Ayn Rand died more than a quarter of a century ago, yet her name appears regularly in discussions of our current economic turmoil. Pundits including Rush Limbaugh and Rick Santelli urge listeners to read her books, and her magnum opus, “Atlas Shrugged,” is selling at a faster rate today than at any time during its 51-year history.
There’s a reason. In “Atlas,” Rand tells the story of the U.S. economy crumbling under the weight of crushing government interventions and regulations. Meanwhile, blaming greed and the free market, Washington responds with more controls that only deepen the crisis. Sound familiar?
The novel’s eerily prophetic nature is no coincidence. “If you understand the dominant philosophy of a society,” Rand wrote elsewhere in “Capitalism: The Unknown Ideal,” “you can predict its course.” Economic crises and runaway government power grabs don’t just happen by themselves; they are the product of the philosophical ideas prevalent in a society — particularly its dominant moral ideas.
Why do we accept the budget-busting costs of a welfare state? Because it implements the moral ideal of self-sacrifice to the needy. Why do so few protest the endless regulatory burdens placed on businessmen? Because businessmen are pursuing their self-interest, which we have been taught is dangerous and immoral. Why did the government go on a crusade to promote “affordable housing,” which meant forcing banks to make loans to unqualified home buyers? Because we believe people need to be homeowners, whether or not they can afford to pay for houses.
The message is always the same: “Selfishness is evil; sacrifice for the needs of others is good.” But Rand said this message is wrong — selfishness, rather than being evil, is a virtue. By this she did not mean exploiting others à la Bernie Madoff. Selfishness — that is, concern with one’s genuine, long-range interest — she wrote, required a man to think, to produce, and to prosper by trading with others voluntarily to mutual benefit.
Rand also noted that only an ethic of rational selfishness can justify the pursuit of profit that is the basis of capitalism — and that so long as self-interest is tainted by moral suspicion, the profit motive will continue to take the rap for every imaginable (or imagined) social ill and economic disaster. Just look how our present crisis has been attributed to the free market instead of government intervention — and how proposed solutions inevitably involve yet more government intervention to rein in the pursuit of self-interest.
Rand offered us a way out — to fight for a morality of rational self-interest, and for capitalism, the system which is its expression. And that is the source of her relevance today.
In his address to the joint session of Congress, President Obama said that “We cannot shun the negotiating table” in conducting our foreign policy. He’s previously elaborated that “if countries like Iran are willing to unclench their fist, they will find an extended hand from us.” And Iran’s president Ahmadinejad tentatively welcomes “talks based on mutual respect and in a fair atmosphere.”
The shared idea, evidently, is that our conflict with Iran stems largely from a past failure to use so-called diplomacy to settle disputes. Alluding to George W. Bush’s supposedly tough policy, Obama has said he wants to restore “the same respect and partnership that America had with the Muslim world as recently as 20 or 30 years” ago.
Really? Thirty years ago this November, followers of Ayatollah Khomeini, who spearheaded Iran’s Islamic revolution, stormed the U.S. embassy in Tehran and took the personnel hostage. President Carter gently admonished Iran, but ruled out military retaliation. Instead his advisors spent months dreaming up schemes to bribe Iran into releasing the hostages — while bending over backward to enable the regime to save face. In the end Khomeini’s Islamist theocracy collected a handsome payoff for its aggression, and concluded, rightly, that if attacked, America would crumple to its knees.
Was Obama thinking of the 1980s? In April 1983 Iran’s jihadist proxies in Lebanon rammed a truck bomb into the U.S. Embassy in Beirut; the Reagan administration responded by doing nothing. Months later, encouraged by Washington’s inaction, Tehran issued a kill order — via its ambassador in Syria — to its allied groups in Beirut. Early one morning, an Islamist suicide bomber set off a massive explosion at the barracks where U.S. marines were sleeping and killed 241 of them.
Reagan spouted hot air about not backing down — and soon after ordered the U.S. troops to bug out. The jihadists wanted America out, they slaughtered our troops, and we caved in and gave them what they wanted.
Osama bin Laden, like jihadists in Iran and elsewhere, viewed our response to the Beirut bombings as further proof that their ideologically driven war was a viable cause. And so, inspired by Iranian aggression, the anti-American jihad kept ramping up.
Maybe Obama meant the fabled halcyon days of the 1990s, when President Clinton tried to mend fences with Iran?
In 1996 a team of jihadists — financed and trained by Tehran — blew up the Khobar Towers building in Saudi Arabia, killing 19 American servicemen. Clinton’s administration learned that Iran was behind the attacks. But Washington brushed aside any notion of retaliating against Iran, in order to facilitate a “reconciliation” with that murderous regime. In an eerie parallel with today, Iran expressed its openness to U.S. groveling — an opportunity Clinton seized.
So, Clinton attended a speech by Iran’s leader at the U.N.; the administration also permitted the sale of much-needed aircraft parts to Iran, among other sweeteners. Granted the cover of respectability, Iran was emboldened to continue fomenting Islamist aggression and avidly pursue its then-embryonic nuclear program.
Obama’s appeasing diplomacy re-enacts the disastrous policy of the past. Our policymakers evaded Iran’s character as an enemy, and by rewarding its aggression with bribes and conciliation, they encouraged a spiral of further attacks.
No. Bush was no exception to this trend. After 9/11 his administration invited Iran — the leading sponsor of Islamist terrorism — to join an anti-terrorism coalition(!). Talk of an axis of evil was quickly abandoned, and Washington backed the European scheme to bribe Iran to halt its nuclear program. By late last year, there was talk of opening a U.S. Special Interests Section (a step down from an embassy) in Iran. Meanwhile Bush’s welfare mission in Iraq negated U.S. security and left Iran untouched to grow more powerful and resolute.
A genuinely new, rational policy toward Iran would turn away from the last 30 years and begin by facing up to Tehran’s ongoing proxy war against us.
Ayn Rand once said that the purpose of her novel Atlas Shrugged — which tells the story of a U.S. economy crumbling under the weight of increasing government control — was “to keep itself from becoming prophetic.” She may not have succeeded. As a number of commentators have noted, the parallels between today’s events and those dramatized in Rand’s 1957 novel are striking.
In a recent Wall Street Journal column, for instance, Stephen Moore observed that “our current politicians are committing the very acts of economic lunacy” that Atlas Shruggeddepicted 52 years ago. In the novel, he points out, politicians respond to crises “that in most cases they created themselves” with more controls and regulations. These, in turn “generate more havoc and poverty,” which spawn more controls, “until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.”
This certainly seems like an apt description of, say, the housing crisis. For decades, Washington promoted homeownership by people who couldn’t afford it: think Fannie Mae and Freddie Mac, the Community Reinvestment Act, tax incentives to buy homes, housing subsidies for the needy, among other programs. And when people started to default on their mortgages by the truckload? The government didn’t scrap its controls, but instead promised to bail out delinquent homeowners and irresponsible bankers and impose more regulations on all lenders (responsible or not).
But what commentators miss is that Rand’s novel provides the explanation for why this is happening — and the cause is not some inexplicable “lunacy” on the part of politicians. The cause is our very conception of fairness, equality, and the good. “Why,” states the hero ofAtlas Shrugged to the people of a crumbling world, “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.”
In Rand’s novel, government puts the needs of the meek and less fortunate first. For instance, the Anti-dog-eat-dog Rule is passed to protect some long established, less-efficient railroads from better-run competitors. Why? Because it was deemed that those “established railroad systems were essential to the public welfare.” What about the superior railroad destroyed in the process? Its owner needs to be less selfish and more selfless. The Rule fails to stem the crisis, and the country sinks deeper into depression. But, wedded to the ideal that each must be his brother’s keeper, government imposes more burdens and regulatory shackles on productive companies in the name of bailing out the struggling ones — only to drive the country further toward disaster.
Sound familiar? These are the same slogans invoked and implemented today. We must be “unified in service to the greater good,” President Obama tells a cheering nation. We must heed the “call to sacrifice” and “reaffirm that fundamental belief — I am my brother’s keeper, I am my sister’s keeper. . .”
In 2002, pushing for extensive new government programs to “expand home ownership,” President Bush reminded us of our selfless “responsibility . . . to promote something greater than ourselves.”
To implement this goal, Washington allowed Fannie and Freddie to pile up dangerous levels of debt. It used the Community Reinvestment Act to coerce banks into relaxing their lending standards. It used our tax dollars to dole out housing subsidies to otherwise unqualified borrowers. And when it turned out that home buyers who couldn’t afford homes without government help, also couldn’t afford them with government help, we still do not abandon these failed policies. Clinging to the notion that we are our brother’s keeper, everyone today proposes new policies to bail out the “unfortunate.”
While the details of these policies have been debated, no one challenges their goal. No one questions whether it is morally right to be selfless and to sacrifice to “promote something greater than ourselves.”
This is what Atlas Shrugged challenges. Why, it asks, is it morally right to regard some individuals as servants of those in need, rather than as independent beings with their own lives and goals? What is noble about a morality that turns men into beggars and victims — the bailed out and the bailers out?
Atlas Shrugged presents instead a new conception of morality that upholds the right of the individual to exist for his own sake. This, Rand tells us, is the only possible basis for a free country. It’s freedom or service — the pursuit of happiness or of the “public good” — the Declaration of Independence or the endless crises of the welfare state — self-interest or self-sacrifice.
Will a green energy industry be an engine of economic growth? Many want us to think so, including our new President. Apparently a booming green economy with millions of new jobs is just around the corner. All we need is the right mix of government “incentives.”
These include a huge (de facto) tax on carbon emissions imposed through a cap-and-trade regulatory scheme, as well as huge government subsidies for “renewable,” carbon-free sources. The hope is that these government sticks and carrots will turn today’s pitiful “green energy” industry, which produces an insignificant fraction of American energy, into a source of abundant, affordable energy that can replace today’s fossil-fuel-dominated industry.
This view is a fantasy — one that could devastate America’s economy. The reality is that “green energy” is at best a sophisticated make-work program.
There is a reason why less than 2 percent of the world’s energy currently comes from “renewable” sources such as wind and solar — the very sources that are supposedly going to power the new green economy: despite billions of dollars in government subsidies, funding decades of research, they have not proven themselves to be practical sources of energy. Indeed, without government mandates forcing their adoption in most Western countries, their high cost would make them even less prevalent.
Consider that it takes about 1,000 wind turbines, occupying tens of thousands of acres, to produce as much electricity as just one medium-sized, coal-fired power plant. And that’s if the wind is blowing: the intermittency of wind wreaks havoc on electricity grids, which need a stable flow of power, thus requiring expensive, redundant backup capacity or an unbuilt, unproven “smart grid.”
Or consider the “promise” of solar. Two projects in development will cover 12.5 square miles of central California with solar cells in the hope of generating about 800 megawatts of power (as much as one large coal-fired plant). But that power output will only be achieved when the sun is shining brightly — around noon on sunny days; the actual output will be less than a third that amount. And the electricity will cost more than market price, even with the life-support of federal subsidies that keeps the solar industry going. The major factor driving the project is not the promise of abundant power but California’s state quota requiring 20 percent “renewable” electricity by 2010.
More than 81 percent of world energy comes from fossil fuels, and half of America’s electricity is generated by burning coal. Carbon sources are literally keeping us alive. There is no evidence that they have — or will soon have — a viable replacement in transportation fuel, and there is only one in electricity generation, nuclear, which “green energy” advocates also oppose.
We all saw the ripple effects last summer when gas prices shot above $4 per gallon, and higher transportation costs drove up prices of everything from plane fares to vegetables. If green policies cause a permanent, and likely far greater, hike in the cost of all forms of energy, what shockwaves would that send through our already badly damaged economy?
We don’t want to find out.
Regardless of one’s views on global warming — and there is ample scientific evidence to reject the claim that manmade carbon emissions are causing catastrophe — the fact is that kneecapping the fossil fuel industry while diverting tax dollars into expensive, impractical forms of energy will not be an economic boon, but an economic disaster.
We in developed countries take industrial-scale energy for granted and often fail to appreciate its crucial value to our lives — including its indispensable role in enabling us to deal with drought, storms, temperature extremes, and other climate challenges we are told to fear by global-warming alarmists.
If we want to restore economic growth and reduce our vulnerability to the elements, what we need is not “green energy” forced upon us by government coercion but real energy delivered on a free market.
Vice President of Education and Senior Fellow, Ayn Rand Institute
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Let Bankruptcy Courts Take the Wheel
by Tom Bowden | February 11, 2009
General Motors, having sucked up $9.4 billion of taxpayer cash since Christmas, now desperately craves the remaining $4 billion authorized by President Bush for disbursement in February.
And come March, once that new money has disappeared down the Detroit drain hole, renewed pleas for aid will undoubtedly land on President Obama’s desk. Will the new chief executive emulate Bush, bowing to the anti-bankruptcy sentiment fomented by Rep. Barney Frank, chairman of the House Financial Services Committee, and others who advocate bailing out the Detroit automakers? Or will he let the bankruptcy courts take charge?
“There’s only one thing you can do in bankruptcy that you can’t do outside of bankruptcy — break your word, break your deals,” said Frank in a “60 Minutes” interview. “It allows you to say to the small businesses who have been catering lunches for you, ‘sorry, we’re not paying you.’ It allows you to go to the workers and say, ‘sorry, we’re not paying you.’”
Really? So bankruptcy is a get-out-of-jail-free card that allows treacherous companies to escape payment obligations they would otherwise have to honor? Sorry, Mr. Frank, but that’s a fantasy.
Plodding behemoths like General Motors are not even eligible for bankruptcy until they’ve become insolvent, which means they already can’t pay their bills and have no prospects for recovery. What bankruptcy does is treat the victims of those broken deals fairly — by preventing the bankrupt company from playing favorites among unpaid creditors, and by giving those creditors a big say in the distressed company’s future.
If an automaker can return to profitability by streamlining products, cutting staff, or closing plants, a bankruptcy judge can allow a reorganization. But a company that’s hopelessly floundering may have to be liquidated through an orderly sale of assets, with income paid to creditors according to their existing contract rights.
Yes, Mr. Frank, some creditors walk away from a bankruptcy empty-handed, or collect only pennies on each dollar of debt. Caterers, assembly-line workers, material suppliers, landlords — everyone who does business with a company in a market economy assumes a risk of nonpayment. But that needn’t spell disaster if creditors take steps in advance to confine the pain of bankruptcy within reasonable limits. Wise businessmen check on credit histories, set limits on outstanding balances, and register liens on hard assets. Even unions can protect their members, such as by having pension funds placed in trusts sheltered from bankruptcy proceedings.
Under bankruptcy, the risk of financial loss stays right where it belongs, on those who assumed the risk of non-payment by voluntarily dealing with a badly managed company. But in Barney Frank’s bailout universe, Congress can simply paper over the reality of business failure by shifting those losses to taxpayers, competitors, and consumers — in short, everyone who doesn’t deserve to pay.
This means that if GM’s caterers don’t get paid for the hors d’oeuvres served to CEO Rick Wagoner and his team of corporate bailout beggars, you and I must foot the bill. And if UAW members fear losing the staggeringly high wages and benefits they’ve extorted over decades using pro-union legal privileges, society must ride to their rescue.
But shifting the financial pain of business failure onto society at large is unjust. Most obviously, taxpayers shouldn’t be forced to prop up failing companies’ balance sheets. But other victims abound. Think of the profitable competitors with hard-earned credit standings, watching with justified resentment as badly managed rivals line up at the public trough.
Consumers, too, pay a price for bailouts. Bailed-out firms flood the market with inferior products — GM cars, anyone? — by continuing to own assets that would have gone to making more desirable products if market forces had ruled. Just picture today’s city streets if the horse and buggy industry had been bailed out a century ago.
Is General Motors to become a brain-dead patient in a Federal bailout ward, languishing on tax-funded life support beyond all hope of recovery? Not if Congress steps aside and lets the bankruptcy courts do justice through adjudication.
As environmentalism continues to grow in prominence, more and more of us are trying to live a “greener” lifestyle. But the more “eco-friendly” you try to become, likely the more you find yourself confused and frustrated by the green message.
Have you tried giving up your bright and cheery incandescent light bulbs to save energy — only to learn that their gloomy-but-efficient compact fluorescent replacements contain mercury? Perhaps you’ve tried to free up space in landfills by foregoing the ease and convenience of disposable diapers — only to be criticized for the huge quantities of energy and water consumed in laundering those nasty cloth diapers. Even voicing support for renewable energy no longer seems to be green enough, as angry environmentalists protest the development of “pristine lands” for wind farms and solar power plants.
Why is it that no matter what sacrifices you make to try to reduce your “environmental footprint,” it never seems to be enough?
Well, consider why it is that you have an “environmental footprint” in the first place.
Everything we do to sustain our lives has an impact on nature. Every value we create to advance our well-being — every ounce of food we grow, every structure we build, every iPhone we manufacture — is produced by extracting raw materials and reshaping them to serve our needs. Every good thing in our lives comes from altering nature for our own benefit.
From the perspective of human life and happiness, a big “environmental footprint” is an enormous positive. This is why people in India and China are striving to increase theirs: to build better roads, more cars and computers, new factories and power plants and hospitals.
But for environmentalism, the size of your “footprint” is the measure of your guilt. Nature, according to green philosophy, is something to be left alone — to be preserved untouched by human activity. Their notion of an “environmental footprint” is intended as a measure of how much you “disturb” nature, with disturbing nature viewed as a sin requiring atonement. Just as the Christian concept of original sin conveys the message that human beings are stained with evil simply for having been born, the green concept of an “environmental footprint” implies that you should feel guilty for your very existence.
It should hardly be any surprise, then, that nothing you do to try to lighten your “footprint” will ever be deemed satisfactory. So long as you are still pursuing life-sustaining activities, whatever you do to reduce your impact on nature in one respect (e.g., cloth diapers) will simply lead to other impacts in other respects (e.g., water use) — like some perverse game of green whack-a-mole — and will be attacked and condemned by greens outraged at whatever “footprint” remains. So long as you still have some “footprint,” further penance is required; so long as you are still alive, no degree of sacrifice can erase your guilt.
The only way to leave no “footprint” would be to die — a conclusion that is not lost on many green ideologues. Consider the premise of the nonfiction bestseller titled “The World Without Us,” which fantasizes about how the earth would “recover” if all humanity suddenly became extinct. Or consider the chilling, anti-human conclusion of an op-ed discussing cloth versus disposable diapers: “From the earth’s point of view, it’s not all that important which kind of diapers you use. The important decision was having the baby.”
The next time you trustingly adopt a “green solution” like fluorescent lights, cloth diapers or wind farms, only to be puzzled when met with still further condemnation and calls for even more sacrifices, remember what counts as a final solution for these ideologues.
The only rational response to such a philosophy is to challenge it at its core. We must acknowledge that it is the essence of human survival to reshape nature for our own benefit, and that far from being a sin, it is our highest virtue. Don’t be fooled by the cries that industrial civilization is “unsustainable.” This cry dates to at least the 19th century, but is belied by the facts. Since the Industrial Revolution, population and life expectancy, to say nothing of the enjoyment of life, have steadily grown.
It is time to recognize environmentalism as a philosophy of guilt and sacrifice — and to reject it in favor of a philosophy that proudly upholds the value of human life.
Speaking of the financial crisis, French president Nicolas Sarkozy recently said, “Laissez-faire is finished. The all-powerful market that always knows best is finished.”
Sarkozy was echoing the views of many, including president-elect Obama, who assume that the financial crisis was caused by free markets — by “unbridled greed” unleashed by decades of deregulation and a “hands off” approach to the economy. And given this premise, the solution, they say, is obvious. To solve this crisis and prevent another one, we need a heavy dose of Uncle Sam’s elixir: government intervention. Whether it’s more bailouts, stricter regulation, a new round of nationalizations, or some other scheme, the only question since day one has been how, not whether, government is going to intervene.
And the issue is wider than the financial crisis. Millions of Americans don’t have health insurance? Well, says Obama, that’s because we’ve left the health care system to the free market. The solution: a complete government takeover of medicine. A few companies engaged in accounting fraud? It must be because we didn’t impose enough regulations on businessmen. The solution: rein in corporations with Sarbanes-Oxley.
But while capitalism may be a convenient scapegoat, it did not cause any of these problems. Indeed, whatever one wishes to call the unruly mixture of freedom and government controls that made up our economic and political system during the last three decades, one cannot call it capitalism.
Take a step back. In the lead up to the “Reagan Revolution,” the explosive growth of government during the ’60s and ’70s had left the American economy in disarray. A crushing tax burden, runaway inflation, brutal unemployment, and economic stagnation had Americans looking for an alternative. That’s what Reagan offered, denouncing big government and promising a new “morning in America.”
Under Reagan, some taxes were reduced, inflation was subdued, a few regulations were relaxed — and the economy roared back to life. But while markets were able to function to a greater degree than in the immediate past, the regulatory and welfare state remained largely untouched, with government spending continuing to increase, as well as some taxes. Later administrations were even worse. Bush Jr., often laughably called a champion of free markets, presided over massive new governmental controls like Sarbanes-Oxley and massive new welfare programs like the prescription drug benefit.
None of this is consistent with capitalism. As the economic system that fully recognizes and protects individual rights, including the right to private property, capitalism means, in Ayn Rand’s words, “the abolition of any and all forms of government intervention in production and trade, the separation of State and Economics, in the same way and for the same reasons as the separation of Church and State.” Laissez-faire means laissez-faire: no welfare state entitlements, no Federal Reserve monetary manipulation, no regulatory bullying, no controls, no government interference in the economy. The government’s job under capitalism is single but crucial: to protect individual rights from violation by force or fraud.
America came closest to this system in the latter half of the nineteenth century. The result was an unprecedented explosion of wealth creation and consequent rise in the standard of living. Even now, when the fading remnants of capitalism are badly crippled by endless controls, we see that the freest countries — those which retain the most capitalist elements — have the highest standard of living.
Why then should capitalism take the blame today — when capitalism doesn’t even exist? Consider the current crisis. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates below the rate of inflation, thus encouraging people to borrow and providing the impetus for a housing bubble; the Community Reinvestment Act, which forces banks to lend money to low-income and poor-credit households; the creation of Fannie Mae and Freddie Mac with government-guaranteed debt leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low risk; government-licensed rating agencies, which gave AAA ratings to mortgage-backed securities, creating a false sense of confidence; deposit insurance and the “too big to fail” doctrine, whose bailout promises have created huge distortions in incentives and risk-taking throughout the financial system; and so on. In the face of this long list, who can say with a straight face that the housing and financial markets were frontiers of “cowboy capitalism”?
This is just the latest example of a pattern that has been going on since the rise of capitalism: capitalism is blamed for the ills of government intervention — and then even more government intervention is proposed as the cure. The Great Depression? Despite massive evidence that the Federal Reserve’s and other government policies were responsible for the crash and the inability of the economy to recover, it was laissez-faire that was blamed. Consequently, in the aftermath, the government’s power over the economy was not curtailed but dramatically expanded. Or what about the energy crisis of the 1970s? Despite compelling evidence that it was brought on by monetary inflation exacerbated by the abandonment of the remnants of the gold standard, and made worse by prices controls, “greedy” oil companies were blamed. The prescribed “solution” was for the government to exert even more control.
It’s time to stop blaming capitalism for the sins of government intervention, and give true laissez-faire a chance. Now that would be a change we could believe in.
For years, the Canadian operator of a huge Venezuelan gold project known as Las Cristinas has been seeking an environmental permit to start digging. Well, Crystallex International Corporation can stop waiting — the mine is being nationalized as part of dictator Hugo Chavez’s long-running program of socialist takeovers. “This mine will be seized and managed by a state administration” with help from the Russians, said Mining Minister Rodolfo Sanz.
It’s not surprising that a brute like Chavez would want to grab the 16.9 million ounces of gold estimated to lie buried in the Las Cristinas reserve. But what’s more puzzling is why — when gold mines, oil rigs and refineries worth billions of dollars are nationalized by regimes such as Venezuela and Russia — the ousted companies can muster no moral indignation, only tight-lipped damage appraisal.
The reason, in a nutshell, is that resources like gold and petroleum in their natural state are universally regarded as public property that cannot be extracted by private companies except with government permission, revocable at will. “Venezuela will not accept that foreign organizations tell them what to do with their own resources,” said a local journalist recently.
But unexploited natural resources are unowned, not publicly owned. Ownership — the legal right to use and dispose of material resources — cannot exist until someone actually brings those resources under human control. A dictator cannot, by decree, bring hidden gold or oil deposits to the surface. Only the knowledge and effort of entrepreneurs, engineers and drillers can transform that hidden potential into actual wealth. Ownership is the law’s recognition that those particular producers deserve the legal right — as against every person on earth who didn’t tap that potential — to control the wealth they created.
Consider that Arabs wandered for centuries across desert sands that concealed vast petroleum deposits, but it was Western investors who actually made Middle Eastern petroleum valuable. These companies searched for many years in a vast wilderness, moving in frustration from one dry hole to another, risking utter failure and financial ruin. Eventually, by virtue of their ingenuity, courage and perseverance, world markets were flooded with oil that Middle Eastern governments should have deemed private property — 100 percent private.
Instead, those governments muscled in, claiming public ownership based on nothing but their sovereignty over the geographical areas where oil deposits happened to reside. First through royalties, then by extorted royalty increases, and finally by outright nationalization, the descendants of nomads whose meager possessions fit on a camel’s back could now build palaces, buy airplanes and fund terrorism from the seemingly endless profits generated by Western technology and ingenuity.
But all this was a perversion of sovereignty. After all, why are states entrusted with exclusive power to use force within their borders? There’s only one legitimate reason: to protect individual rights, including property rights. Just as a bodyguard’s task is protecting clients from physical attacks, a government’s function is safeguarding people and property against criminals and foreign invaders.
Sovereignty exists to protect private property, not to destroy it. A bodyguard who claimed to own his client’s house, cars and jewelry would be immediately fired. Yet governments that claim to own all natural resources within their borders get a free pass, as if ownership could be conjured from the barrel of a gun.
Today, nationalization is endorsed not only by third world thugs but by the United Nations, which — with America’s full agreement — declared in 1962 that the “sovereign right of every State to dispose of its wealth and natural resources” is “recognized as overriding purely individual or private interests.” Even the victims agree. Said one CEO: “We do not see the issue of nationalization as a violation of the law but as a right of a government.”
This is why power-grasping dictators like Venezuela’s Hugo Chavez and Russia’s Vladimir Putin can claim moral authority to treat foreign investors the way they treat their own citizens — as cattle to be herded, milked or slaughtered for society’s sake. Thus when ExxonMobil recently dared to dispute the pittance Venezuela offered in payment for seized assets, Chavez denounced “those bandits of ExxonMobil,” absurdly declaring they “will never rob us again.”
Nationalization, stripped of all rationalization, is naked theft. A blow for justice will be struck by the first public figure to denounce it as such. In the meantime, companies like Crystallex will continue to be bullied by dictators who know exactly how much they can get away with.
About The Author
Tom Bowden
Analyst and Outreach Liaison, Ayn Rand Institute
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Supreme Disappointments
by Tom Bowden | November 03, 2008
Where do individual rights come from? You’d think that if anyone knows the answer, it would be America’s top judges.
But you would be wrong.
On this basic question conservative and liberal judges alike are locked into a crucial error about America’s bedrock constitutional principle: individual rights.
The error consists in regarding rights as gifts from society that can be revoked at will, through the political process.
In truth, rights are not social gifts but political principles based on facts of reality. These facts don’t bend to the so-called will of society. That’s why the most fundamental question a Supreme Court justice must answer is what in fact do the individual’s rights to life, liberty, property, and happiness include? Only then can he determine if a certain law or government action is securing or violating those rights.
But judges don’t ask this question anymore, because they don’t think it’s objectively answerable.
Instead, and broadly speaking, judicial conservatives only ask what privileges American society granted the individual at the time of constitutional ratification. To conservatives, it’s meaningless to ask whether the right to liberty in fact includes, say, the right to use contraception (a question 18th-century Americans may have answered incorrectly). Their only concern is whether society at that time meant to permit this action. So when modern legislators make criminal offenses out of abortion, contraception, homosexuality, and other acts said to be frowned upon centuries ago, conservative judges feel duty-bound to stand aside and do nothing, in obedience to the “social will.”
Judicial liberals reject this conservative view of social values frozen in time, like a sepia-toned snapshot of bygone days. Instead, liberals see constitutional values evolving like a motion picture, constantly updating to reflect current social mores. To liberals, it’s meaningless to ask whether the right to liberty in fact includes freedom of trade and contract (a question that a majority of Americans may be answering incorrectly today). Their only concern is whether the “will” of today’s society favors permitting such actions. So when Congress declares federal dominion over every nut, bolt, and button of American industry, liberal judges feel duty-bound to stand aside and do nothing — not because earlier Americans intended to allow such controls, but because modern Americans want them.
But conservatives and liberals are both wrong about rights.
It is not true that rights are grants from society. The very concept of a right identifies the actions you can take without anyone’s permission. Rights are not social privileges but objective facts, identifying the freedoms we need to live our lives — whether a majority in society agree or not. This is why the Founding Fathers dedicated their new government to the protection of each individual’s already existing rights to life, liberty, and the pursuit of happiness.
Thus, the Fifth and Fourteenth amendments forbid the government to deprive you of “life, liberty, or property” (except when you have violated someone else’s rights, and even then the government must follow due process, such as holding a trial). The Ninth Amendment safeguards all “rights” not listed elsewhere. These principles encompass all the innumerable actions required for your survival and happiness over a lifetime — the right to make a contract, earn a profit, build a house, make a friend, speak your mind, and so on.
Because the Constitution is the “supreme Law of the Land,” judges are duty-bound to strike down statutes that violate rights. This is not improper “judicial activism” but the robust, constitutional power of judicial review.
Judges must never bow to social opinion, historical or current, when exercising judicial review. For example, laws that institutionalized government discrimination against blacks in military service and voting deserved to be struck down, even if political majorities in the Founders’ generation or modern times favor such rights violations.
To their discredit, today’s judges — conservatives and liberals alike — have all but abandoned this judicial safeguard of our liberties.
The arch-conservative Robert Bork once declared that Ninth Amendment “rights” carry no more meaning than an accidental inkblot on the constitutional parchment. And according to Justice Antonin Scalia, there’s nothing in the Constitution “authorizing judges to identify what [those rights] might be, and to enforce the judges’ list against laws duly enacted by the people.” As for life, liberty, and property, government can smash them at will, if society so wishes. “Does [the Constitution] guarantee life, liberty or property?” asks Justice Scalia rhetorically. “No, indeed! All three can be taken away. . . . It’s a procedural guarantee.”
Judicial liberals don’t dispute that a judge must bow to the “social will” — they simply divine it differently. As one liberal Justice declared, the Constitution “must draw its meaning from the evolving standards of decency that mark the progress of a maturing society.”
While conservatives and liberals squabble about whether society permits you this action or that, they are defaulting on their sacred constitutional duty of judicial review.
America desperately needs a new generation of judges who understand that their function is not to uphold social opinions but to protect our rights.
Following the economic disasters of the 1960s and 1970s, brought on by the statist policies of the political left, America seemed to change course. Commentators called the shift the “swing to the right” — that is, toward capitalism. From about 1980 to 2000, a new attitude took hold: the idea that government should be smaller, that recessions are best dealt with through tax cuts and deregulation, that markets work pretty effectively, and that many existing government interventions are doing more harm than good. President Bill Clinton found it necessary to declare, “The era of big government is over.”
Today that attitude has virtually vanished from the public stage. We are now witnessing a swing back to the left — toward statism. As a wave of recent articles have proclaimed: The era of big government is back.1
The evidence is hard to miss. Consider our current housing and credit crisis. From day one, it was blamed on the market and a lack of oversight by regulators who were said to be “asleep at the wheel.” In response to the crisis, the government, the policy analysts, the media, and the American people demanded action, and everyone understood this to mean more government, more regulation, more controls. We got our wish.
First came the Fed’s panicked slashing of interest rates. Then the bailout of Bear Stearns. Then the bailout of Freddie Mac. Then a $300 billion mortgage bill, which passed by a substantial margin and was signed into law by President Bush. No doubt more is to come.
All of this intervention, of course, is supported by our presidential candidates. Both blame Wall Street for the current problems and vow to increase the power of the Fed’s and the SEC’s financial regulators. John McCain has announced that there are “some greedy people on Wall Street that perhaps need to be punished.”2 Both he and Barack Obama envision an ever-growing role for government in the marketplace, each promises to raise taxes in some form or another, and both support more regulations, particularly on Wall Street. Few doubt they will keep these promises.
What do Americans think of all this? A recent poll by the Wall Street Journal and NBC News found that 53 percent of Americans want the government to “do more to solve problems.” Twelve years earlier, Americans said they opposed government interference by a 2-to-1 margin.3
In fact, our government has been “doing more” throughout this decade. While President Bush has paid lip service to freer markets, his administration has engineered a vast increase in the size and reach of government.
He gave us Sarbanes-Oxley, the largest expansion of business regulation in decades. He gave us the Medicare prescription drug benefit, the largest new entitlement program in thirty years. He gave us the “No Child Left Behind Act,” the largest expansion of the federal government in education since 1979. This is to say nothing of the orgy of spending over which he has presided: His 2009 budget stands at more than $3 trillion — an increase of more than a $1 trillion since he took office.4 All of this led one conservative columnist to label Bush “a big government conservative.”5 It was not meant as a criticism.
Americans entered the 21st century enjoying the greatest prosperity in mankind’s history. And many agreed that this prosperity was mainly the result of freeing markets from government intervention, not only in America, but also around the world. Yet today, virtually everyone agrees that markets have failed.
Why? What happened?
To identify the cause of today’s swing to the left, we need first to understand the cause and consequences of the swing to the right.
Although the swing to the right was portrayed as an embrace of capitalism, it was primarily a rebellion against the disastrous government policies of the left. Recall that the 1960s and 1970s were a time of incredible government growth — the establishment of the massive welfare state of the so-called Great Society. Medicare and Medicaid were launched, and welfare programs were greatly expanded. Government interference in the economy was at its greatest in U.S. history. Industry was heavily regulated, from how much airlines could charge and what destinations they could service, to the routes trucking companies could use and how much they were allowed to charge for freight, to the commissions that stockbrokers could charge. The Federal Reserve dictated not only the interest rates at which banks could borrow from one another, as it does today, but also the interest rates that banks could pay on savings accounts.
As a consequence of all this, inflation was rampant, in double digits for much of the 1970s. American industry struggled and became less competitive. The stock market, as measured by the Dow Jones Industrials, was basically flat from 1965 to 1982. Economic growth was nonexistent, with the 1970s characterized by repeated recessions. Unemployment was high. And because the combination of inflation, stagnation, and unemployment was a phenomenon unanticipated by economists, a new term was coined: stagflation.
This economic chaos is what Americans rebelled against in 1980 by electing Reagan. However, instead of embracing full, unregulated, laissez-faire capitalism — in which the state is separated from the economy — the Reagan administration and conservative policy makers repealed only some of the disastrous interventions strangling the economy. They lessened our crushing tax burden, rolled back a few of the most burdensome regulations, and undid some of the most destructive controls. It was a step in the right direction, but it was merely a pragmatic solution to an immediate crisis.
The intellectual groundwork for this solution had been laid largely by free-market leaning economists such as Milton Friedman and Friederich Hayek. Presenting and building on the work of predecessors such as Adam Smith, Frank Knight, Ludwig von Mises, and many others, they successfully dismantled virtually every economic charge against capitalism and demonstrated, from many aspects and angles, the economic impotence of statism. But on capitalism’s moral superiority — on whether capitalism is a good and just system — they had nothing new or persuasive to say. In fact, most of these advocates of free markets downplayed or denigrated the significance of morality altogether.
To be sure, some figures in the 1980s spoke of economic prosperity in vaguely moral terms. Reagan, for instance, spoke of a new “morning in America.” But neither he nor his supporters could explain why seeking wealth and pursuing one’s own economic well-being, essential characteristics of capitalism, are morally proper.
From a young age, and throughout life, Americans are taught that pursuing self-interest is petty and wrong. The noble, we are told, is the self-sacrificial. Denying the self is good, we are told, especially when it “helps others.” In the noncontroversial words of Senator McCain, “[S]erving only one’s self is a petty and unsatisfying ambition. But serve a cause greater than self-interest and you will know a happiness far more sublime than the fleeting pleasure of fame and fortune.”6
The economic advocates of freer markets did nothing to dislodge this premise; often they did worse than nothing: They reinforced it.
Thus the view remains prevalent in America that although making money is practical, only “giving it back” is moral. Bill Gates might be admired for the business smarts that earned him tens of billions of dollars, but he has routinely been condemned for creating his fortune and is now regarded as “noble” only because he has given away billions to charitable causes.
And not only are self-interest and individual prosperity viewed as morally suspect; so too is the mode of action demanded and protected by a capitalist system: the profit motive. A person pursuing his own profit, conventional morality teaches us, is unprincipled and without scruples and will engage in any form of corruption if it suits his purposes. A free market unleashes greed. Corporations, businesses, capitalists, workers, traders, speculators, individual investors — each acts to make money, to make a profit for himself. Thus, given the contempt for self-interest, the conclusion is inescapable: Capitalism unleashes vicious, not virtuous, action.
Although some on the right try to evade this conclusion, many openly acknowledge it. Instead of searching for new moral principles to defend the selfish nature of capitalism, they bemoan that nature. In a time of economic crisis, these individuals — largely religious conservatives and neoconservatives — proclaim the economic success capitalism brings. But they hate the fact that business is motivated by self-interest and profit-seeking, and they say so.
Because of capitalism’s inherent selfishness, Irving Kristol, a leading neoconservative “defender” of the free market, can muster only two cheers, not three, for capitalism. And the prominent conservative writer Michael Novak, in a speech claiming to defend capitalism morally, could not manage even that.
Capitalism is by no means the Kingdom of God. It is a poor and clumsy human system. Although one can claim for it that it is better than any of its rivals, there is no need to give such a system three cheers. My friend Irving Kristol calls his book Two Cheers for Capitalism. One cheer is quite enough.7
The swing to the right was a swing to avoid economic catastrophe — a “practical” move, not a moral one. And given the lack of moral justification, the swing could not last.
Confronted with the prospect of economic collapse, Americans — the most reality-oriented people on the planet — listened to practical solutions. They were willing to put aside the teachings of their morality to avert disaster, particularly when they could see the ravages to which these teachings led when followed consistently, as they were being followed in the Communist bloc, and when their pragmatic reaction was given a vaguely moral spin, as it was when Reagan spoke of a revival of America’s independent, can-do spirit.
But once the collapse was avoided and some prosperity restored, the meaning and demands of the temporarily repressed morality had to resurface. If it is unfair that some Americans cannot afford homes, to take but one example, then the government should require (i.e., force) banks to lend them money — hence the Community Reinvestment Act (CRA). So what if this will lead to some economic inefficiency or problem down the road? People are in need now. Morally, everyone knows, we cannot turn our backs on the poor.
Some economists who inspired the swing to the right conceded that government intervention is needed when the market does not lead to the results we believe are morally right. And in any case, because most supporters of freer markets could not or would not challenge conventional moral teachings, they had no answer to those who asked, “Why shouldn’t we sacrifice a little bit of economic efficiency to do what’s right?”
The conflict between the alleged immorality and the perceived practicality of capitalism has been and is the bane of liberty in America. If capitalism is so flawed morally, how can we trust it economically?
If selfishness and the profit motive are immoral, then no wonder they are blamed for any and all economic crises. Nor is it any wonder that the government — which we are assured is not self-interested — is posited as the solution to such greed-induced crises. Politicians and bureaucrats, we are told, are working not for their own benefit, but for the “common good” or “public interest.” Thus, economic disasters cannot be their fault; the blame must lie on the shoulders of greedy businessmen.
Because Americans accept the notion that self-interest is morally wrong, they have come to equate businessmen with crooks, on the grounds that both pursue self-interested goals. The argument goes, in effect, like this: Left to his own devices, free from the watchful eye of our public servants in Washington, a businessman will try to make a buck by raiding the cookie jar rather than by producing and selling cookies.
So, although in the wake of the economic disaster that was the 1970s Americans came to think that some freeing of markets was necessary, they were never morally comfortable with capitalism. And almost all of the culture’s voices — on the left and right, Democratic and Republican — told them they were right to be uneasy, that capitalism unleashed greed and destructive “excesses.” As the 1970s faded from memory and prosperity returned, a familiar pattern reemerged: Whenever a new economic problem surfaced, the cause had to be “greed” and “market excess” — and the cure, government intervention. The swing to the right had come to an end, and the pendulum had reversed course.
Consider again the current problems in the housing market. The causes are complex, but the driving force is clearly government intervention: the Fed keeping interest rates around 1 percent for a year, thus encouraging people to borrow and providing the impetus for a housing bubble; the CRA, which forces banks to lend money to low-income and poor credit households (otherwise called sub-prime lending); the creation of Fannie Mae and Freddie Mac with government guaranteed debt, leading to artificially low mortgage rates and the illusion that the financial instruments created by bundling them are low-risk; government licensing of the rating agencies, which has eliminated competition among raters of financial securities and entrenched a suspect business model; deposit insurance and the “too big to fail” doctrine, which have created huge distortions in incentives and risk-taking throughout the financial system; and so on.8
These are the real causes of the housing and financial crisis. But this fact, open to anyone who makes the effort to see, goes unnoticed because commentators, politicians, and policy makers know the popularly accepted “cause” in advance: the “greed” of banks, mortgage brokers, lenders, and borrowers — the “greed” that produced “market excesses.” The solution? Rein in the selfishness of these market participants with new government interventions and more government regulators. Thus the very cause of the housing mess — government interference in the market — is adopted as the solution, and the government’s power to dictate our economic decisions grows and grows.
This was the historical pattern of the 20th century. In every major economic crisis, the evidence implicating government interventions went unnoticed, and blame was laid instead at the feet of the market.
The Great Depression? Despite massive evidence that the Federal Reserve’s and other government policies were responsible for the crash and the inability of the economy to recover, “greedy” investors, speculators, and businessmen were blamed. Consequently, in the aftermath, the government’s power over the economy was not curtailed but dramatically expanded.
The energy crisis of the 1970s? Despite evidence that it was brought on by price controls, fiat currency, and legal restrictions on our capacity to produce energy, “greedy” oil companies were blamed. The prescribed “solution” was for the government to exert even more control.
Time and time again, the failures of statism have been blamed on capitalism and cited as a rationalization for more statism.
So, what we witnessed in the 1980s and 1990s was a period of unshackling markets a little bit in order to prevent economic disaster within a longer-term trend of growing government power over our economic lives. Reversing this longer-term trend requires that capitalism be seen not as an unpleasant and temporary fix, but as the noble ideal and moral solution that it actually is. In other words, reversing the trend requires a profound shift in the nation’s moral convictions. It requires a radical change in Americans’ conception and evaluation of self-interest.
To be self-interested is to be dedicated to the actual requirements of your life and long-term happiness. This, Americans must come to understand, demands much of a person. To be self-interested, one must first figure out which goals and values will in fact advance one’s life and happiness; then one must determine which actions will in fact secure these goals and values. None of this knowledge is trivial or self-evident; it is essential to good living, and comes only from rational thinking.
Americans must come to realize that a person who lies, cheats, and steals does not qualify as self-interested, precisely because he does no such thinking. He does not consider the long-term requirements of his life and happiness, map out a course to achieve them, and then pursue that course with passion and rigor. Rather, he takes the “easy way” by seeking unearned money, ersatz love, and political power that enables him to “get away” with such things. He does not think and act rationally; he does whatever he feels like doing. And regardless of whether he is caught and jailed for his crimes, or whether his trophy wife cheats on him or divorces him and takes him to the cleaners, or whether his political “career” collapses as his indiscretions are aired on national television, he is not and cannot be happy — because happiness is a consequence of rational thought and productive effort, not of evasion and parasitism.
Americans must come to understand that a selfish person is the opposite of the stereotype: A selfish person is a thinker and a creator.
It is true that capitalism unleashes selfishness. But Americans must learn what this actually means: Capitalism unleashes the thinkers and creators of the world. By protecting the individual’s right to life, liberty, property, and the pursuit of happiness, capitalism leaves each individual free to use his mind and produce goods. When you consider some of the giants of American industry — from John D. Rockefeller to JP Morgan to Henry Ford to Sam Walton to Bill Gates — two things stand out: the ideas these men originated and the novel products and business innovations they created. These men created products and services that improved our lives by orders of magnitude — and they were able to originate and produce such goods only to the extent that the government left them alone. Americans must come to realize that our quality of life stands in direct proportion to the freedom of industrialists and businessmen to act selfishly — and that the only way to defend such freedom is to recognize and uphold the morality of self-interest.
Americans must come to realize that we have nothing to fear from businessmen acting selfishly. On the contrary, we can only gain from their rational, productive efforts. We can learn from their example and profit from the opportunity to trade with them. Our unprecedented prosperity and standard of living exist not despite but because of these men. To shackle and tether such individuals with government regulations and interventions — to treat them as potential or actual Al Capones — is both unjust and self-destructive. Where would we be without our cars, medications, and computers?
Liars and cheats and crooks exist in every era and every culture, but under capitalism their opportunities diminish and their “lifestyles” become more difficult. Because capitalism entails a wall of separation between economy and state, their path to power is cut off. In a capitalist society, no businessmen or lobbyists would be skulking around Washington in search of favorable government interventions — whether subsidies for themselves or shackles for their competitors — because the government could not intervene in economic affairs. No politicians would be promising a new prescription drug benefit to be paid for by soaking the rich or by treating the middle class as beasts of burden, because the government would be constitutionally prohibited from “managing” the economy. Fewer business scandals on the order of WorldCom or Enron would arise, because unscrupulous businessmen would not stand a chance competing against fully free businessmen with long-range vision and integrity, men such as JP Morgan and Sam Walton (not to mention that in a capitalist system, actual crooks would be jailed).
Americans must come to understand that appeals to the “common good” and the “public interest” are not moral claims but licenses to evil. Because the American public is just a number of separate individuals, whenever some group trumpets action in the name of the “public interest” — say, a new prescription drug benefit or Social Security scheme — it is declaring that the wishes of some individuals trump the rights and interests of other individuals. But everyone has a moral right to pursue his own happiness, free from coercive interference by others. If it is to have a legitimate meaning, the “public interest” can mean only this: The rights of each and every individual are equally protected by the government.
If Americans want to turn permanently toward a genuinely free market — and thus toward peak prosperity — they will have to reconsider their moral convictions. They will have to discover a new morality, one based on the requirements of human life and backed by detailed arguments and demonstrable facts. This is what Ayn Rand offers in her body of writings. She is the only champion of capitalism who would and could defend capitalism on moral grounds, as indicated by the radical titles of her books Capitalism: The Unknown Ideal and The Virtue of Selfishness. Those who want to fight the trend toward statism — those who want to effect a real and lasting turn toward capitalism — would do well to study her thought.
Acknowledgements: The author would like to thank Don Watkins for his editorial assistance and Onkar Ghate for his suggestions and editing.
1 See for instance: “Amid Turmoil, U.S. Turns Away From Decades of Deregulation,” July 25, 2008, http://online.wsj.com/article_print/SB121694460456283007.html; “The Return of Big Government” April 11, 2008, http://www.usnews.com/articles/business/economy/2008/04/11/the-return-of-big-government.html; “How Big Government Got Its Groove Back,” June 9, 2008, http://www.prospect.org/cs/articles?article=how_big_government_got_its_groove_back, “A move to curb capitalism?” May 30, 2008, http://www.washingtontimes.com/news/2008/may/30/a-move-to-curb-capitalism/.
2 “Transcript of Republican presidential debate in Simi Valley,” http://www.baltimoresun.com/news/politics/la-na-transcript-cnn,0,3961241.story?page=10.
3 “Amid Turmoil, U.S. Turns Away From Decades of Deregulation,” July 25, 2008, http://online.wsj.com/article_print/SB121694460456283007.html.
4 “Budget of the United States Government,” Fiscal Year 2009, http://www.gpoaccess.gov/usbudget/fy09/pdf/hist.pdf.
5 “A ‘Big Government Conservatism,’” August 15, 2003, http://www.opinionjournal.com/extra/?id=110003895.
6 “John McCain’s New Hampshire Primary Speech,” January 8, 2008, http://www.nytimes.com/2008/01/08/us/politics/08text-mccain.html.
7 Michael Novak, “The Moral Case for Capitalism,” Wealth & Virtue, February 18, 2004, http://www.nationalreview.com/novak/novak200402180913.asp.
8 See my Forbes.com column, “The Government Did It,” July 18, 2008, for a fuller discussion of the causes of the housing and financial crisis; http://www.forbes.com/2008/07/18/fannie-freddie-regulation-oped-cx_yb_0718brook_print.html.
