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Chapter
3
The Capitalist-Libertarian-Objectivist
View of Economics*
One of the corner stones of Ayn Rand's philosophy
is its deification of capitalism. In the
main, her attitudes are unrealistic, dogmatic,
and essentially religious, as are other objectivist
views. Let me review some of the more blatant
irrationalities of objectivist, capitalist,
and libertarian economics.
Utopianism. [1.]
To understand the evangelical upholding of
capitalism, we'd better, right from the start,
see that Rand and her associates are not
defending any capitalist economy that is,
or ever has been, in operation. On the contrary,
they continually damn the American variety
of capitalism, though extolling some of its
virtues.
To quote Rand, "A system of pure, unregulated
laissez-faire capitalism has never yet existed
anywhere." (1966b).
What existed were mixed
economies, capitalism and statism--that is
freedom and control, a combination of voluntary
choice and government coercion. America is
the freest country on earth, but it always
has had elements of statism in its economy,
developed by intellectuals who were horribly
committed to the philosophy of statism--yes,
horribly!
In fact, all
economies, past and present, were and are
a mixture of capitalism and collectivism.
Moreover, it seems that a mixed economy is
the only possible economic state. The more
extreme a state is, either capitalist or
collective, the less likely it is to last.
The final economic form of the state will
vary with culture, technology, the current
environment and its resources. Since democracy,
almost by definition, is based on compromise,
it is logical that the economy of a democracy
would be a mixture of collectivism and capitalism.
Rand's idealistic notion of laissez-faire
capitalism, if it did exist, is utopian and
impractical for many reasons:
1. It is
based on the supposition that people can
live successfully on a purely selfish basis,
without considering members of the social
group. It does not consider the dualistic
possibility that, as I noted in chapter one,
people may be better off when they consider
themselves first and the members of their
community as a close second. I accept Rand's
observation that every act is selfish since
altruistic acts bring pleasant mental feelings
or assuage mental pain. However, she abandons
that logic when she exalts capitalism, implying
that money and production themselves are
a higher pleasure, and that they bring pleasant
feelings innately. In reality, one can only
buy things that might cause good feelings.
After necessities are met, it is a personal
preference as to where one finds pleasant
feelings. Money's "value" will
always be diminished by inflation and material
things decay over time. While one can run
out of money and possessions or have them
taken away, one will always have the ability
to sing, create art, tell jokes, hug a friend,
kiss a lover, play a sport, etc., -- if one
invests in developing such. True friendships
and skills grow with time and practice without
the drudgery and fear of competition. Money
and physical assets demand constant care
and the pleasure of possession is dualistic
with the fear of loss.
1. Actually redundant since "Utopia"
is Greek for "not on earth," and
religions dwell on an afterlife, which is
not on earth.
Since people depend
on their community for support and the enhanced
wealth and health that living in that community
brings, it seems that people will be better
off if they do think of the community as
a close second. Rand assumes that if people
only go after what they want and think this
is best, they will never harm others and
or interfere with others' basic interests.
In fact, Rand keeps claiming that the pure
and entirely uncontrolled capitalist --if
it ever existed--would invariably help all
people by its productive drives and would
rarely harm anyone. There is no evidence
that this would be true. There is considerable
historical evidence and reason for believing
it would not.
For example, until
the 1920's the utilities in the United States
operated under little constraint. Their rates
corresponded to the maximum amount that could
be extorted from the community, and their
service was usually poor. Many communities
had to take over, or at least regulate, these
utilities in order to provide a decent level
of service to consumers. The recent Enron
utility scandal has confirmed that capitalists
have not changed, and still need regulation.
Governments that have
existed under capitalism have seen fit to
regulate industrial production, and usually
in rigorous ways, because the majority of
citizens who backed these governments believed
that capitalism is to some degree inimical
to the public welfare. This is not to say
that capitalism is an unmitigated social
evil, for it clearly is not. It has had great
advantages and is possibly the most efficient
kind of economy that humans have yet invented.
But in its pure laissez-faire form, it appears
to have great limitations--as most economists
admit. In fact, capitalism is inherently
inefficient. If there is to be competition,
there must be choice. Choice requires that
there be more product available than in demand.
That means there will be products and services
that either are not consumed or sold at a
loss. That is, there will be lost effort,
unused real estate, and wasted materials
in the production of the products not sold
or sold at a loss. Moreover there are many
non-productive tasks that capitalism requires,
which I will detail later in this chapter.
Rand's vehement
espousal of unadulterated capitalism is highly
utopian--although it would be an interesting
experiment to try pure laissez-faireism,
just to see how successfully it can work.
But because this kind of experiment most
likely will not be attempted, Rand and her
cohorts are safe in dogmatically insisting
that ultra-pure capitalism would work; and,
with this rigid assertion, they excoriate
both semi- capitalistic and non-capitalistic
economies.
It is interesting to note, in this connection,
that Rand's view of pure capitalism resembles
the views of many fanatical religions. Modified
Judaism, Christianity, and Islam, say purists,
do not work, and are even abominable; only
an unalloyed, completely orthodox version
of these religions would really work. When
asked where one might find such an unqualified
religious setup, they often reply: "In
the Kingdom of Heaven." This statement
is then taken as "proof" of the
fact that pure religion is good, and all
alloyed forms are bad. Q. E. D.!
The objectivist argument
that mixed capitalism is horrendous because
it cannot provide the heavenly advantages
of pure capitalism is similar to this fanatically
religious view. Essentially, in fact, it
is a utopian religious view .
2. Objectivism
confuses capitalism with freedom and implies
that complete capitalism would mean complete
human freedom. Thus, Rand states that if
you uphold freedom, you must uphold individual
rights. If you uphold individual rights,
you must uphold a person's right to her/his
own life, to his/her own liberty, to the
pursuit of his/her own happiness. (1966b).
This means you must uphold a political system
that thoroughly guarantees and protects these
rights-- the politico-economic system of
capitalism. Rand's allegation is invalid
for several reasons:
a. Humans are
never really totally free. They have only
a limited right to their own lives, their
own liberty, and their own pursuit of happiness.
They are restricted by their biological heredity,
which sets distinct limits on them. Secondly,
they almost always live in a social group
and have to suffer some restrictions in order
to get by in that group.
Third, under any
economic system they still have to eat; and
they must frequently surrender a considerable
amount of their freedom in order to eat regularly.
Capitalism forces them to work in order to
eat; and only under some kind of social welfare
system where all people were guaranteed a
minimum income, whether or not they worked,
would they have maximum freedom. Rand defines
force in purely physical terms and, by definition,
says that a person is free when he is not
subjected to physical force. But this definition
ignores the powerful forces that any conceivable
kind of capitalism will exert against what
we ordinarily call human freedom.
b. Capitalism
by no means protects an individual's "rights"
to life, liberty, and the pursuit of happiness.
Not even ideal capitalism, such as Rand demands
but has little possibility of ever existing,
does this: For under pure laissez-faire capitalism
people can be left to starve to death (because
their particular skills are not wanted),
can be deprived of liberty (by being forced
to engage in some kind of work they do not
enjoy), and can be restrained from achieving
their own happiness, by not being able to
accumulate enough capital to make sufficient
money.
Under qualified
capitalism, which exists in "capitalist"
countries, millions of people have been and
still are continually deprived of their "rights"
to life, liberty, and the pursuit of happiness.
It is quite possible that Rand's ideal capitalism
may provide individuals with more freedom
than do alternative economic systems. But
under its purest form it would offer very
little protection from the capitalists who
would limit their choices and make their
rights irrelevant under the monopolies that
would form - monopolies that Rand advocates.
Under "pure"
capitalism, society would be left at the
mercy of people who are concerned with making
a maximum amount of money from the use of
land, labor, capital, and by entrepreneurship.
Since it appears to be in the capitalist's
best interest to keep the costs of production
as low as possible, a successful capitalist
might easily drive wages below the subsistence
level, if the supply of labor was greater
than the demand. Also under ideal capitalism,
if machines can do a job at a lower cost
than people, "pure" capitalism
would use people without concern for their
welfare.
For example, in the last century,
millions of farm laborers were replaced by
automatic cotton picking and sorting machines.
The farm owners who introduced these machines
were not concerned with the welfare of their
displaced laborers.
Another example is the New England textile
industry. Quite often, the textiles were
the only game in town. After World War II,
many mill owners decided to close their mills
and move to the South, where labor costs
were cheaper. The result was a rate of unemployment
as high as twenty-five per cent in the North.
If the government hadn't provided welfare
services and some job retraining, what would
have stopped the unemployed people from starving?
The Northern mill owners did not take care
of them!
This job destruction
is worse today with 'high tech' jobs as well
as more factory jobs going overseas to India,
Pakistan, Thailand, and other Asian, African,
and South American countries.
2. Since one capitalist's worker is another's
customer, by driving down wages, capitalists
drive down the purchasing power of their
customers--therefore making less total profit,
though the few make more.
Pure capitalism justifies
its callousness with the absurd assumption
that there is effortless, easy mobility of
labor, resources, and capital, from one place
to another. Capitalists contend that displaced
workers, resources, and capital will rapidly
move to where the work is, implying that
the total costs will be less and the total
benefits will be greater for the economy
as a whole. The reality is that the community,
the majority of workers, and the supporting
local businesses will incur a great loss,
greater in total than the individual capitalist
gains. The whole point of a company moving
is to drive down wages by moving to an area
with more desperate, lower paid workers and
less health and environmental regulations.
This destroys the environment, the everyday
lives and the relationships of a community.
In addition, it destroys all the secondary,
tertiary, etc. facilities and businesses
that need and support that business, its
workers, and its customers.
Of equal importance is the effective loss,
through under utilization of the government
infrastructure, such as roads, utilities,
school systems, and government administration.
It imposes the delay and burden of building
or improving the same infrastructure and
supporting companies for the new communities.
The capitalist is, in fact, imposing a huge
tax and financial burden on both communities
so he or she can make a few more dollars.
c. Although collectivist
economies have partly protected the individual's
pursuit of life, liberty, and happiness,
they have done so to a minimal degree in
many instances.
Moreover, just as capitalism --as Rand shows--can
encourage considerably more life, liberty,
and the pursuit of happiness, so have some
collectivist economies. A collectivist system
that included real safeguards for human life,
liberty, and happiness could definitely be
worked out, and is collectivism's stated
goal and active pursuit, unlike capitalism
which seeks to minimize others income while
maximizing the capitalists' wealth. Since
neither ideal capitalism nor ideal collectivism
exist, we can only evaluate the actual mixed
systems in existence and throughout history,
in order to discover which components work
best together. To think that political despotism
must accompany collectivism is nonsense;
since (as Rand points out) we have a reasonably
collectivist and state controlled economy
in the United States at present, and still
have a large measure of political freedom.
3. Rand's "pure"
capitalism requires an ethical outlook by
all members of a society that is utopian,
has never existed, and probably will never
exist. In fact, if it did, we might choose
not to be capitalistic! This outlook has
two contradictory aspects. On the one hand,
it is entirely selfish; on the other hand
it requires ideal rationality. Thus, Branden
notes that capitalism implied and required
a system of ethics that does not yet exist:
a morality of rational self-interest (1965).
If altruists foolishly assert that the profit
motive is evil, that able people must work
for the good of society, then they resemble
devout collectivists, who often espouse totalitarianism.
What Branden
(following Rand) seems to mean, is that the
pure capitalists only work for their self-interests
and do not concern themselves with those
of others (although, of course, they must
consider others to some extent in order to
trade with them ). This kind of extreme selfishness
has never worked in human affairs and probably
never will: for
(a) it is social Darwinism that would lead
to the annihilation of many weak individuals,
and
(b) it would result
in continual upheaval, dislocation, and overall
loss to the economy when the strongest persons
bankrupted their competitors. This would
cause the dislocation and devaluation of
the competitors' assets, workers, suppliers'
workers, and the subsequent discomfort and
loss for the society. Since competition never
ends, all companies would fail over time,
wreaking havoc again and again.
3.The capitalist would be better off it they
consider the interests of others more since
the more and wealthier the customers, the
bigger the sales and profits for the capitalists
overall.
Actually, I believe, if capitalism were to
be a really good system, what would be needed
is for humans to have a morality of 'rational
self-interest' that included
(a) long-range, sustainable pleasure - that
is to say, rational hedonism, instead of
short-term, destructive hedonism; (b) some
considerable degree of social as well as
of individual interest; and (c) a recognition of the fact that as long
as human beings live together, it is desirable
(though not absolutely necessary) that they
engage in a good amount of cooperation, collaboration,
and compromise.
If every capitalistic
entrepreneur were guided by this kind of
morality of rational self-interest, then
capitalism might survive without bringing
various kinds of state control that it has
always engendered. For under these conditions,
capitalists might not deplete the land of
irreplaceable natural resources, pollute
the atmosphere with noxious chemicals, make
many of the waterways unfit for human enjoyment
or animal life, market harmful drugs, etc.
However, since capitalists must compete
to survive, if their competitors resort to
unethical actions that give them an advantage
over an the ethical company in the short
run, the long run benefits will never be
achieved and everyone suffers. The fact is
the vast majority of men and women are not
entirely ethical. And if they were, they
might well decide that a rational, mixed
form of collectivism, rather than a pure
form of capitalism, would be the better kind
of economic system to follow.
Rand espouses a one-sided
view of capitalism that simply ignores its
other facets. She exaggerates that it is
terrible when people criticize consumerism
in contemporary capitalistic society. She
rants about "irrational" economists
who proclaim that the essence (and the moral
justification) of capitalism is "service
to others--to the consumers," that the
consumers' wishes are the absolute edicts
ruling the free market (1966b).
4. "Ethics" is derived from "customary",
in that society has made it survive in the
long run.
Actually, capitalism,
like just about every other human system,
is not one-sided; rather it is dualistic--the
two things are not separate at all. Just
as production is the precondition of consumption,
so is consumption the precondition of production.
For no capitalist, no matter how free the
market, would think of producing anything
unless they were reasonably sure that, sooner
or later, there would be a good market for
it. If they knew, for example, that they
could make a perfect mousetrap and make it
cheaper and better than any of their competitors,
they would still not produce it if there
were no mice around to be caught, and no
people interested in catching them. Although
capitalists would normally not manufacture
anything merely to serve others, serving
others is exactly what they do; it just has
to be profitable. Thus, serving others cannot
be entirely divorced from capitalist motives.
Moreover, although Rand keeps emphasizing
productivity, and tends to make manufacturers
the heroes of her books--such as Rearden
in Atlas Shrugged-- the fact remains that
production today is a diminishing part of
the capitalist system, while the production
of services (such as entertainment, advertising,
teaching, medicine, psychology, and research)
is now a large and integral part of capitalism.
While up to 90% of the population once worked
in agriculture, today less than 1% work in
farming, due to harvesters, and mobile factories,
etc. While 65% of the population once
was employed in manufacturing, there is now
less than 18% of the US population in manufacturing,
due to cheaper, more reliable machines, computers,
and robotics. The same is happening to the
service industry today--as we see self-checkout
at K-mart, self-check-in at airports, and
self-ordering online. Dualistically, this
frees people from much of the drudgery of
life. Jeremy Rifkin, in his book, "The
End of Work", points out that soon there
will be almost no work as computers and robots
eventually take over repetitive tasks. The
problem is that one capitalist's worker is
another capitalist's customer - for when
they fire a worker, they fire a customer
too; if they pay workers less, their customers
buy less and their profits eventually fall.
It is absurd,
therefore, to assume that either production
or consumption is a precondition for the
other; or that as long as the producer is
left untrammeled, capitalist heaven will
manifest itself here on earth. It is even
more absurd to set up production as the one
precondition for reason, justice, reality,
and ultimately happiness. True, most of us
would not last very long if someone did not
produce food; but even with sufficient production--reason,
justice, and happiness would hardly prevail
automatically!
Ayn Rand enthusiastically
favors capitalistic monopolies and is vehemently
opposed to antitrust laws. She anathemizes
"coercive monopoly" or, as her
associate, Alan Greenspan Chairman of the
Federal Reserve for the last decade, backed
her by saying, a business can set its prices
and production policies independent of the
market, with immunity from competition and
the law of supply and demand, (1965a). An
economy dominated by such monopolies would
be rigid and stagnant. She insists that such
a coercive monopoly can only be accomplished
by government intervention, in the form of
special regulations, subsidies, or franchises,
and never can result from the operation of
the laws of a free market. These objectivist
views do not make much sense for several
reasons:
a. While one of the
essences of capitalism is the operation of
a free market, its practical and actual essence
is profit making. Real-life capitalists will
do almost anything to derive a profit; and
will think nothing of abrogating various
laws, especially those of supply and demand,
if they can even temporarily make a good
income from doing so. Many--indeed most--of
the special regulations, subsidies, or franchises
which governments grant in order to create
coercive monopolies are granted because some
capitalist venture lobbied, bribed, propagandized
and otherwise pressured government into granting
it such special privileges. As long as such
privileges are profitable, and capitalists
are allowed to pursue the profit motive fairly
freely, there is every reason to believe
that businesses will continue to demand and
receive government-backed monopolistic privileges
and that the operations of the free market
will not be maintained.
Capitalists
who construct coercive monopolies may be
cutting their own throats by doing so, but
that seems to be one of the main conditions
intrinsic to any brand of capitalism that
has yet existed or will probably ever will.
Various capitalists, ostensibly for their
own profit motives, cut their own throats
(as well as those of their competitors) in
many ways. Tough! But this is the grim reality
of profit making that Rand fails to acknowledge.
Her "capitalist" never does anything
wrong or stupid, because, by definition,
he is an all-knowing, all-beneficent god
who can do no wrong.
b. Although it
may have been true at one time that coercive
monopolies were not necessary and that it
was possible (but not easy!) to avoid their
growth, this is probably not true today.
In the old days, almost anyone with a little
capital could open up a business and did
not have to get involved with any kind of
governmental agency.
Today, many industries--such
as the production of large aircraft--require
an investment of literally billions of dollars,
which is a small, but significant portion
of the total economy; A huge investment gamble
for any one firm. Because of that, capitalists
require some kind of guarantee that parts
of the government (such as the armed forces)
will purchase large numbers of the finished
product. Even more important, perhaps, is
the fact that there are certain industries,
such as atomic power, which are just too
big for any ordinary-sized business, and
have to be run largely along the lines of
a coercive monopoly. Moreover, competition
would require duplication of time, energy,
and waste of too much of our resources. For,
such industries have to be regulated to a
considerable extent by government agencies;
and they have to be subsidized or guaranteed
by the government as well. Therefore, if
it was feasible in Adam Smith's day for business
to operate completely along the lines of
the free market, and history shows that even
then it wasn't--it seems clear the huge benefits
from a single, regulated producer in the
mass production of certain kinds of products,
has made increasing governmental control
over those businesses a virtual necessity.
c. The
capitalist economists assume that the "free
market" has mobility of resources, infinite
availability of capital to start competing
companies, and virtually instant creation
competing factories and support systems.
Additionally, they assume that there will
be consumers with the ready cash who know
about all products including their relative
merits and faults. They also assume that
the customers or products have costless travel
to or from the producers. However, reality
is full of uncertainties, misperceptions,
ignorance, subtle differences, and limited
time, which have significant consequences.
The market is never free; it is full of scarcities,
vast distances between the parts, irrationalities,
inertia, stupidity, and distractions that
insure there will always be inequities.
Unrealism.
Ayn Rand ceaselessly talks about the necessity
of accepting reality--because A is A and
existence exists, we'd better face these
facts and live according to empirically observable
happenings. In regard to life in general
(as we shall show later in this book) and
to capitalism in particular, Rand's objectivism
is just about as unrealistic and anti-empirical
as it can be. It remains in a world of deep
denial about its "rational" fictions,
and it invents innumerable fantasies about
capitalism, refusing to admit that it is
fantasizing. For example:
1. Ayn Rand states, "without
property rights, no other rights are possible,"
(1964.) This is hogwash, and has been contradicted
in many past and present societies. It has
been virtually impossible for many enslaved
peoples, for serfs, for prisoners, and for
citizens of collectivist nations to own property;
and yet it is ridiculous to claim that such
individuals have no rights whatever. Property-
deprived persons in most countries are legally
protected from theft of their personal possessions,
from rape, from assault, from libel, from
murder, etc.
In some collectivist
jurisdictions, in fact (such as the former
Soviet Union), citizens have certain rights--such
as the right to free health services and
free education--that they do not have in
jurisdictions where they are allowed to hold
any amount of property they can lay their
hands on. So Ayn Rand's view that without
property rights no other rights are possible
is clearly contradictory to reality, and
is a product of her own wishful thinking.
Because she would like to see capitalism
as all-good, and non-capitalism as all-evil,
she "proves" that this is so. Only
by giving a special definition to "property"
which makes all rights property rights does
Rand's statement make (purely tautological)
sense!
2. "When I say 'capitalism,'
Rand writes, "I mean a full, pure, uncontrolled
unregulated laissez-faire capitalism,"
(1964). She means capitalism with a separation
of state and economics, like the separation
of church and state. But, although it may
be possible to separate the state and church,
it is highly unlikely that the state and
economics can be equally separated. The state
is part of the economic system; and in this
day and age, it inevitably will be something
of a producer, a seller, a consumer, a financer,
etc.
Even under Rand's proposed system,
the state must provide for national defense.
However, under such a system, of course,
the state does not produce armaments; it
buys them from the capitalists. So, even
here, a certain amount of interaction between
the public and private sector is necessary.
And since the state is a huge, monopolistic
institution (and not merely a community of
free traders) some of its interactions with
capitalists will be effectively coercive.
For example, it will force them to manufacture
armaments in a certain manner and sometimes
under secretive conditions.
It is therefore
quite unrealistic for Ayn Rand not to recognize
the inevitable voluntary and coercive tie-ups
between the state and economics. And it is
probably even more unrealistic for her to
cop out by claiming that capitalism is the
system of the future--"if mankind is
to have a future," (1964). If objectivism
is to have a future, it had better face facts!
3. "Capitalism,"
states Rand's credo, "demands the best
of every man--his rationality--and rewards
him accordingly," (1962). Why? Because
it leaves people free to choose the work
they like, to trade their product for the
products of others, and to go as far on the
road to achievement as their ability and
ambition will carry them. Their success depends
on what Rand calls "the objective of
their work" and on the rationality of
those who recognize that value. When people
are free to trade, the best product and the
best judgment wins. They also raise the standard
of living, and of thought, ever higher for
all those who take part in productive activity
(Rand, 1961b).
What a pious hope! First of
all, if men truly used reason and reality
as their only arbiter, they could easily
devise many different kinds of economic systems,
which would work well. Perhaps capitalism
would then be the best system they could
invent and work with; but, quite possibly,
it would not be.
More to the point: People
do not use reason and reality as their only
arbiter; and it is probable that, at least
for the next millennium, they won't. Considering
how they really behave and are likely to
behave in the near future, capitalism, as
we know it and as it is every likely to be,
deviates enormously from the ideal of leaving
all people free to choose the work they like,
to specialize in it, to trade their product
for the products of others, and to go as
far on the road to achievement as their ability
and ambition will carry them. Most people,
including some of the most "successful",
under capitalism end up in work that they
hardly like, not trained for what they enjoy,
and sometimes blocked from achieving what
they desire to achieve, in spite of their
ability and ambition.
However, in the early
stages of capitalist enterprise, when the
economic caste system is still loosely set,
it may be possible for many, if not all,
able and ambitious individuals to achieve
what they would like. But after just a few
generations, when enough competent and energetic
people have amassed their fortunes, built
their economic empires, and willed their
gains to their heirs , enormous restrictions
are placed on the capitalistic activities
or would-be activities of able and ambitious
individuals.
Of course, the same
applies to collectivism. The famous motto:
"From each according to his ability,
to each according to his needs," might
work when an entire society lives on the
borderline of survival, since the individuals
accept that the survival of others in that
society directly affects their own survival.
However, once there is enough for the necessities,
most will feel taken advantage of by those
who do not work as hard or as much. In their
pure forms, which are extremist, both systems
demand an extreme, a society of super-humans,
for their systems to work.
Moreover, a large organization
is far different from a startup. As innovative,
startups grow into high volume producers,
the requirements to run them change. At best,
the "organization man" then tends
to replace the true entrepreneur; and at
worst, the real individualist tends to become
a business "drop-out" and may end
up as an alcoholic, a drug addict, a jailbird,
a hippie, or a general misfit as we see in
so many of the heirs of the rich and the
wealthier middle class.
5. Another of Rand's double standards: It
is the right of the rich to give their enormous
wealth to those who have not earned it -
their heirs - but wrong for the state to
give a minimum standard of living to those
in need.
The capitalist system, in its youth, is one
thing; in its middle age, it is a contraption
of a different color! As it "grows,"
individualism seems to wane; and what Rand
and her associates deem its impurities and
its perversions are, at least in part, inevitabilities
of its aging process. 'Organization men'
are "smart" gamblers in that they
limit their investments, risks; to areas
that they believe have a very high chance
to be profitable. The innovator or entrepreneur
is the real risk taker, often betting all
he or she has on a risky venture. However,
the innovator has small up-front cash requirement
since he does not pay for his own time or
rent for his garage. A large corporation
has to pay for all of this plus high salaries.
The 'organization woman' realizes that it
is a better bet to buy innovation than to
do it. It is far wiser to pay the proven,
successful, small startup a fantastic profit
in the entrepreneur's eyes, far less that
the total research and development costs
of a large corporation. Furthermore, all
the entrepreneurs that lose money represent
failed innovations for which the corporation
for does not have to pay; Rather, it is absorbed
by the entrepreneurs who lose everything.
Entrepreneurship is a lottery where one person
makes a million dollars while another fourteen
million lose one dollar.
4. Rand's followers say,
"The fundamental issue... is not what
kind of economic controls a government enforces,
nor on whose behalf; the real issue is a
controlled economy versus an uncontrolled
economy. This issue is slavery versus freedom,"
(Branden, 1965b). Several errors are stated
and implied in this position.
a. Obviously, a controlled
economy--such as we largely have in the United
States today, and exists in most parts of
the world--hardly means complete slavery.
It has its disadvantages, but it also frees
those who live under it, from great price
fluctuations, uninsured unemployment, facing
poverty in old age, harm from unlicensed
medications, and so forth. Freedom, as Rand
defines it, narrowly means freedom from physical
coercion; but it includes all kinds of other
forms of coercion that may well be pernicious.
b. It is highly doubtful today
whether the issue any longer is a controlled
versus an uncontrolled economy. Uncontrolled
economies never seem to have existed anywhere;
and in isolated cases, we have already shown
they seem to be much less practicable today
than they ever were in the past. Whether
Rand and Branden like it or not, the fundamental
issue throughout history, and today, seems
to be what kind of economic controls a modern
government enforces and on whose behalf.
c. The implication of Rand's
"free" capitalism is that government
controls exist entirely in themselves, because
the state, government, legislature, or some
other body insists on these controls. Actually,
even monarch-led governments, these days,
are almost always voted in and kept in office
by people--by the citizens who live under
the government's regulations. And it is usually
these people who are demanding the government's
economic controls. Moreover (as I noted above)
the people who today tend to ask for most
of the government controls are businesspersons
themselves--who, "oddly enough,"
seem to find such controls to their advantage.
Yet it is common to see these same individuals
vehemently and dogmatically advocate Rand's
philosophy when it comes to workers. These
are also the same people who advocate the
end to inheritance taxes, government bailouts
of large corporations, and demonize welfare.
In any complex, sophisticated
society, there are controls--whether they
are instituted by the will of the majority
or by a powerful minority. The question,
then, is not whether we have a controlled
or an uncontrolled economy, but who has the
control of the economic system: the government,
those duly elected by the majority of the
people who are pawns in the economy, or businesspersons
who fare well during good and bad times?
Rand's choice is, without doubt, the businesspersons,
acting purely in their own interests.
d. For reasons such as these,
Rand's position on a controlled economy is
highly unrealistic, accords with no known
reality or observed behavior of humans, and
is futuristic only in an unrealistic way.
5. Ayn Rand holds that
there are three schools of thought on the
nature of good: (a) the intrinsic theory,
which contends that the good is inherent
in certain things or actions as such, regardless
of their context and consequences; (b) the
subjectivist theory, which holds that the
good bears no relationship to the facts of
reality, that it is a product of people's
consciousness, created by their feelings,
desires, or whims; and (c) her objective
theory, which holds that the good is neither
an attribute of things in themselves nor
of people's emotional states, but an evaluation
of the facts of reality by their consciousness,
according to a rational standard of value.
But, there are rational
problems with this. "Rationality"
entails comparing facts and processes so
one can extrapolate them to achieve a desired
result. In this argument, however, the words
"good" and "value" are
circular: "Good" means something
you "value". Who would not value
the 'good? The origin of "good"
revolves around something that fits well
or that is on target. As a result, one of
its other definitions is "likely to
live or last," the same as "ethical"
and "moral." With humans and most
creatures, if one is happy, one is more likely
to survive. Therefore, Maslov's "hierarchy
of needs" is a much more functional
definition of the "good." Therefore,
a rational process will value those things
that promote sufficient prosperity for a
reasonably secure life and happiness in the
long run.
Rand claims that of
all the social systems in history, capitalism
alone is based on her objective theory of
values--that only her theory of values morally
bans rule by force, (1966b). Her objectivist
allegation is unrealistic for these reasons:
a. Capitalism is the only system
implicitly based on an objective theory of
values according to Ayn Rand and her followers.
Many devout believers in capitalism also
believe in the intrinsic or subjectivist
theory of values; and many believers in the
"objective" theory of values (including
many philosophers in the collectivist countries,)
are quite anti-capitalistic.
b. Like collectivism, forced
rule is opposed by the great majority of
social and political thinkers--and a good
many of those who oppose it hold what Ayn
Rand calls the intrinsic or the subjectivist
view of the good.
Again, a number of those who
uphold rule by physical force definitely
uphold, as well, an objective theory of value--including,
for example, Lenin and Trotsky. Such believers
in physical force merely happen to believe
that an evaluation of the facts by human
consciousness according to a "rational"
standard of value does lead to the conclusion
that, at least temporarily, forceful political
rule is a good thing. The fact that both
Rand and I might disagree with their evaluation
does not gainsay the fact that they believe
in her version of reality and rationality.
Moreover, Rand's version of
capitalism does depend on a state and force
to settle contractual disputes and to protect
property rights, copyrights, and patents.
Rand admits outright that the state must
exist and that force must be used to protect
the state, unlike her even more unrealistic
libertarian (anarchy) counterparts.
c. Rand and her acolytes
imply that there is only one possible evaluation
of the facts of reality by human consciousness,
and that there is only one rational standard
of value by which this singularly correct
evaluation can be made. They also vehemently
(or should I say rigidly?) avow that this
single "rational" evaluation of
the facts can only conceivably lead to one
conclusion: That capitalism is the only good
economic system that can ever be invented
by man. These monolithic, unequivocally held
beliefs in this respect are hardly in accord
with reality; and they do not appear to be
"rational." Rather, they are religious
absolutes or assertions of "truths"
without sound empirical or practical foundation.
Moreover, since capitalism allegedly maximizes
money and goods, objectivists imply that
money and goods are the only rational values
of life.
d. The objective theory
of values that Rand finds so implicit in
capitalism exists in Rand's head and not
uniquely in capitalism itself. None of the
large or even medium-sized capitalist corporations
behave the way Rand suggests they do. Decision
is reached mainly after committee discussion,
and the decision that is reached is usually
not unanimous. Furthermore, outside consultants
are often called in to give their opinions.
Elements of collectivism, collaboration,
and cooperativeness are rife in virtually
capitalist enterprises, and elements of "rugged
individualism" are relatively rare.
A corporation is an economic dictatorship
which regularly intrudes into its employee's
private lives with homework, travel, social
and political prohibitions, social and political
commitments, dress codes, and other requirements.
We see corporations imposing their political
views through ownership, propaganda, and
censorship of the news in an effort to make
everyone believe and behave alike.
6. "Within
every category of goods and services offered
on a free market," Ayn Rand asserts,
"it is the purveyor of the best product
at the cheapest price." who gains the
greatest financial rewards, not automatically
nor immediately nor by fiat, but by virtue
of the free market, (1966b). This market
teaches every participant to look for the
objective best he/she can arrange and penalizes
those who act on irrational considerations.
It seems counter-intuitive, but when one
tries to maximize any particular thing, everything
else must suffer neglect. You never reach
the maximum, or not for long, since the body
develops behavioral dysfunctions such as
alcoholism. The greatest possible long-term
pleasure from life comes to those who seek
reasonable balance and acceptance, not the
most or best. Rand's statement is hogwash,
as virtually any reasonably intelligent student
of economics should be able to see. Why?
Because:
a. Frequently,
the greatest financial rewards in a given
field, such as the field of producing furniture,
are won by the firms that make a shoddy product
at a cheap price, or that produce a good
product at an inflated price. For although
it may be true that the consumers who buy
these shoddy cheap products or good overpriced
products are being penalized for acting on
irrational considerations, the free market
clearly does not teach them to act otherwise.
In some cases--as in the purchase of furniture,
which usually lasts for a long period of
time even when it is shoddily produced--the
free market would rarely induce people to
change their poor buying habits; and in other
cases--as when cheap toys are purchased and
break very quickly--the free market still
is not effective enough to teach many purchasers
to buy more rationally next time.
The deficiencies of
the capitalist system: greediness, and other
"irrationalities" of people (who
wrongly persuade themselves that they can
keep getting something for nothing,) combine
to defeat the good "intent" of
the free market. Rand refuses to acknowledge either of these
deficiencies or irrationalities. Ideal capitalists,
a la Ayn Rand's fictions, would presumably
not produce shoddy goods (because they are
only interested in fair trade) and would
not be greedy or irrational. Neither would
angels be.
b. The "rationality-producing
tendencies" of the free market are beautifully
defeated in many (or most) instances by other
aspects of the profit-making system. Thus,
it is the aim of commercial advertising,
publicity, high pressure selling, and other
forms of propaganda to induce the purchaser
to buy products that are not the best or
the cheapest in their field; and this kind
of propaganda frequently pays off. It could
be said in this respect that Rand means the
best product of the advertising agency or
sales promotion staff wins out in the free
market of advertising and in selling! But
this obviously is not what Ayn Rand means.
She really thinks it is the best goods that
win out in the free market regardless of
advertising and sales promotions; and we
all know from real life that she is often
wrong about this. Rand may contend that in
a truly free market everyone would be productive,
informed, and fair to the greatest possible
extent. But this concept of the truly free
market is indeed religious and supernatural--for
where is she going to find the human beings
who behave as this kind of system demands
that they behave? In fact, as Socrates observed
long ago, the goal of every trader is "to
buy low and sell high" - not to give
equal value for value received.
c. The objectivist position
is that the free market teaches every participant
to look for the objective best "within
the category of his own competence."
This may not have been a bad rule several
hundred years ago, during the early days
of capitalist trading when buyers often were
quite competent to select rugged rather than
shoddy goods, because they frequently had
previously produced rugged goods in their
own workshops and homes. Today, however,
the buyer is usually quite divorced from
producing anything but the one particular
kind of material he may work on in his own
factory (and he may even have little experience
with that kind of production if he does non-producing
work at this factory). Consequently, he is
not usually competent to look for the objective
best in what he purchases, and he can easily
be misled by various kinds of sales pitches.
The main aim of marketing is to sell products
at the highest profit, not the best profit
or deal for the customer. It is far easier
to confuse and convince than produce a high
quality product. Moreover, there is a considerable
cost in time and travel money to the consumer
who would research and be completely informed
about every purchasing decision. If such
a standard were demanded, people would be
spending all their time researching and evaluating
instead of accepting, buying, and enjoying.
Rand talks about
free markets and about the interaction of
supply and demand. Economic theory teaches
us that in order for there to be a truly
free market there must exist (among other
conditions) many firms, no one of which accounts
for more than a small percentage of the total
production of goods; homogeneity--that is,
all firms must produce identical products;
costless movement of goods, workers, facilities,
support, and auxiliary organizations, infrastructure,
and buyers (the best goods may be too far
away to travel to acquire or the cost of
that travel may diminish that superiority);
and fully informed buyers and sellers. If
a firm makes a better product, it becomes
(with limitations) a monopolist; for, its
product being better than all others, it
becomes different from the other firms. Therefore,
the law of free markets is rendered inapplicable,
and is only likely to remain in force under
rare conditions--which certainly do not exist
in the complex society of today.
d. Consumerism, at present,
is based much more on fad and fashion than
on any "intrinsic" value for the
goods that are purchased. Therefore, the
woman who knows that the dress she is purchasing
today will be outmoded next season does not
particularly care if it is shoddily made
and will fall apart at the seams in a year
or two. And even the husband and wife who
realize that they must refurnish their house
or apartment every few years to keep up with
the Joneses will not be too offended if the
furniture starts coming apart a few years
later. With advertisers, salesmen, and publicists,
again, ceaselessly pushing the individual
into making unnecessary, fashion-impelled
purchases, and with the average customers
having such a dire need for social popularity
that they cannot too easily resist purchasing
many things for different reasons, Rand's
view of the free market encouraging buying
and selling for rational considerations becomes
ill-founded and unrealistic. Capitalism,
moreover, fosters conspicuous consumption
(as Thorstein Veblen pointed out many years
ago)--and thereby creates much of the irrational
buying that clearly sabotages the rational
considerations that are, according to Rand,
implicit in the free market.
7. The myth that quality
products win out under capitalism is continually
perpetuated in Rand's writings. Thus, we
read that a given product may not be appreciated
at once, particularly if it is too radical
an innovation; but, aside from irrelevant
accidents, "it wins in the long run,"
(Rand, 1966b). Does it? Perhaps--if the producers
of this product can last long enough for
the customers to finally perceive it to be
superior; But in innumerable instances they
go broke--especially considering the high
investment and running costs of production
these days--long before their fine product
wins a public hearing. Or someone else beats
them out with a poor product that looks better
but soon deteriorates. Or someone puts on
a huge sales campaign for a somewhat different
product that really isn't as useful as theirs,
but which takes over so much of the market
that they cannot survive.
Take, for example, dishwashing
equipment. Two gadgets were invented a good
many years ago that nicely solve the problem
of washing a few dishes at a time. One is
a cleaning brush that attaches to the sink
itself and that holds a reservoir of liquid
detergent, so that you can conveniently wash
a dish without wetting your hands with a
dishrag or sponge. The other is a cleaning
brush that is not attached to the sink but
which has its own plastic handle, in which
you can place water and detergent, and which
again enables you to wash a dish without
wetting your hands. Both these kinds of brushes
have been manufactured for many years by
various firms; but these firms keep discontinuing
them because their sale is not sufficiently
profitable. Why? Because (a) many people,
largely because of advertising, would wrongly
rather use a huge electric dishwasher for
washing a dish or two; and (b) the small
gadgets are not profitable enough per unit
to warrant large advertising campaigns, while
the large appliances are. Instances like
this, where useful and quality products have
been unsuccessful under capitalism, can be
cited endlessly.
Rand may object that,
under her ideal kind of capitalism, capitalists
would only be interested in being productive
and not in selling "unproductive"
goods by means of advertising. If so, this
ideal capitalism simply does not in the least
resemble modern, real capitalism and "should"
really be called perfectionism, utopian capitalism,
or something similar, to distinguish it from
historical capitalism. Moreover, if this
ideal system existed and a single capitalist
started to produce shoddy goods, used high-powered
advertising, and employed other common capitalistic
methods, he would quickly drive most of his
competitors out of business, and the system
would become the non-ideal capitalism that
exists today and that Rand so violently deplores.
Capitalism, the "unknown ideal,"
obviously needs ideal (and presently unknowable)
people!
8. As might be
expected, Rand includes a great deal of nonsense
about labor and its value. For example, she
says that the economic value of people's
work is determined, in a free market, by
a single principle: by the voluntary consent
of those who are willing to trade them their
work or products in return. This, she states,
is the moral meaning of the law of supply
and demand; it rejects two "vicious"
doctrines: the tribal premise and altruism.
The supply and demand law recognizes that
a person works to support his own life--as,
by his nature, he must--that he has to be
guided by his rational self-interest, and
that if he wants to trade with others, he
cannot expect sacrificial victims, i. e.,
he cannot expect to receive values without
trading commensurate values in return. The
sole criterion of what is commensurate, in
this context, is the free, voluntary, un-coerced
judgment of the traders (Rand, 1966b). Some
of the unrealistic statements in this paragraph
include:
a. No free market has
ever existed, (which at least is one point
on which I and Ayn Rand agree!) Or ever will
exist, because, as I stated, even if it did,
the value of people's work in that market
would hardly be determined by a single principle.
Not only would it be determined by the voluntary
consent of those who are willing to trade
them their work or products in return, but
it would also be determined by (i) their
innate abilities, (ii) their willingness
to work at all, (iii) their willingness to
work well or badly, mightily or weakly; (iv)
their ability to convince their employer
that they were working well, whether or not
they were; (v) the number and ability of
other people who are available for the jobs
they want; (vi) the strength of their desires
for various necessities and luxuries, etc.
It is remarkable how Rand often seems to
reduce the principles that determine various
human behaviors to a single rule. This kind
of simplistic thinking, however, hardly covers
the known facts of a much more complex reality.
b. The "two vicious
doctrines" that Rand talks about--the
tribal premise and altruism--here basically
seem to be the same doctrine: that people
sometimes put others, or the members of their
tribe, above themselves. Why are they "vicious?"
Because she assumes that they always are
taken to great extremes, and that those who
follow them only subjugate themselves to
others and never strive for self-interest.
This extremist way of thinking is typical
of Ayn Rand; but it is doubtful if any non-objectivists
actually follow it. Also: Rand defines altruism
as being wholly self-sacrificial (when, as
usually thought, it includes pleasure for
the altruist and is therefore partly based
on self-interest). And she defines all self-sacrifice
as vicious (without empirically proving that
it really is). Her statement, therefore,
that altruism is vicious is actually a definitional,
tautological, fanatically religious proposition
that is not related to reality.
c. Actually, the moral meaning
of the law of supply and demand may be a
number of different things: in fact, almost
anything that you care to make of it. Thus,
altruists could use the law by noting that
the goods they held were more valuable when
they were scarce rather than when they were
plentiful; and they might give them away
when they held scarce goods, and then consider
themselves more altruistic.
When Rand states that
the moral meaning of the law of supply and
demand means the rejection of altruism and
the acceptance of selfishness, she is only
stating what the meaning is to her. In itself,
this "law" seems to have no morality
about it whatever--any more than does Gresham's
law of currency or any other economic law.
One can define moral laws after one observes
the relationships of economic facts to the
society's values; but the facts themselves
do not make moral rules. If Rand wants to
state that the moral meaning of the law of
supply and demand should be the total rejection
of altruism, she is of course entitled to
her arbitrary belief. But let her recognize
that this is not its meaning to most people,
nor is it (except by her fiat) its one true
and only meaning, If she is to be objective
in this claim, she must show that her logic
prevails in all cases to the preferred values
of all societies. Moreover, she ought to
show why the law of supply and demand leads
to the moral condemnation of altruism; and
she has not done this.
d. The allegation that
the law of supply and demand represents the
recognition that people are not the property,
or the servant of the tribe, and that they
work in order to support their own life is
sheer drivel. Even if we consider people
the property of their tribe, the law of supply
and demand would, at least to some degree,
hold true: For if the tribe had a scarcity
of, say, steel, it might order people to
work in a steel mill; while if it had an
abundance of steel, it might order them to
work at something else. The law of supply
and demand tends to exist even under a collectivist
society and is by no means entirely indigenous
to capitalism, (though it may apply to more
capitalist than collectivist events). Moreover,
tribes were just a larger 'family'. The fact
is that tribes flourished because individuals
alone fared less well than those in a tribe.
It might be said that
if, in a collectivist society, the law of
supply and demand is followed on the basis
of productive (rational) supply and informed
demand, that society is to that degree capitalistic.
Perhaps so; but only in Ayn Rand's work does
pure capitalism and pure collectivism exist.
In reality, all economies are and always
have been, mixed. The prime examples are
families (a collective) and profit sharing
in companies under capitalism, and black
markets under collectivism.
It is also nonsense
to believe that the law of supply and demand
represents recognition of the fact that people
work in order to support their own lives.
First of all, people need not, today, work
to support their own lives since machines
produce the vast majority of what we consume.
Machines have freed us from manual labor
and menial tasks to do things we really enjoy.
The economic system today is mostly an accounting
and marketing system that decides who gets
what the machines make. When asked, rather
than do it themselves, most people would
prefer the state trained professionals to
take care of the old, the handicapped, and
the very poor, practically from the cradle
to the grave.
Second, even when people
do not work to support their lives, the law
of supply and demand still largely operates.
Thus, if a mother and her child are on relief,
they will be more likely to spend one hundred
dollars on a television set that will bring
them movies every day of the week than spend
it on first-run movies at several dollars
a showing; and they will be willing to pay
more for a bottle of soda than for a glass
of water. Their survival will hardly be affected
by choosing between television and the movies
or between water and soda.
e. Rand contends
that a man cannot expect to receive values
without trading commensurate values in return
when the free market operates. Balderdash!
(i) The free market, I reiterate, is a fiction.
It never has existed and it probably never
will exist. (ii) People can very often, even
in a so-called free market, give something
that means very little to them and get something
that means very much--as long as they can
find other individuals who have different
kinds of consumer values. Thus, for a few
glass beads a savage may give a trader several
pounds of gold or ivory. Or a woman can give
a half hour's time to a man, enjoy sex with
him, and collect a hundred dollars. On the
other hand, another woman may have to work
thirty-five hours or more a week at an onerous
job like typing or selling in a five-and-ten
cent store for a wage that enables her barely
to keep her body and soul together.
f. According to Rand,
the sole criterion of what is commensurate,
in regard to trading values, is the free,
voluntary, un-coerced judgment of the traders.
This may be her sole criterion, but it is
hardly mine, that of many others, or often
even that of the traders themselves. For
one thing, when a woman who dislikes typing
has to type her fingers away thirty-five
hours a week for a subsistence wage or else
has to move into a coldwater flat, become
a prostitute, or marry a man she does not
care for--is her accepting the typing job
really done on a "free, voluntary, un-coerced"
basis? And when a working man is driven to
spend considerable amounts of his hard-earned
money in order to satisfy the craving for
toys which television commercials have deliberately
produced in his children, does he truly do
so on the basis of his "free, voluntary,
un-coerced judgment"? If Rand and her
fellow objectivists think so, they are indeed
naďve! The fact that no one is putting a
gun to the head of the typist as she "freely"
chooses her job, or is threatening the working
man with a knife as he pays for his children's
toys, surely does not prove that their choices
are actually free, voluntary, and un-coerced.
Similarly, many or most
"free" traders under capitalism
are as hogtied and coerced as they can be:
by their attitudes, their abilities, their
biological drives, their social conditioning--and
especially by the forces of the capitalist
system itself. It may be contended that they
might be even more coerced under another
economic system, such as collectivism; but
even if this is sometimes true, it does not
prove that the free market and the law of
supply and demand provide absolute human
freedom. To imply that they do is to be extremely
misleading and certainly not objective.
The limitations of human
biology and the restrictions of reality make
all extremes of freedom impractical or impossible.
Only by definition are Rand's capitalistic
traders free, and voluntary their judgment.
We see, as usual, that her entire system
of "proof" is tautological, unempirical,
and at least semi-theological.
9. The objectivists
uphold the free market even when it leads
to such results as rock singers making more
money than Albert Einstein. Why? Because,
Rand says, people work in order to support
and enjoy their own lives--and if many find
value in singing, they are entitled to spend
their money on their own pleasure. Rock singer's
fortunes are not taken from those who do
not care for their work (I am one of them,)
or from Einstein--nor do they stand in Einstein's
way. Nor does Einstein lack proper recognition
and support in a free society, says Rand,
on an appropriate intellectual level (Rand,
1966b). This argument is unrealistic on several
counts, especially when the amounts devoted
to an occupation are large parts of the economy:
a. Although it seems
fair that people who find value in singing,
sports or gambling would be able to spend
money on them, it is not true that the rock
stars, sports stars, casino owners, employee's
wages, and the expenditures for stadiums,
casinos, advertising, accessories, etc. are
not taken from those who do not care for
their work. Obviously, if they produce nothing
else and with the proceeds, consume considerable
goods, as well as using facilities and resources
that others produce, it is very probable
that those who do not enjoy their singing,
sports, or gambling will have less of the
world's earthly goods and services in order
that the singers, casino owners, sports stars,
etc. may have more of it. They will certainly
have to pay a higher price since the world's
resources are limited, so the law of supply
and demand will drive up the prices of the
remaining goods, facilities, and resources.
b. It is
even more likely that the rock singers',
sports stars', and casino owners' fortunes
are to some degree taken from Einstein. For
the `Einsteins' of the world are usually
professors who are relatively poorly paid
in our capitalist society and who mainly
live, directly or indirectly, on some form
of public bounty. Consequently, the more
rock singers, casino owners, sports stars,
etc., are paid for their work, the less scientists
and professors such as Einstein may be remunerated,
and the higher the cost of land, equipment,
and buildings for homes, schools, universities,
etc. I am not saying that this is terribly
unfair and horrible--for if the public freely
chooses to reward rock singers, sports stars,
or casino operators more than it chooses
to reward `Einsteins,' it is presumably entitled
to do so but, it will have to pay the price.
If, however, these people tend to give visible
and immediate benefit to mankind and the
`Einsteins' tend to give the world less visible
and immediate benefit, and the public shortsightedly
rewards the former more than the latter,
it is certainly something of a disadvantage
for capitalism to encourage such a peculiar
system of reward; and it seems silly for
Rand not to have recognized this fact.
c. Although Albert
Einstein may not lack proper recognition
and support in a free society, on what Rand
calls an appropriate intellectual level,
most scientists and professors get much less
publicity than he did and may not be recognized
by the public at all, even though their contributions
to science and humankind have been enormous.
Such scientists may get intellectual recognition
from their fellows (a small minority of our
populace) but the public, including the intelligent
reading public, hardly knows of their existence
in most instances.
Rock singers,
sports stars, and casinos, however, get enormous
public acclaim not merely because they are
in the entertainment business, but because
part of their business is to hire high-priced
publicity people to sell their names to the
public. Scientists and professors who did
the same--if they could afford to do so --would
often be considered professionally unethical
and would be censured by their professional
societies. Capitalism--whether or not Rand
admits it --usually favors certain kinds
of popular singers and other stars not only
monetarily, but also with publicity. This
is not to say that people under capitalism
have to behave the way they do; or that people
under alternative systems, such as collectivism,
will behave any better than they will under
capitalism. But it is to say that capitalism,
ideally or not ideally, encourages various
important kinds of human inequities, particularly
those backed by paid publicists.
10. Ayn Rand apotheosizes
capitalism and ignores many of its obvious
failings. Thus, she notes that the magnificent
progress achieved by capitalism in a short
span of time is historically supported. Moreover,
its progress was achieved by non-sacrificial
means. Progress, she says, can come only
out of individual surplus, i. e., from the
work and energy, the creative over-abundance
of capitalists who produce more than they
consume. By taking their own risks, they
make progress not by sacrificing to some
distant future, but as part of their enjoying
the living present, (1966b). Here are some
of the palpable errors of Rand's view:
a. Rand implies
only capitalism has achieved magnificent
progress in a brief span of time. But, of
course, non-capitalist systems, such as those
in the Soviet Union and Communist China,
have also achieved magnificent progress in
briefer spans of time. These systems have
at times also led to more equality for women
and far better health services for the entire
public. Some of the political and social
disadvantages that have accrued to the Russian
and Chinese people while progress was achieved
may indeed be great; but these cannot gainsay
the fact that the progress was also achieved.
Besides, capitalism--to say the least! --also
often achieves great progress at immense
human cost.
b. What Rand forgets
is that the "individual surplus"
that she says is created under capitalism
is usually also created by individuals depriving
themselves of consumer goods in order that
they may accumulate capital to invest or
reinvest in their businesses. When, in the
capitalist system, people become wealthy
enough, and have what she calls a "creative
over-abundance," they can then put aside
capital while simultaneously engaging in
a great deal of personal consumption. But
few capitalists start off this way; and many
never get to the point where they continue
to retain and add to their capital except
by personal deprivation. Some capitalists
begin by borrowing capital rather than saving
it; but only a few can manage without considerable
self-deprivation. This, of course, is the
self-sacrifice that Rand dramatically deplores.
Rand also fails to mention that huge numbers
of entrepreneurs lose everything they have
on their invention or new business. As said
before, capitalism is like the lottery -
you only hear about the winner - not the
millions of losers.
c. Rand excoriates the
starvation of the masses produced in the
collectivist Soviet Union but ignores the
following:
(i) Even in the
United States, where the agricultural and
other resources have been plentiful in proportion
to the number of inhabitants of the country,
many workers and their relatives, in both
the industrial and the farming regions of
the country, have often practically starved
during our most prosperous times.
(ii) During periods
of depression, which have so far been chronic
and indigenous to capitalism, extreme poverty
and near-starvation have been known by high
percentages of our populace. In fact, according
to Nobel Prize capitalist economist Milton
Freidman, the Federal Reserve run by capitalists
caused the great depression. Fortunately,
we have not had any depressions for many
years; but as the objectivists and most other
economists admit, this good state of affairs
largely resulted from the government's stimulation
of the economy during a series of wars we
have been involved in during that period,
and a somewhat enlightened Federal Reserve
policy. Moreover, in this twenty-first century,
serious recession and economic depression
have occurred in America, Japan, and several
other capitalist nations. High unemployment
across the world has not been solved in the
hundreds of years that capitalism has existed.
Variations of collectivism, on the other
hand, have lifted more out of poverty in
one hundred years, with much greater success
than early capitalism.
(iii) Just as Soviet agricultural mismanagement
produced famine, so has American shortsightedness
led to an immense amount of soil erosion,
stripping of fertile land by poor crop growing
practices, the harvesting of under-ripened
eatables, and other aspects of agricultural
mismanagement; which have at times forced
tens of thousands of farmers to leave their
land, and resulted in famine or near-famine
for millions of individuals. The main ways
in which these evils have been halted--as
the objectivists again will be the first
to admit--have been by our government's use
of highly collectivized methods of agricultural
subsidy and control.
It should also
be noted that the industrial revolution in
Western Europe caused tremendous unemployment
by greatly reducing the labor needed on farms
with machines. This enabled the factory owners
to pay wages at or below the subsistence
level, get away with abominable working conditions,
and require long hours. Children and women
were tied, sometimes literally, to the factory
machines for seventy to eighty hours a week.
These conditions continued for more than
one hundred years. It was not until the social
legislation of the last half of the nineteenth
century that subhuman working conditions
began to be improved, and this social legislation
was probably as important as any other factor
in causing the improved conditions.
More recently, in our
own country, until the great depression in
1929, steel workers worked seven days a week,
in twelve-hour shifts, for a total of eighty-four
hours per week. And until the International
Ladies Garment Workers Union became a powerful
force during the early years of the twentieth
century, sweatshop conditions were rife in
New York City and other parts of the country,
and led to great evils. Without technological
improvement, poor working conditions might
still exist; but technological improvement
is not unique to capitalism, it is also common
under collectivism.
c. The objectivist contention
that progress under capitalism is part of
the living present and is achieved while
people live and enjoy their lives, is at
best a sorry half-truth. Even the most successful
capitalists tend to live much more for the
future than for the present and to amass
huge paper fortunes, which they use in minor
ways for personal consumption. Lesser capitalists
tend to be even more future- oriented and
have even less time and money to spend on
themselves. Most capitalists are notoriously
joy-deficient, in that they worry incessantly,
are obsessed with their business affairs,
stress themselves into early heart attacks,
are often abysmally uncultured, consume for
purposes of display rather than for real
enjoyment, and in many other ways, are miserable
tranquilizer-taking, alcohol-sopping individuals.
There is no evidence that people, as a whole,
are happier in capitalist, than in non-capitalist
regions.
11. The psychology
of people under capitalism is mainly ignored
by Ayn Rand and a myth is set up in its place
to the effect that these people really want
to work hard for a living, to discipline
themselves to save their money, and to produce
useful products for themselves and their
fellow men. "Most people," states
Ayn Rand "are not moochers who seek
the unearned, not even today," (1963).
What claptrap!
Now that full-bodied American capitalism
is a few centuries old, most people in this
country are engaging in various kinds of
organized and unorganized gambling; are cheating
on their personal and business taxes; are
padding their business expense accounts;
are trying to acquire millions of dollars
on the stock market (gambling really) instead
of engaging in productive work; are deliberately
avoiding employment and living off unemployment
insurance for considerable periods of time;
accepting some form of relief when they could
be working; are applying for all kinds of
government aids, benefits, subsidies, and
grants; are holding featherbedding jobs as
a result of union-management contracts; setting
up restrictions which make it very difficult
for others to work in their professions;
selling the shoddiest of merchandise to anyone
they can induce to buy it; and are manufacturing
or selling foods and drugs which do more
harm than good to the consumers, etc.
Ayn Rand may contend, of course,
that mooching is against the spirit of capitalism
and that it exists in spite of entrepreneurism.
The fact remains that the spirit of capitalism
is not productive work, but the acquisition
of more and more money by whatever means
possible, for the least amount of effort,
in spite of Rand's allegations or implications
to the contrary. In its early years, capitalism
was the kind of system where profits were
perhaps more easily amassed by starting and
operating a factory than by other means.
But this is by no means true of today's capitalism.
Innumerable "middle-man" businesses
have grown up--such as advertising, merchandising,
financing, and lobbying--and many of these
businesses promise the individual much more
reward at the risk of less investment than
does manufacturing or agriculture. Since
it is the nature of capitalists to seek higher
incomes for minimal risk-taking and to use
high-pressure selling techniques rather than
high-level productivity, mooching of one
kind or another has become the norm in our
capitalist society; and the kind of capitalistic
ideals which the objectivists preach are
very rarely followed. I am not contending
here that money is the root of all-evil and
profit making necessarily warps people. But
it certainly helps!
12. "Under
capitalism," states Nathaniel Branden,
"any man or company that can surpass
competitors is free to do so." (1966g).
This is another half-truth by the objectivists.
Yes, under capitalism any individual who
is able to surpass competitors probably won't
go to jail if he arranges to do so; while,
under certain forms of collectivism, he may.
But under capitalism, especially as it now
exists in these United States, any person
who can surpass competitors is free to do
so--if he can beg, borrow, or (often!) steal
enough capital to work with; if he can sell
the product he produces; if he can meet innumerable
government regulations about manufacturing,
selling, hiring employees, and paying taxes;
if he can somehow arrange to induce enough
legislators to pass the laws he wants and
repeal the laws he dislikes; if his products
are wanted in a war or peace economy, whichever
happens to exist from time to time; if competition
from abroad, often subsidized by foreign
government doesn't put him out of business;
and if many other events that are largely
out of his control do or do not occur. Capitalist
production is regulated, today, from beginning
to end by all kinds of important influences.
Perhaps, as the objectivists contend, it
shouldn't be. But it is, and it seems that
it will continue to be.
I am reminded, in this connection,
of the old story about the man who kept telling
his friend all about the terrible traits
of women. They were, he said, silly, fickle,
childish, nasty, unsexy, over-talkative,
and Beelzebub knows what else! "I quite
agree with you," said his friend. "But
don't forget they're the only thing we have
in that line."
Let me agree, then, with Ayn Rand:
Modern capitalism is restricted, shortsighted,
politically hogtied, un-idealistic, corrupt,
and hellishly "un-capitalistic."
But don't forget: It's the only thing we
have in that line. And it seems almost certain
that this "un-capitalistic" type
of capitalism or something akin to it is
going to remain for some time to come. When
we speak of capitalism, therefore, this is
what we'd better be talking about. All else
is a phantasmagoric dream.
13. The inevitable goodness
and holiness of capitalism is one of the
cornerstones of Randian thinking. Thus, Branden
notes that capitalism, by its nature, is
a constant process of motion, of growth,
of progress. Under capitalism no one has
a vested right to achieve. All people have
the right to do better--if they can, (1967b).
This is mistaken in several respects:
a. Capitalism,
by its very nature (or the nature of the
humans who operate under it), definitely
encourages vested interests and economic
stasis. Once a large corporate entity becomes
established, it tends to acquire what Gaibraith
calls a "technostructure," and
to have all kinds of vested interests which
encourage it to maintain its policies, whether
or not these make for economic progress or
retrogression.
Objectivists may object
here that their kind of ideal capitalism
consists only of people who are completely
productive, honest, informed, rational, and
physically un-coerced, and that such people
would not encourage economic stasis and vested
interests. But such people don't exist; and,
even if they did, it is doubtful that they
will long survive under any system, which
even slightly resembles actual capitalism!
b. Although, under capitalism,
no one has a vested right to a position purely
because the state keeps him in power and
refuses to let others take his position from
him (as is often true in collectivist states),
there may actually be a great deal of state
power behind him which tends to keep him
where he is. Thus, the president of a large
corporation who has the ability and influence
to wrangle government contracts for his firm
may remain president even though others are
more capable than he is; and the owner of
a neighborhood bar who bribes the local police
may remain in business when more capable
proprietors who do not resort to such bribery
are unable to keep operating. Perhaps Ayn
Rand's ideal capitalists would never resort
to bribery; but many normal capitalists would
and do! This is important since her ideal
of a totally laissez-faire system would not
prevent capitalists from continuing to do
so, and worse. As said before, even if her
ideal system was instituted for a while,
it is bound to revert right back into the
present system because of human nature.
c. Vested rights
to a position exist under capitalism in millions
of instances where no governmental control
backs them up. Thus, a highly incompetent
man can have a high position in a capitalist
firm, and very frequently does, because,
for example, he is closely related to the
boss or president; or because some high-placed
woman in the company is sexually attracted
to him; or he is having a homosexual affair
with a company official; or he knows some
scandal about executives of the firm; because
he is friendly with important union officials;
and so on. To state, as Branden does, that
"no one has a vested right to a position
if others can do better than he can"
is therefore ridiculous, unless the term
"right" is used in a very limited
and unrealistic manner.
14. The objectivist
credo states that in a pure form of laissez-faire,
free-market capitalism there would be no
severe recessions and depressions. At worst,
said Branden when he echoed practically all
of Rand's views, the economy may experience
a mild recession. Ah! But, "a temporary
recession is not harmful but beneficial."
Why? Because it corrects the error of the
economy and brings it back to health, (1966g).
Really?
6. The word "right" is derived from
the word "law"; it is what the
law grants; which is determined by the community
and its government.
There is, of course,
no way to check the truth of this hypothesis,
since no unregulated economy has ever existed;
nor does it appear that one ever will. On
theoretical grounds, however, it seems clear
to practically all economists that severe
economic recessions and depressions are inevitable
under actual capitalism--unless drastic governmental
measures are taken to prevent them. Various
schemes, ranging all the way from liberal
government spending and subsidizing, to strict
belt-tightening in times of depression have
been worked out; and some of them, at times,
seem to be at least partly effective. But
practically everyone except Ayn Rand and
her followers seem to agree that capitalism,
left to its own devices, will lead to recessions,
depressions, and at times, stagnation. The
capitalist cycle can be easily outlined as:
a.) Optimism,
or the creation or discovery of a product,
process, or service which brings new or increased
sales and profits;
b.) The infusion
of capital and labor into that and subsequent
markets by competitors to produce the same
or similar goods to order to acquire those
new or better profits;
c.) Over-supply of those
goods and services, since there is no overall
plan to match production with consumption;
which then results in:
d.) The dropping of prices
and profits; the failure of many of those
businesses; the losses of the capital invested;
increased unemployment, and possible recession
or depression.
Modern technology
can produce so many goods that even well
paid workers have difficulty consuming them.
Capitalism demands ever-increasing profits.
This equates to ever-increasing consumption.
When humans did not have enough to survive,
this was good. However, consumption levels
are now so absurd that we are not really
"consuming" what we produce. Our
closets, garages, and storage rooms are full
of things we do not use. We have multiple
cars, motorcycles, boats, sporting equipment,
electronics, and other toys, which, since
we have so many, are, used only part of the
time, if at all. Our "obsolete"
computers that we can hardly give away still
do the job practically as well as our new
"cutting edge" ones; in the real
world of limited supply, there are not enough
resources for the entire world to continue
the rapid expansion of consumption. Therefore,
pure capitalism is bound to be impaled on
one horn or the other with this consumption
dilemma. In a world of diminishing resources,
capitalism must eventually run out of gas,
pardon the pun.
In the old days,
the threats of serious unemployment and a
surplus of investment capital were fairly
well met by expanding domestic frontiers,
the possibility of foreign investments, and
the great consumption of materials and labor
that occurred during major wars. But, how
long will these kinds of stop-gap measures
be effective and who will come to the rescue
of the existing capitalist system? Periods
of serious recession and depression seem
inevitable, unless special governmental (and
as the objectivists would say, anti-capitalistic)
controls are employed. Even the Federal Reserve-with
its revered chairman, Alan Greenspan, Ayn
Rand's disciple--is a collectivist, statist
organization. When these controls are employed,
evidence from the first few years of the
twenty-first century largely shows they haven't
worked.
Branden's point
that temporary recessions are not harmful
but beneficial is a curious one, especially
when he notes that such recessions represent
the curtailing of disease within the economic
system. He favors some organism assailing
it, following the logic that a fever is 'good'
because it helps rid the body of disease.
Perhaps so. But the problem of fighting disease
would be far more efficaciously solved if
we could eliminate the disease completely,
or built the body's resources so that it
was not prone to serious infection. Branden's
callous attitude can be lampooned by the
old joke, "What is the difference between
a recession and a depression? A recession
is when your neighbor is out of work. A depression
is when you are out of work."
Similarly, instead
of retaining present-day capitalism, with
its tendency to overproduce goods and over-investment,
then saying that recessions and depressions
are "good" because they help return
it to the condition of underproduction and
underinvestment, it might be far more effective
to redesign the system, or replace it with
another system, in which overproduction and
over-investment rarely occur and therefore
doesn't have to be "cured" by recessions
and depressions.
It should be noted that
during a recession, unemployment rises and
manufacturers operate their plants and equipment
below capacity. Workers do not have the purchasing
power to buy goods and services, and business
firms do not produce all they can produce
because of insufficient demand. Recession,
therefore, harms both employers and employees;
and it is difficult to see what real good
ensues. Moreover, recession breeds mismanagement
since there is a demand for jobs and goods
that goes unsatisfied while the very real
capacity to satisfy goes unused.
The fact is that
in any reasonably unmodified form of capitalism,
general economic planning has to be so limited
that, from time to time, serious overproduction
and lack of investment opportunity occurs.
Since capitalists are generally secretive,
in order to protect their advantages, they
cannot see the whole situation. Therefore,
the individuals within it can only vaguely,
poorly plan. They lack clear vision or a
master plan for the future, or even the best
immediate response to the changing present.
It is also practically certain that there
will not only be many recessions but occasional
serious depressions in this kind of economy.
Now, it is quite possible that, considering
capitalism's other advantages and potentialities,
these recessions and depressions are a relatively
small price for us to pay, and that we should
philosophically accept this price. But capitalism
has enormous disadvantages and there is no
reason to believe that ideal capitalism (a)
will ever exist or (b) if it ever does, that
it will not have its own disadvantages, including
wasteful consumption, overproduction, recessions,
and depressions. People, even under utopian
capitalism, will be fallible; and fallible
people build and run fallible economic systems.
15. Ayn
Rand and her objectivist comrades take an
unrealistic attitude toward the hazards of
economic planning and the supposedly enormous
ease and automatic nature of the free market.
Thus, Branden notes that in a free economy,
when businessmen make an error of economic
judgment, they suffer economic consequences,
(1966g). But in a controlled economy, a central
planner makes errors of economic judgment
and therefore the whole country suffers the
consequences. Some of the fairly obvious
objections to this one-sided viewpoint concerning
economic planning are these:
a. When entrepreneurs
make an error of economic judgment, it is
by no means merely they and their associates
who suffer the consequences. If a capitalist
is president of a large corporation, and
if he decides to produce the wrong product,
or use an ineffective type of sales promotion,
move his factory to a region where it cannot
operate well, commit some other business
error, not only may he and his suppliers
and purchasers suffer, but (i) he may throw
thousands of people out of work; (ii) he
may upset the economy of an entire community;
(iii) he may help precipitate a serious recession
or depression in his country; (iv) he may
upset the economic balance in a huge industry;
and (v) he may create all kinds of other
economic, political, and social repercussions.
b. Rand and Branden's
position implies that the free market works
automatically and that economic planners
have to work consciously to make good plans.
Consequently, the free market requires much
less work on the part of human beings and
is more rational and prone to result in fewer
human errors. What is false about this implication
is that the free market, as Frederick Hayek
and some other economists have said, does
not work at all automatically but probably
requires more work and worry than any other
system of economics yet to be devised.
Let us see for a moment how
things would really work if there were a
completely free market: Mr. Jones produces,
let us say, nuts and bolts, and sells them
to various distributors, retailers, and manufacturers.
When he first goes into business, he knows
that there is a great demand for his product,
and he can hardly produce enough nuts and
bolts to meet this demand. So he sells them
at the prevailing rate or a little higher
and he makes a nice profit.
A period of time goes by and
Mr. Jones increases his production of nuts
and bolts. In the meantime, several other
manufacturers start making a similar product
and some of the older manufacturers keep
increasing their production, too. Meanwhile,
the number of customers for nuts and bolts
increases, but not quite as rapidly as the
facilities for making them have skyrocketed.
So now a plethora of nuts and bolts exist,
and Mr. Jones finds that he and his competitors
have more than enough on hand. He has several
choices: Shall he manufacture fewer nuts
and bolts, (even though his overhead may
remain pretty much the same if he does)?
Shall he sell his product for a lower price,
(even though his manufacturing costs do not
decrease)? Shall he forget about nuts and
bolts and manufacture some other product
instead?
How can Mr. Jones answer
these questions? He can best answer them
by getting a good deal of salient information--as
to the inventories of his competitors, the
likelihood of their going out of business,
the prices they probably will be charging
next season, and the general prospects for
the sales of nuts and bolts in the country,
etc. And since much of this information is
unavailable or hard to get, Mr. Jones will
have to make many guesses, and make his decisions
according to these guesses. Then when some
of his guesses prove to be incorrect, he
will have to guess again, and make new decisions
according to the new guesses. In a totally
free market, mind you, Mr. Jones will not
have a manufacturers' association to give
him very much help, he will not be able to
get together with other producers and prices;
nor rely on governmental loans or subsidies;
he will not have any national tariffs to
protect him from cheap imports of nuts and
bolts that may come from abroad, and he will
have practically no help except that which
comes from his own brain with the aid of
employees or hired agencies.
Poor Mr. Jones!
Even if he succeeds in the nut and bolt business,
he has some job cut out for him! He will
have to be continually checking his competitors'
prices, changing his own prices every few
weeks or months, entering into voluminous
correspondence with his customers, exploring
the raw materials market to see where he
can possibly buy more cheaply, canvassing
the labor market to see if he can get better
workers for lower wages, etc. For the so-called
free market does not work automatically and,
as we can easily see, is far from free. It
only works because Mr. Jones, and millions
of other entrepreneurs like him, stay awake
nights, worry over prices, make innumerable
guesses, worry over wages, make innumerable
more guesses, spend money on all these non-productive
details, and keep changing their cost and
their selling prices from month to month,
week to week, and even day to day.
When times are
relatively good; it is still possible for
Mr. Jones to make a decent profit. When times
are bad, the best he can do is to minimize
his losses. Mr. Jones tends to become much
more frantic in his information gathering
and his guessing; and if he saves his business
without ending up in the nut house, he is
lucky! At best, he is continually harassed
and fearful; and it is unlikely that he is
going to enjoy this kind of harried existence.
In view of all
this concrete information-gathering, checking,
rechecking, guessing, re-guessing, price-changing,
wage-lowering and wage-raising, corresponding,
and other operations required of Mr. Jones
to keep alive in the "automatic"
free market, it is no wonder that he almost
always shows great enthusiasm when some plan
is devised for curtailing or stopping the
operations of this kind of pure capitalism!
It may be pointed out to him that he can
get together with "competing" manufacturers
and fix prices, or that he can have a trade
association or the government bind him to
some kind of cost-fixing and price-fixing
arrangements. As soon as this happens, Mr.
Jones may be delighted to go along with such
a scheme. Without doubt, this is one of the
main reasons why the free market has never
really worked for any length of time, and
why pure capitalism is still a myth.
Moreover, just as the
producer must shop for supplies and figure
out what consumers want, under Rand's capitalism,
the customer must be fully informed and logical
in order to buy the best product to reward
the best producer. This means that the customer
must travel from store to store, read labels,
record prices, compare quality, spend time
making a decision, and then return to the
store with the best offer. None of these
costs produce the product wanted. They are
hidden costs of time and money as well as
the accompanying anxiety that capitalism
produces, yet ignores.
This does not gainsay
the point made by the objectivists that a
planned economy has great dangers. It does.
The central planning board may err; work
with the wrong information; consist of corrupt
individuals; not work well with other key
central planning boards; come up with decisions
which are misguided and costly to the nation's
economy; or it may get into many other difficulties.
It does, however, have
many advantages too: It can more easily obtain
relevant data than an individual manufacturer
(and only has to do it one time by one team
rather than many times duplicated by many
competitors); it can often correct its own
mistakes fairly quickly; it can make decisions
which are beneficial to many people rather
than to a favored few; it can see that valuable
natural resources are preserved; it can replace
an old technology industry with a modern,
more efficient one that would be resisted
by individual capitalist owners, and so on.
What the objectivists
refuse to see is that if that Mr. Jones,
working as a free agent under free market
capitalism, has many benefits and handicaps,
the same can be said for central planning
boards, whether they be run by trade associations,
local governments, national states, or by
world federations. No ideal system of free
markets or national economic planning exists.
Mr. Jones is not an individual hero, and
a national planning board is not a collective
villain; nor is a collectivist planning board
heroic and Mr. Jones villainous; stated otherwise:
human beings in the final analysis always
do economic management. They, and not the
"free market," or the "collective,"
or any other entity, do the actual work that
is required for making industrial and marketing
decisions.
The free market
only works "automatically" because
millions of men and women who take part in
it "automatically" run to their
battle stations, put on their thinking caps,
and make innumerable decisions which cause
prices to rise, fall, or remain stationary.
The fact that people who use a free market
work according to some kind of profit system
may possibly help them make more rational
decisions than those who work according to
some other kind of economic system. But there
is no reason why this has to be so. For when
one person loses money under capitalism another
luckier capitalist may make it; and neither
of their decisions may be made along very
practical or sensible lines, for as I said,
their object is profit-making, not the highest
and best use of the economy's resources for
the greatest benefit of all.
A truly "rational"
system of economics, does not concern itself
merely with money and the decisions that
are made, but also with the human cost of
making such decisions. Even if it were true
that Mr. Jones and millions of his fellow
producers were able to "automatically"
make better decisions about buying and selling,
the questions would still arise: Is it really
more efficient for so many Mr. Joneses, rather
than so few committee members, to spend their
time deciding such matters? And, are all
the headaches acquired by Mr. Jones and his
fellow businesspersons in the course of the
decision making process really worth it?
Of course, Mr. Jones
may have nothing better to do in life than
to stay up night after night worrying about
the price of his nuts and bolts. Or he may
actually enjoy this kind of activity and
consider it a creative endeavor. Or he may
feel that, if he lets a central planning
committee make his economic decisions, planners
will start regulating the rest of his life
as well--will tell him what kind of tie he
should wear, when he should eat his meals,
and how often he should copulate with his
wife.
So there are compensations
that Mr. Jones may have if he acts as a capitalist
and takes on his shoulders all the responsibilities
for "automatically" abiding by
the rules of the free market. But there are
also enormous drawbacks. And it is these
drawbacks that Ayn Rand, with her one-sided
deification of pure capitalism, pig-headedly
refuses to acknowledge. Not that there aren't
serious drawbacks to allowing a nation's
economy to be run by civil servants, who
can easily become bureaucratic, self-seeking,
corrupt, unresponsive to consumer desires,
and otherwise inefficient; for there certainly
are such disadvantages of collectivism. Let
us, unlike Rand, recognize the evils of all
economic systems and not pretend that ideal
capitalism would be perfect or feasible.
Let us admit that a combination of socialism
and capitalism may possibly produce the best
we truly want to achieve.
16. Since Rand
is opposed to any form of collectivism, she
also is opposed to collective bargaining
on the part of labor. Whereas the Marxist
philosophy insists that all productivity
and economic value stems from labor power,
and that profit is merely the surplus value
that the employer extracts from his laborers
through the process of exploiting them, Rand
takes the opposing view: that labor itself
is worth relatively little but gains most
of its value through the creative ingenuity
of individual capitalists, who help it achieve
its best ends. States Nathaniel Branden in
this connection: A country's standard of
living, including the wages its workers receive,
depends on the productivity of labor. But
high productivity, in turn, depends on machines,
inventions, and capital investment; and these
depend on the creative ingenuity of individual
men. Only a capitalist system that protects
the individual's rights and freedom provides
these essentials, (1966g). Here are some
objections to this position:
a. Both the Marxist
view and the objectivist view are myopically
one-sided. Yes, workers would not produce
very much without machines, inventions, and
capital investment; but capitalists would
not produce at all without various kinds
of employees, as well as those workers who
had a notable part in producing the machines,
the inventions themselves, and the capital
investment that they employ in their plants.
The capitalist and the worker are interdependent;
and under the capitalist system, one would
not get very far without the other. Moreover,
the worker is the customer in the big picture.
If the capitalists continue their consolidation
and automation of production, there will
be almost no workers - and no customers.
Productivity increases will either have to
be limited or most people will have to give
up their work ethic.
b. The capitalists
themselves are workers. They are not merely
people with ideas, creative inventiveness,
and an intransigent belief in rampant individualism--as
Ayn Rand nobly depicts them in her novels--but
are also, and perhaps more importantly, people,
who work steadily at building their enterprise,
who deprive themselves of all kinds of goods
and pleasures in the process, and who keep
plodding away to earn and to save money,
and still more money. Very often, they have
a minimal of creative imagination and clear-cut
ideation. Often, they are imitators, buyers
and stealers of others' ideas, grubby traders
who make excellent use of others' inventions
but who rarely think up any of their own.
To be sure, they organize, direct, and take
financial risks. But most of all, if they
are successful, they probably work and work
and work.
It should
be recognized that very frequently the inventor,
the innovator, and the capitalist are three
different people. The inventor creates a
new commodity or technique or improves on
existing goods and services. The innovator
finds a way to produce and market a commodity
so that there is demand for it. The capitalist
mainly provides the financial backing for
the entire set of transactions that includes
invention, innovation, production, and distribution.
In the old day the capitalist may have been
an inventor and innovator as well as entrepreneur;
but today is likely to be a capitalist in
the literal sense of the term--an accumulator
of capital who finances the business for
which investors, innovators, and other individuals
work. Rand's continual use of the term "capitalist"
as if it were synonymous with creator, inventor,
or innovator is therefore not legitimate.
She refuses to acknowledge the highly uncreative,
work-day activities capitalists perform most
of the time.
c. There is no
evidence that the creative ingenuity of individuals
requires, for its exercise, a politico-economic
system that protects the individual's rights
and freedom. People of outstanding creative
ingenuity--including composers, artists,
inventors, statesmen, generals, writers,
and professionals--have done marvelous work
under the worst kind of despotic monarchies
and dictatorial governments. People of genius,
like Mozart and de Vinci, for example, worked
for royal patrons. Modern rocketry was developed
to outstanding heights (no pun intended!)
under, first, the Nazi and then the Soviet
dictatorships. It is quite probable that
creative ingenuity, in the long run, tends
to develop better under conditions of politico-economic
freedom than under authoritarian regimes.
But it certainly can flourish quite well
under politico-economic systems that Ayn
Rand in no way tolerated (and which I, too,
would deplore). Moreover, while the economic
growth of a nation is partly dependent upon
the nature of its politico-economic system,
it seems clear that a government can aid
the growth process by doing more than merely
protecting the individual's rights and freedom.
For one thing, it can spend money on research
development that may pay off handsomely.
In our own country, for example, many billions
of dollars a year are spent on research development;
and the government puts much of this up through
subsidies and tax incentives, thus encouraging
research money spent by private industry.
Much of the research development funds available
are used by private industry; and a large
part of America's recent economic growth
seems to be both directly and indirectly
attributable to this kind of government spending.
There is another
confusion in Rand's philosophy. The real
essence of capitalism is the direct rewarding
of effort. The essence of what Rand is saying
is that people only perform well when their
rewards are closely tied to their efforts
and not taken from them after the fact. She
expands that concept to mean that there must
be no control or involuntary tax on such
efforts or they will cease. Yet B. F. Skinner
and others proved long ago that it is the
schedule of reinforcement or punishment that
really matters, so that one can train an
animal and some humans to work for very unprofitable,
undesirable things in the long run. However,
the reverse is also true--you do not have
to give them huge rewards, as capitalists
would have you think. Rather, you just need
to make the reward sure and fair.
Furthermore,
there is no reason that rewards cannot be
built into a collectivist system just as
they are in the more successful corporations.
If done properly, the collectivist managers
would be rewarded for efficiency in their
operation as well as foresight for the whole
economy. For example, the manager of a buggy
whip and carriage factory would be rewarded
for shutting down his enterprise so that
an automobile company could form in a collectivist
society. In a capitalist society there will
be all sorts of skullduggery, wailing, pleas
to the government, and gnashing of teeth
in the transition, if it takes place at all.
17. Rand
takes the unrealistic attitude that humans
can only be coerced by the threat of physical
violence and that economic coercion itself
never leads to such violence.
Typically, Branden
notes that in a free, unregulated economy,
from which coercion is barred, no economic
group can acquire the power to victimize
the rest of the population. (1966b). This
is simply not true, because:
a. A free, unregulated
economy does not bar coercion; it sanctions
it. For coercion does not mean only physical
force, compulsion, restraint, or constraint.
It also means the use of any kind of power
or control to force, compel, restrain, or
constrain people to do something that they
do not want to do. Thus, a child is coerced
into being mannerly or going to school not,
mainly, because his parents whale the hell
out of him if he refuses, but because they
level various other sanctions--including
loss of his allowance--against him if he
does not comply.
In a free economy, I have the
perfect right to purchase the local water
reservoir, and then to force you and everyone
else in town to pay almost any price I ask
for drinking water. I also have the right
to accumulate money, by working hard and
spending little on myself; to use it to monopolize
the town's real estate, grocery stores, bars,
or anything else, and to force you to obey
virtually any rules I set up in regard to
living quarters, food purchases, or drinking
liquor. Large corporations impose arbitrary
rules and burdens on their employees and
customers. The recent documentary "Outfoxed"
shows how a single man, Rupert Murdock, has
ruthlessly tried to monopolize and pervert
the news to suit his own philosophy - which
is based on whose work? Ayn Rand!
In a true unregulated
economy I have the right to set up huge factories
in town, to poison the air with polluted
byproducts, to maim you and your family members
with this kind of pollution, and to deceive
and confuse you with my advertising or editorials.
And if you or others should try to stop me
by passing town laws against my polluting
the air, I can scream to the heavens that
you are abrogating my inalienable right to
be an individual, to use the free market,
to use freedom of speech and press to push
my agenda, and that you are unfairly coercing
me with your nasty governmental rules!
b. Economic coercion
is so pervasive and subtle that it is probably
far worse than most coercion by physical
violence. If you threaten me with assault
or murder in case I disobey your desires,
I can at least see that you are my enemy,
know what you are going to do to coerce me,
and prepare some kind of counter-attack against
you if I wish to do so. Even if you rule
my entire community by threat of physical
force, I may eventually incite a rebellion
against you, or get enough citizens to fight
your fire with fire and to use enough violence
to subdue you and your hired thugs.
But if you gain great
economic power in my community, you can more
subtly rule me and the other members of the
community in a variety of ways that I shall
probably never quite understand and combat.
Thus, you can directly and indirectly buy
political votes. You can bribe me directly
with money or indirectly bribe me by inviting
me to your social affairs and other functions.
You can coerce me by lording it over me economically
and making me seem foolish in front of others
unless I go along with you on various issues.
You can see that I do not get or keep the
kind of job I want until I do your socio-
political bidding. You can encourage others
to ostracize me by the economic power that
you wield over them. You can direct your
own or other privately owned media to praise
your efforts and condemn the support for
your candidates and denigrate mine. You can
even make the content of "entertainment"
shows subtly convince people that your way
is right and good while mine is silly and
bad. You can get me to think your way, and
really to believe that I naturally think
the way you do, by exerting socio-economic
pressure on me to conform to your ways of
thinking and behaving. You can use many other
social, religious, political, media, and
economic influences to get me to do what
you want me to do. Advertising is merely
propaganda for business.
All this, ostensibly,
is not coercion, since you do not overtly
threaten to maim or kill me if I won't do
your bidding. But if I believe that real
force and coercion are not involved in your
assault on my wishes, I am being exceptionally
naďve. And, in that way, I am being brainwashed
by you, the media, and by the social situation.
c. When physical constraint
does occur these days, and you force me to
do your bidding because I will be physically
hurt or killed if I don't, it is generally
economic power, which starts and makes possible
the physical coercion. Thus, if you are a
gangster and threaten to kill me if I don't
run my business the way you want me to run
it, or pay you off every week for letting
me run it my way; the main reason you can
get away with it is that you are using some
of your ill-gotten gains to bribe the police
force, to pay immoral lawyers, to buy out
businesses that might unfairly compete with
mine, to win social influence so that I and
my family may be socially ostracized in our
community, and so on.
Or if you are
a police chief or the mayor of my town and
you physically coerce me into paying off
your henchmen or voting for you at election
time, the main reason you keep your position
is usually that you have economic ties with
industry, with gangsters, or with other individuals
that enable you to gain and keep political
power. So behind your physical constraint
lie very pervasive and strong economic interests.
For reasons such
as these--and you can easily find similar
ones if you think about this matter of physical
coercion--it should be obvious that Ayn Rand
takes a highly unrealistic attitude about
coercion and victimization and blindly, stubbornly
believes that the free market would prevent
this kind of thing in the face of the overwhelming
evidence that it will not.
Ironically enough, if
the free market or some reasonable facsimile
of it does at first exist, some bright or
miserly individuals tend to save enough capital,
which others have not, creating an oligopoly
in capital. That oligopoly of capital begets
an oligopoly of businesses. Larger enterprises
need even larger amounts of capital. So capitalism
always begets limited monopolies, which then
become full-blown monopolies. Sooner or later,
they exert distinct political-social-religious
power and, through their businesses, engage
in all kinds of coercion. The Republican
Party under born-again Christian George W.
Bush and anti-government US Representative
Tom Delay in 2005, are recent examples of
this. Capitalism, almost by its very nature,
leads to concentrated economic power, which
often encourages one person to push around
others.
18. Rand
and her objectivist devotees maintain the
myth that capitalism, by its nature, must
lead to honest dealings by businessmen and
to their turning out a quality product. Says
Alan Greenspan in this respect: "What
collectivists refuse to recognize is that
it is in the self-interest of every businessman
to have a reputation for honest dealings
and a quality product. Since the market value
of a going business is measured by its moneymaking
potential, reputation or 'good will' is as
much an asset as its physical plant and equipment,"
(1966b). There are several major flaws in
this kind of "description" capitalism:
a. Although it is in
the self-interest of some businessmen to
have a reputation for honest dealings and
a quality product, it is hardly in the interest
of every businessman to have this kind of
reputation.
(i) Today, the individual
businessman is hardly known to the public,
since he directs a large corporation; and
his personal reputation is not much at stake
if his corporation practices skullduggery.
(ii) Nothing succeeds like
success; and most people admire the successful
person even when he is obviously dishonest.
John D. Rockefeller, Sr., as several biographers
have written, engaged in all kinds of dishonest
and disreputable business methods; but even
before his public relations men changed his
image to that of a kindly old man who doled
out dimes to golf caddies and other poor
people, the public seems to have admired
him despite knowledge of his dishonesty.
(iii) If people make
enough money by skullduggery, they can live
quite happily in spite of their poor reputation.
Surely enough crooks, gangsters, bribers,
thieving politicians, bookies, and other
individuals who gain a disreputable living
exist; and many others who are dishonest
know most of them. Yet, they somehow thrive
despite their poor reputations.
(iv) If capitalists
totally control the media, as they would
under pure capitalism and largely do today
in the US, they can downplay, ignore, or
outright lie about them with such a loud
voice that it drowns out the cries against
them, as they are doing today in the 21st
century.
b. As I indicated previously
in this chapter, thousands of capitalists
turn out shoddy goods instead of quality
products, and manage to keep in business.
Many of them, in fact, only make huge profits
because of the shoddy products they manufacture
and sell, while many quality manufacturers,
in similar lines of industry, go bankrupt,
(consider Wal-Mart). Perhaps there is some
significant correlation between an industrialist's
producing quality products and her remaining
in business and making money; but it would
appear to be fairly low.
On the contrary, the
existing capitalist system virtually forces
some individuals to produce shoddy goods
if they are to stay in business--partly because,
in the "free" markets we actually
have, the consuming public is so easily misled
and short of money that they will choose
almost any product that is cheap over a higher
quality one that is more expensive. The capitalist
culture of buying cheap is so perverting
that even the very rich waste much of their
time trying to "save" money - an
irrational thought since spending less on
an item you do not need is not saving at
all. Saving and acquiring money is an obsession
to most successful capitalists. A common
jibe at some of the rich: "He will spend
10 dollars in time to save 5 dollars in cash."
Few capitalists view being wealthy as reason
not to worry about money, and often buy shoddy
goods themselves. An interesting example
of this tendency of the public to purchase
goods or services cheaply at almost any cost
is shown in my own field. For years, I have
noticed people who are in need of psychotherapy
and who are able to afford the fees of private
practitioners will do a great deal of shopping
around for a cheaper practitioner or even
go to a clinic-- often at inconvenient hours
of the day--to save money. Such individuals
often will receive most of their psychotherapy
from a psychotherapeutic trainee, who is
inexperienced and often relatively incompetent,
only because by doing so they can get to
see her or him at a cheaper rate. They end
up, in many instances, paying more money
to relatively ineffectual therapists because
they have to see them much longer than they
would more effective therapists--and they
remain in psychological pain a much greater
period of time. But because they shortsightedly
look at their pocketbooks instead of their
pain and the therapist's ability to help
them, they foolishly go for the wrong kind
of help, wasting their time and money, and
ultimately extending their pain.
Although, theoretically,
this would not happen under ideal capitalism--where,
by some magical process, both producers and
consumers of goods and services would be
fully informed and be completely rational,
long-range hedonists seeking balanced, rational
pleasure--the chances of such an ideal form
of capitalism arising, particularly when
present-day capitalists fight it tooth and
nail, are virtually nil. First, we'd need
to have radically different kinds of humans
to populate it. Then we'd have to make certain
that they stayed forever incorruptible. Neither
of these possibilities seems worth betting
on!
c. Greenspan is
naďve if he believes that the "good
will" of a going business is based on
its reputation or on the quality of the goods
it produces. As he himself states, "the
market value of a going business is measured
by its moneymaking potential," and this
potential is often related in a minor way
to the reputation of its owner or to the
quality of its product. Even if a management
is dishonest and if the business turns out
shoddy goods, as long as it makes big profits,
its "good will" will be high. Thus,
ironically, its "good will" often
directly depends on its "bad will"
toward its customers and toward the public!
This does not mean that this is always true.
For, as Greenspan later points out, a drug
company may lose reputation and acquire very
bad will if it turns out a shoddy or dangerous
product. But another company may not!
19. Ayn Rand claims
that, because people apply knowledge and
effort, they have an absolute right to own
the thing they apply it to. Thus, she says
that all materials and resources that are
useful and that require effort should be
private property--by the rights of those
who apply the required effort. Broadcasting
frequencies should especially be private
property, because they are produced by human
action and do not exist without it. In nature,
only the potential and the space through
which those waves must travel exists. (1966b).
This is pretty crummy thinking, for these
reasons:
a. Virtually any material
element or resource that requires the application
of human knowledge and effort to make it
useful not only requires an individual's
but many people's application. Thus, although
Marconi invented the wireless, many other
inventors had to add to it before it became
the modern radio and TV system; and many
other inventors had to work at producing
wires, condensers, coils, and TV tubes before
their imaginings could be actualized. Even
the knowledge that Marconi and other inventors
of radio-TV systems employed to create their
ideas and conceptions had to be worked on,
refined, and taught to them by others. Isaac
Newton acknowledged this when he accepted
his famous appointment, stating: I stand
here today only because I stand on the shoulders
of so many great men who came before me.
Indeed, the whole concept
of the self-made person is ludicrous. First,
we are totally dependent on others as babies.
Second, language, math, literature, organizational
and management principals, laws, etc. that
we all must use in our pursuits, were given
to us. Moreover, living alone or in a small,
independent society would dramatically impair
ones ability to care, defend and fend for
oneself. If one were truly a self-made and
self-sustained person, one would have to
do everything alone. That equates to poverty
since one would be very busy surviving without
time to produce or enjoy luxuries.
So the notion that the
individual inventor, just because she applies
human knowledge and effort, has a full right
to her invention, seems one-sided. Presumably,
she has a partial right, perhaps even a large
one, to her "property" in the invention;
but other people, including her culture (not
to mention her teachers, the authors of the
books she has read, etc.), might legitimately
have some property right in her invention,
too.
b. Although it is true,
that which exists in nature is only the potential,
and the space through which broadcasting
waves must travel, it does not follow that
therefore; the person who first discovers
them should own these waves. We could perhaps
contend that if private property must exist,
one good way of deciding ownership is to
award the property to the individual who
first discovers it. But we could also say,
"Oh, no! The individual who first settles
on the discovered land; or who first develops
it properly; or who finds some outstanding
use for it--he should be the one who owns
it." Or we could say that the individual
who is the fifth owner of a piece of land
would therefore own it forever and be able
to will it to his heirs; while the first
four owners should only temporarily own it.
All property "rights,"
in other words, are arbitrarily given the
owner, by some definition--by some agreement
among people. A single individual, as Ayn
Rand and her followers see things, may relate
this agreement, to the application of human
knowledge and effort; or it can, according
to the way others see it, be related to other
criteria. It is also possible for people
to agree, at any given time and place, that
there be no private ownership of property.
This kind of collectivism, where the community
alone owns property and individuals do not,
may prove to be inefficient for many purposes;
but that does not prove that it is an evil
or immoral system of property ownership,
since for some important purposes such as
water supplies, parks, and army bases, it
has been proven superior. That Rand can see
only one possible method of "justly"
or "rightly" assigning property
rights is, once again, an indication of her
monolithic, absolutist-oriented views.
Just as Rand and other
objectivists see that individuals who apply
themselves to discovering and developing
property should "rightfully" own
it, so do they insist that patents and copyrights
are the legal implementation and basis of
all property rights: a person's right to
the product of his mind (Rand, 1966b). Here
again, they forget that the man whose mind
works out a patented or copyrighted idea
invariably leans on innumerable other men,
from the past and in the present, from whose
efforts he partially derived this idea; and
that even if he completely got it out of
his own head--which is almost inconceivable--his
society would still have the "right"
to insist that part or all of the property
rights in this idea belong to the community.
This, in fact, is what
normally happens under capitalism. An individual
who works for a large company invents a machine
or a process, and the firm she works for
insists that, because she is paid a salary
by it, all or some of the property rights
in this invention should go to the company.
By the same token, society could insist--and,
mind you, I am not saying that it should--that
just because it nurtures a human for all
of her life, and then enables her to exist
by some kind of activity, she owes all or
part of the property rights in her inventions
to it.
Rand's absolute
thinking that people have a complete right
to the product of their mind, only makes
sense by definition: because she insists
that it makes sense. It may be, on pragmatic
grounds, possible to prove that both the
individual and society will benefit more
by awarding inventors property rights in
their inventions than by awarding such rights
to others. But even if this were proved--which,
as yet, has definitely not been--a community
could still legitimately (though perhaps
not too sanely) agree that property rights
in inventions are to be shared rather than
solely given to the inventor. In contradiction,
Rand advocates force so people will not use
inventions or copyrights. In a truly laissez-faire
system, no businessperson could enforce his
patent rights.
20. Rand, when
she faces the fact that laissez-faire or
pure capitalism does not exist and most probably
never will, refuses to face the true reasons
for its failure to flourish. She rationalizes
as follows: Why has capitalism been destroyed
in spite of its incomparably beneficent record?
She answers: Cultures have a dominant philosophy
and capitalism never had a philosophical
base. It was the last and (theoretically)
incomplete product of an Aristotelian influence.
Its moral nature and its political principles
have never been fully understood or defined.
Even its defenders think it compatible with
government controls, ignoring the (sacred!)
meaning and implications of "laissez-faire."
Only mixed capitalist economies have existed
since the nineteenth century, and its controls
necessitated and bred further controls. The
statist element of this mixture wrecked pure
capitalism, and its free, capitalist element
took the blame, (Rand, 1966b). This statement
is misleading in several respects:
a. The capitalism
that Rand says was destroyed in spite of
its beneficent record apparently never existed.
Even early capitalism was far from laissez-faire;
and, as we noted previously in this chapter,
Rand and the objectivists themselves freely
admit that pure capitalism never existed.
b. Rand's "incomparably
beneficent record" of early capitalism
is another myth. Not that it did not have
a reasonably good record in some respects,
it did. But, as Karl Marx and many other
critics, including pro-capitalist critics,
have shown, early capitalism had many, many
abuses, in terms of its exploitation of labor,
its turning out of poor products, its unethical
practices, its destruction of the environment,
its encouragement of wars, and other deficiencies.
c. Virtually any
system of economics or politics has a philosophical
base; people make certain rules because they
believe, on some basis, that x is good and
y is bad.
Capitalism arose, fairly
obviously, because people believed that an
individual was capable of running a business,
of determining whether he would make a profit
or loss, of taking risks, of helping the
general system through helping him, etc.
If everyone had believed that people were
incapable of doing anything on their own
and that they had to make collective judgments
about everything, it is hard to imagine capitalism
arising. Adam Smith was the first "worldly"
philosopher to support capitalism. It is
ironic that Smith was, in reality, a pragmatic
socialist. He decried the conditions of his
day but accepted the reality that, for his
times, capitalism was the lesser of evils
available. So capitalism always has had some
kind of philosophical base, even though capitalists
and their antagonists may not have been quite
aware what this base was.
Money is the
real philosophical base of capitalism. Without
money there can be no capitalism. Money,
however, is not real--it is merely a symbol--of
a debt owed to the possessor for labor, goods,
and/or materials. The actual functions of
capitalism are the lending or investing of
money in hopes of receiving more money. Capitalism's
unwritten philosophical base is that individuals
do the gathering of fruits, vegetables, etc.
or the actual killing of game. However, the
individual, his family, and his tribe were
better off when they worked as a group. So
the collectivist state (family, tribe, and
hunting party) and the capitalist state (you
get to eat first if you kill it or find it
first) have always been inextricably intertwined.
Capitalism also arose from the observation
that the tribe as a group did not have the
time or the ability to manage every individual.
The group had the obvious disadvantage that
the tribe's leaders would frequently make
mistakes or abuse their power to better themselves
at the expense of the group. Hence, the mistrust
of power and the state arose early, Moreover,
since some people thrived in the lending
and investing of money, they and their family
were conspicuously alive and well and people
tended to copy what they saw as success.
Thus, Ayn Rand's real philosophical base
and its opponent philosophy were endemic
to human nature and social structures.
d. According to
Ayn Rand and her group "a resurgent
tide of mysticism engulfed philosophy in
the 19th century" (Rand, 1966b), but
this is a peculiar view. Actually, the end
of the nineteenth century and the beginning
of the twentieth saw the rise of logical
positivism, empiricism, pragmatism, and other
highly non-mystical (or less mystical) philosophies
than had previously existed. Only Rand and
the objectivists see these views--because
they disagree with them--as "mysticism."
e. Assuming that the
moral nature and political principles of
capitalism had never been fully understood
or defined, there is no evidence that it
therefore declined. It is much more likely
that the philosophy of capitalism--that the
individual, through a laissez-faire economy,
could make maximum profit and help humanity
most--was found wanting in practice; that
it did not work; and that consequently a
freer kind of capitalism declined into a
more controlled variety.
Rand insists that government
controls necessitate and breed further controls,
and she may be right. But she fails to see
that "pure" capitalism soon will
probably become so chaotic and one-sided
that it will breed controls, including government
controls; and this seems to be an almost
inevitable consequence of just about any
kind of capitalism. It was not necessarily,
as she alleges, "the statist element."
Rather, it was probably the free, capitalist
element that led to the statist element,
and eventually caused what she considers
to be the holocaust of mixed economies.
Included
in Rand's objectivist views on economics
are many contradictions. Although objectivism
is presumably a most rational and logical
set of principles, in actuality it is not.
Some of its inconsistencies in regard to
capitalism are these:
1. Ayn Rand insists
that since values are established contextually,
all people must judge for themselves, in
the context of their own knowledge, goals,
and interests, (1966b). Since values are
determined by the nature of reality, it is
reality that serves as their ultimate arbiter:
if people's judgment is right, the rewards
are theirs. If it is wrong, they are their
only victims. This is rather contradictory
gobbledygook on a number of counts:
Human values are established contextually:
with individuals relating with their environment
and reacting to it. The context, therefore,
is not merely their "knowledge, goals,
and interests," but their knowledge,
goals, and interests as partly determined
by the culture in which they live, by their
biological inheritance, and by various other
factors.
It may be reality that serves as men's ultimate
arbiter; but reality includes the person.
Therefore, again, it is an interaction between
individuals and the reality in which they
live that serve as their ultimate arbiter.
Interactions and transactions seem foreign
to Ayn Rand's mode of thinking. If a person's
judgment is right, the rewards are not only
his or hers; they are for their community
as well. And if it is wrong, the wrongdoer
is not necessarily the only victim; many
others may also suffer. Rand seems to hold,
at least implicitly, two contradictory creeds:
(i) people are the only
creators of their own values;
(ii) systems, such as
capitalism and collectivism, create values,
which impose themselves on people. Actually,
when one understands the dualistic or pluralistic
nature of things, both these propositions
may be true. But Rand does not appear to
uphold a dualistic view; and yet she and
objectivism cannot sustain a monolithic,
un-contradictory view either.
2. Nathaniel Branden
points out that the essence of the social
system Ayn Rand advocates, the system derived
from her ethics, is contained in a single
principle: "No man--or group of men--may
seek to gain values from others by the use
of physical force." (1965b). However,
as I have shown earlier in this chapter,
the capitalist system is precisely that system
of economics that does give one person enormous
power, both physical and propagandistic,
over other people, and that clearly encourages
the use of several kinds of force to enable
an individual to gain and to keep economic
power. Also, she advocates a state, and force
by that state to protect patents and copyrights.
This is the main difference between her and
"libertarians," who are really
anarchists with the even more unrealistic
wish that there be no government at all.
This ignores the fact that there are governments
everywhere that would soon impose themselves
on them. How Rand or the Libertarians can
endorse any large element of capitalism and
not encourage the use of physical and other
coercive force is quite a question!
3. Ayn Rand keeps contradicting
herself as to whether or not free capitalism
exists and whether or not un-free capitalism
is good. She insists that capitalism, in
her sense of the term, is only an ideal that
has never existed; but then takes existing
capitalism, which she presumably abhors,
and insists that it, with all its horrors,
is much better than statism or collectivism,
and presumably even good in its own right.
Thus, Rand noted that the differences between
the superior productivity and speed of economic
progress in West and East Berlin in the 1960's
indubitably showed that collectivist East
Berlin was inferior to capitalist West Berlin,
(1964). Rand's thinking is poor for these
reasons:
a. Both capitalism
and socialism are really forms of state capitalism
and state socialism, and are hardly entirely
different from each other, as Rand implies
that they are.
b. Even if socialism
in East Berlin in the 1960's did not match
the output of contemporary capitalism in
West Berlin that would hardly answer the
question of any comparisons between capitalism
and socialism "once and for all,"
as Rand states. At most, it would answer
the question with those particular people,
in that place, and time.
c. Oddly--or not so
oddly--enough, since this passage was published
by Ayn Rand in 1964, productivity and speed
of economic progress made great gains in
East Berlin; and, reports tend to show that
the building of the brick and mortar and
steel wall between the two sections of the
city by the East Berliners was one of the
main factors in the economic progress of
the eastern half of the city. Physical force,
in other words, did partly pay off--in spite
of Rand's theory that, economically, at least,
it never does!
d. Additionally, she
ignores the fact that the US and NATO poured
huge amounts of capital into Berlin that
would not have gone there under traditional
capitalism since capitalists abhor making
non-government guaranteed investments in
war zones. The fact that at the height of
the cold war billions were being poured into
a city completely surrounded by tanks, rockets,
and troops of the communists is proof that
massive state intervention and capitalism
greatly benefited the city.
4. If the objectivist
position in regard to capitalism were half
as sound as objectivists think it is, we
would presumably tend to have
(a) universal
capitalism and
(b) pure laissez-faire.
Nathaniel Branden, for example, notes that
the great merit of capitalism was that it
uniquely aids human survival and people's
need to grow. It leaves people "free
to think, to act, to produce, to attempt
the untried and the new." It rewards
effort and achievement, and penalizes passivity,
(1964a). This statement leads one to ask:
a. If capitalism is
so uniquely appropriate to the requirements
of human survival, why should Ayn Rand and
her associates have to keep beating the drum
in its favor? Obviously, it should win out
completely on its own.
b. Why, if capitalism
is so beneficial, do capitalist nations such
as the United States modify the system so
extensively that true believers in capitalism,
such as Randians, can hardly recognize it
as such? Why doesn't the United States economic
system become more and more, instead of less
and less, capitalistic?
c. If the principles
of capitalism operate in a way that rewards
effort and achievement and that penalizes
passivity, why do capitalists try to get
away from its pure state and why do they
passively go along with the intrusion of
so much governmental control over the capitalist
system? Can it be that people are naturally
more passive than active, that therefore
they do not get along too well under capitalism,
and that consequently they adopt non-capitalist
goals such as the welfare state, government
subsidies for industry, agreements between
management and labor unions?
Irrelevant arguments of Randians. The objectivists, who again are supposed
to be so logical in their appeals, ceaselessly
repeat irrelevant arguments in favor of capitalism
and against any form of collectivism. Here
are a few of their irrelevancies.
1. John Galt, in his
famous speech in Ayn Rand's Atlas Shrugged
gives this typically weak objectivist argument:
What determines the material value of people's
work? Nothing but the productive effort of
their minds. If people lived on a desert
island, their brains would think less efficiently,
the less their physical labor would bring
them, and they could spend their life on
a single routine, collecting a precarious
harvest or hunting with bow and arrows, unable
to think any further. But by living in a
rational society, where people are free to
trade, they receive an incalculable bonus:
the value of their work is determined not
only by their effort, but by the effort of
the best productive minds who exist in the
world around them. This is a great argument
in support of the notion that if you work
in a factory or in a social group you will
normally derive more benefits than if you
work in isolation--for, as Rand notes, you
may then benefit from the productivity of
others. This fact, however, has virtually
nothing to do with capitalism or the free
market; the same thing is true in a collectivist
society. Even a highly efficient worker in
a collectivist nation benefits more from
working for the government than from working
entirely for himself. As Rand says, the material
value of his work is partly determined not
only by his effort, but by the effort of
the best productive minds who exist in the
nation around him, (1957).
2. By the same token,
of course, a physician who works with other
physicians will benefit from their efforts
as well as from his own; and Nathaniel Branden
in a vehement argument against socialized
medicine, forgets this point, (1965b). It
may indeed be somewhat unfair for a good
physician to be remunerated in exactly the
same way as is a poor physician, when medicine
is socialized. But if there were no socialization
of medicine whatever, from medical school
to hospital and clinical work, probably no
physician would be very competent--nor perhaps
would she have many patients left to pay
her!
3. Along somewhat similar
lines, we have the irrelevant argument of
Ayn Rand against socialized medicine. Says
Rand: Gigantic achievements of American medicine
"were created by men who were individualists
and egoists in the highest sense of these
words," people of unusual ability, judgment,
ambition, and courage, the courage to be
innovators. The implication here is that
collectivist medicine has no achievements;
and that in the collectivist nations there
are no physicians of unusual ability, of
independent judgment, ambition and courage,
including the courage to be innovators, (1963).
This, of course, is absurd. It is certainly
possible that a collectivized system of medicine
will eventually produce fewer fine physicians
and fewer medical achievements than a capitalistic
system of medicine. But there is no evidence,
as yet or likely in the future, that this
is true.
4. Nathaniel Branden
insists that, like every form of progress,
economic progress has only one ultimate source:
"man's mind--and can exist only to the
extent that man is free to translate his
thought into action." (1966g). The implication,
once again, is that only under capitalism
can economic pioneers, creators, and inventors
exist. Obviously, economic pioneers, creators,
and inventors existed as slaves, under feudalism,
and in collectivized communities. Quite probably,
political freedom aids inventiveness; and
quite possibly, capitalism (or some reasonable
facsimile) aids political freedom. But it
is silly to down human creativity under any
kind of economic system; and it is presumptuous
to contend that it can only flower under
ideal capitalism.
5. Ayn Rand contends that if
a government holds economic control, it has
to create a special "elite," an
"aristocracy of pull." It will
attract the corrupt type of politician into
the legislature, will work to the advantage
of the dishonest businessman, and will penalize
and destroy honest and able people, (1966b).
While this statement may be partly true,
there is every reason to believe that it
applies as much to "free capitalism"
as to state capitalism or to collectivism.
For special "elites" have easily
existed in all societies; and it is probably
more likely that they will be uncontrolled
under "free capitalism" than under
government controlled economies, where there
are likely to be restrictions on them.
Rand's point that, when the
government holds the power of economic control,
honest and able individuals will eventually
be completely destroyed, is a gross exaggeration.
Honest people may well be handicapped when
a corrupt politico-economic system exists;
but able individuals, instead of being destroyed,
often wind up running the system.
Strawmanism. This leads us logically into our next heading-strawmanism.
As I shall show later in more detail, Randians
have a remarkable penchant for setting up
straw-men, by claiming that their opponents
believe in all kinds of things in which they
really do not believe, and then enthusiastically
knocking down these setups. They do this
in the realm of economics as they do in most
other realms. For example:
1. Ayn Rand has John
Galt exclaim in Atlas Shrugged (1957): "Were we supposed to want to
work for the love of our brothers? What brothers?
For the bums, the loafers, the moochers we
saw all around us?" This statement has
at least three major strawmen in it:
(a) It is assumed that, under
collectivism, all men are supposed to work
only for the love of their brothers. This,
of course, is nonsense. Collectivists work
mainly for themselves; but they believe--whether
rightly or wrongly--that they will help themselves
by working cooperatively and collectively
rather than by working individually. They
are by no means pure altruists--except in
the distorting eyes of Ayn Rand!
(b) Certainly, many people
shirk under collectivism--as, of course,
they do under capitalism and any other economic
system that has yet been devised. Some of
them shirk because they are "lazy";
others are emotionally disturbed; others
are relatively incompetent and are afraid
to compete with more competent individuals;
and still others have different reasons for
their indolence and escapism. But the objectivists
pejoratively label all of these shirkers
as "bums," "loafers,"
and "moochers"--implying that they
are only out to exploit the industrious workers
and producers, and that they should be totally
condemned for being what they are.
(c) Rand implies that these
people are hopelessly evil and cannot change.
She dehumanizes them so she can justify leaving
them to die along the road or be cast into
prison for being the pure evil she contends
they are. If her ideas are great, then she
should have a realistic, step-by-step method
to cure these "loafers", etc. Instead
she implies that they are evil or hopeless
from birth. What Rand is really advocating
is the death of all those that oppose her;
social Darwinism based on a person's abilities
in capitalism.
2. Rand holds that the
rank injustices toward racial or religious
minorities are specifically practiced toward
businessmen. For instance, condemning some
men and absolving others, without a hearing:
Today's 'liberals' consider a businessman
guilty in any conflict with a labor union,
regardless of the facts or issues involved,
and boast that they will not cross a picket
line 'right or wrong.' Consider the evil
of judging people by a double standard and
of denying to some the rights granted to
others. "Liberals" recognize workers'
(the majority) right to their livelihood
(their wages), but deny the businessmen's
(the minority's) right to their livelihood
(their profits), (1966b). Again, we have
several exaggerated accusations here and
Rand demonstrates her own "racism"
towards people who do not completely agree
with her:
a. It is assumed
that a class of "liberals" exists
today, and that all individuals who think
of themselves as "liberal" are
one hundred per cent opposed to businesspersons
and ceaselessly condemn and persecute them.
On the face of it, this is a type of "racism"
lumping together all "liberals"
as the same and asserting that they are less
desirable than objectivists. Ironically enough,
most of the "liberals" that Rand
talks about are or aspire to be businesspeople
(i. e., proprietors, doctors, lawyers, psychologists,
professors who consult with industry). And
most of them are opposed to some, but hardly
all, the practices of businesspersons.
b. It is surely
something of an absurd exaggeration to imply
that businesspersons in the United States,
at the present time, are being persecuted
in exactly the same way, as have been Negroes
in the Deep South, Jews in Nazi Germany,
and businesspersons during the years of the
Soviet revolution in Russia.
c. There is no evidence
that many American "liberals" incessantly
condemn businesspersons and uphold workers'
rights regardless of facts. Liberal newspapers
and periodicals, for example, uphold labor
unions in one dispute and uphold management
in another dispute--or change from one side
to the other in the course of a single dispute.
And "liberals" frequently condemn
labor unions for their racketeering, ultra-conservative
policies, inefficiency, for their political
ties, and for many other things.
d. Most "liberals"
give both businesspersons and labor a hearing
and weigh the facts involved before they
make up their minds on a given issue. This,
largely, is why we call them "liberals":
because they do consider the issues involved
in a dispute, do change their minds frequently,
and do engage in all kinds of compromising
in their views. The monolithic, bigoted "liberals"
of whom Rand writes are largely figments
of her romantic imagination.
3. Nathaniel Branden
insists that all collectivists or socialists
are pure altruists who only put the collective
good above individual good; and he favorably
quotes Joseph Goebbels in this respect: "To
be a socialist is to submit to the thou;
socialism is sacrificing the individual to
the whole." (1965b). This, again, is
errant strawmanism.
Most collectivists are rather
individualistic in their ultimate goals.
Marx and Engels believed that the dictatorship
of the proletariat would be only temporary;
and Lenin wrote that, once socialism was
well established, there would be no need
for the state at all, that it would wither
away. Collectivists believe, right or wrong,
that the people will greatly benefit from
socialization of the means of production
and that they will have more economic gains
and political rights as a result of this
socialization. And although these collectivist
ideals have by no means been realized as
yet, it can also be said, under capitalism,
people have had exceptionally little economic
individualism or political freedom.
In some instances, moreover,
socialistic communities have preserved the
I-thou relationship and the rights of the
individual to a considerable degree. Thus,
in our own country in the middle of the nineteenth
century, there were several communistic societies,
such as Brook Farm and the Fourier-inspired
communities, where economic collectivism
and rampant individualism seemed to blend
fairly nicely. In the main, collectivist
inclined people tend to believe in a philosophy
which is a blend of socialism and individualism,
of enlightened self-interest and community
spirit; and they are quite unlike the strawmen
whom the objectivists accuse them of being.
2. In their campaign
against socialized medicine, Rand and the
objectivists go to pejorative extremes of
accusing their opponents of all kinds of
trickery and predicting disaster in case
any vestige of legislation favoring socialized
medicine passes. Thus, in the early stages
of the campaign against our federal and state
governments setting up Medicare plans, Leonard
Peikoff said in the Objectivist Newsletter
(1962), that those who attempt to convert
a free country into a dictatorship have to
move gradually. The Kennedy administration
wrote letters to newspapers and petitions
to Congress in support of Medicare. The American
Medical Association also had a similar campaign
in defense of doctors. No one who values
freedom should remain silent.
Note the allegations
that setting up a Medicare plan in the United
States will lead to a "totalitarian
dictatorship;" that it will result in
the demise of countless Americans; and will
blot our individual freedom. As far as I
know, we do not yet have a totalitarian dictatorship
in this country; our lives are not in great
jeopardy (indeed, because of better medical
care for the indigent, some of this jeopardy
has been removed!); and, prior to Patriot
Acts 1 and 2 which were proposed by the capitalist
Republican Party, we seemed to have just
about the same amount of individual freedom
as we had when President Kennedy was still
alive. How could this happen if Rand was
correct? Indeed, today we see the capitalists
taking our freedom of the press under the
guise of free enterprise.
Although socialized
medicine would appear to have definite drawbacks,
Rand and the objectivists fail to point out
that unregulated, capitalist-inspired medicine
also has its distinct disadvantages. Thus,
the American Medical Association, which is
somewhat akin to the National Association
of Manufacturers in that it protects the
interests of individual medical entrepreneurs,
has restricted the output of new doctors
in this country by opposing plans for new
medical schools. By limiting the number of
physicians per capita in the nation, it encouraged
the setting of medical fees at an artificially
high level. "Free" medicine in
the United States has provided excellent
care for lower income and upper income groups,
but fees have been semi-prohibitive for many
middle-class people in our population.
Another
problem objectivism fails to solve is the
earnings gap dilemma. As doctors earn more
and more money than their unskilled counterparts,
they need richer and richer patients or to
work longer and longer hours or to give less
and less care to each patient. With socialized
medicine, the doctor may not become a millionaire,
but he will have plenty of patients and be
fulfilling his oath of service rather than
playing golf in hopes of seducing a new rich
patient to pay his high rates. If a doctor
is only doing his job for the money, I would
not want him for my doctor. Again, Rand monolithically
believes that the only motivator of people
is money.
Tautological premises.
Most of, the philosophical basis of Rand's
objectivism seems to be tautological thinking.
This is not so unusual, since most 'isms'
are based, at bottom, on pure definitions;
and the propositions, which they hold to
be "true", are only true because
they say they are. Rand's objectivism, however,
claims that it is both rational and empiric:
that its tenets are true because they ultimately
relate to reality, to the way things are,
and are therefore observably connected with
the facts of human behavior and of the world.
One might therefore expect that objectivism
would not be fundamentally tautological or
definitional.
But it is! Its
general tautological premises will be examined
later in this book. Here let me point to
some of the tautological thinking in Rand's
economic philosophies.
1. The philosophic core
of objectivism's capitalistic credo seems
to be incorporated in this section by Ayn
Rand There is no such thing as "a right
to a job"--only the right to free trade
exists. A person has a right to take a job
if another person chooses to hire him. The
"right to a home" doesn't exist--only
the right of free trade and the right to
build a home or to buy it. Only those who
choose to have a "fair" wage or
a "fair" price have the right to
pay it, hire someone, or to buy his product.
Only the right to manufacture milk, shoes,
movies, or champagne exists because producers
choose to manufacture them and no one has
the right to manufacture them oneself. There
are no "rights" of special groups--of
farmers, of workers, of businessmen, of employees,
of employers, of the old, of the young, of
the unborn. There are only the Rights of
Man--rights possessed by every individual
man and by all men as individuals,"
(1964). This is a tautological statement
for several reasons:
a. It is
laudable for Ayn Rand to try to track down
the rights of people to rights possessed
by every individual person and by all people
as individuals--since that would at least
give us a consistent basis for human rights.
But how can there by such universal rights
except by definition? As noted before, the
root of "right" is "law",
so rights are merely what the society chooses,
not mandates from the gods or nature. The
one "inalienable" right that most
everyone agrees on is a person would seem
to have is the right to live. But even that
can be legitimately abrogated: as when John
kills Jim because Jim is attacking him and
may possibly kill John; or when a group of
individuals band together to protect its
homes and lands from outside invaders; or
when a government's army fights against the
army of another government. So even the human
right to live is not completely unconditional
and inalienable.
b. For every
single human to have exactly the same basic
rights would probably mean for all of us
to be truly equal in ability, age, strength,
moneymaking propensity, etc. For if you are
very bright and strong and capable and I
am very stupid and weak and incompetent,
and we both theoretically have the same "right"
to produce and sell goods, is the equality
of this "right" really meaningful?
Will you not, because of your superior abilities,
invariably have the "right" to
put me out of business while I, conversely,
have little "right" to out produce
and outsell you?
c. If all
people have, to begin with, equal rights,
what happens as soon as some of them gain
friends and allies and some do not? If Jones,
because he has blue eyes and blond hair,
or because he was born into a friendly family,
gains many friends during the course of his
life; and Smith somehow gains very few, is
Smith's "right" to compete with
Jones for the socio-economic favors of others
going to do him much good? d. Ayn Rand is
correct about there being no such thing as
"a right to a job"--unless people,
in a given community, agree upon this right.
There is no reason why anybody should, ought,
or must be entitled to work when they are
able-bodied. But if the people of any community
hold that all able-bodied people are entitled
to work and that none of them should be discriminated
against (because they are stupid, incompetent,
or anything else) then these rules give the
individual the right to a job in this community.
Of course if the community cannot create
the jobs, that right is moot. This right
is not fate- given or God-given; it is clearly
people-given. And it can always be changed
at different times and places.
By the same token
the "right of free trade" is people-given,
too! Ayn Rand seems to believe that it is
the essence of nature or humanity for the
right of free trade to exist; but it palpably
isn't. If people, in a given community, wish
to run their economic lives by the principles
of free trade, they can make such rules;
and, after these rules have been passed,
individuals in this community then have the
right of free trade. But not simply because
they are human, because they are alive, or
because free trade is indubitably good. These
may be good reasons why a community passes
free trade rules. But unless it does pass
such rules, people's "right" to
engage in free trade is nonexistent and may
easily be abrogated.
If Rand is talking
about moral right, she is still only definitionally
asserting, in a moral sense, that people
have no right to a job but do have "the
Rights of man"--whatever that may be.
By similar definition, one could say exactly
the opposite, and could call almost any human
right moral, immoral, or non-moral. Since
"moral" merely means what is best
for the community in the long run, to assert
that her principals are best in the long
run requires proof that she cannot give since
her system, by her own admission, has never
existed at all. To assert one's policy is
good because it is good is tautological and
religious in nature. If any inalienable moral
rights exist, no one, including Rand, unequivocally
has shown what they are.
e. All human "rights,"
then, including the "rights" to
enjoy a fair wage, to receive a fair price,
to consume goods are conditional, limited,
and self-imposed--as long as people live
in social groups. For these rights are group
rules. It is clearly the group that "gives"
rights to the individual and can take them
away. For Rand and her objectivist followers
to set up as "true" and inalienable
the one particular "right" which
we call the "right of free trade"
is patently definitional --merely an assertion,
not a proof. Alfred Korzybski would have
called that claim an arrant overgeneralization!
In his view, Rand and the objectivists would
be "unsane" since they are ignoring
reality in choosing a fanciful universe,
(Korzybski, 1933).
When Rand says
that humans are human because they "possess
the unassailable right of free trade,"
she really means, "Because I, Ayn Rand,
say you possess the unassailable right of
free trade and are human because of it."
She can muster no empirical evidence why
you must have this right (although she may
present some evidence that it would be desirable
if you did have it). Therefore, she really
is tautologically stating: "You have
the right of free trade because you have
the right of free trade." Similarly,
all the other basic economic "rights"
which she insists that people possess have
no basis in objective fact or logic.
2. Rand defines all the disadvantages of capitalism as being
caused by non-capitalistic governmental control.
Thus, she) states that according to historical
facts, all the evils popularly ascribed to
capitalism were caused, necessitated and
made possible, only by government controls
imposed on the economy. (1961b). Check the
facts and you will discover whether or not
free trade of government controls was responsible
for the alleged iniquities of capitalism.
When you hear that capitalism has had its
chance and failed, remember that what ultimately
failed was a "mixed" capitalist
economy. Controls caused its failure. We
can save only save capitalism by not forcing
it to swallow a full, "unmixed glass
of the poison which is killing it."
This is ridiculous for several reasons:
a. Rand holds that pure
capitalism has never existed, but only a
"mixed" capitalist economy; and
yet she dogmatically states that all the
evils in this "mixed" economy were
caused, necessitated and made possible only
by the non-capitalistic parts of the mixture.
She presumes that the evils in a mixed capitalist
economy are necessarily caused by the controlled
or "non-capitalistic" elements
of this economy.
b. Rand does not even
consider the possibility that capitalism
itself causes evils, and that non-capitalist
controls may ameliorate these evils. She
says we should check the facts and discover
which of the two opposite political principles--free
trade or government controls--was responsible
for capitalism's alleged failure. But she
presents no facts.
c. Ayn Rand seems to
mean that capitalism is good because it is
good and that government control is bad because
it is bad. She states that a mixed glass
of poison is killing capitalism and that
the poison is government control. Why? Well,
because she claims that the poison is governmental
control.
d. Rand's complete syllogism
seems to be: "Capitalism is entirely
good and government control is entirely bad;
contemporary capitalist economy has a considerable
amount of government control mixed in with
pure and holy capitalism; therefore anything
that is wrong with contemporary capitalism
must be in the government controls which
made it into an unholy mixture."
e. The claim could just
as easily be made by communists: When you
hear that collectivism has had its chance
and has failed, remember that what ultimately
failed was a "mixed" world economy.
Not enough controls caused its failure. We
can save only save collectivism by not forcing
it to swallow a full, "unmixed glass
of the poison which is killing it."
3. Rand's view of money
is quite definitional and almost entirely
divorced from reality. Thus, her hero, Francisco
d'Anconia states in Atlas Shrugged, "The
code of good men is to trade by means of
money. But money rests on the axiom that
every man is the owner of his mind and his
effort," (1957). If you have money,
no power can prescribe the value of your
effort except the voluntary choice of people
who are willing to trade you their effort.
Only money permits you to obtain for your
goods and your labor products that you want
from others. Only deals that are mutually
beneficial by the unforced judgment of the
traders are permitted by money. More assertions!
Real fiction! In fact, just as it has been
said that Ayn Rand's novels read like non-fictional
philosophic tracts, it could even more justifiably
be said that her non-fictional writings read
like romantic fiction! Some tautological,
anti-empirical statements in the above quotations
are these:
a. People of good
will may or may not trade by means of money,
since there are various other ways they can
trade. Ayn Rand apparently posits, however,
that if you trade by money you are, by that
very fact, a person of good will. By definition,
rather than by any empirical evidence, she
makes trade and good will equivalent.
b. Money certainly
does not rest on the axiom that every person
is the owner of his mind and his effort.
Money is merely paper or metal with a symbol
that represents labor and/or materials for
which you can trade it. It is used because
it is easier to trade by means of money than
by means of barter, and because it is often
more efficient to use money than to try to
exchange goods directly for services.
c. The axiom that
all people are the owner of their mind and
effort is purely definitional and unrelated
to reality. Actually, every human seems to
learn and to think and to gain from his work
largely through the collaborative and cultural
help of others. d. Perhaps in a free market
of productive (that is, angelic) traders,
money allows no power to prescribe the value
of your effort except the voluntary choice
of the person who is willing to trade you
his effort in return. But under real capitalism
you can use money for barter and still coerce
another into trading with you, and doing
so to his disadvantage, because you threaten
him physically, blackmail him, refuse to
approve of him, or otherwise constrain him.
e. Perhaps in utopian
capitalism money would permit you to obtain
for your goods and your labor exactly what
they would be worth to the people who would
buy them. Almost any conceivable system of
real capitalism, however, includes all kinds
of threats and blackmail; and if you want
to lie, cheat, coerce, and use other means
of "persuasion," the system neatly
enables you to use them almost to your heart's
content. It is certainly not unique in this
respect--you can also prevaricate and steal
under collectivism. But capitalism, above
perhaps all other economic systems, which
have widely prevailed in human history, encourages
and enables various kinds of cheating and
coercion, so that you can easily obtain for
your goods and your labor more than they
are worth to the people who buy them. To
think that money permits no deals except
those leading to mutual benefit by the unforced
judgment of the traders is lunacy. Money
exists in non-capitalist economies, too--including
slave and collectivist economies--and in
such systems it certainly permits deals,
which are not mutually beneficial or made
according to the unforced judgment of the
traders. Even in relatively free capitalism,
money merely allows mutual benefit by the
unforced judgment of the traders; it hardly necessitates it.
If I gain political
influence, or am a member of a socially powerful
family, or acquire a monopoly on, say, the
taxicab industry in a given town, I can easily
force you to give me more money than you
think fair for various goods and services
that I offer you; and I can definitely trade
with you more to my advantage than yours.
Money may well enable traders to have unforced
judgment for their mutual benefit in their
deals; but the only way to ensure their dealing
with each other in a fair and mutually beneficial
manner is to grant them sainthood. This,
essentially, is what Rand grants them in
a book, Capitalism, The Unknown Ideal. In
an interesting review of this book, Honor
Tracy points out that in London's Hyde Park
in the 1930s fanatics who denounced one thing
and deified another vied with each other
in fervent lunacy. Says Ms. Tracy: "A
type there was yet nuttier than the rest,
namely, he who knew what was wrong with mankind
and, alone of his fellows, was able to put
it right." (1966). The tone of Rand's
book, with its monomaniac vehemence, is much
like that of the thinkers in Hyde Park.
Tracy goes on to say:
"Where businessmen are concerned, her
notions are romantic indeed. Their minds
are rational, creative, inviolate (at this
point, for some reason, she hauls in Galileo),
they stand for freedom, civilization, progress,
joy: they form the elite of a society, if
not--as Valery said that Europe did--'la
partie précieuse du monde.' It is a view
that some of us would like to explore in
greater depth: an appendix, telling us exactly
where these paragons are to be found, would
have been most acceptable." (1966).
Money itself is a commodity
whose value is constantly changed by forces
beyond anyone's control. Failed currencies
and inflation/deflation are proof of this.
Moreover, Rand completely overlooks the fact
that money itself is a commodity and subject
to the law of supply and demand for it. If
you are on a gold standard, then the supply
of gold is quite outside the control of the
individuals producing goods and services.
Yet the supply of gold drastically affects
their relative wealth in terms of purchasing
power. For instance, the western world's
economies were stagnant in the 1500s before
the discovery of the new world's gold. There
was no gold to buy new or expanded production
so there was no new or expanded production.
The infusion of gold from the new world gave
people money to buy more and thereby put
more people to work. However, as a result
of they're being more gold, gold went down
in value, buying less goods and services
than before. The same is true of paper money.
If the government does not print enough money
to support the purchase of new and more products,
then either those new products are not produced
or some other products that were are stopped
from being produced. If the government prints
too much money, then the money in circulation
goes down in value - what we call inflation.
Money is subjective, not objective; by nature
since it value is determined by people's
attitudes. Therefore her assertion that money
is somehow an objective arbiter of anything
is silly.
Moreover, individual
capitalists are largely ignorant of macroeconomics
and labor economics. Since, under capitalism,
they direct the economy, we have the blind
leading the blind, prejudiced by capitalism
for short-term self-interests only. Individual
businesspersons cannot control the whole
economy by their individual actions and are
therefore forced to use lowest common denominator
to compete so their businesses survive. If
one keeps some other industry's customers
working, that does not mean that industry's
workers will buy one's products. Like the
fastest runner, they will survive if their
competitors fail for any reason, not necessarily
for producing an inferior product or service.
.
International
blockage and lag-time are facts. If the U.
S. stimulates its workers with money spent
buying goods from countries that don't buy
our goods, this stimulation aids another
country, and hurts our own. Frivolous production
rather than substantial/sustainable production
is an inescapable outcome of capitalism.
More and more people must be employed in
what is not necessary since machines will
be brought in to replace workers. Some psychological
fears innately caused by capitalism. 1) You
can fail at any time. 2) You and your whole
family's future are always at stake. 3) Selling
promotes "rating," "needing,"
and self-esteem--mood swings based on others
perceived view of you.
Furthermore,
after one's needs are met, money becomes
a burden itself. If one has more money and/or
goods than one can use, one must spend time
worrying about, maintaining, storing, insuring
the goods, etc. These are not tasks that
undisturbed people enjoy. Moreover, having
a great deal of money makes one a target
for those that want or need it. Therefore,
more and more money and goods can be contrary
to survival, security, piece of mind, and
true friendships. To fixate on money as the
only measurement the "good" is
disturbed.
As an ironic example
of how capitalism almost inevitably corrupts
itself, because human beings are much interested
in profit than they are in productive effort,
the March 1968 issue of The Objectivist announced that even the Nathaniel Branden
Institute had compromised its principles
in order to take in some extra money. After
logically being a purely profit-making corporation
for the first decade of its existence, and
after discouraging tax-exempt donations to
its cause, this objectivist Institute established
a nonprofit corporation Foundation for the
New Intellectual, with Nathaniel Branden
and Leonard Peikoff as trustees, and had
it accepted as a tax-exempt organization
by the United States Internal Revenue Service,
so that people could make nontaxable deductions
to help carry on its work. This procedure
clearly takes advantage of "welfare
state" tactics, is anti-capitalistic
in any ideal sense, and beautifully demonstrates
that the purest capitalists almost always
get corrupted by the lure of easy monetary
gains instead of sticking to truly productive
labor. If even Branden and Rand must look
to donations and altruism for support, is
pure capitalism really a feasible ideal?
From the foregoing analysis, it can be seen
that in numerous ways, which I have delineated--as
well as in many more which would be redundant
to examine--the relationship between Ayn
Rand's theories of capitalism, the free market,
money, and the value of labor to empirical
reality is practically nil. Rand's economic
theory consists of one unverified (and often
unverifiable) axiom after another, amounting
to a huge tautology.
It is a system of religious
economics or economic religiosity. It presents
some sophomoric arguments favoring capitalism;
and it is of no advantage to the individual
who believes, on more solid and empirical
grounds, that capitalism may have distinct
disadvantages, but that it nevertheless is
a superior kind of economy. If anything,
it should be of great solace and aid to the
rabid collectivists, who may easily undermine
its credos, and thereby may falsely convert
some individuals to their own sometimes religious
tenets: that collectivism has few failings
and innumerable virtues. Essentially, Randian
economics is an intellectual word game and
an unexciting one at that!
(*Jimmy Walter revised, updated and contributed
to this chapter.)
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