Capitalism: The Unknown Ideal

Capitalism: The Unknown Ideal

Setting the stage

Capitalism: The Unknown Ideal a non-fiction book written by Ayn Rand and first published in 1966. The book is a collection of essays that include, among others, articles by Alan Greenspan (the future chairman of the FED), Nathaniel Branden, and Robert Hessen. Her purpose is to revive the consciousness of American entrepreneurs; making profits is something they should absolutely take pride in! Not something to be ashamed for.

Rand realizes that the distinctly American ideals of classical liberalism and capitalism had been betrayed in America. Despite the end of the Progressive era (1890-1910), the Progressive movement, founded by Robert Lafollette following the crisis of 1983, continued to exist and support the New Deal. The movement advocated anti-capitalist and anti-individualist ideals. The policies it pursued were inspired by principles of belief in social justice, anti-capitalism, and welfare programs. Soon after, regulations on the banking and financial systems, minimum wage, public education, and prohibition would be introduced.

Capitalism as "Unknown Ideal"

  • It is ideal because it's a system based on the recognition of individual rights, including property rights, where all property is private.
  • It is unknown because pure capitalism as Rand envisions it has never actually existed. This form of pure capitalism (laissez-faire capitalism) refers to the complete separation of economy and politics, leaving the market entirely uncontrolled.

Rand views this form of capitalism with the COMPLETE SEPARATION of state and economy as the only possible, legitimate, and morally justifiable as the morality of capitalism lies in the fact that it allows individuals to pursue their ends through labor and voluntary exchange.

Capitalism as the Moral System

The central point of the book, supported by all the chapters, is exactly the following and emerges clearly: capitalism is the only moral system.

Capitalism is that system which leaves men free to act. It allows every individual to live by their mind, reason, and judgment, to pursue their own goals. It's a system based on self-interest.

Socialism is the opposite, she argues. It rewards the incompetent, the parasites, and those who do not use reason. Essentially, socialism treats men as sacrificial animals. Its aim is not the individual's life but the welfare of the group. Socialists believe that the individual's duty is to serve the group, to sacrifice oneself for others. This ultimately means that the individual becomes a slave to the State, or the nation, or the community.

Businessmen must NOT feel ashamed

According to Rand, the problem with most capitalists today is that they have accepted the idea of being guilty of the profits they make, and the only way to free themselves from this guilt is to be altruistic and make profits for the "common good." Rand emphasizes, however, that those capitalists who make profits for themselves are the ultimate indicator to discern whether we live in a free or totalitarian country.

As she writes in the third chapter America's Persecuted Minority: Big Business

Businessmen are the one group that distinguishes capitalism and the American way of life from the totalitarian statism that is swallowing the rest of the world. all the other social groups – workers, farmers, professional men, scientists, soldiers – exist under dictatorships, even though they exist in chains, in terror, in misery, and in progressive self-destruction. But there is no such group as businessmen under a dictatorship. Their place is taken by armed thugs: by bureaucrats and commissars. Businessmen are the symbol of a free society – the symbol of America.

The Problem with Mixed Economy: Crony Capitalism

Finally, we find in the same chapter one of the most politically innovative viewpoints of Rand’s thought. If politics didn't have the ability to interfere with the free market, the problem of lobbying (or crony capitalism) wouldn't exist. That is, the problem of rent-seeking.

The large corporations that have acquired political power have been able to demand rents from the government just because politicians have the ability of selling them. If there were no possibility of selling because politicians could not intervene in the economy, there wouldn’t even be a demand for those rents.

Ayn Rand shifts the perspective of the problem: crony capitalism therefore doesn't arise from the voluntary demand of capitalists towards politicians to enjoy privileges, but from the potential of politics to offer these privileges. This is not a problem of demand but of supply.

A minimal government that only concerns itself with protecting individual rights, maintaining a monopoly on the use of force, and overseeing the courts, wouldn't be useful to any capitalist, as it wouldn't have any chance to interfere in the economy.


My Take Today

The demand for "more state" and the loss of a freer alternative

Has the world progressed thanks to individuals who were great inventors and discoverers or because of the solidarity of collectivism?

Maybe it is the free, selfish action of the individual who, in following their predatory impulse, eventually contributes to the well-being of humanity. Maybe the reason that kept the West surviving for so long was capitalism and the industrial revolution.

So why is it that despite the crisis of this interventionist state, Rand's ideas don't prevail?

My hunch is that we've now reached a level of blending between big government and big business that it's truly difficult to reverse, and citizens have developed a kind of addiction to welfare programs and interventionism of the state; they always want more of it.

There's an hegemony of radical left ideas that propose "more State" as the only solution. People can no longer think of a freer alternative.