The bas relief sculpture above is Atlas Libertas by Guatemalan sculptor Walter Peter Brenner. It is inspired by Ayn Rand’s Atlas Shrugged and is a feature at Guatemala’s Universidad Francisco Marroquin. Today’s post is an excerpt from Chapter 1 of my book, The Pendulum.
I first read Rand’s Capitalism: The Unknown Ideal in the summer of 1969. I was a commerce student at McGill University at the time. It was the heyday of the New Left, the era of the anti-Vietnam War movement, hippies, drug culture, and rabid anti-capitalist activism on campus. That Spring, campus leftists agitated against the building of a Faculty of Management building. The leftist council proposed a resolution condemning the project, condemning capitalism, and demanding the building be devoted to student housing. The Commerce Undergraduate Society prepared to have our rep on council present a counter-resolution at the next council meeting. They also organized a mass sit-in at the council meeting by all 500 commerce students. My first ever demonstration. We cheered our rep on, and read along the endorsement of business managers and the important role they played in society. We hooted and jeered the leftist opposition. It was exhilarating!
I was, at the time, non-political. It didn’t interest me. But after the meeting, the Commerce VP recommended reading Atlas Shrugged by Ayn Rand. That summer, browsing through a book store, I came across Capitalism: The Unknown Ideal. I recognized the author name and snapped it up. The first of Rand’s books that I read. And it was a tough slog. I’d never heard of words like metaphysics or epistemology before. But with the help of my trusty dictionary, I soon became familiar with these concepts. And the book blew me away. It was the first book I ever read where I found myself agreeing enthusiastically with everything it said.
I had not reread the book since, though I had read everything else of Rand’s published during her lifetime. Researching this chapter for my book, I decided to read her lead essay on “What is Capitalism?” again after almost 55 years. And it blew me away again. It reminded me of the exhilaration I felt when I first read it. Her support of capitalism is revolutionary so I decided to include an overview of the chapter in my own chapter. So here it is.
The Revolutionary Capitalism of Ayn Rand
Capitalism has long been a mainstay of libertarian thought. But it was not until Ayn Rand came on the scene that capitalism took on a new tenor. Its defenders, for the most part, had been economists, and, as economists are wont to do, their arguments for capitalism were largely pragmatic. Rand, more than anyone in the modern era, turned capitalism into a moral crusade.
Ayn Rand is a systematizer, a rarity in modern times. She developed a complete, integrated and unified philosophy where each integral part related to the others and progressed from a basic metaphysics to epistemology, ethics and politics. “It does not regard politics as a separate or primary goal,” she writes, “that is: as a goal that can be achieved without a wider ideological context.” (Introduction, Capitalism: The Unknown Ideal, vii)
Objectivists are not ‘conservatives.’ We are radicals for capitalism; we are fighting for that philosophical base which capitalism did not have and without which it was doomed to perish. (ibid)
What she proposed was a defense of capitalism on moral, not pragmatic grounds. She then proceeds to her seminal essay, What is Capitalism?
As she argued in that 1965 essay, pre-capitalist society was essentially tribal.
In the pre-capitalist eras, private property existed de facto, but not de jure, i.e., by custom and sufferance, not by right or by law. In law and in principle, all property belonged to the head of the tribe, the king, and was held only by his permission, which could be revoked at any time, at his pleasure. (Capitalism: The Unknown Ideal, 3)
But even after the rejection of feudalism, the tribal notion of property persisted. Rand cites the article on capitalism in the world’s first and most pre-eminent encyclopedia, the Britannica, at length. Britannica’s article sounds like it was written by a communist dupe of the progressive era. The kind that viewed the “Soviet experiment” as some kind of beneficent ideal, something we should all try to emulate.
I went to the current article on capitalism at Britannica Online and, while marginally better than the 1965 version, it too is replete with critiques of capitalism without any explanation of the source of capitalism’s power to create wealth or its moral basis. In fact, on the argument that capitalism succeeds because of its efficiency, the article concludes with the following:
Critics question the criterion of efficiency itself, which counts every dollar of input and output but pays no heed to the moral or social qualities of either and which excludes workers from expressing their own preferences as to the most appropriate decisions for their firms. (Capitalism, Encyclopedia Britannica Online, https://www.britannica.com/money/capitalism/Criticisms-of-capitalism)
I don’t know if the 1965 version named the authors (I tried but failed to find it online), but the current version does and it was “Written by Robert L. Heilbroner, Peter J. Boettke, Fact-checked by The Editors of Encyclopaedia Britannica” Boettke is an economist of the Austrian school, the pre-eminent advocates of laissez faire today. He is thoroughly familiar with the works of Ludwig von Mises, Friedrich Hayek, Murray Rothbard and others.
When even a scholar fully conversant with the politics and economics of laissez faire can lend his name to an article that condemns capitalism for an alleged failure to heed moral principles, Rand’s advocacy of capitalism as a moral ideal becomes even more important today than it ever was. What is that argument?
Political economists, she argues, see men in the roles they fill in society. But it is this societal role that determines their value. For example,
If they observe a shoemaker, they find no difficulty in concluding that he is working in order to make a living; but as political economists, on the tribal premise, they declare that his purpose (and duty) is to provide society with shoes. (Capitalism: The Unknown Ideal, 6)
They may reject communism “emphatically” yet, as political economists,
they speak of the government’s duty to effect “a fair distribution of wealth,” and they speak of businessmen as the best, most efficient trustees of the nation’s “natural resources.” (ibid)
Individuals are not regarded as individuals so much as cogs in a societal machine serving a function they have a “duty” to fulfill. This goes completely against her view of individuals and their relation to society.
She reiterates the building blocks of her system and from these principles, she derives her argument for laissez faire capitalism as the only proper and only moral politico-economic system. We must reject the tribal premise and “begin at the beginning.” She starts by “identifying man’s nature.” (7)
She recognizes that “man’s essential characteristic is his rational faculty.” And she goes on to quote a lengthy excerpt from her essay, The Objectivist Ethics. Man, she argues, cannot live on the perceptual level. Survival requires “a process of thought.”
No percepts and no “instincts” will tell him how to light a fire, how to weave cloth, how to forge tools, how to make a wheel, how to make an airplane, how to perform an appendectomy, how to produce an electric light bulb or an electronic tube or a cyclotron or a box of matches. Yet his life depends on such knowledge—and only a volitional act of his consciousness, a process of thought, can provide it. (“The Objectivist Ethics,” The Virtue of Selfishness, 23)
She goes on to argue that only individual minds can think. “There is no such thing as a collective brain.” (“What is Capitalism?” Capitalism: The Unknown Ideal, 7)
If some men do not choose to think, they can survive only by imitating and repeating a routine of work discovered by others—but those others had to discover it, or none would have survived. (8)
But in order for men to think, to innovate, to create, they must be free. “Freedom is the fundamental requirement of Man’s mind.” She goes on to summarize her two fundamental tracts on politics, Man’s Rights and The Nature of Government, both included as appendices in this volume.
The social recognition of man’s rational nature—of the connection between his survival and his use of reason—is the concept of individual rights. (9)
She elaborate that rights
are a moral principle defining and sanctioning a man’s freedom of action in a social context, that they are derived from man’s nature as a rational being and represent a necessary condition of his particular mode of survival. (ibid)
These rights include the right to property. He needs the right to property, the rights to the fruits of his labor, in order to survive. “Without property rights, no other rights can be practiced.”
And a proper social system must be based “on an identification of man’s nature.” Social systems differ in how they regard man’s nature.
Is man a sovereign individual who owns his person, his mind, his life, his work and its products—or is he the property of the tribe (the state, the society, the collective) that may dispose of him in any way it please, that may dictate his convictions, prescribe the course of his life, control his work and expropriate his products? Does man have the right to exist for his own sake—or is he born in bondage, as an indentured servant who must keep buying his life by serving the tribe but can never acquire it free and clear? (10)
In short: “Is man free?” “Capitalism,” she asserts, “is the only system that answers: Yes.” She defines it thus:
Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. (ibid, italicized in original)
Individual rights “entails the banishment of physical force from human relationships: basically, rights can only be violated by physical force.”
She goes on to argue that “no man or group may initiate the use of physical force against others.” The only proper use of force is in self-defense or in retaliation against those who have initiated the use of force. In a moral society, i.e. a capitalist society,
the government acts as the agent of a man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control. (“What is Capitalism?” Capitalism: The Unknown Ideal, 10-11)
This has been and continues to be the biggest bone of contention between Objectivists and anarcho-capitalists, the ancaps arguing that government necessarily involves the initiation of the use of force. As I have argued in a previous essay, the ancaps are wrong and have misquoted or misrepresented Rand’s arguments. The respective positions on both sides are virtually identical and the differences are questions of semantics. In any event, taking Rand’s argument as a given, let’s continue.
Rand goes on to emphasize that “in a capitalist society, all human relationships are voluntary.” (11)
They can deal with one another only in terms of and by means of reason, i.e., by means of discussion, persuasion, and contractual agreement, by voluntary choice to mutual benefit. The right to agree with others is not a problem in any society; it is the right to disagree that is crucial. It is the institution of private property that protects and implements the right to disagree—and thus keeps the road open to man’s most valuable attribute (valuable personally, socially, and objectively): the creative mind. (ibid, italics in original)
She continues with an attack on the “common good.” While it is true that capitalism, in fact, is the best way to achieve the common good, this is not its moral justification. Such good as capitalism delivers is “a secondary consequence.”
The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is justice. (ibid, italics in original)
She goes on for several pages discussing the nature of the good. She includes an attack on intrinsicism, the idea that there is some “higher good.” Here she reflects Isaiah Berlin’s argument against Rousseau’s “general will” and similar arguments.
She argues against a subjective theory of the good and writes that “capitalism is the only system based on an objective theory of values.” (14) I won’t go into details here but note that the Austrian school of economics, which she more or less supported, argues for subjective value theory, the idea that in a capitalist market economy, prices are determined by every transacting individual exercising his subjective preferences. Is this a seeming contradiction? Not really, but the differences are subtle. For Rand, the good is objective because it is “determined by the nature of reality” (15) but for the Austrians, the nature of reality is such that capitalism allows for individuals to act on their own subjective interests and choices. As I said, subtle.
Rand, in fact, acknowledges the subjective value theory of Austrian economics when she goes on to consider some of the arguments against capitalism, such as that the market is unfair, that it rewards an Elvis Presley more than an Einstein. Why should this disparity be promoted or upheld?
The answer is: Because men work in order to support and enjoy their lives—and if many men find value in Elvis Presley, they are entitled to spend their money on their own pleasure. (20)
A parallel critique is that not only is the market unfair to the man of genius, Einstein in the example, it is unfair to the average man who suffers a disadvantage in the marketplace. Here Rand really comes on with a very powerful argument. It is the argument that she dramatizes so effectively in Atlas Shrugged. She quotes from Galt’s speech extensively, but the nub of the argument is that the creative genius is mankind’s benefactor, not his exploiter.
In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains. Such is the nature of the ‘competition’ between the strong and the weak of the intellect. Such is the pattern of ‘exploitation’ for which you have damned the strong. (Atlas Shrugged, quoted on page 21)
In today’s world, the Jeff Bezoses, the Bill Gateses, and the sundry other creative geniuses of our time have given incalculable benefits to society. Far greater than the billions they have earned as a result.
Even those who are not creative geniuses on the level of such technological giants but earned great wealth by providing pleasure to millions, such as a Taylor Swift, have earned their wealth. They too are society’s benefactors, enriching the lives of millions.
Creating wealth is, for Rand and for those she has inspired, an act of heroism.
Postscript: This is a first draft of the summary of Rand’s argument and I may make some changes. I also want to note something in the news recently. An American judge has ruled that Google is guilty of monopolizing the web browser market. This because Google contracted with Apple to make Google the default browser on Apple products. But the ruling acknowledges the following: Apple users are not compelled to use Google and have the oprion of using any browser they like. And most people choose to use Google because, the ruling notes, Google is, in fact, the best browser on the market!
The absurdity of this position is glaring. It should be noted as well that the default browser for all personal computers (PCs) with Windows operating systems is Microsoft Edge. According to Bing Co-pilot (Microsoft’s AI):
As of the latest data:
Windows is the most widely used operating system for personal computers, including laptops, with about 72.22% of the market share1.
Apple’s macOS holds the second position with approximately 14.73%.
Other operating systems include desktop Linux at 3.88% and Google’s ChromeOS at 2.45%.
So the judge’s ruling that Google monopolizes the browser market is absurd on the face of it. Google was not the first browser on the market. Many preceded it. But Google earned its market share by being the best, bar none.
I’ve switched to Edge for many features it has, but for search, I still launch Google on the Edge platform. Because it really is the best. But I’m starting to feel the love for Bing Co-Pilot though I rarely use Bing.
Google is a prime example of how creative innovators are mankind’s benefactors as Rand argues.
Links of Interest
The Best Little University You Probably Never Heard Of – about the Universidad Francisco Marroquin in Guatemala
Thank You Ayn Rand – a personal account of all the valuable lessons I learned from Ayn Rand.
This edition is available to everyone, but if you would like to see it delivered to your email account, do subscribe.
My wife and I are leaving tomorrow for a three week vacation and The Pendulum will be on hiatus for the duration. Back in September!