In fact,” writes Trattner, “so rapidly did private agencies multiply that before long America’s larger cities had what to many people was an embarrassing number of them. Charity directories took as many as 100 pages to list and describe the numerous voluntary agencies that sought to alleviate misery, and combat every imaginable emergency.”

It all makes you wonder: If Americans could thrive without an entitlement state a century ago, how much easier would it be today, when Americans are so rich that 95 percent of our “poor” own color TVs? But we won’t get rid of the entitlement state until we get rid of today’s widespread entitlement mentality, and return to a society in which individual responsibility is the watchword.

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

Nearly thirty years after her death, Ayn Rand’s novels continue to be wildly popular — Atlas Shrugged alone is selling more today than it did when it was first published in 1957 — more than one million copies have sold since the 2008 elections.

Especially among Tea Partiers, Ayn Rand is being hailed a prophet. How could she have anticipated, more than 50 years ago, a United States spinning out of financial control, plagued by soaring spending and crippling regulations?

How could she have painted villains who seem ripped from today’s headlines?

There’s Wesley Mouch, who in the face of failed government programs screams like Rep. Barney Frank (D) of Massachusetts for wider powers. 

There’s Eugene Lawson, “the banker with a heart,” who like former Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke is ever ready with a bailout. 

There’s Mr. Thompson, who like President Obama seeks to rally the country behind pious platitudes. 

There’s Orren Boyle, who like President Bush says that we must abandon free-market principles to save the free market.

And in the face of this onslaught, what can you do? Should you, like Rand’s heroes, “go Galt,” stop working, retreat to a secluded valley, and try to rebuild only when the country has collapsed?

Rand was asked these very questions in her own lifetime. Her answers might surprise you. 

In the 1970s, America was in a deep financial crisis (a new word, stagflation, had to be coined), urban violence was rampant, and power-seeking politicians like President Nixon instituted wage and price controls that led to, among other things, gas stations with no gas. 

How, people wondered, could Rand have foreseen all this? Was she a prophet? No, she answered. She had simply identified the basic cause of why the country was veering from crisis to new crisis.

Was the solution to “go Galt” and quit society? No, Rand again answered. The solution was simultaneously much easier and much harder. “So long as we have not yet reached the state of censorship of ideas,” she once said, “one does not have to leave a society in the way the characters did in Atlas Shrugged. . . . But you know what one does have to do? One has to break relationships with the culture. . . . [D]iscard all the ideas — the entire cultural philosophy which is dominant today.”

Now, the fact that Atlas Shrugged is not a political novel might surprise you. But the book’s point is that our plight is caused not by corrupt politicians (who are only a symptom) or some alleged flaw in human nature. It’s caused by the philosophic ideas and moral ideals most of us embrace.

“You have cried that man’s sins are destroying the world and you have cursed human nature for its unwillingness to practice the virtues you demanded,” the novel’s hero John Galt declares to a country in crisis. “Since virtue, to you, consists of sacrifice, you have demanded more sacrifices at every successive disaster.”

He elaborates: “You have sacrificed justice to mercy.” (For example, calls to make homeownership “accessible” to those who could not afford it and then bailouts and foreclosure freezes to spare them when they couldn’t pay.)

“You have sacrificed reason to faith.” (For example, attempts to prevent stem cell research on Biblical grounds, or blind faith that Mr. Obama’s deliberately empty rhetoric about hope and change will magically produce prosperity.)

“You have sacrificed wealth to need.” (For example, Bush’s prescription drug benefit and Obamacare, both enacted because people needed “free” health care.)

“You have sacrificed self-esteem to self-denial.” (For example, attacks on Bill Gates for making a fortune; applause when he gives that fortune away.)

 “You have sacrificed happiness to duty.” (For example, every president’s Kennedyesque exhortations to “Ask not what your country can do for you — ask what you can do for your country.”)

The result? “Why . . . do you shrink in horror from the sight of the world around you? That world is not the product of your sins, it is the product and the image of your virtues. It is your moral ideal brought into reality . . .”

This is what Atlas Shrugged is asking us to question: our ideals. Rethink our convictions and philosophy of life from the ground up. Without doing so, it argues, we won’t escape further crises.

Strike, the book urges us, but intellectually, since to strike means to reject the fundamental terms of your opponents and assert your own.

This kind of thinking is difficult, Rand held, but necessary to enter the Atlantis depicted toward the end of the novel. 

If Atlas Shrugged has been on your list of books-I’ve-been-meaning-to-get-to, then consider finding out for yourself how a story published in 1957 so eerily captures the world we live in today and so beautifully presents a road to a brighter future.

Postscript: And if you’re like the millions who prefer reading e-books, I highly recommend the just-released Atlas Shrugged app for iPad: it includes the unabridged text of the classic novel, and offers a glimpse into the backstory of the book and sketches out the essentials of Rand’s original philosophic system, Objectivism. 

About The Author

Onkar Ghate

Chief Philosophy Officer and Senior Fellow, Ayn Rand Institute

Watching the world mourn Steve Jobs, we are reminded of how massive crowds of Americans used to gather to celebrate the launch of a new bridge or a new railroad. There is a widespread recognition that Jobs was a creative genius who changed our world profoundly and for the better. Even President Obama, not usually given to praising businessmen, said that Jobs “transformed our lives, redefined entire industries, and achieved one of the rarest feats in human history: he changed the way each of us sees the world.”

All of this raises an important and to-date unasked question: what do we owe Jobs and productive geniuses like him?

For one, we owe them gratitude, which we do not always give them — Jobs, here, is the exception that proves the rule. But we owe them something more than that, something not even Jobs has received. We owe them the recognition that their achievements are profoundly moral.

If dedicating your life to creating the values that advance it is a moral achievement, then there is nothing greater or nobler than the creative geniuses whose productive ability has created our modern world: a world where we live more than three times as long as our ancestors; where our homes are heated in the winter, cooled in the summer, and lit at night; where we can travel across a continent in a matter of hours; where we can say goodnight to our children from the other side of the globe.

But far from holding up the great producers as moral exemplars, we lump them in with the Al Capones and the Bernie Madoffs as people who must be stopped or at least shackled until they learn to selflessly serve others. Even Jobs was criticized because he devoted his life to Apple rather than philanthropy.

This perverse attitude has led us to deny creative heroes like Jobs the third thing we owe them: freedom. Innovators by definition challenge convention, and it is only freedom that protects their right to do it. When government infringes on freedom by initiating force against producers — by regulating their actions, by controlling their choices, by seizing their wealth — it stifles and ultimately crushes the creative mind.

Jobs was able to thrive because the tech industry has been left relatively free. But what if it had been subject to the same regulatory morass as the automotive industry? What if bureaucrats in the 1970s had started dictating the specifications for making microprocessors, or if they had dictated energy efficiency standards for server farms? It is doubtful we would have ever had the information revolution.

Let us mourn the loss of Steve Jobs — but let us also use this as an opportunity to look in the mirror and question whether we have treated Jobs and others like him as they deserve.

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

After Rick Perry called Social Security a Ponzi scheme, pundits everywhere smugly assured the world that Perry is crazy because, after all, the government can never really go bankrupt: it can always print money to pay its debts. Of course, that’s hardly a comfort to those who know what hyperinflation can do to an economy.

In any case, Perry can be commended for daring to violate the first law of politics: whatever you do, do not question entitlements. Despite the fact that the big three entitlement programs — Social Security, Medicaid, and Medicare — have the U.S. government facing upwards of $100 trillion in unfunded liabilities, they largely remain a third rail: touch not lest ye be voted out of office.

Why are they sacrosanct? Because, whatever else you can say about the entitlement state, no one disputes that it’s a moral imperative. Inefficient? Maybe. Expensive? You bet. But morally questionable? Absolutely not.

The problem with the entitlement state is not simply that it is bankrupting this country — the problem is that it is morally bankrupt.

The basic principle behind the entitlement state is that a person’s need entitles him to other people’s wealth. It’s that you have a duty to spend some irreplaceable part of your life laboring, not for the sake of your own life and happiness, but for the sake of others. If you are productive and self-supporting, then according to the entitlement state, you are in hock to those who aren’t. In Marx’s memorable phrase: “From each according to his ability, to each according to his needs.”

As we’ve argued in past columns, no system that treats you as other people’s servant can be called moral. What made America the noblest nation in history was that it was the first country founded on the idea that each of us has a right to live and work for our own sake, that it’s our own job to try to make the most of our life, and that the government’s sole purpose is to protect our freedom to do so.

Some have raised objections to this line of argument, however. Here are three of the most popular objections.

1. “The entitlement state is no different from insurance.”

When Social Security first passed, under FDR, most Americans regarded being “on the dole” as shameful. One way the program garnered widespread support was by positioning itself, not as welfare, but as insurance. Medicare would later take the same tack. You pay in when you’re young and healthy, and when money is paid out to you, you’re not going on the dole — you’re simply getting back what’s yours.

This was always a fraud. Your taxes aren’t invested in order to generate your future benefits — they are used to supply benefits to current enrollees. If a private insurance company operated that way, racking up $100 trillion in debts it couldn’t pay, it would be bankrupt and its executives would be sent to prison.

But the most vital difference is this: the entitlement state is involuntary. For the rational person, insurance is something he chooses to buy when he judges that a given policy represents a net gain. Even in a voluntary, competitive system where profit-seeking companies tailor policies to your individual needs, insurance isn’t for everyone. A young entrepreneur might rationally decide to forego homeowners insurance in order to make his fledgling business a success. But the entitlement state forces us into costly, one-size-fits-all programs regardless of whether we think it’s in our personal interest.

2. “The entitlement state benefits everyone.”

Far from offering genuine benefits, whenever the government takes people’s money and decides how that money is “best” spent, it makes life harder for rational people. A rational person needs the freedom to plan his own life, make his own choices, and support his own existence. Consider the impact of Social Security.

In a world without Social Security, the rational person would think about his own long-range plans and interests. He might rationally decide that he loves working and never wants to retire, or that he’d rather invest his current income in growing his business today and start saving once he has established himself. When he does invest, he will think carefully about where to park his savings, consulting experts, judiciously diversifying. As a result he will know where his investments stand and why, and will not be at the mercy of a political process that might raise the retirement age, curtail promised “benefits,” etc. For him, Social Security is all downside. All its alleged benefits he could attain much better on his own.

So why is he deprived of this freedom to live and plan his own life? Because some people may choose not to plan.

Social Security, and the entitlement state more broadly, institutes a basic injustice: the rational and productive are sacrificed in the name of the irrational. “From each according to his ability, to each according to his needs.”

3. “But what about those who can’t take care of themselves?”

Sure, some people say, most of us would thrive without the entitlement state — but what about those who can’t? What happens to them? Don’t they starve in the streets?

In any industrialized nation, it is only a fraction of a sliver of a minority who are unable to support themselves, and even in the days before America’s entitlement state, they didn’t starve in the streets. Most turned to friends and family. Many others turned to voluntary social insurance programs run by private mutual aid societies, like the Security Benefit Association. And some turned to private charities.

If Americans a century ago could flourish without an entitlement state, how much easier would it be today, when even most “poor” people own cars and color TVs?

The entitlement state was never needed to ensure that the unable got fed. It is and always has been geared, not to the unable, but to the unwilling: to that entitlement mentality that expects payment “according to his needs.” And by rewarding that mentality, we foster that mentality.

The entitlement state is geared to the unwilling at the expense of the willing and able. What could be greater evidence that it is morally bankrupt?

About The Authors

Don Watkins

Former Fellow (2006-2017), Ayn Rand Institute

Yaron Brook

Chairman of the Board, Ayn Rand Institute

This book challenges the orthodox view of Lochner v. New York as a politically motivated judicial coup that ushered in an era of laissez-faire constitutionalism. In Rehabilitating Lochner, Professor David E. Bernstein has produced a serious and significant work of historical revisionism, one intended to enrich our understanding of substantive due process analysis under the Fourteenth Amendment. Bernstein‘s special focus is constitutional protection for liberty of contract: whence it came, how it applied, and where it led. He does not, however, undertake the task of showing that Lochner was correctly decided or that its theory of judicial review was sound…

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About The Author

Tom Bowden

Analyst and Outreach Liaison, Ayn Rand Institute