Rand argued that the underlying reason for this failure to achieve systemic purity was moral and cultural. Capitalism as a social system was an implicit by-product of an Aristotelian philosophical base, one that celebrated the rational, the secular, and the egoistic. And yet capitalism was historically distorted because the cultures within which it evolved had not fully emerged from the influence of mysticism, altruism, and collectivism.52 Rand saw capitalism and altruism as “philosophical opposites” that could not “co-exist in the same man or in the same society.”53 The modern age was fractured by an “inner contradiction” because it tried to combine the concept of eudaemonic man with the notion that human beings were sacrificial animals.54 It was for this reason that Rand was extremely apprehensive about the introduction of capitalist markets into primitive cultures. She argued that capitalism required a predominantly rational and secular orientation, and that industrialization could not “be grafted onto superstitious irrationality” without massive distortion in the evolving structure of production.55 Though the United States achieved the greatest progress because it was the most secular Western country, it too had preserved significant elements of altruism and collectivism in its cultural base. And it was paying the price.
Curiously, Rand spoke in terms of a cultural and philosophical “base.” This view differs considerably from the Marxist formulation, which sees culture and philosophy as components of a social “superstructure,” a byproduct of a material “base.” These opposed characterizations have disparate consequences for both the theory of history and the nature of social revolution; however, what must be explored at this stage is Rand’s understanding of capitalism as an unknown ideal. In Rand’s view, the nature of capitalism is so inherently radical that its historical, philosophical, and cultural implications have yet to be fully comprehended. Rand unabashedly proclaims that Objectivists “are radicals for capitalism … fighting for that philosophical base which capitalism did not have and without which it was doomed to perish.”56 Once again, Rand’s project is geared toward articulation. She aimed to articulate those premises which underlie the daily practices and institutions of a historically emergent but not yet fully realized social system.
Following her literary methods, Rand seems to have extracted and emphasized those principles which, she believed, distinguish capitalist society from all previous social formations. She began with the real concrete circumstances of the historically mixed system, breaking down its complexity into mental units. She constituted her vision of capitalism on the basis of such abstraction, having isolated and identified those precepts which are essential to its systemic nature. In this way, she eliminated the accidental and the contingent in order to focus instead on the philosophical ideals of the capitalist revolution. Such a revolution was incomplete because its principles had never been fully articulated and implemented. Rand viewed her own project as the first successful attempt to articulate the moral nature of the capitalist system, ideally understood, thus making possible its historical fulfillment.
Without access to all of Rand’s journals, it is difficult to ascertain the point at which she actually began to defend capitalism as part of her developing philosophical synthesis. It seems clear that by the time she had published The Fountainhead, her political convictions were fully formed. In the 1930s and 1940s, she enjoyed cordial relationships with several individualist and free-market thinkers, including Ruth Alexander, Henry Hazlitt, Rose Wilder Lane, Ludwig von Mises, Albert Jay Nock, and Isabel Paterson. Stephen Cox suggests that it was Paterson who introduced Rand to most of the individualist works in economics, philosophy, history, and politics. In later years, Rand favorably reviewed Paterson’s God of the Machine for N.B.I.’s book service. Despite their eventual estrangement, it was clear that Rand felt a certain debt of gratitude for Paterson’s tutelage.57
Another important intellectual influence on Rand’s developing free-market perspective was Mises, the father of the modern Austrian school of economics. Mises had taught such economists as the Nobel laureate, F. A. Hayek, the distinguished Israel Kirzner, and the libertarian anarchist, Murray Rothbard (B. Branden 1986, 163–67, 188–89). Later, it was through Rand’s lectures and writings, and through the Nathaniel Branden Institute (N.B.I.) and the N.B.I. Book Club, that Mises’s works began to enjoy a wider and more popular audience.
Though Rand criticized Mises and other Austrians for their “Benthamite” utilitarianism, she had largely accepted their extensive demonstrations of the superiority of markets (1961T). Throughout Objectivist literature, there are many Austrian-flavored discussions of the gold standard, business cycles, monopolies, labor unions, public education, and child labor.58 Like the Austrians, Rand rejected the positivistic, mechanistic, and statistical methods of mainstream economics. And while she acknowledged competition as a natural by-product of the market process, she repudiated the standard neoclassical models of “perfect competition” as a vestige of rationalist, Platonic Idealism with no relevance to the real world.59
For Rand, while the Austrians had provided a profoundly important theoretical, economic defense of the free market, they had failed to articulate an appropriate moral base for the capitalist system they championed. Peikoff (1983T, lecture 8) argues, for instance, that Mises, like most Austrians, had rejected socialism because it did not actualize the alleged goals of its practitioners. This method of criticizing socialism on the basis of its internal inconsistencies was insufficient. One cannot simply reject socialism or accept capitalism based on rationalist polemics or purely empirical evidence. Such approaches, though effective in certain contexts, could not bypass the need for a principled defense of the moral superiority of capitalism.
In Rand’s view, most social theorists were guilty of reification. Political economists in particular had observed that people were producing goods and services, and trading with one another. They assumed that human beings “had always done so and always would.” They saw these facts of economic life as “given, requiring no further consideration,” and merely addressed themselves “to the problem of how to devise the best way for the ‘community,’ to dispose of human effort.” Most contemporary theorists approached the study of economics on the macrolevel, without ever focusing on the individuals that constituted the social whole. Like their counterparts in sociology, they endorsed a conception of humanity as an undifferentiated, aggregated collective. This was a kind of methodological “tribalism” that began the study of society without defining the nature of the entities involved in social practices and institutions. Reiterating her objection to this oversocialized conception, Rand writes: “A great deal may be learned about society by studying man; but this process cannot be reversed: nothing can be learned about man by studying society—by studying the interrelationships of entities one has never identified or defined.”60
It is ironic that Marx and Engels leveled a similar, though opposite, charge against those liberal thinkers who viewed capitalism as a logical derivative of the “eternal laws of nature and of reason.”61 The “Robinsonades,” as Marx called them, dissolve society “into a world of atomistic, mutually hostile individuals,” who are self-interested and isolated from one another.62 Whether he was commenting on Locke or Smith, Marx (Grundrisse, 83) argued that the bourgeois vision of civil society as “natural” and “normal” was typical of each epoch in its quest for transhistorical legitimacy. Marx condemned this vision as a product of “vulgar economy” and “bourgeois narrow-mindedness” to counter the liberal defense “in doctrinaire fashion” of those categories of explanation which were historically specific to the capitalist mode of production.63
For Marx, as for Rand, political economists expressed capitalist social relations as a given, without grasping the conditions that made them possible. In Rand’s view, such an approach was one-dimensional and abstract. It obscured any understanding of human species identity and failed to grasp either the nature of capitalism, or the philosophical, psycho-epistemological, moral, cultural, and
social conditions that make capitalism possible.
This parallel between Rand and Marx, however, cannot erase their very different assessments of the capitalist system. One of the most important distinctions between Rand and Marx lies in their alternative conceptions of the relationship between capitalism and dualism. Since I have described Rand as a nondualistic, dialectical thinker, it is extremely valuable to consider her response to the Marxian view that capitalism, as such, engenders an array of dualistic tensions in social life that only socialism can resolve.
Marx views capitalism as a historical and organic totality, one that generates a “dualism between individual life and species-life, between the life of civil society and political life” (Jewish Question, 225, 231). According to Marx, the capitalist labor process stunts the development of integrated human being. Such fragmentation is endemic to capitalist social relations. Whereas in previous social formations, the laborer unites within himself multiple functions, the development of capitalism leads to a corresponding differentiation in the relations of production. The division of labor is the turning point. Products are no longer the result of individual labor; they are social products produced by the cooperation and combination of many laborers, each of whom performs a different task (Capital, 1:508).
Previously combined branches of production become separated, even as each branch internally differentiates its own operations (Surplus-Value, 3:288–89). In capitalist commodity production, “separation appears as the normal relation” (1:409). The manufacturing process develops the natural endowments of the laborer in a one-dimensional manner. The laborer becomes a perfectionist in his limited tasks and one-sided specialties (Capital, 1:363).
The division constitutes and is constituted by a dual dynamic. First, according to Marx, it cripples the laborer by pitting the functions of his body against the functions of his mind. The organic unity of body and mind is fractured, as the laborer’s particularized, mechanical abilities are developed to the detriment of his cognitive, creative abilities. Second, it expresses the basic alienation of the laborer who becomes estranged from the product of his labor as he is forced to sell that product, and his own labor-power as a product, on the market.
The market, itself, exists by virtue of the distinction between the product and the producer. The laborer’s product becomes externalized and objectified. The early Marx focused on this process as one “of self-sacrifice” and “mortification” (Manuscripts, 108). The later Marx stressed that alienated labor-power is the basis of commodity exchange. On the market, dualism takes the form of a division between purchase and sale or the exchange of commodities for money, and the exchange of money for commodities (Grundrisse, 148, 146). Money, itself, spontaneously emergent in precapitalist society, comes to dominate bourgeois life.
Marx recognized that the evolution of exchange is a chief means for the individuation of human society. “It makes the herd-like existence superfluous and dissolves it” (496). But its progressive character is subverted because capitalism robs people of the ability to consciously plan their own fate. The emergence of more substantive notions of human freedom is coupled with “the most complete suspension of all individual freedom, and the most complete subjugation of individuality under social conditions which assume the form of objective powers, even of overpowering objects—of things independent of the relations among individuals themselves” (652).
Rand proceeded upon entirely different assumptions. She celebrated the division of labor and saw the exchange of knowledge and goods as two of the most important values of human social existence.64 In Rand’s view, specialization of labor does not symbolize fragmentation; it is how a laborer develops his particularized efficacy through the mastery of certain skills and practices. What makes capitalism distinct from all previous systems is its expansion of the avenues for human social advancement. Capitalism liberates the laborer from all former institutional constraints on his mobility. No laborer is compelled to remain frozen in a guilded caste. The laborer can rise as high as his ambition and knowledge will take him, enabling him to pursue his chosen goals and to actualize his unique potentialities without the interference of religious or political authorities.
Rand’s defense of capitalism traces the moral meaning of every essential market category, including trade, money, the law of supply and demand, and the objective value structure which the system embodies. She argued: “Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”65 According to Rand, the market is a dynamic, continuous, upward process “that demands the best (the most rational) of every man and rewards him accordingly.” Trade—the voluntary exchange of value for value—is the central form of social relation under capitalism. Such trade is founded on a delineation of rights that bars the initiation of physical force in human relationships.
One of the most important categories of capitalist economy is money. The predominant role of money in market society is not a fact that Rand laments. As one of her characters in Atlas Shrugged explains:
“Money is a tool of exchange.… Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return.… Money permits no deals except those to mutual benefit by the unforced judgment of the traders.… Money is your means of survival.… Money is so noble a medium that it does not compete with guns and it does not make terms with brutality.… Money is the root of all good.… When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns—or dollars. Take your choice—there is no other—and your time is running out.” (410)
In this passage, Rand does not deny that money can be used in a distorted or corrupted fashion.66 But it must be remembered that Rand here is describing money within the context of capitalism, the unknown ideal. The current mixed system features an interpenetration of statist and market categories, such that it becomes very difficult to distinguish between the genuine money-makers and the money-appropriators, between those who trade legitimate values and those who use money as a tool of expropriation.
In Rand’s conception of the free market, however, she reserves for the dollar sign the same reverence that Christians project in the sign of the cross. It is interesting that in the above passage, Rand implies an identity between reason and money. She states that “money is your means of survival,” recalling her epistemological conviction that reason is one’s means of survival. While Rand emphasizes that money is a material means for human sustenance, she is also tracing a much more profound connection between money and the rational process, which underlies its accumulation and use. For Rand, money “is a frozen form of productive energy,” and cannot be severed from the rational activities that make its existence possible.67
The role of money in capitalist economy is crucial, in Rand’s view, because it is both a tool of exchange and a tool of savings, enabling people to delay their own consumption, and to purchase time for all future production. While consumption is the final cause of the production process, savings is its efficient cause. Savings represent future goods that have yet to be produced and consumed. The dynamism of the process is driven by the law of supply and demand. This economic law embodies a normative principle since it involves the same people in two different, though inseparable capacities, that of producer and consumer. While a producer can support a limited number of nonproducers, Rand argued: “The man who consumes without producing is a parasite, whether he is a welfare recipient or a rich playboy.”68
Interestingly, Rand enunciated a principle that Marx would have accepted in starkly different terms. For Marx, capitalist “exploitation” is a direct outgrowth of the separation of the product from the producer. In the production process, the laborer endows the product with its value and receives in return only enough for his or her own subsistence.
The extraction of surplus value makes possible capitalist accumulation. But it is symptomatic of a condition in which the capitalist consumes value without producing it. In this regard, Marx views the capitalist qua capitalist as a parasite on the production process.
Paradoxically, Rand’s criticism of the Marxian doctrine of exploitation illustrates her own endorsement of a form of the labor theory of value. Rand presents a caricature of the classical labor theory, when she argues that in Marx’s view, “the material tools of production” (that is, “machines”), determine thinking, and that it is “muscular labor” which “is the source of wealth” (New Intellectual, 33). As we have seen, Marx’s conception of human labor was far richer than Rand presumed. Nevertheless, Rand criticized Marx for obscuring the intellectual praxis at the foundation of production. For Rand, an innovation, an idea, is the creative force behind the production of material values. The implementation of creative ideas are a permanent benefit to the day laborer, much more valuable than the hourly expense of merely physical work that extends no further than the range of the immediate productive process.
Rand presented a view of the capitalist as creator, inventor, and entrepreneur.69 It is the creator who stands at the top of the intellectual pyramid of ability, contributing “the most to all those below him,” but receiving far less in material payment than his or her innovations make possible. In Rand’s view, even though day laborers contribute their energy to the production process, they would starve outside the wider social context because they depend for their employment on the innovations introduced by those above them. Even the machines that laborers use are “the frozen form of a living intelligence,” expanding the potential of the laborers’ lives by raising their productivity (Atlas Shrugged, 1064–65).
Ayn Rand: The Russian Radical Page 38