History is Happening Now

If you want a taste of the utter lunacy of modern libertarian thought on economics, I can suggest no better article than Stephen Moore’s WSJ piece on Ayn Rand. According to Moore, Rand’s Atlas Shrugged has eternal lessons to teach us, especially relevant in the wake of our recent economic crisis:

Politicians invariably respond to crises — that in most cases they themselves created — by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

Powerful stuff. Want a sense of how our government’s current interventions in the haywire market are exactly like the desperate dystopian vision of despicable-government-run-amock in Rand’s classic fictional defense of capitalism (“the second-most influential book… behind only the Bible”)? Here:

In one chapter of the book, an entrepreneur invents a new miracle metal — stronger but lighter than steel. The government immediately appropriates the invention in “the public good.” The politicians demand that the metal inventor come to Washington and sign over ownership of his invention or lose everything.

The scene is eerily similar to an event late last year when six bank presidents were summoned by Treasury Secretary Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave until they collectively signed a document handing over percentages of their future profits to the government. The Treasury folks insisted that this shakedown, too, was all in “the public interest.”

Okay, so the “appropriation” of a miracle metal is exactly the same as Henry Paulson demanding a modicum of return — not control mind you, just preferred shares — of banks that were asking the government for taxpayer dollars. Indeed, when we take a little trip back to that place sometimes known as Reality, Paulson’s sin was in fact his not demanding a correlating measure of control in the banks he was helping to recapitalize. We gave our tax dollars to the banks, and instead of recapitalizing credit markets, they paid out big bonuses, acquired other companies, among other misuses of our hard-earned cash. One ought also to mention that it was partly Alan Greenspan’s faith in the ability of companies to “regulate” themselves that led our economy to the brink of a new Depression.

The more important point is that Moore is treating a government-enforced monopoly on intellectual property — which creates classic incentives for “rent seeking” behavior — as if it were the natural right of the fictional miracle steel maker. But patent rights (the “ownership” of which Moore speaks) is anything but an example of laissez-faire economics. As Dean Baker points out: there is no such thing as patent and copyright in a free market.

In short, Moore wants Big Government to use its police and courts (at taxpayer expense) to arrest anyone who duplicates the Big-Government-loving entrepreneur’s miracle steel, but Big Government using its leverage over banks to ensure that taxpayer dollars are spent well is simply horrifying to him. The Big Bad Market is just too tough for Rand’s steel-maker; he demands that government protect him from the winds of the fickle marketplace. Let’s call this the philosophy of Protect Me from People Who Copy My Ideas But Don’t You Dare Tax My Capital Gains. In the same breath, government is desperately necessary for the public good but horribly destructive to it.

If you want to read a more intelligent (and humorous) invocation of Ayn Rand’s relevance to the current economic crisis, I point you to Jeremiah Tucker’s “Atlas Shrugged Updated for the Current Financial Crisis” at McSweeney’s:

Dagny and Hank searched through the ruins of the 21st Century Investment Bank. As they stepped through the crumbling cubicles, a trampled legal pad with a complex column of computations captured Dagny’s attention. She fell to her hands and knees and raced through the pages and pages of complex math written in a steady hand. Her fingers bled from the paper cuts, and she did not care.

“What is it, Dagny?”

“Read this.”

“Good God!”

“Yes, it’s an experimental formula for a financial strategy that could convert static securities into kinetic profits that would increase at an almost exponential rate.”

Hank studied the numbers. “The amount of debt you would need to make this work would be at least 30-to-1, but a daring, rational man who lives by his mind would be willing to take that risk!”

“Yes, and it’s so complex the government could never regulate it.”

“It’s perfect. There’s only one problem—half the pages are missing. Could you reconstruct it, Dagny?”

Her answer escaped her lips like air from a punctured galvanized-steel duct:

“No.”

“I didn’t think so, but why leave such an achievement to rot here? It’s the greatest thing I’ve ever laid eyes on, made by a monumental genius, the sort of mind that’s only born once in a century … Dagny, why are you fondling your breasts?”