Objectivism & Economics, Part 23

Conclusion. In The Virtue of Selfishness, Rand makes the following remark:

[T]he Objectivist ethics is the moral base needed by that politico-economic system which, today, is being destroyed all over the world, destroyed precisely for lack of a moral, philosophical defense and validation : the original American system, Capitalism.

We’ll ignore whether the statement about capitalism being “destroyed all over the world," which, even if it were true when Rand made it, is hardly true any more. Our focus instead regards Rand’s view of “moral base” or moral foundation. What Rand means by moral base is a set of ethical arguments that can be made on behalf of capitalism. She is declaring that Capitalism requires moral rationalizations to survive. She appears to believe that if these rationalizations are good (i.e., logical and “rational”), capitalism can survive. If the rationalizations are bad (i.e., illogical and irrational), capitalism cannot survive. In other words, the survival of capitalism depends on how it is defended verbally.

The economist Wilhelm Roepke had a very different view concerning this matter of moral “foundations” and the like. Roepke is little concerned with abstract theories and other such editorial page verbiage. He is more focused on character and conduct. What sort of moral standards do people have to live up to in order for a free market to flourish? “Is it enough to appeal to people’s ‘enlightened self-interest’ to make them realize that they serve their own best advantage by submitting to the discipline of the market and of competition?” Roepke asks. He answers:

The answer is decidedly in the negative. And at this point we emphatically draw a dividing line between ourselves and … a school which we can hardly call by any other name but liberal anarchism, if we reflect that its adherents seem to think that market, competition, and economic rationality provide a sufficient answer to the question of the ethical foundations of our economic system.

What is the truth? The truth is that … we have made it abundantly clear that we will have no truck with the sort of economically ignorant moralism which … always wills the good and works the bad [i.e., “socialism” in the broad sense of the word]. But we must add that we equally repudiate morally callous economism [i.e., capitalism based on self-interest], which is insensitive to the conditions and limits that must qualify our trust in the intrinsic morality of the market economy. Once again, we must state that the market economy is not enough….

Self-discipline, a sense of justice, honesty, fairness, chivalry, moderation, public spirit, respect for human dignity, firm ethical norms—all of these are things which people must possess before they go to the market and compete with each other. These are the indispensable supports which preserve both market and competition from degeneration. Family, church, genuine communities, and tradition are there sources. It is also necessary that people should grow up in conditions which favor such moral convictions [and] fosters individual independence and responsibility as much as public spirit which connects the individual with the community and limits his greed. [Humane Economy, 123-125]

Rand, it goes without saying, would have strongly disagreed with Roepke. She had no use for traditional values or such things as “public spirit” and “connection” with community. Nor would she have approved of putting limits on greed. For Rand, greed is good, and any limits on greed are merely gratuitous concessions to altruism and “self-sacrifice.” She regarded “trade” as “the only rational ethical principle for all human relationships, personal and social, private and public, spiritual and material,” She would probably have disagreed with Roepke’s assertion that society “cannot be ruled by the laws of supply and demand [i.e., by trade].” Nor would she have been willing to accept any limits on her precious ethical principles.

Who is right on this issue? Is it enough to convince everyone they ought to be selfish? Could a society based primarily on enlightened self interest and Rand’s “trader principle” lead to greater wealth and happiness for individuals and society? Or would it simply bring about moral degeneration and collapse?

The evidence strongly suggests that Rand is wrong on this issue: that society cannot be based solely or primarily on enlightened self-interest and the trader principle. The majority of people are not rational, and self-interest, if left to its own devices, quickly degenerates into predatory behavior. Consider Enron, for example. Enron was governed by self-interest and greed. Jeffrey Skilling, Enron’s Chief Operating Officer, believed that “all that matters is money… You buy loyalty with money. This touchy-feely stuff isn’t as important. That’s what drives performance.” And so Enron was run merely as a money making machine by people lacking the “ethical norms” that come from community and tradition. “You were really less thought of if you got a percentage, even if it was 75 per cent of your annual base pay,” noted one ex-employee. In tapes that became public in 2004, Enron employees are heard asking electric companies to shut down production in order to maintain prices. And why shouldn’t they have cut power to increase profits? After all, it was in their self-interest! Another exchange involves “all the money you guys stole from those poor grandmothers of California.” In yet another tape, Enron traders watching a California wildfire are heard shouting “Burn, baby, burn." It was in Enron’s self-interest for California’s electrical infrastructure to be seriously damages by fire: so let it all burn, regardless of who gets hurt (or even killed). Self-interest, it turns out, is not always so benign. Nor can it be counted upon to make people honest or benevolent toward others. Morality cannot depend, as it does in Rand’s Objectivist philosophy, on self-interest and verbiage about honesty. Arguments about the “rational” self-interest of honesty will not convince people to refrain from defrauding and harming others. If the institutions of society don’t instill the values of honesty and empathy for others into the very moral fibre of the individual, “rational” arguments will prove useless.