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Ayn Rand Didn't Understand Capitalism

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Initial post: Apr 16, 2011 8:27:43 AM PDT
Last edited by the author on Apr 16, 2011 8:40:55 AM PDT
Let me first say that I love the book and I completely agree on the over cumbersome government, with it's 70K regulations, it's suppressing of individual liberties, its infringing on property rights. Pretty much, I agree with Francisco's Money Speech, when a government begins to make you get a license to sell your own wares, when it makes you get permission to do something on your own property, we're in trouble. When our money is no longer backed by anything of value. These things are bad.

My issue with Ayn Rand is that she makes the CEO's the movers and shakers of the world. Yes, I know, she mentions actresses and musicians, she mentions inventors as well. What about exceptional workers? The men and women who know the value of their service and request to be paid according to their worth. You can be the greatest CEO in the world, if you're workers don't know how to run the machines, if they don't know how to pour the metal, if they don't know how to lay the track, if they don't know how to run the train, you're company is still going to fail. All great companies have succeeded because of the great workers they hired in the process. Henry Ford was the first to realize that if you paid an employee a good wage, they worked better for you, and if you paid them according to their worth, you could get the best employees.
Steve Jobs might be a visionary, but there were many people responsible for the creation of the Ipod, from the factory worker who assembled it to the truck driver that delivered it to the stores, to the men and women who came out with advertisements. Without workers the ipod may have never been. Rand understood these things in her characters speeches but fails to include these workers in her list of great movers of people that should be disappearing. Capitalism is the only system that truly engenders the best form of cooperation. A cooperation where both people get exactly what they want from any given situation. Capitalism is the only system where there can be two winners in any transaction. In Socialism, one man is subjugated for another, in Fascism and in Communism all are subjugated to the state.

Capitalism is a system for which a man who opens a restaurant, wants to get a great staff, other chefs, and some capital to do it with, and all of these workers are movers. It is a system for which Finance, Innovation, Management, and Work force come together to create a beautiful mosaic of accomplishment. Each supposed to be paid according to their worth in the market place. If your worth becomes of greater value, than you should be able to approach your employer and two rational people can talk about a higher pay for a greater value, if they are unable to come to an agreement, than they should part company on good grounds, and the person should seek a place where his perceived value can be recognized.

My question is, why isn't the therapist who does her job better than most others, the machinist for whom does his, the firefighter who keeps his crew safe while rescuing people, the teacher who teaches the unteachable or revolutionizes a way to approach students with a topic, included in the list of great movers.

She left out the major aspect of capitalism, which is cooperation, she mentions it in her philosophy and its important in her philosophy, the money speech being the best example, each person works with or for another by agreement. But she, like Republicans, insults these people by not including them in her list of great movers. A man who knows his worth and is willing to work for the value of his servie is a mover of society, not just the man that gives the job, not just the person that invents the equipment. Those who work with deliberate intent to a certain and specific goal are a success in this world.

It is still a great book and I still enjoyed it and I enjoyed the movie version. I still highly recommend it. I just want people to realize that great minds are not just CEO's, Inventors, or Financiers, but also, men for whom know the value of their service and are willing to work for it, for whom without, the CEO would be useless, the inventor would never get his products out to the vast amount of people he would want, and the financier would have little to finance.

Posted on Apr 16, 2011 9:04:51 AM PDT
Calvin says:
I don't know why you assert that these people are not recognized by either Rand or Republicans when both do.

Indeed, one could argue that Rand's role in writing her books is one of a teacher.

Posted on Apr 16, 2011 9:16:14 AM PDT
I assert it because they are not dissapearing in vast numbers, when, for any society to survive, they would need people to lay the wiring down, they would need builders for the houses, they would need all these things. ANd yet, we don't hear about the hard working men and women in her book.

Like I said, she talks about these people in her philosophy, in my favorite speeches, I have The Money Speech printed on decorated paper and on my wall. But, she doesn't directly talk about their value in the eyes of Galt, they don't get to go to Atlantis. That's my point. It's the fallacy in the story. Pretty words do not make up for good action.

Posted on Apr 16, 2011 6:04:11 PM PDT
C. Oliver: You're just factually wrong. Many in the Valley were not CEOs but included the young brakeman at the beginning of the story, a truck driver (who didn't want to remain just that), and a young mother. And, of course, the reason Galt made his speech was to convince ANYONE listening to join his strike.

Posted on Apr 16, 2011 6:25:47 PM PDT
I'll reread the book and I'll tell you if you're right.

In reply to an earlier post on Apr 16, 2011 6:53:52 PM PDT
Temagami says:
I have read this book. Where did you get the idea that Rand did not appreciate the contributions of those who were employed by her? The book is full of references to her appreciation of lower employees.

In reply to an earlier post on Apr 17, 2011 10:34:58 AM PDT
I think you are off base. One of the heroes in the book was the inventor of the engine. It didn't get produced because 'the union' didn't want any disruption to the status quo. Many other inventors are stifled the same way.

In the book, you'll recall that Dagny offered one manager (who could manage) anything he wanted to run the Rio line. Remember? He wasn't a CEO...he was just good at his job. THe problem in Atlas Shrugged is 'wage flattening'. Everyone got paid the same whether they produced or were slackers. that's what we are getting today, with 100,000 teachers in NJ and only 3 fired for incompetence in the last 10 years! A system that doesn't work.

In a socialist world, folks cannot rise due to their abilities....they just rot away as just 'one of the wage earners'.

You'll recall that 'the machine' tried to kill Reardon had the best, but it would have put others out of business.

The US has tried the same. Attacked IBM for 10 years before it gave up. Too successful... then it was MSFT by the European Union - too successful. Now , MSFT is going after Google at 'too successful'. Never ends. Libs hate success. Libs hate those who make profits. I'm surprised Apple hasn't been sued and sued again....... and shut down.

We're not far from John Galt time in the world. The Euros are more intent upon killing Capitalism and success at every turn. So is the US.

It's attack the oil company profits. It's attack success wherever it comes from.

NOw, if you invent the best mousetrap, your first customer is likely to be the government trying ot shut you down for one cooked up reason or another.

In reply to an earlier post on Apr 17, 2011 11:14:33 AM PDT
Neil Baxter says:
Eddie Willers.

Posted on Apr 17, 2011 12:04:36 PM PDT
Benjamin K. says:
I agree!

Rand's main misunderstanding of capitalism lies in her inability to recognize that the government (that is, the citizens of a nation and their elected representatives) create the arena in which capitalists thrive.

Capitalism could not exist without laws, infrastructure and courts-of-law able to uphold contracts, dissolve unfair agreements and impose binding judgements upon people and the companies they own/operate. The examples are endless: Who would enter into a business contract if there was no way to enforce it? Who would work if they had no legal guarantee to their wages? Who would start a company if there were no roads (rail or otherwise) and bridges with which to transport products?

Capitalism is an economic system that presupposes (to use one of Rand's buzzwords) the existence of infrastructure, laws and the courts to uphold them, which, in turn, presuppose the existence of a strong federal government. Not the strawman dictatorship that Rand spent 1,100 pages castigating in Atlas Shrugged, but the kind of federal government the founders threw over the Articles of Confederation for.

I recommend Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole, which is a detailed account of the steady deterioration of capitalism from the economic system created and sustained by the Protestant ethic to it's current incarnation as the breeder of infantilism and lever of immediate gratification. Rand was not alone in misunderstanding the economic system she tried to champion- Milton Friedman and F.A. Hayak grossly underestimated the role of the government in keeping the capitalists in line.

As long as citizens banding together to protect themselves from the onslaught of ever-cheaper and more unecessary products and the steady exodus of jobs to third world countries because they demand a living wage with which to live and raise families is decried as 'socialism', we will all continue to misunderstand capitalism until the U.S. is nothing but an endless string of Subways and Cash-For-Gold stores, dotted by playgrounds for the rich and fabulous.

In reply to an earlier post on Apr 17, 2011 1:59:52 PM PDT
Last edited by the author on Apr 17, 2011 2:03:20 PM PDT
Temagami says:
Boy - sounds like you got booted from more than a few jobs? What we have in this country today is basically more dollars riding in the cart than dollars pulling it. And mostly because of "feel good" legislation putting us trillions of dollars in the red on the road to economic disaster. Not much incentive for investment into the private sector. Why invest when half the country thinks it is "unfair" that the capitalists make too much money and believe that the have-nots should get more of your money in the name of "Fairness'". "The bigger the government - the smaller the citizen." Why? Many reasons, but to keep it simple the bigger the government the higher the taxes to pay for that growth = fewer private sector jobs supporting a larger government and less purchasing power for the individual citizen who must pay for the increased taxes.

Posted on Apr 17, 2011 6:03:15 PM PDT
Benjamin Kenon wrote:

"Rand's main misunderstanding of capitalism lies in her inability to recognize that the government (that is, the citizens of a nation and their elected representatives) create the arena in which capitalists thrive.

"Capitalism could not exist without laws, infrastructure and courts-of-law able to uphold contracts, dissolve unfair agreements and impose binding judgements upon people and the companies they own/operate. The examples are endless: Who would enter into a business contract if there was no way to enforce it? Who would work if they had no legal guarantee to their wages?"

Rand's main MISUNDERSTANDING?? That was Rand's main ARGUMENT for the NECESSITY of government and for her opposition to anarchists and anarchism.

I can see that Benjamin hates Ayn Rand, but he sure doesn't know very much about her.

Betsy Speicher

Facts, Values, and Friends --

In reply to an earlier post on Apr 17, 2011 6:20:50 PM PDT
Benjamin K. says:
@ Betsy: Hello again!

Rand argued endlessly that government is evil. Government is always depicted as such in her work. She does admit some government is neccesary- but only, I think, to keep herself from occupying that strange right-wing anarchism that is in vogue these days. She wrote that all taxes are evil in principle, all regulations are morally wrong and that only an unrestricted capitalism (which, one can gather from her books, is a capitalism unrestrained by any law or regulation) is appropriately called 'capitalism'. She is ignorant of Adam Smith's "Wealth of Nations" and doesn't even mention Keynes (!!!!!).

Without a social safety-net of sorts and regulations to protect the people from the capitalist and the capitalist from himself, capitalism can't exist. If the goal is ever-cheaper products and endlessly increasing profits, the capitalist has no choice but to 1:) cut the workforce, 2:) outsource jobs, 3:)lower wages while increasing hours worked, and 4:) cheaper materials with which to manufacture his goods.

The regulations on the books (cumbersome though they may be) serve to protect us from the multinational mega-corporations that have taken the place of the businessman of integrity over the last 50 or so years, and try to guarantee that capitalism survives the short-sightedness of it's champions and that it's boons and burdens are shared by all.

Posted on Apr 17, 2011 6:29:51 PM PDT
Instead of the silly stuff Benjamin makes up and writes here, if you want a short introduction to what Ayn Rand's views on government REALLY are, you can read her essay "The Nature of Government" for free at

Betsy Speicher

Facts, Values, and Friends --

In reply to an earlier post on Apr 17, 2011 7:01:36 PM PDT
Benjamin K. says:
Or read "Atlas Shrugged" for Rand's views, which are on full display, without the hedging sometimes seen in her nonfiction articles.

Posted on Apr 17, 2011 7:14:32 PM PDT
Benjamin Kenon wrote: "Or read "Atlas Shrugged" for Rand's views, which are on full display .. "

A very good idea!

Posted on Apr 18, 2011 1:04:24 PM PDT
Last edited by the author on Apr 18, 2011 1:06:12 PM PDT
I'm with Betsy. Ayn's grasp of capitalism is perfectly sound. (I just finished my third reading of the novel and am more impressed with it every time I read it.) No, she doesn't ignore the rank-and-file worker. But she does make the point that real wealth is typically and fundamentally created by the brains and the ambition of a few extraordinary people. (By the way, I note with pleasure that the novel is ranked #6 on Amazon today. Phenomenal.)

In reply to an earlier post on Apr 18, 2011 1:28:44 PM PDT
Last edited by the author on Apr 18, 2011 1:37:08 PM PDT
Benjamin K. says:
@ Donald: True, people with good ideas can sometimes make money from them, but that is only a peripheral issue in capitalism. Capitalism is concerned primarily with the movement of capital.

Capitalism is an economic system in which persons who control the means of production (factories, farms, etc.) use those resources to make a profit, aka capital.

Having said capital, the person (now called a capitalist) can invest it in other ventures in order to increase his/her capital. In doing so, the capitalist will theoretically employ non-capitalist workers, who themselves may aspire to become capitalists someday. And they may do so by investing their surplus earnings in business ventures and stocks.

If someone comes along who is able to improve an existing product, speed up an existing process, or create something new, he or she may attract investors who capital to invest. The pressure exerted by capitalism puts a premium on innovation, novelty and publicity. But it also creates and nurtures conservatism- which is why electric cars, which were possible more than a few years ago are only now appearing (since gas prices seem poised to grow ever higher).

Something of a simplification, but this is the gist of the capitalist model. There's nothing about not taxing the rich or corporations, nothing about corporations being considered as people under the constitution, nothing about not regulating markets. It's just that A has money, invests it with B, who hires C, and more money is made. That's it!

Rand would have done well to be honest with her readers; without regulation, capitalism would collapse... like a bunch... of broccoli! (I had to say it.)

Again, without the safety net of laws and courts you can't have legally binding contracts, arbitration or lawsuits, so you can't have commerce. Without taxes you can't have infrastructure, so you can't have commerce or engage in trade because there are no roads. And without laws and regulations to protect the workers from the capitalist and the capitalist from himself, you can't have commerce. Who would work if they weren't legally guaranteed their wages? Who would work if there were no safety standards and no recourse for compensation for on the job injury? Who would want a job if they couldn't earn a living wage for themself and their family?

I hate to repeat myself, but the absurdity of Rand's definition of capitalism ought to be apparent by now. She wasn't a superwoman, or even a particularly bright one. I'm sure anyone reading this is capable of seeing the absurdity of Rand's "theory" of capitalism- if they use this logic they keep telling me they're so fond of...

Posted on Apr 18, 2011 2:33:31 PM PDT
Last edited by the author on Apr 18, 2011 2:34:11 PM PDT
I do use that logic (I'm a mathematician and pretty fond of logic) and I really do still think she had her finger soundly on the pulse of what capitalism is and always should be. The problem really is that people basically critical of Ayn Rand want capitalism to be something different from what it is.

Posted on Apr 18, 2011 3:00:41 PM PDT
L White, CPA says:
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Posted on Apr 18, 2011 3:34:33 PM PDT
Temagami says:

Posted on Apr 19, 2011 5:20:39 AM PDT
Last edited by the author on Apr 19, 2011 5:27:36 AM PDT
I would never minimize the role of the ordinary worker in the production of goods, because obviously production requires an army of hard workers. But the fact remains that it all starts with the inventiveness of the human mind. Take the cell phone (please!-- not one of my favorite devices but it serves as an example)-- while it could not be produced without the army of workers I mentioned, there would be nothing whatever to produce without the initial work of the mind, which, in this case, required use of the principles of quantum physics. No number of workers could ever produce a cell phone unless the brainwork had already been done by those few extraordinary individuals capable of doing it. Ayn Rand is right-- this is where it all starts, and this is the essence of success in any capitalist enterprise. There is validity in recognizing the worth of the workers all up and down the line, but the work of the mind is what gives value to all the work.

Posted on Apr 19, 2011 9:43:23 AM PDT
And by the way, one may say that the current conception of capitalism is perhaps different from the one that was current half a century ago, but I would say that to the extent that they are different, the difference in many respects amounts to a degeneration of the original concept. For example, apparently part of the modern conception of "capitalism" includes what some of us would consider corporate socialism, i.e. the currying of government favor, on the part of a corporation, because that corporation doesn't have the ability to compete well without such favor. This isn't capitalism-- it's looting.

In reply to an earlier post on Apr 19, 2011 2:55:25 PM PDT
Temagami says:
Totally agree. Ayn Rand's "Atlas Shrugged" was voted by the Library of Congress as being the second most influential book in the US - next to the bible (#1). Not bad for a book that is hated by the left and of course most of Hollywood.

Posted on Apr 19, 2011 3:29:13 PM PDT
Hadn't heard that Library of Congress pronouncement-- interesting!

In reply to an earlier post on Apr 19, 2011 3:29:20 PM PDT
Benjamin K. says:
So, you haven't read Adam Smith, have you?

Also, when Atlas Shrugged was 'voted' the second most influential book of all time, I believe that was based on sales figures. And if it's sales are an indication of merit, the the Bible is a way better book. And Miley Cyrus is a better musician than John Coltrane, whom she almost certainly outsells.

As if sales were the same as merit. Don't objectivists usually hate Hollywood for the movies it makes? The movies make money, don't they? Then they must be good, right?
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Atlas Shrugged by Ayn Rand (Paperback - October 1, 2007)
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