Thursday, August 20, 2009

Objectivism & Politics, Part 22

Politics of Human Nature 7: Psychology and social type of the businessman. Ayn Rand imagines a polity where entrepreneurs and capitalists are free to do as they like. But where is this freedom supposed to come from? Who is going to defend it? Can merchants and industrialists, capitalists and entrepreneurs be counted on to defend their freedom from threats, both foreign and domestic?

Not according to Joseph Schumpeter. In order to defend freedom, one must be able to lead men in battle. But this is precisely where the typical entrepreneur-businessman, dominated, as he is, by Pareto’s combination instinct, tends to fall short.

There is surely no trace of any mystic glamour about [the industrialist and the merchant] which is what counts in ruling men, [wrote Schumpeter in Capitalism, Socialism, and Democracy.] The stock exchange is a poor substitute for the Holy Grail. We have seen that the industrialist and merchant, as far as they are entrepreneurs, also fill a function of leadership. But economic leadership of this type does not readily expand, like the medieval lord’s military leadership, into the leadership of nations. On the contrary, the ledger and the cost calculation absorb and confine.

I have called the bourgeois [i.e, the businessman] rationalist and unheroic. He can only use rationalist and unheroic means to defend his position or to bend a nation to his will. [In other words, the businessman is not good at using or applying force, so he must use his wits, just as Pareto warned.] He can impress by what people may expect from his economic performance, he can argue his case, he can promise to pay out money or threaten to withhold it, he can hire the treacherous services of a condottiere or politician or journalist. But that is all and all of it is greatly overrated as to its political value. Nor are his experiences and habits of life of the kind that develop personal fascination. A genius in the business office may be, and often is, utterly unable outside of it to say boo to a goose—both in the drawing room and on the platform. Knowing this he wants to be left alone and leave politics alone.

Again exceptions will occur to the reader. But again they do not amount to much…. The inference is obvious: ...the bourgeois class is ill equipped to face the problems, both domestic and international, that have normally to be faced by a country of any importance…. [W]ithout protection by some non-bourgeois group, the bourgeoisie is politically helpless and unable not only to lead its nation but even to take care of its particular class interest. Which amounts to saying that it needs a master. [137-138]

Now Schumpeter wrote these words in the late thirties, when capitalism was clearly on the defensive. Many defenders of capitalism were frustrated with the inability (or unwillingness) of businessmen to defend capitalism against attacks from both the fascist right and the socialist/communist left. Rand herself seems to have at least had an inkling of some of the issues raised by Schumpeter; for we find her, in Atlas Shrugged, going out of her way to cast the businessmen in the role of a quasi-Nietzschean superhero, with the dollar sign replacing the Holy Grail; and we also find her formulating a theory to explain why businessmen failed to adequately defend themselves: the “sanction of the victim,” wherein the victim (i.e., the businessman) accepts the morality of his enemies (i.e., altruism) and hence deprives himself of the moral high ground.

Is Rand’s explanation plausible? Not really. There are, it should be clear, far more plausible explanations for why businessmen fail to defend themselves. In the first place, where individuals have some choice in their vocation, this very choice serves as a selective or screening process, since individuals tend to choose vocations that best fit their innate talents. So those who combine intelligence with the ability to delay gratification and the willingness to put in long hours of work will not only feel themselves drawn to a career business, but, even more importantly, such individuals will be more likely to succeed in such an endeavor. And given the extensive division of labor in an advanced industrial society, the tendency is toward specialization in the development of one’s abilities and talents, so that individuals who devote most of their time to business activity (as they often must to succeed), end up developing only those skills useful in business at the expense of skills that might be useful in other endeavors, such as skills of political or military leadership. Hence the processes of societal selection under capitalism produce a class that is not particularly adept at defending its own interests.

Nor is it merely the man of force and violence, the marauder and plunderer, that poses a threat to the productive classes. There is another type of individual who arises in advanced civilizations who also can cause serious problems to a free, market-orientated social order. This individual goes by a number of names: socialist, humanitarian, progressive, idealist, social democrat, altruist. Rand was particularly concerned with defending the businessmen from this specific social type. In the next series of posts, I will examine the extent Rand’s analysis of the humanitarian syndrome accords with the facts.


Wells said...

I'm sure the VOC, John Company, and others would beg to differ. While I'm pretty sure Rand's view of Humanitarians doesn't coincide with the facts, neither does Greg Nyquest's post here.

My observation is organizations from the bottom use very different types of leadership styles. However, at the top of a large organization leadership styles are very similar. You can swap out a Ford Executive for a Secretary of Defense and vice versa, But a straw boss and a sergeant are doing very different jobs.

Cavewight said...

Greg wrote: and we also find her formulating a theory to explain why businessmen failed to adequately defend themselves: the “sanction of the victim,” wherein the victim (i.e., the businessman) accepts the morality of his enemies (i.e., altruism) and hence deprives himself of the moral high ground.

Primarily, no. The businessman can't deprive himself of the moral high ground because he never had one to stand on. This is what Rand attempted to provide. She literally rested the destiny of mankind on the shoulders of those who are, traditionally, just trying to make a buck, and gave them the moral authorization to "shrug" if it ever comes down to that.

Michael Prescott said...

Capitalist countries can be quite good at waging war. As I recall, the capitalist West did okay versus Nazi Germany, fascist Italy, imperial Japan, communist Russia, etc.

A case could be made that the individualism fostered by capitalism makes for a more effective fighting force, by encouraging soldiers to think for themselves rather than blindly following orders.

Schumpeter's argument seems way off-base to me. Maybe ten years later, in the midst of WWII, he would have reconsidered when he saw the industrial and organizational genius of capitalism unleashed against the Axis powers, with devastating results.

Anon69 said...

Greg wrote: "And given the extensive division of labor in an advanced industrial society ..."

The extensive division of labor is the answer. It's a volunteer military that uses the businessman's technology to fight wars, instead of needing to conscript every male inhabitant of the society (including businessmen). The easiest explanation for why businessmen don't concern themselves with defense is that the government does it for them -- just like the cops down the block or the security guard in the lobby. Rand was not an anarchist. She supported the military as a proper function of government. And that is the answer to why businessmen don't defend themselves.

gregnyquist said...

Michael: "Capitalist countries can be quite good at waging war. As I recall, the capitalist West did okay versus Nazi Germany, fascist Italy, imperial Japan, communist Russia, etc."

While it's quite true that the capitalist West (or, actually, capitalist America) did quite well against Japan and Germany, elsewhere they have not done so well. The Korean War ended in a cease fire agreement, a stalemate more than an outright victory. Following the Bay of Pigs disaster, America wound up losing against Vietnam. America did win Iraq War 1, but that only involved retaking Kuwait. When later on we decided to remove Saddam, things have proved more difficult, and the verdict is still out as to whether that war (along with the Afghan conflict, now escalating) is won.

As to whether we did okay against communist Russia—well, that conflict is not altogether ended, as the military and KGB elite that runs Russia still regards America as the enemy and, through its alliance with China, still poses a serious threat to us. And while the axis of dictatorships that Putin is forming as a coalition against America may not be capable of fully conquering the U.S. and liquidating its population, it could seriously compromise, if not destroy, our way of life.

Andrew said...

Micheal- I think you may misinterpret Schumpeters comment.

"Schumpeter's argument seems way off-base to me. Maybe ten years later, in the midst of WWII, he would have reconsidered when he saw the industrial and organizational genius of capitalism unleashed against the Axis powers, with devastating results."

I dont believe Schumpeter would have argued that Capitalism itself as an economic system was not capable of creating the economic base required to wage war. But that the individual actors who dominate in the Capitalist economy are not suited to being 'warrior leaders' who are required to maximize such a power into a machine of geo-political domination.

Hitler was a cunning demagogue, not an entrepreneur.

I think the point is that if our ruling class as an aggregate begins to become dominated by combination-instinct residue, we may forgo making adequate efforts in being cunning in securing our preservation.

This seems reasonable to me.

Michael Prescott said...


I don't know much about the Korean War, except that Alan Alda was in it and it ran for, like, ten seasons. But as far as Vietnam and Iraq II are concerned, I would say our difficulties were a result of fighting an indigenous population that resorted to insurgency and guerrilla warfare. The British encountered the same problems when trying to hang on to their American colonies. I don't think a capitalist combination instinct had much to do with it. The 18th century Brits and the American rebels were equally capitalistic, but the rebels "fought dirty" and won.


I think I get Schumpeter's point, but my view is that the performance of capitalist America in WWII showed that the capitalist bourgeoisie are perfectly capable of standing up to tyranny. Schumpeter seems to think that only demagogues who exert a mystical fascination on the populace can wage war. I would say that such demagogues are more likely to start wars, but less likely to win them.

What does seem to deplete the will to fight is what is now called "democratic socialism." I don't know just why this is, but it may have something to do with Charles Murray's critique of modern Europe:

gregnyquist said...


I think the insurgency and guerilla warfare aspect, though true up to a point, is overplayed. The most important aspect in Vietnam and for the Brits in the American Revolution was the quality (or rather lack of quality) of the leadership. Normally, leadership in England was selected on the basis of aristocratic connections and court sycophancy. Under such leadership, anyone with any great competence was seen as a threat to leadership and kept out. Only when England was led by a great leader did it become invincible, as it was under Marlborough and the Elder Pitt. These leaders (particularly Pitt) had a talent for promoting only the most qualified generals and admirals. Lord North had no such talent and the British armies were, in key situations, incompetently led. Be assured, if the British in America had been led by a general with the chops of a James Wolfe or a Wellington, the American rebels would probably not have won the war.

Leadership is always of decisive importance, and military leadership is different from business leadership and calls on different qualities. The two best generals of civil war, Grant and Sherman, were failures in business.

I agree that democratic socialism, or what I would call narcistic humanitarianism, depletes the will to fight. But I would add that capitalist elites have a particularly poor record in this area. More often than not, they have tried to cater to it, to make money out of it, to buy it off (just as they have with the related counter-culture movement).

If Schumpeter were alive today, I think he would point to the eagerness of American capitalists to do business with China as an example of the inability of the business class to look after its long-run interest. There are instances when the defense of a nation should take precedence over short-term business interests. But not enough businessmen seem to understand this.

JayCross said...


Love the definition of socialism as narcissistic humanitarianism.

Just out of curiosity - in what ways do you believe military leadership differs from business leadership?

gregnyquist said...


There are, of course, similarities between business and military leadership; and if we concentrated merely on the similarities, you could say with Wells that leadership styles at the top are pretty similar. But there are at least a few important differences, the most important of which is that, in the military, the stakes aren't merely profit and loss, but life and death. To be a military leader, one must be willing to face death coldly and deliberately, without losing one's head; and there aren't actually a large body of people, particularly in a wealthy society, who have that degree of courage. Moreover, military organizations require a much higher level of obedience and discipline than is necessary in business. If an employee doesn't like his boss, he can quit and move elsewhere. But if a soldier doesn't like his commanding officers, his options are much more limitted. Military organizations stress authority and hiearchy far more than business organizations. In business, there is much greater range for self-interested individualism. But in the military, one requires a more honor-based, group orientated morality, with a heavy stress on the importance of following orders from one's superiors.

All these factors contribute and demand a contrasting style of leadership. They demand someone who is tough, courageous, respectful of military traditions and the code of honor of the soldier, and who sympathizes with that particularly set of militaristic sentiments required of men who must risk their lives on a field of battle under the horrible conditions of combat. These are characteristics which, in most cases, can only be developed by having a career in the military. They are not, in any case, likely to developed in a career in business, which does not rely so heavily (if it relies at all) on courage, authoritarianism, and militaristic sentiments.