Atlas Shrugged and the Housing Crisis that Government Built
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Atlas Shrugged and the Housing Crisis that Government Built

by Yaron Brook | March 2009

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.

It’s still not too late to make the right choice.

About The Author

Yaron Brook

Chairman of the Board, Ayn Rand Institute