No, Atlas Shrugged is still fiction
Yesterday, a friend e-mailed me a link to a Wall Street Journal article, 'Atlas Shrugged': From Fiction to Fact in 52 Years, and asked me what I thought about it. I read the article and started to reply to the e-mail, but decided to blog about it instead because there was a lot to say.
The first thing you have to remember is that, despite the mask it wears of being a respected journalistic entity - and by implication, objective - the Journal's editorials consistently slant far to the political right.
The article attempts to paint a picture of the current economic bailout package as the very worst sort of government excess that Ayn Rand warned about in her classic novel Atlas Shrugged. The article also not-so-subtly attempts to pin parts of this on Obama in a way that (because Rand was writing from her experiences having lived in Soviet Russia)attempts tar him with the communist brush.
It's ludicrous, but transparently so, so I won't worry about that too much. Anyway, the WSJ jumped a lot of sharks last year with their election coverage and editorials so I suppose we shouldn't be surprised.
The article also criticizes the bailout package for being redistributionist. It boggles the mind that the WSJ can do this with a straight face.
The very deregulatory practices that a) that the WSJ cheered from the sidelines, and b) led to the financial crisis which triggered the bailout, are themselves responsible for the biggest redistribution of wealth in American history: a transfer of ungodly sums from the middle and lower income families to the wealthy.
Those who wish to criticize redistribution should start by observing that while productivity and GDP growth have increased at a remarkably steady rate since World War II, wage growth has remained essentially flat since sometime in the early 1980s. Which is to say that about thirty years ago, corporations stopped sharing the increased profits from increases in worker productivity with the workers who are themselves responsible for generating those profits.
I have a word for that, but I can't print it in a family blog. I guess redistribution only bothers the Wall Street Journal when the money isn't going to those who already have more than they'll ever need.
The article goes on to whine about the bailout package in the context of the projected 2009 federal budget deficit and the cumulative federal debt amassed in the Bush years. Funny.
I don't remember the Wall Street Journal decrying Bush's fiscal policy during the height of the Bush error, even when it became clear it wasn't working.
Where were the scathing editorials criticizing the cost of the Iraq occupation? Where were the scathing editorials criticizing the veritable blizzard of no-bid contracts awarded to Halliburton and so many other corporations with deep cronyistic ties to the administration?
(Contracts, I might add, which have proven to be over-inflated and under-administered. That is, we spent too much for contracts that have been poorly executed in the obscuring fog of non-existent federal oversight).
Yes, we're spending a lot of money to help out Wall Street. Yes, we have a huge federal debt. Neither of those things are good in and of themselves. But we are also facing the very real possibility of falling into a depression if meaningful steps aren't taken to address the financial system's breakdown.
And if the previous Great Depression taught us anything, it is that when your choice is more debt or economic disaster, you engage in deficit spending to stimulate the economy and you worry about the budget later.
It's a rock-and-a-hard-place decision, but I for one am glad that meaningful steps are being taken. (They're not perfect, and frankly, I'd have spent the money differently were I in Paulson's shoes, but they're better than nothing.)
Rand's central thesis in Atlas Shrugged, that government intervention inevitably begets a vicious downward cycle of stifling innovation and growth, was certainly applicable to Soviet Russia from which she hailed.
But that economic system was radically different in its fundamental organization than the (admittedly flawed) capitalist system we have here.
In Rand's vision, the government has all the power and uses it poorly, while the private sector may only bend over and take it.
Anyone who looks at the American economy today and claims that the government has all the power is, frankly, a fool. Corporations are presently at a zenith of power not seen since the British East India Company amassed the influence to dictate its wants to the British Government, which dispatched its navy and re-wrote its laws to the company's pleasure.
The central example in Atlas Shrugged is a railroad owner who dreams to build a dominant, nation-spanning rail network. One boxcar to rule them all.
In the book, this brave and visionary entrepreneur is taxed and regulated into oblivion. True, forcing a business into bankruptcy through over-taxation and over-regulation is rarely good for anyone.
What Rand fails to address is the risk inherent in letting her protagonist, Dagny Taggart, succeed in her quest. So let's play out this thought experiment - hey, if the Wall Street Journal can get away with criticizing the Wall Street handout based on a published work of the imagination, then surely I can criticize their article based on some plausible imagination of my own.
Let's say Taggart does achieve her dream, and not a parcel or packages moves from point A to point B without her say-so and to her profit.
Where does Taggart stop? At the nation's borders? Why should she, when there's good money to be made in Canada and Mexico? Why stop there?
Why not run rails down to Tierra del Fuego and buy up the rail infrastructure in Europe? Expand, expand, expand! Raise that bottom line!
The risk, of course, is that Taggart will over-extend, over-reach. Try to grow too far, too fast, too big. It's a risky move, for if anything goes wrong, the whole leveraged house of cards can collapse.
Let's say, for the sake of our thought experiment, that a disaster at a major coal mine reduces coal supplies and drives up Taggart's fuel prices.
She raises her freight fees to compensate - gotta maintain that profit margin! - and inadvertently triggers a slowdown in shipping. Which slows down the economy and slows down the demand for Taggart's rail lines.
The rail system (which, in Rand's philosophy, should have been allowed to monopolize the nation's shipping infrastructure), goes under, taking the whole of the economy with it. When you grow or attempt to grow too big, you can become vulnerable to being de-stabilized by any unexpected event that affects your business.
Except now, in this version of the story, Taggart's railroad has become "too big to fail". Taggart knows it, and the politicians know it.
So Taggart will turn to the only source of money available - the government - for a bailout. Hat in hand, Taggart will say "So sorry. I messed up. But you can't let the people suffer for my mistake! Fill my hat with gold or the nation will endure such misery as you cannot comprehend."
In Atlas Shrugged, Rand offers us a straw man vision of government regulation that kills all, and argues that the polar opposite extreme - no regulation at whatsoever - must be the way to go. No wonder the Wall Street Journal digs this book.
But it's a false choice.
There is a middle ground, and we have seen some hints of it in the wake of the financial meltdown. Ironically, the Wall Street Journal article itself hints at them in the article's one spot of salience:
Like I said, I'd have spent the money differently than Paulson.
But lost in the WSJ's criticism is the observation that if a corporation is "too big to fail," then like Taggart's railroad in our imaginary version of Atlas Shrugged, it is also too big to exist.
That it should never have been allowed to grow that large in the first place, because the risk to society should it fail is too great.
And again, it is the deregulatory actions begun in the Reagan years (Hmm. Right about when American workers stopped getting their fair share. Coincidence?) and culminated in the early 2000s (See NPI's The Man who Broke the Economy) which enabled those Wall Street firms to become "too big to fail" in the first place.
And again, where was the WSJ's criticism then? Their criticisms of the bailout package ring hollow knowing that there weren't any, or that if there were, they were solitary voices speaking in a wilderness of deregulatory glee.
No doubt Ayn Rand would scream in frustration at my argument that those corporations literally should not have been allowed to get that big.
She would certainly decry it as regulation against innovation. As the worst sort of big government meddling. Yet, those very regulations, from Glass-Steagall onward, were born of the last really big financial crisis: the Great Depression.
It was the regulations, federal programs, and fiscal policies put into place in the wake of the market crash of 1928 which led to the rise of the middle class and a series of wildly successful decades through the 40s, 50s, 60s, and 70s, in which U.S. productivity shot through the roof and the economy grew by leaps and bounds. It is also hugely ironic to note that Atlas Shrugged was published in 1957, smack in the middle of this boom period.
(Side note: recently, Daily Kos ran an excellent series detailing the macro-economics of the Great Depression, written in layman's terms with graphs thatare easy to understand. It is well worth reading: Part 1, Part 2, Part 3, Part 4)
Rand shows us a false choice between two extremes, and demands that we choose one of them. But as usual, the world is considerably more complex than that and the best answer lies somewhere in between, at a place where government regulation can curb the worst excesses of corporate greed while at the same time providing an economic framework in which innovation can take place. We know this is possible. We've seen it happen in the post-World War II boom.
Sometimes, regulation is good.
Sometimes, regulation is necessary.
Sometimes, government does use its power wisely.
And sometimes, corporate interests driven by an underlying motive of greed push less than scrupulous politicians to re-write the laws and repeal the regulations, leading to the sort of crisis we are witnessing today.
Yes, that part of Rand's central message is true: politicians do respond to crises. But when such a crisis has been brought on by the worst excesses of brazen, venal greed, by those who do place their own bottom lines above any larger interests of the world, the nation, or their fellow man, then I say good.
Let the government intervene. Let the only player on the stage who has the power to change things and doesn't answer to a profit-driven board of directors, act. Let the politicians hear the frustrated and enraged screams of their constituents, and let them act in our interest for a change.
The government is the only entity that can act to undo what greed has wrought. We all know the corporations won't do it on their own.
The first thing you have to remember is that, despite the mask it wears of being a respected journalistic entity - and by implication, objective - the Journal's editorials consistently slant far to the political right.
The article attempts to paint a picture of the current economic bailout package as the very worst sort of government excess that Ayn Rand warned about in her classic novel Atlas Shrugged. The article also not-so-subtly attempts to pin parts of this on Obama in a way that (because Rand was writing from her experiences having lived in Soviet Russia)attempts tar him with the communist brush.
It's ludicrous, but transparently so, so I won't worry about that too much. Anyway, the WSJ jumped a lot of sharks last year with their election coverage and editorials so I suppose we shouldn't be surprised.
The article also criticizes the bailout package for being redistributionist. It boggles the mind that the WSJ can do this with a straight face.
The very deregulatory practices that a) that the WSJ cheered from the sidelines, and b) led to the financial crisis which triggered the bailout, are themselves responsible for the biggest redistribution of wealth in American history: a transfer of ungodly sums from the middle and lower income families to the wealthy.
Those who wish to criticize redistribution should start by observing that while productivity and GDP growth have increased at a remarkably steady rate since World War II, wage growth has remained essentially flat since sometime in the early 1980s. Which is to say that about thirty years ago, corporations stopped sharing the increased profits from increases in worker productivity with the workers who are themselves responsible for generating those profits.
I have a word for that, but I can't print it in a family blog. I guess redistribution only bothers the Wall Street Journal when the money isn't going to those who already have more than they'll ever need.
The article goes on to whine about the bailout package in the context of the projected 2009 federal budget deficit and the cumulative federal debt amassed in the Bush years. Funny.
I don't remember the Wall Street Journal decrying Bush's fiscal policy during the height of the Bush error, even when it became clear it wasn't working.
Where were the scathing editorials criticizing the cost of the Iraq occupation? Where were the scathing editorials criticizing the veritable blizzard of no-bid contracts awarded to Halliburton and so many other corporations with deep cronyistic ties to the administration?
(Contracts, I might add, which have proven to be over-inflated and under-administered. That is, we spent too much for contracts that have been poorly executed in the obscuring fog of non-existent federal oversight).
Yes, we're spending a lot of money to help out Wall Street. Yes, we have a huge federal debt. Neither of those things are good in and of themselves. But we are also facing the very real possibility of falling into a depression if meaningful steps aren't taken to address the financial system's breakdown.
And if the previous Great Depression taught us anything, it is that when your choice is more debt or economic disaster, you engage in deficit spending to stimulate the economy and you worry about the budget later.
It's a rock-and-a-hard-place decision, but I for one am glad that meaningful steps are being taken. (They're not perfect, and frankly, I'd have spent the money differently were I in Paulson's shoes, but they're better than nothing.)
Rand's central thesis in Atlas Shrugged, that government intervention inevitably begets a vicious downward cycle of stifling innovation and growth, was certainly applicable to Soviet Russia from which she hailed.
But that economic system was radically different in its fundamental organization than the (admittedly flawed) capitalist system we have here.
In Rand's vision, the government has all the power and uses it poorly, while the private sector may only bend over and take it.
Anyone who looks at the American economy today and claims that the government has all the power is, frankly, a fool. Corporations are presently at a zenith of power not seen since the British East India Company amassed the influence to dictate its wants to the British Government, which dispatched its navy and re-wrote its laws to the company's pleasure.
The central example in Atlas Shrugged is a railroad owner who dreams to build a dominant, nation-spanning rail network. One boxcar to rule them all.
In the book, this brave and visionary entrepreneur is taxed and regulated into oblivion. True, forcing a business into bankruptcy through over-taxation and over-regulation is rarely good for anyone.
What Rand fails to address is the risk inherent in letting her protagonist, Dagny Taggart, succeed in her quest. So let's play out this thought experiment - hey, if the Wall Street Journal can get away with criticizing the Wall Street handout based on a published work of the imagination, then surely I can criticize their article based on some plausible imagination of my own.
Let's say Taggart does achieve her dream, and not a parcel or packages moves from point A to point B without her say-so and to her profit.
Where does Taggart stop? At the nation's borders? Why should she, when there's good money to be made in Canada and Mexico? Why stop there?
Why not run rails down to Tierra del Fuego and buy up the rail infrastructure in Europe? Expand, expand, expand! Raise that bottom line!
The risk, of course, is that Taggart will over-extend, over-reach. Try to grow too far, too fast, too big. It's a risky move, for if anything goes wrong, the whole leveraged house of cards can collapse.
Let's say, for the sake of our thought experiment, that a disaster at a major coal mine reduces coal supplies and drives up Taggart's fuel prices.
She raises her freight fees to compensate - gotta maintain that profit margin! - and inadvertently triggers a slowdown in shipping. Which slows down the economy and slows down the demand for Taggart's rail lines.
The rail system (which, in Rand's philosophy, should have been allowed to monopolize the nation's shipping infrastructure), goes under, taking the whole of the economy with it. When you grow or attempt to grow too big, you can become vulnerable to being de-stabilized by any unexpected event that affects your business.
Except now, in this version of the story, Taggart's railroad has become "too big to fail". Taggart knows it, and the politicians know it.
So Taggart will turn to the only source of money available - the government - for a bailout. Hat in hand, Taggart will say "So sorry. I messed up. But you can't let the people suffer for my mistake! Fill my hat with gold or the nation will endure such misery as you cannot comprehend."
In Atlas Shrugged, Rand offers us a straw man vision of government regulation that kills all, and argues that the polar opposite extreme - no regulation at whatsoever - must be the way to go. No wonder the Wall Street Journal digs this book.
But it's a false choice.
There is a middle ground, and we have seen some hints of it in the wake of the financial meltdown. Ironically, the Wall Street Journal article itself hints at them in the article's one spot of salience:
The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you.There is a certain bilesome measure of truth, there. It is galling to witness billions going to those Wall Street firms, the ones who are "too big to fail," precisely because they screwed up royally.
Like I said, I'd have spent the money differently than Paulson.
But lost in the WSJ's criticism is the observation that if a corporation is "too big to fail," then like Taggart's railroad in our imaginary version of Atlas Shrugged, it is also too big to exist.
That it should never have been allowed to grow that large in the first place, because the risk to society should it fail is too great.
And again, it is the deregulatory actions begun in the Reagan years (Hmm. Right about when American workers stopped getting their fair share. Coincidence?) and culminated in the early 2000s (See NPI's The Man who Broke the Economy) which enabled those Wall Street firms to become "too big to fail" in the first place.
And again, where was the WSJ's criticism then? Their criticisms of the bailout package ring hollow knowing that there weren't any, or that if there were, they were solitary voices speaking in a wilderness of deregulatory glee.
No doubt Ayn Rand would scream in frustration at my argument that those corporations literally should not have been allowed to get that big.
She would certainly decry it as regulation against innovation. As the worst sort of big government meddling. Yet, those very regulations, from Glass-Steagall onward, were born of the last really big financial crisis: the Great Depression.
It was the regulations, federal programs, and fiscal policies put into place in the wake of the market crash of 1928 which led to the rise of the middle class and a series of wildly successful decades through the 40s, 50s, 60s, and 70s, in which U.S. productivity shot through the roof and the economy grew by leaps and bounds. It is also hugely ironic to note that Atlas Shrugged was published in 1957, smack in the middle of this boom period.
(Side note: recently, Daily Kos ran an excellent series detailing the macro-economics of the Great Depression, written in layman's terms with graphs thatare easy to understand. It is well worth reading: Part 1, Part 2, Part 3, Part 4)
Rand shows us a false choice between two extremes, and demands that we choose one of them. But as usual, the world is considerably more complex than that and the best answer lies somewhere in between, at a place where government regulation can curb the worst excesses of corporate greed while at the same time providing an economic framework in which innovation can take place. We know this is possible. We've seen it happen in the post-World War II boom.
Sometimes, regulation is good.
Sometimes, regulation is necessary.
Sometimes, government does use its power wisely.
And sometimes, corporate interests driven by an underlying motive of greed push less than scrupulous politicians to re-write the laws and repeal the regulations, leading to the sort of crisis we are witnessing today.
Yes, that part of Rand's central message is true: politicians do respond to crises. But when such a crisis has been brought on by the worst excesses of brazen, venal greed, by those who do place their own bottom lines above any larger interests of the world, the nation, or their fellow man, then I say good.
Let the government intervene. Let the only player on the stage who has the power to change things and doesn't answer to a profit-driven board of directors, act. Let the politicians hear the frustrated and enraged screams of their constituents, and let them act in our interest for a change.
The government is the only entity that can act to undo what greed has wrought. We all know the corporations won't do it on their own.
# Posted by Jason Black : 10:55 AM
Comments:
dagny taggart did not want to hold a monopoly on rail traffic in the US, she welcomed competition, she just wanted to be better than the competition. she knew the consequences of her biggest competitor's (atlantic southern) going out of business and fought against it.
in that way, your arguments against rand are flawed. she did not advocate monopoly, and indeed believed monopolies were only possible when the government intervened in the economy.
transparent and flawed most aptly describe your argument - you truly don't understand the book.
@gretchen:
Rand's belief, then, does not fit the facts of U.S. economic history very well. The actual history of our economy shows that monopolies--or ones that function as such, even if they aren't strict, literal monopolies--do crop up on their own. And that when they do, they tend to engage in behavior that is detrimental to the populace at large.
Rand's belief just doesn't fit reality. To cling to it anyway is, not to put too fine a point on it, no different than what the Bush administration did in "fixing facts around policy" in the run-up to the disasterous Iraq war. If your belief doesn't match the facts, then your belief is wrong. Not the facts. And the facts show that monopolies can and do arise, on their own, and that when they do the little guy better damn well watch out.
This is why we have the Sherman Anti-Trust act of 1890, and why the U.S. government has intervened several times in the subsequent 120 years to _break up_ monopoly companies or injoin them against particular anti-competitive practices.
Wiki's description of the purpose of the act includes this:
"In other words, innocent monopoly, or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not."
In that sense, I have to believe that both Rand and her protagonist Taggart would have no problem with a so-called "innocent monopoly," and that Taggart would have been happy to have had one on the basis of being better than her competition. Indeed, an "innocent monopoly" is the expected end-state of a situation where one competitor is measurably better than another at providing some good or service, and that competitor's market share grows over time as people come to understand this.
Yet invariably we see that in the real world, corporations who do have monopoly power in the marketplace end up acting (again to quote Wikipedia) "to artificially preserve their status," which has time and time again resulted in the need for regulators to step in to establish some sembalence of a level playing field in the marketplace.
I can believe that Rand didn't advocate that corporations with monopoly positions in a market should be allowed to engage in dirty tricks to sustain their position. My sense of her is that she had a more high-minded attitude towards how people (and by extension, the corporations they operate) should act.
But that just isn't reality. Not all people are good and high minded. Monopolies do come into existence even without government intervention. And when that happens, the tendancy for power to corrupt rears its ugly head, and the flawed human beings who hold the strings just don't seem to be able to resist pulling at them here and there in an attempt to preserve or entrench their market share, profit, and power.
This is understandable. When you're a monopoly, in a certain sense there's nowhere to go but down. You either maintain your market share by any means necessary, or you lose market share and your stock goes in the toilet. So of course companies with dominant market share engage in less than high-minded practices.
In a world where everyone did act with noble purpose all of the time, I don't doubt that Rand's philosophy would carry considerably more weight.
That just isn't this world.
All coersive monopolies arrive from government intervention and manipulation. Without the laws that keep out competition, businesses can jack up prices and take advantage of their customers, as their customers find themselves with no alternative.
This is not the case when the market is free. The only way a business can stay on top of competitors is to offer a better service/product, a better price, better customer service, or a combination of these. If they don't, then their customers will go to a competitor who can do better. It is that simple.
Not only does Rand's philosophy fit reality, but it is the only philosophy that does fit reality. Your historical understanding of monopolies seems rather slanted. Historical text books (especially in the universities of today) tend to gloss over the rampant involvement of government intervention in business when talking about the 'Robber Barrons' of yesteryear, such as the Railroad tycoons of California.
Please reference these historical accounts of destructive monopolies that "can and do arise, on their own..."
As for the Anti-Trust act. This is a sham. The act itself is used, not against coersive monopolies, but on companies that threaten the power of "non-competative" cartel-based monopolies... Precisely the ones who use government pull to get what they want.
You need to get the fact that the 'regulators' are pulling the wool over your eyes. They are not working for you, but for the companies you think they are protecting you from.
You misunderstood what has happened in the early 2000's. Almost everything the WSJ has said, the government has instead done the opposite! There was no 'deregulation' as a fact it is a little more complicated than the envelope term, and an attempts at regulation of government projects-on Fan/Fred where turned back!
Dont take my word for it, go to the WSJ opionion and search Fran/Fred etc topics and read for yourself, and you will see exactly what the WSJ have been warning about for years become true.
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