The free-market fallacies of Ayn Rand

By Phil Hearse

August 22, 2009 – Marxsite – Most people sympathetic to radical politics outside the United States have probably never heard of Ayn Rand, and a brief introduction to her ultra pro-free market views would doubtless be enough to convince them they haven’t missed anything. Yet 27 years after her death, Ayn Rand continues to be seriously debated in the US, her books sell hundreds of thousands each year, her views are propagated by right wing think tanks and foundations and – bizarrely – Charlize Theron is in discussions to turn Rand’s 1088-page magnus opus Atlas Shrugged into a TV mini-series.

The Times Educational Supplement claimed in July that the Ayn Rand revival is gathering pace on US campuses. According to the TES:

The surge in interest has also been propelled by the millions of dollars given to 25 universities by the charitable foundation of banking giant BB&T, run by one of her adherents. But even this funding, handed out so institutions can teach and study Ms Rand and to establish centres for the advancement of American capitalism, has been controversial. The faculty at Meredith College in North Carolina rejected a $420,000 (£260,000) grant because it came on the condition that Ms Rand's work be taught there, and there was a similar uproar at the University of North Carolina at Charlotte. Even many of the professors who now teach Rand, Dr McCaskey said, "will preface their presentations with, 'I don't agree with this, but you should hear it'.

In her lifetime Rand strongly influenced Ronald Reagan, and long-time chair of the US Federal Reserve Alan Greenspan was part of her entourage as a young man and remained faithful to her views throughout his career (catastrophically so as far as the US economy was concerned).  According to The Week magazine:

Rand attracted a group of disciples, known, with self-conscious irony, as the Collective...It wasn’t just her ideas that inspired the group, it was Rand’s charisma. At the height of her popularity in the 1950s and early 1960s, Rand cut a highly exotic figure with her bobbed hair, Russian accent, dollar-sign brooches, and long cigarettes, smoked through a holder. She saw smoking as a Promethean symbol of creativity and regarded health warnings as a socialist conspiracy. When she died of lung cancer, in 1982, a 6-foot-high floral dollar sign was erected by her open coffin (April 16, 2009).

Astonishingly, the advent of the world banking crisis has led to an upsurge in Ayn Rand book sales, with 300,000 copies of Atlas Shrugged sold last year, and in January 2009 it came in at number 33 in Amazon’s top 100 US book sales. The Ayn Rand Institute argued strongly against state money bailing out the banks, and unsurprisingly Randites have been to the forefront of opposing US President Barak Obama’s rather mild plans to extend health-care insurance.

Ayn (rhymes with mine) Rand was the pseudonym of Alisa Zinov'yevna Rosenbaum, an exile from Bolshevik Russia who stayed in the United States after a visit in 1926. She started off writing film scripts on anti-Soviet themes, and her links with the film industry enabled her to get her first major novel The Foutainhead turned into a 1949 film starring Gary Cooper, Patricia Neale and Raymond Massey. A film about her love life, The Passion of Ayn Rand, was released in 1999 starring Helen Mirren as Rand and Peter Fonda as her long-suffering husband Frank O’Connor. The same year she was even put on a US postage stamp.

Capitalist ideology

Rand propounded her views through her novels and a series of essays and interviews, but left no major single work outlining her political and social theory. Her appeal and her cult status is based on two central ideas that chime in perfectly with key aspects of US capitalist ideology. These are a) self-interest, not altruism, is the highest moral value and as a guiding thread leads to the best outcomes, and b) free-market capitalism is the system that leads to the best economic outcomes and allows the fullest development of individuals. It spontaneously leads to the best possible outcomes for everyone – this a version of Adam Smith’s “hidden hand’'.

Free-market capitalism in this version is a system where the only function of the state is to exercise the monopoly of the legitimate use of violence, preventing violence between individuals thus allowing business to develop uninterruptedly. Nothing else – not healthcare, not the post office, not education of any type, not firefighting and rescue services, absolutely nothing whatsoever – is the business of the state. This is ultra-privatisation on a scale probably never seen in the history of capitalism, a point made frequently by Rand herself, although she didn’t understand the significance of this fact.

That self-interest not altruism happens to serve the highest good (though not any “collective good’' which Rand regarded as a meaningless concept) is indeed a remarkably fortunate outcome for the many right-wing adherents of her ideas. Just do what’s good for yourself, don’t care about anyone else, and lo and behold you happen to be doing the morally right thing as well!

Ayn Rand’s writings reveal a consistent and utterly naive idea about wealth. Wealth is created by the effort, intelligence and inventiveness of “men'’ who are prepared to stand out from the crowd and be true to their own visions. For her, capitalists, whom she regarded as a persecuted minority, are always self-made “men'' (she was utterly consistent in never using any other pronoun to describe clever people); she did briefly discuss the issue of inheritance, but never acknowledged that power and wealth were due to class positions, rather than individual genius. Once the simple fact that most rich people are rich because they come from rich families is established, Rand’s whole system collapses.

The strivings of the talented against the holding back of the collectivist philistines is the theme of both The Fountainhead and Atlas Shrugged. The former’s main protagonist, Frank Roark, is an architect who from the time he is a student fights back against attempts to throttle his individuality and make him conform to stylistic fashion and consensus. In Atlas Shrugged, “Atlas'' is the talented, the geniuses, the clever people who “hold up the world''; their “shrug'' is a worldwide strike organised by their international champion, the mysterious John Galt, who unusually for a modern novel makes a 60-page speech explaining what is in effect Ayn Rand’s philosophy.

Rand’s time and context

Ayn Rand became famous through The Fountainhead in 1943, and remained prominent until her death in 1982, speaking at numerous meetings, notably the Ford Hall Forums in Boston and appearing on radio and television. Her great ideological battle was against the mixed economy welfare state model of capitalism – Keynesianism – a battle waged by the US right during and immediately after the second world war. She described a trinity of ideological opponents – altruism, collectivism and mysticism. It was the latter that got her into trouble with many on the US right, then as now a Christian redoubt. To give Ayn Rand her due, she loathed and detested religion as not based on reason (obviously). This led her into many battles with more mainstream conservatives, for example William F. Buckley, influential editor in the 1960s of the National Review and a key intellectual behind the extreme right-wing Republican candidate for the presidency in 1964, Barry Goldwater. Ayn Rand was vicious in her denunciation:

The good, say the mystics of spirit, is God, a being whose only definition is that he is beyond man's power to conceive- a definition that invalidates man's consciousness and nullifies his concepts of existence...Man's mind, say the mystics of spirit, must be subordinated to the will of God... Man's standard of value, say the mystics of spirit, is the pleasure of God, whose standards are beyond man's power of comprehension and must be accepted on faith....The purpose of man's life...is to become an abject zombie who serves a purpose he does not know, for reasons he is not to question (For the New Intellectual).

Rand also annoyed mainstream conservatives with her views on abortion:

An embryo has no rights. Rights do not pertain to a potential, only to an actual being. A child cannot acquire any rights until it is born. The living take precedence over the not-yet-living (or the unborn)….Abortion is a moral right—which should be left to the sole discretion of the woman involved; morally, nothing other than her wish in the matter is to be considered. Who can conceivably have the right to dictate to her what disposition she is to make of the functions of her own body?”

Rand made many searing attacks on the anti-abortionists not because she saw herself as a feminist – she told a Ford House Forum that on feminism and the Equal Rights Amendment she “disagreed with all that” – but because she saw it as a matter of individual rights. Philosophical individualism is the cornerstone of her system.

Basic fallacies

Ayn Rand’s system is made possible by a series of fallacies which underpin her system. As she herself said many times about her opponents, these errors are so glaring it’s difficult to believe anyone would make them in good faith

Fallacy 1 – Wages under capitalism

In her essay Capitalism, the Unknown Ideal, Rand uses the following illustration of individual responsibility.

Imagine, she says, a “little stenographer” who spends all her money on lipstick and not microscopes. Her choices are not irrational if her individual values accord lots of importance to lipstick. However, if she later gets sick she may regret she didn’t allocate some money to “microscopes'' – here a metaphor for medical science and medical insurance. If she doesn’t have the health insurance it’s her own fault.

This of course is bog-standard free-market nonsense. The obvious fallacy is that any waged worker under capitalism could possibly earn enough to pay privately for every good and service they might need in a lifetime. As capitalism evolved its neoliberal phase the amount of discretionary income workers have at their disposal has diminished. In Britain privatisation of transport, gas, electricity, most forms of dentistry etc. has swallowed up workers’ incomes so that, unlike in Ayn Rand’s time, it needs two full-time workers to support a household – especially with the astronomic cost of housing. The complete privatisation of healthcare would lead to millions of workers being unable to afford to have many therapies and treatments. Just like in the United States where, as Michael Moore shows in Sicko, insured people are regularly ripped off  by health insurance companies that specialise in not paying.

Fallacy 2: The source of wealth is individual effort and talent

Ayn Rand’s world, where the clever and industrious are the one’s who reap the rewards, was always a major caricature, even in her own times. In the neoliberal epoch dominated by finance capital it is ludicrous. Finance capital takes a chunk of the money paid for most commodities in the form of rents, interest etc. It’s money that makes money, and that may involve second-order artfulness and gambling techniques, but it probably does not involve anything very clever, inventive or productive.

But even in the sphere of industrial capital Rand’s ideas don’t work. The example of Carlos Slim, Mexico’s richest man and two years ago listed as the richest man in the world, is highly indicative about the source of wealth today. Slim got his $70 billion by owning Telmex, the Mexican telephone and communications giant. He was given it by his close friend Carlos Salinas de Gortari, who as Mexican president in the 1980s oversaw the advent of neoliberalism and privatisation. Rand’s model assumes that corruption and the use of the state apparatus for personal enrichment does not exist. But under capitalism it’s endemic, because the economic power of the capitalists enables them to further enrich themselves through non-economic power techniques like corruption and violence.

Ayn Rand waxes lyrical over the clever, the industrious and those who create things. But the people who make most things, whose billions of hours of labour make the world go round each day, are the workers – in industry, in services and on the land. Rand has nothing but contempt for them.

Fallacy 3: The state, class and society

Millions of people remember British Prime Minister Margaret Thatcher’s famous adage that “there is no such thing as society, only individuals and their families”. This utterly shocking view, that there was no collective good, was highly damaging to Thatcher and the Tories. But it was not an aberration – Ayn Rand said it first:

The tribal notion of the “common good'' has served as the moral justification of most social systems – and of all tyrannies – in history...The “common good'' (or “public interest'') is an undefined and undefinable concept; there is no such entity as ‘the tribe’ or ‘the public’; the tribe (or the public or “society’'' is only a number of individual men. Nothing can be good for the tribe as such; “good'' and “value'' pertain only to a living organism – to an individual living organism – not to a disembodied aggregate of relationships. (What is Capitalism, p. 20)

Even if we accept Rand’s strange terminology and discuss the fate of tribes – for example Native Americans or pre-historic Europeans – it seems fairly obvious that the tribe as a collective had overall interests. For example, it had the collective interest of finding somewhere with accessible food and water; of not being massacred by white settlers; of moving somewhere warmer with the advent of harsh winters; of finding shelter; of not being eaten by predators etc. etc. This may seem a small and trivial example, but it goes to the heart of everything that is wrong with Ayn Rand thought.

It was in the interest of each individual member of the tribe to do all the above things. But individuals couldn’t do all of them on their own. So they banded together in groups who produced and reproduced their existence by working together collectively, by collaborating. (The social nature of humanity and the social nature of labour is of course the very basis of Marxist thought. Collaboration for the common good is essential for virtually any type of society to work, including capitalism.)

Even under advanced capitalism there are many things that individuals and private companies either can’t or won’t do – or if they do they run into trouble because it’s inherently unprofitable but socially necessary. A classic case is the Channel tunnel linking the UK with Europe. The investment needed was so vast it couldn’t be recovered in fares and charges over any reasonable time to recoup investors’ money. So the company effectively went bust and was bailed out by governments. Which shows that it should have been financed by the UK and French governments all along.

It is possible to argue that every road, bridge and museum should be built by private money for a profit, but then the system of tolls and charges would be so enormous and complex, that people would spend all day sorting out change and things would slow down in a major way. But there is a more important issue, another one that goes to the heart of Ayn Randism. If profit is the sole criterion of everything except the police and the army, then you radically limit the range of things that can and will be done. You will sabotage the arts, education, social security and health – and the quality of life for millions of real individuals. You will have massive unemployment, thousands of beggars on the streets and social explosions so vast that spending on the repressive apparatuses would skyrocket to repress the consequent riots and uprisings.

Capitalism has always needed the state, indeed capitalism was brought into existence in the mercantilist period under the aegis and protection of the state. So long as capitalism subsists there will be a permanent battle about the priorities of the state, especially state spending. As a rule of thumb, the higher state spending the lower the level of poverty.

A linked blind spot for Rand is class. The capitalist class, the working class and the petty bourgeoisie (middle class) are absent actors from her texts. Since there is no such thing as society, other “disembodied aggregates'’ like social classes as disallowed too. Rand’s individualism is sustained by ignoring real collectives.

Fallacy 4: social solidarity and individual recognition

Rand saved some of her most persistent vitriol for “altruism''. This issue divided her from many conservative contemporaries who at least saw charities and some state health and welfare spending as necessary. The sea of altruism – and the unworthy and lazy claiming the wealth of the creative and industrious through taxes to fund social spending – was rotting the moral fibre of the United States and preventing the adequate recognition of the worth of  “Atlas'' – the talented and vigorous whose achievements “hold up the world''.

Marxists however do not advocate altruism – being generous to the less fortunate in the manner of well-meaning aristocrats – but social solidarity. This proposes that people work for the common good, sure, but not only for that.

Even in an egalitarian, collectivist society, the question of the recognition of individual achievement would be an important one. The need for recognition, for positive feedback from peers, to have personal qualities of skill, hard work and inventiveness recognised by others is something built into human beings, part of “human nature'' if you want. And it is clearly part of the motivation for the activity of billions of human beings. The esteem of others is always part of the self-esteem that everyone needs.

Recognition and esteem for individuals is not counterposed to social solidarity or collectivism. Ayn Rand’s vision of this, perhaps best explained in her dystopian novel Anthem, is that collectivism leads to the obliteration of individual recognition and individual personality – even individual names are replaced by numbers. This is a 1984-style vision of Stalinist totalitarianism, the kind of thing that is being wheeled out to oppose Obama’s health reforms, revealing the deeply paranoid style of the US right.

The question is not whether individual talent and achievement shoul be recognised, but whether hugely disproportionate financial rewards should accrue to those who make major contributions.

Fallacy 5: The capitalist free market equals freedom

According to Ayn Rand, freedom means only one thing – freedom from the threat of physical violence, and it is the role of the state to ensure that freedom. Everything else is a matter of contract – agreements freely drawn up between individuals on the basis of legal equality (Rand was a true daughter of John Locke).

This is an entirely restricted view of freedom, of course. Real freedom is the freedom to develop your own individuality and creativity on the basis of freedom from hunger, from poverty, from disease, from exploitation, from intimidation – and from the permanent exhaustion imposed by capitalist work regimes. (It is no accident that the centre of modern capitalist work regime methods, the United States, is the sleep deprivation capital of the world.)

People do not confront one another in the market place on the basis of freedom and equality, but on the basis of deep structural inequalities – of class, race and gender. They do not have equal access to education, and as a result the education system in modern capitalist states tends to spontaneously reproduce existing structural inequalities. Social mobility is slowing down, not speeding up. The overwhelming majority will remain in the social class into which they were born.

Karl Marx said that being rich meant being rich in free time, which is what most full-time workers can’t get. The free marketeers point that nobody is “forced'' to do a particular job is trivial and puerile. Yes, you have the right to be destitute; otherwise for most people it means having a full-time job, which for most people means an end to freedom.

Objectivism – the vacant heart of Ayn Rand thought

As befitting a cult guru, Ayn Rand topped off her system with a quack philosophy which she called “Objectivism''. This says that a) “Existence exists''; b) People should be guided by reason and not religious faith (mysticism): reason is the method in which information from the senses is integrated and synthesised; c) Reason determines that individualism, not altruism, shows the right way to live; and d) Each “man'' must determine their own “values'' on the basis of reason, but these values are contingent on time and circumstances, except that they must be conditioned by c).

The real problem which this system is the lack of any determination about what “values'' might be, except the dogma about individualism. Lacking any secure concepts about history or society, lacking any engagement with Freud which might have yielded up something about individual motivation, it really says “use your reason to determine your own best interests''.

Rand adds an ontology, which is peripheral to her system, but is as it happens completely wrong. She says contradiction in reality cannot exist: A = A. A thing is what it is and nothing else. This of course is a radical rejection of dialectical thinking that sees phenomena not as things in themselves, but in the process of their development and in the light of their interconnections with other phenomena.

It is this dynamic view of phenomena which enables Marxists to understand that everything – including capitalism fortunately – has a beginning and an end.

The cult of Ayn Rand

For a lot of people the success of cults – like Scientology for example – seems a mystery. How did Scientology manage to recruit all those Hollywood stars? It is less of a mystery when you realise that Scientology is really a self-improvement system. On the basis of mumbo jumbo, it aims to convince you that you are the centre of the universe, you can do anything, you must concentrate all your energy on being successful.

Thus with Ayn Rand thought. Individuals must be morally comfortable with unbridled self-interest, and use reason to think through the ways they can be most successful. This is deeply appealing because it links in with the great US myth – anyone can make it, on the basis of hard work, creativity, intelligence. It’s all up to you: individual and not collective solutions are the key.

All these systems fall on one central point. Stephen R. Covey says in his multimillion selling Seven Habits of Highly Effective People, “Highly effective people make their own world”. Covey is incapable of seeing that making our own world is just not available to the vast majority of the world’s population. How does a poor women in an Indian village make her own world? Or a peasant in a Mexican village? Or a Russian factory worker? The realities of class, of power and wealth – the deep structures of capitalism – prevent the vast majority of people exercising the kind of autonomy necessary to make real choices.

Capitalism does not make people free. It enslaves people.

Appendix: the world according to Ayn Rand

The New Left

"If concern with poverty and human suffering were the collectivists’ motive, they would have become champions of capitalism long ago; they would have discovered that it is the only political system capable of producing abundance. But they evaded the evidence as long as they could. When the issue became overwhelmingly clear to the whole world, the collectivists were faced with a choice: either turn to the right, in the name of humanity—or to the left, in the name of dictatorial power. They turned to the left—the New Left.

Instead of their old promises that collectivism would create universal abundance and their denunciations of capitalism for creating poverty, they are now denouncing capitalism for creating abundance. Instead of promising comfort and security for everyone, they are now denouncing people for being comfortable and secure."

Return of the Primitive

"Old-line Marxists claimed [falsely] that they were champions of reason, that socialism or communism was a scientific social system, that an advanced technology could not function in a capitalist society, but required a scientifically planned and organized human community to bring its maximum benefits to every man, in the form of material comforts and a higher standard of living .... [T]oday we see the spectacle of old Marxists blessing, aiding and abetting the young hoodlums [of the New Left] (who are their products and heirs) who proclaim the superiority of feelings over reason, of faith over knowledge, of leisure over production, of spiritual concerns over material comforts, of primitive nature over technology, of astrology over science, of drugs over consciousness."

Fascism and communism

“Fascism and communism are not two opposites, but two rival gangs fighting over the same territory ... both are variants of statism, based on the collectivist principle that man is the rightless slave of the state.''

Lipstick and microscopes

“A microscope is of no value to a little stenographer struggling to make a living; a lipstick is; a lipstick, to her, may mean the difference between self-confidence and self-doubt, between glamour and drudgery.

“This does not mean, however, that the values ruling a free market are subjective. If the stenographer spends all her money on cosmetics and has none left to pay for the use of a microscope (for a visit to the doctor) when she needs it, she learns a better method of budgeting her income; the free market serves as her teacher: she has no way to penalize others for her mistakes. If she budgets rationally, the microscope is always available to serve her own specific needs and no more, as far as she is concerned: she is not taxed to support an entire hospital, a research laboratory, or a space ship’s journey to the moon. Within her own productive power, she does pay a part of the cost of scientific achievements, when and as she needs them.'' 

Conservatives

“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 ...

“Today’s culture is dominated by the philosophy of mysticism (irrationalism)—altruism—collectivism, the base from which only statism can be derived; the statists (of any brand: communist, fascist or welfare) are merely cashing in on it—while the ‘conservatives' are scurrying to ride on the enemy’s premises and, somehow, to achieve political freedom by stealth. It can’t be done.''

Collectivism

“Collectivism holds that the individual has no rights, that his life and work belong to the group ... and that the group may sacrifice him at its own whim to its own interests. The only way to implement a doctrine of that kind is by means of brute force—and statism has always been the political corollary of collectivism.'' – The Virtue of Selfishnesss, p. 128

Altruism

“What is the moral code of altruism? The basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value.

“Do not confuse altruism with kindness, good will or respect for the rights of others. These are not primaries, but consequences, which, in fact, altruism makes impossible. The irreducible primary of altruism, the basic absolute, is self-sacrifice—which means; self-immolation, self-abnegation, self-denial, self-destruction — which means: the self as a standard of evil, the selfless as a standard of the good.

“Do not hide behind such superficialities as whether you should or should not give a dime to a beggar. That is not the issue. The issue is whether you do or do not have the right to exist without giving him that dime. The issue is whether you must keep buying your life, dime by dime, from any beggar who might choose to approach you. The issue is whether the need of others is the first mortgage on your life and the moral purpose of your existence. The issue is whether man is to be regarded as a sacrificial animal. Any man of self-esteem will answer: ‘No.' Altruism says: ‘Yes.'''

Contradiction

“A contradiction cannot exist. An atom is itself, and so is the universe; neither can contradict its own identity; nor can a part contradict the whole. No concept man forms is valid unless he integrates it without contradiction into the total sum of his knowledge. To arrive at a contradiction is to confess an error in one’s thinking; to maintain a contradiction is to abdicate one’s mind and to evict oneself from the realm of reality.'' – Speech by ‘John Galt’, For the New Intellectual.

Free market

“In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined — not by the arbitrary whim of the rich or of the poor, not by anyone’s ‘greed' or by anyone’s need — but by the law of supply and demand. The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values—better products or services, at a lower price—than others are able to offer.''

[Phil Hearse is a activist in the British socialist organisation Socialist Resistance, which publishes a newspaper of the same name. This article first appeared at Hearse's web site Marxsite.]