Capitalism: Unknown Ideal?

Writer-philosopher Ayn Rand (1905–1982) emphasized the sovereignty of the individual and the right to pursue wealth and happiness through capitalism. In the face of today’s global economic woes, her ideas have gained a new currency. In fact, Hollywood is once again dusting off her hugely influential novel Atlas Shrugged in hopes of finally bringing it to life as a movie.

In apparent opposition to the philosophy of Ayn Rand and her capitalist ideal is the often-voiced standard from the pages of the Bible, “Love your neighbor as yourself.” Capitalism, with its competitive ethic and profit motive, too often has the practical effect of showing little regard for one’s neighbor. In fact, the postmodern adaptation of the Golden Rule, “Those with the gold, rule,” is often equated with capitalism in that those who enjoy great affluence (whether personal or national) tend to have great influence. Such wealth, observers note, is often accomplished through the dishonest use of others’ labor or assets. This is true, though the power to exploit and use one’s neighbor is not unique to the capitalist system.

Its darker attributes notwithstanding, capitalism is enshrined as the mechanism that promotes the best for all because its core attribute, business competition, creates new products, progress and economic growth. The fact that there are myriad circumstances that do not allow all people to participate in this competition, that the playing field is often far from level, and that the “haves” of the system can extract great profit from the “have-nots,” is often overlooked. Many believe, as Herbert Spencer noted at the turn of the last century, that social and business success are simply matters of “survival of the fittest.” But even Spencer believed that what he called “ethical checks” were needed to curb the more selfish aspects of human behavior.

If we were capable of rising above the covetous nature of self-interest to overcome its pulls, which often lead to harming others, then perhaps Rand could be a credible prophet for the virtues of capitalism. Yet examples to the contrary are ubiquitous. The glaring disparity today between executive and worker pay even while companies’ profitability has collapsed is only one example. Where does the problem lie? Is this just greed run amok? Or is self-interest not as enlightened as Rand’s fiction would have us believe?

Rand taught that seeking the best for oneself is not only a virtue but the highest moral standard. In her 1967 collection of essays, Capitalism: The Unknown Ideal, she boldly stated that pure capitalism is “the only system geared to the life of a rational being.” She continued, “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” (Rand’s emphasis). Through unfettered capitalism, she argued, free individuals would have the greatest opportunity to prosper and seek their own rational, thoughtful self-interest. Rand believed that the United States was unique as a land of true capitalist opportunity because it was established to protect the rights of the individual. Nevertheless, she claimed, a pure form of capitalism has never been tried.

Rational Self-Interest

The atheistic Rand rarely discussed love, much less the biblical directive to love your neighbor as you love yourself, but her philosophy of rational individualism certainly taught that one must value self. And for anyone who considers loving neighbor as self to be a commendable aim, it perhaps makes sense that one must first value self and understand what is best for self in order to translate that into action toward others. But the actual application of love for neighbor is often a problem. Mouthing the right words is always easier than taking correct action, as the Bible also points out (see James 2:15–17).

We may happily love ourselves in what Rand called “rational self-interest,” but is it possible for self-directed behavior to lead beyond our individual fulfillment to include that of others around us?

This seems a difficult proposition. Can living a life of getting for self—the “get” way, it could be called—somehow benefit all? Sociologist Robert Bellah focused on this question more than two decades ago. Discussing the need for more community-mindedness, less expressive (“me first”) individualism, and a less consumption-oriented way of life, Bellah presciently noted, “Now that economic growth is faltering and the moral ecology on which we have tacitly depended is in disarray, we are beginning to understand that our common life requires more than the exclusive concern for material accumulation.”

It is this concept of common life and the social contract of community that Rand misunderstood. Her self-devised objectivist viewpoint assumed that rational humans, if left to their own self-interests, would neither require nor accept charity. The objectivist theory holds that we have only our intellect to guide us; to objectively view the world and operate in our own rational (mindful or enlightened) self-interest is the zenith of human capability. In Capitalism, she argued that the values humans hold must be rational, “derived from the facts of reality and validated by the process of reason.” Accordingly, throughout her fiction and nonfiction works, Rand upheld capitalism and free markets as foundational to the ultimate success of the human enterprise.

My philosophy, in essence, is the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute,” says Rand in her “About the Author” statement at the end of Atlas Shrugged. That book and her other major novel, The Fountainhead, brought this philosophy to life in a way that she said would “concretize” her view; readers would perceive and experience the “immediate reality” of her ideas. Teenagers and young adults continue to be especially captivated by these works, which portray the struggles of self-identity, personal integrity and finding individual meaning—issues close at hand at that point in life. The result is an appealingly romanticized view of the individual.

It is naïve to believe, however, that the pursuit of one’s self-identity through productive achievement sums up life’s purpose. The downside in following too closely in the footsteps of Rand’s characters is a life coldly isolated and emotionally dissociated from community connections and responsibilities. Social capital held no investment value for Rand, who even as a child had detached herself emotionally and psychologically from both family and community.

Ideal” Capitalism

Capitalism was for Rand far more than just one of many economic systems; it was the system connoted by human nature itself. “If one recognizes the supremacy of reason and applies it consistently, all the rest follows,” she wrote in 1971. She had earlier described this connection between economics and the nature of man: “Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries.” Rand posited that capitalism not only allowed but obligated individuals to follow their desires and thereby be true to their convictions. A person’s objective sense, rationality or power to determine and make choices, she argued, would lead not only to economic success but also to becoming an integrated, consistent whole—a happy and fulfilled person.

I am not primarily an advocate of capitalism, but of egoism; and I am not primarily an advocate of egoism, but of reason. If one recognizes the supremacy of reason and applies it consistently, all the rest follows.”

Ayn Rand, “Brief Summary,” The Objectivist (September 1971)

Accordingly, in Rand’s estimation, the United States Constitution was unique in that it allowed a person to use his mind to follow his personal “pursuit of happiness.” A nation with a limited government that may not suppress citizens’ natural liberty to forge their own happiness—as she defined it—is Rand’s political, economic and social utopia.

It is the Founding Fathers who established in the United States of America the first and only free society in history,” she insisted in a 1961 University of Michigan interview. “And the economic system which was the corollary of the American political system was capitalism—the system of total, unregulated laissez-faire capitalism. This was the basic principle of the American way of life or the American political system.”

An unbound capitalism was Rand’s gospel message. Yet, while she believed that individual freedom and constitutional restrictions on government were keys to the economic growth and success of the United States, she found that even the American system was amiss. Unlike the separation of church and state, there was not an explicit separation between the capitalist enterprise and government regulation. This had led, she believed, to a continuing slide toward a collectivist welfare state. Indeed, her adherents today explain the current global economic crisis as a crisis of political failure and government misrule rather than as a result of capitalism’s shortcomings.

In practice,” Rand continued in the 1961 interview, capitalism “has never yet been practiced as total separation of government and economics. [Such a separation] had not been established from the first but was implied in principle. But certain loopholes or contradictions were still allowed into the American setup and into the Constitution, which permitted collectivist influences to undermine the American way of life.”

Capitalism was destroyed by the morality of altruism. . . . There is no way to save capitalism—or freedom, or civilization, or America—except by intellectual surgery, that is: by destroying the source of the destruction, by rejecting the morality of altruism.”

Ayn Rand, “Conservatism: An Obituary,” in Capitalism: The Unknown Ideal (1967)

Rand viewed governments’ willingness to manipulate markets and coerce individuals as fundamentally against the rights of man. Simply put, to enforce a “taking from the rich to give to the poor” was most abhorrent to her, a throwback to Russian collectivism which had so seared her mind as a child. Government’s role from her objectivist worldview was one of defender, not interferer; of deal-enforcer, not deal-maker. Interventionist policies that manipulated monetary policy, trade, production and consumption were the kinds of allowed contradictions that sent Rand reeling. She believed that her ideal (though as yet unpracticed) version of free-market capitalism would not require regulations outlawing monopolizing, price-fixing, collusion or consumer-exploiting activities.

Irrational Greed

The very real downsides of capitalism were recognized as such by Rand, but only as symptoms of an adulterated brew, not as intrinsic properties of capitalism. These were the irrational by-products of hedonism. By cheating one’s fellow man, the cheater is lowering his own standard of value—a nonsensical proposition to Rand. Greed apparently did not exist in her rational world. If pure capitalism were ever allowed to run its course, she assured, other rational pressures would keep the entrepreneur’s greed in check: “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. . . . Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment” (“America’s Persecuted Minority: Big Business,” in Capitalism: The Unknown Ideal).

An early adherent of objectivism, Alan Greenspan (who served as chairman of the U.S. Federal Reserve from 1987 to 2006), argued that it is the very desire for corporate profit that protects the consumer against dishonest business. In his essay “The Assault on Integrity” (first published in Rand’s Objectivist Newsletter in August 1963), Greenspan noted that “it is precisely the ‘greed’ of the businessman or, more appropriately, his profit-seeking, which is the unexcelled protector of the consumer. . . . 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 money-making potential, reputation or ‘good will’ is as much an asset as its physical plant and equipment. . . . In fact, in one way or another, every producer and distributor of goods or services is caught up in the competition for reputation.” 

Real Capitalism

The objectivist view of capitalism has drawn its share of criticism. Albert Ellis, founder of rational-emotive behavior therapy, was one of Rand’s most vehement critics during the 1960s. In his book of rebuttals to all things objectivist (Is Objectivism a Religion?), Ellis recognized that people simply do not have the inner rationality to control the tendency to take advantage of others: “Almost any conceivable system of real capitalism . . . 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. . . . Capitalism, above perhaps all other economic systems which have widely prevailed in human history, encourages 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 men who buy them” (Ellis’s emphasis).

Ellis also put the kibosh on the objectivist’s optimistic view of people’s desire to achieve and trade only their best according to their rational self-interest. It is more realistic to conclude that man naturally takes the lower, easier, emotionally selfish action, according to Ellis. Thus, he argued, one’s self-interest within “the existing capitalist system virtually forces some individuals to produce shoddy goods if they are to stay in business—partly because, in a free market, the consuming public is so easily misled that it will choose almost any product that is cheap over a higher quality one that is more expensive.”

Of course, Rand would respond to this position that an unfair exchange is the result of the irrationality of the buyer, his own desire to get more for less. But rationalism will not make that desire go away. And while Ellis is quick to illustrate that economic reality stands in great contrast to pure capitalism, he, too, is at a loss to explain the cause of its practical failure from his own psychological tenets.

If any economic system is to operate to the benefit of all, the producer and the consumer must understand their mutual dependence. There must be not only a sense of value but a sense of need as well as a sense of charity. Inevitably there will be at times a necessity to give without the expectation of return. Human beings are social beings; we have a need to love our neighbors as ourselves.

Rand may have been correct that pure laissez-faire capitalism had never truly been tried, but its results would be no different because people would still be the same. Rand simply refused to acknowledge that however enlightened self-interest may be, it will never be enough to overcome on its own the human tendency toward self-deception and toward self-advancement at the expense of others.

The True Ideal

The problem Rand failed to acknowledge was stated long ago by the prophet Jeremiah: “The heart [i.e., the human mind] is deceitful above all things and beyond cure. Who can understand it?” (Jeremiah 17:9, New International Version). Because this understanding is found in a place that she declared had no relevance—rationally out of bounds—Rand rejected it out of hand. Yet when one truly takes an objective overview of the human experience, one must come to a conclusion similar to Jeremiah’s. When left to its own devices, the human mind is the ultimate spin machine creating a credible story for almost any circumstance.

This is a conundrum. While able to discern and create good and positive things, the human intellect is seemingly forever ensnared in a form of self-centeredness that converts good beginnings to bad ends. Rationality alone, limited to one’s inner mental conjuring, provides only a partial path to understanding humanity’s individual and collective purpose. If we could see that purpose in its fullness, then we could indeed love our neighbor as we love ourselves, because we would see more in our fellow man than just a competitor, a customer, or a rube to be taken advantage of. Then the concept of enlightened self-interest would in fact be a most powerful force for the good of all.

We would be finally free to choose those things that not only benefited us individually but that would benefit all others as well; we would even understand the value of opting to make choices seemingly to our own detriment while providing for the betterment of others. We would understand that to reap good things, we need to sow good things; to receive, we have to give. The wisdom of the proverb, “There is one who makes himself rich, yet has nothing; and one who makes himself poor, yet has great riches” (Proverbs 13:7), would become plain. The economics of relationships is not a zero-sum game; to win, one does not need to create a loser.

The individual pursuit of happiness would then contribute to the happiness of all. Such a rationale would be the beginning of a true utopia, a time spoken of in a New Testament reference to Jeremiah’s writings: “The days are coming, says the Lord, when I will make a new covenant. . . . I will put My laws in their mind and write them on their hearts” (Hebrews 8:8, 10, quoting Jeremiah 31:31, 33).

Therein lies the factor that is missing within us and our economic systems today: an extension of our knowledge that will catalyze in us the capacity to know and to act on what is best for ourselves and for our fellow man. This unknown ideal is not the spirit of capitalism. It is the spirit of loving one’s neighbor as oneself; the spirit of giving rather than getting.