The Following article originally was published on November 10, 2008, in Grand Junction’s Free Press.
Ayn Rand doesn’t need a bailout
by Linn and Ari Armstrong
Ayn Rand recognized a common pattern in the growth of political power: the enemies of liberty blame the free market for economic problems caused by government interference, then use those problems as a pretext for yet more political controls. Much of Rand’s prescient novel Atlas Shrugged revolves around that cycle.
Now Rand’s critics sound exactly like the villains of Atlas. They wouldn’t attack her if they didn’t recognize her as a barrier to their grand central plans.
Recently Alan Greenspan fueled the Rand hunt. In an October 23 statement to a Congressional committee, Greenspan said he had “found a flaw” in his ideology of “free, competitive markets.”
There’s just one problem with Greenspan’s statement: he practiced no such ideology. For two decades, Greenspan served as Chairman of the Federal Reserve, a central-planning agency tasked with manipulating the money supply. Greenspan’s flaw is that he long ago abandoned the ideology of liberty.
Two decades before becoming a central planner, Greenspan, while still in association with Rand, warned of the dangers of the Federal Reserve. In a 1966 article, Greenspan noted that, in the late 20s, the “Federal Reserves pumped excessive reserves into American banks.” This “spilled over into the stock market — triggering a fantastic speculative boom.” Sound familiar? Greenspan became the monster he once warned against.
Today’s crisis centers around risky home loans. But were these loans made on a free market? No. Instead, they were encouraged, and in some cases mandated, by the federal government.
Not everyone has forgotten Rand’s wise criticisms of central planning. Before the election, we asked Yaron Brook of the Ayn Rand Institute to summarize the causes of today’s crisis.
Brook answered, “The most harmful instances of government interference in the economy include, but are not limited to: the Federal Reserve Board’s inflationary policy of keeping interest rates artificially low and the money supply artificially high, the government’s hand in the creation and management of Fannie Mae and Freddie Mac, other government ‘affordable housing’ policies including the Community Reinvestment Act, and the policy of bailing out large financial institutions deemed ‘too big to fail’.”
Brook further explained the damage of government inflation: “As Ludwig Von Mises and other members of the Austrian school of economics stressed, inflation does not simply raise everyone’s prices. It leads to massive, unfair redistributions of wealth. It starts with the injection of money into one sector of the economy, where participants are rewarded with higher prices for their products — most recently, we saw an enormous redistribution of wealth to those involved in home-buying — and then gradually spreads to drive up all prices higher than they would be absent the inflationary spending.”
The cycle Rand warned about is in full force. Brook noted, “Unfortunately, despite a few enlightened and courageous voices out there, most politicians and commentators are blaming greed and the market for the current crisis and demanding more government control of markets as the solution — and most of the public believes them. The media share the general cultural antipathy toward genuine capitalism, so they are inclined to publicize views that blame the market for today’s problems.”
Barack Obama blamed greed and deregulation, despite the fact that nobody can point to the repeal of a regulation that could have caused the crisis. By contrast, the mechanisms by which government controls caused the crisis are clear.
Obama’s rhetoric ignores the nature of the free market, in which the government consistently protects the individual rights of each participant.
Can people be “greedy” on a free market? If that means they can pursue their own prosperity and happiness while respecting the rights of others, sure. If greed means people can use political force to get their way, then we’re no longer talking about the free market — we’re talking about the sort of system that McCain and Obama advocate.
Does the government “regulate” the market by protecting property rights, resolving contractual disputes, arresting those who threaten and practice brute force, and rooting out fraud? In a sense, yes. But by imposing political controls that infringe people’s rights, the government makes the market irregular and disrupts the rational plans of individual participants.
Unfortunately, Obama has sworn to impose even more economic controls. He wants more corporate welfare and more central planning for energy. He wants to further socialize medicine, even though costs are so high because of existing political controls of the health market. He wants increased federal spending, resulting in higher taxes or more deficit spending.
Obama’s central plans are bound to create more economic problems, which he will no doubt blame on whatever liberty we have left. At least Rand through her works will continue to set the record straight.