Prosperity Classics

Ayn Rand - Capitalism: The Unknown Ideal

Capitalism: The Unknown Ideal
Ayn Rand

Ayn Rand is the author of the famous 1400-page philosophical novel Atlas Shrugged (1957), which glorifies individual freedom and the ability to create wealth unhampered by government.

Capitalism: The Unknown Ideal
, is essentially a non fiction version of the novel, laying out Rand’s Objectivist philosophy of the importance of personal motives above any kind of collectivist or tribal outlook. The power of the book rests on Rand’s surprising contention that capitalism is a system morally superior to any other, built on personal freedom and delivering astounding wealth – and which yet remains the most misunderstood system of political economy.

She wrote it because she was confounded by the fact that young people blamed every societal ill on capitalism, which was hardly surprising since they had not lived under any system. Socialism and communism, at the time she was writing, had legions of promoters and defenders, but capitalist ideals seemed to be trampled on everywhere and held up as evil. An American immigrant who had witnessed the economic misery and attacks on individual dignity that defined communist Russia, she had at an early age resolved to be capitalism’s defender.

The 24 essays in the book originally appeared in Rand's The Objectivist Newsletter. While most are by her, there are two by then acolyte Alan Greenspan, who became the chairman of the US Federal Reserve Board, and a couple by Nathaniel Branden, whom self-development readers will know as the author of The Psychology of Self-Esteem.

Most of the thinking of the book is encapsulated in the first essay, ‘What Is Capitalism?’ Its main points are discussed below.

Beware ‘the common good’

Rand rounds on what is usually considered a source of impeccably objective information: the Encyclopaedia Britannica. She had discovered its entry on 'Capitalism', which described it as simply another way that a society organizes itself to produce a 'social surplus’, and contained no mention of wealth being created by individual minds. Rather, wealth is described as an impersonal aggregate produced by the efficient allocation of resources.

This infuriated Rand, as in her view there is no such thing as a 'social surplus'. All wealth is created by somebody, and therefore belongs to them. In modern society, it is very clear who has contributed what. To see wealth as some social good produced by the tribe was ‘morally obscene’. In her words:

“When 'the common good' of a society is regarded as something apart from and superior to the individual good of its members, it means that the good of some men takes precedence over the good of others, with those others consigned to the status of sacrificial animals.”

When the good of the majority overrides individual rights, Rand observes, you may as well have no rights at all, since what you are left with, taken to its logical conclusion, is regimes like the former Soviet Union, where ‘the greater good of all’ means misery for almost every individual. In Russia, people were told to bear many hardships in the service of achieving some vision of a prosperous, industrialized state. Tough conditions were only temporary; soon they would overtake the capitalist West. But while they waited for tractors and generators, the government was spending fortunes on atomic power and putting men into space. In a socialist or communist society, Rand notes, everything gained comes at the expense of something else.

This does not happen in a capitalist system. America grew rich not by public sacrifices to some 'common good', but by the freedom of people to use their brains in pursuing their own fortunes. No one had to starve for America to become industrialized. In fact, the freedom of innovators to do their thing led to “…better jobs, higher wages, and cheaper goods with every new machine they invented, with every scientific or technological advance”.

She thought it wrong to consider society as an entity that advanced as one. Rather, the entity that advanced humanity was the individual. “A great deal may be learned about society by studying man”, she observed, but “...nothing can be learned about man by studying society.”

Give free reign to the thinkers

Civilization has been built on the thought of individuals, the 'intransigent innovators' as Rand calls them. She describes the creation of new things as “the application of reason to the problem of survival”. Prosperity requires such people to have absolute freedom to think, and not to be held back by those who do not, who are simply blind followers. The most truly successful cultures in an economic sense have always been the freest politically.

Property rights are so important to a capitalist system because thinking people need to be able to freely dispose of the products of their efforts in order to support their life. They must not be accountable to the tribe, the state, the society or collective. When people make money in a free market, she notes, “They did not take it from those who had not created it.” The law must support their sovereign nature. Rand notes:

“The magnificent progress achieved by capitalism in a brief span of time – the spectacular improvement in the conditions of man's existence on earth – is a matter of historical record…But what needs special emphasis is the fact that this progress was achieved by non-sacrificial means.”

That is, the free world’s economic progress came about precisely because no one was forced into doing anything by some method of central planning. Rather, the great achievements occurred through voluntary thought and action, not only in pursuit of financial fortunes, but motivated by individual values. Capitalism cannot only be seen as a practical system that works to deliver the greatest economic output for all, but as the most moral system of political economy.

Values cannot be determined by a majority or by some state dictate, but are always a personal matter. A free society allows for a myriad of individual values to exist, as long as others are not harmed by them. There are not many areas the state should be involved in, but protection against violence is basic to ensuring the right of everyone to pursue ‘life, liberty and happiness’.

Final comments

Most of the ‘anti-capitalists’ of today actually know little about the system into which they were born. They have eyes only for some actors within it (such as large companies) and their apparent greed, while being blind to the fantastic freedoms and prosperity they have inherited. Free markets, they believe, will mean a ‘race to the bottom’ of greater and greater exploitation of workers.

Such arguments fail to notice that the sweatshop workers in developing countries who make things sold in the rich world have usually arrived there by choice, leaving behind backbreaking lives of rural poverty. Their wages may be a pittance, but they represent the beginnings of a way out; their conditions look bad, but are little different to those endured by our grandparents or great-grandparents when their countries were industrializing.

Rand includes an essay by her colleague Robert Hessen, ‘The Effects of the Industrial Revolution on Women and Children’, which notes the factory system in 19th century England allowed thousands of children who would otherwise have starved to have an income, allowing them to grow into adulthood. Income earned by women allowed a household to move away from the poor hygiene and squalor that was a fact of life in pre-Industrial times, a change which led to a sharp decrease in infant mortality. Child labor ended with the rising incomes of parents, paid for by the increasing prosperity of manufacturers and the financiers wanting to invest in them. Marxist scholars ignore such facts, preferring to evoke a romantic, but wholly false, picture of life prior to industrialization.

The usual accusation leveled at Rand and her followers is of extremism. A more intelligent view is that she was a supreme rationalist who valued personal freedom to the highest degree. Capitalism for her was not just a system for people to get richer, but was the only system in which people were free to act according to their best interests – not according to some imposed idea of the ‘common good’. Today, the comfortable lives most of us lead are taken for granted, and as a result we take capitalism for granted.

Source: 50 Prosperity Classics: Attract It, Create It, Manage It, Share It by Tom Butler-Bowdon (London & Boston: Nicholas Brealey)

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Ayn Rand

Born Alissa Rosenbaum in 1905 in St Petersburg, Rand’s father had owned a business that was taken over by the state after the Bolshevik Revolution erupted. She graduated from the University of Petrograd (Leningrad) in 1924, before beginning a screenwriting course. The following year, she travelled to Chicago to 'visit' a cousin, never returning. After six months she moved to Hollywood to become a screenwriter, changing her name to Ayn Rand. 'Ayn' was the first name of a Finnish writer, 'Rand' the model of her Remington typewriter. On her second day in Los Angeles she famously met Cecil B de Mille, who offered her work as an extra on a film where her future husband, Frank O'Connor, was on the set.

Rand never broke in to screenwriting, but in 1935 her play Woman On Trial was mounted on Broadway as Night of January 16th. Her first novel We the Living (1936), and Anthem (1938) were well-received critically but not best-sellers. Rand's fortunes changed with the success of The Fountainhead (1943), a 700-page story of a modernist architect who battles to realise his vision. Atlas Shrugged was an instant bestseller. In 1958 Rand and Nathaniel Branden (who was her lover for several years) opened the institute in New York which would spread Objectivist philosophy.
Having railed against government anti-smoking campaigns, the author died in 1982 of lung cancer. A dollar sign was placed over her coffin.


From Capitalism: The Unknown Ideal

“No political-economic system in history has ever proved its value so eloquently or has benefited mankind so greatly as capitalism – and none has ever been attacked so savagely, viciously, and blindly. The flood of misinformation, misrepresentation, distortion, and outright falsehood about capitalism is such that the young people of today have no idea (and virtually no way of discovering any idea) of its actual nature.”

“What they have to discover, what all the efforts of capitalism's enemies are frantically aimed at hiding, is the fact that capitalism is not merely the 'practical', but the only moral system in history.” ©2015 All rights reserved.
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