capitalism — VOICES for REASON

For more than a century, federal largesse has shielded people living in bad-weather areas from the economic costs of their decision to locate there. (I’ve discussed this elsewhere.)

One such area is called the “American Bottom” region, consisting of 174 square miles directly across the Mississippi River from St. Louis. Since the 1950s, a huge federally financed levee has protected American Bottom residents and businesses from the great river’s frequent floods. The levee is 52 feet high. It runs 75 miles north and south. And to maintain it costs a lot of money.

In the aftermath of Hurricane Katrina, federal funding has not kept up with the need for maintenance. As a result, the American Bottom levee is among the weather-ravaged levees that is no longer deemed capable of defying a 100-year flood. Among other things, that means everyone in American Bottom with a federal loan will have to buy federal flood insurance.

As you read the following portion of a Wall Street Journal article on these developments, notice the economic lesson that’s dawning on American Bottom’s residents:

Judy Hamilton, who owns a chemical blending and packaging business in Dupo, a village of 4,000, has already taken a hit. She was required to buy flood insurance after she expanded and refinanced the loans on her factory in 2008. She is now paying an extra $7,000 a year for the insurance.

“Every little cost factor cuts us back,” she said. “Nobody benefits but the government.”

Some local officials have complained that the remapping is intended to raise money for the National Flood Insurance Program, which is $18.5 billion in debt in the wake of Katrina and other storms. . . .

Mayor Hagnauer of Granite City says tacking more than $1,000 a year in some cases onto mortgage payments could push the city over the edge. The town of 31,000 boasts a new, $4.6 million city-built movie theater, a struggling main street and the huge US Steel Granite City Works two blocks from City Hall.

“We’d be a ghost town,” Mr. Hagnauer said.

What these people are learning firsthand is that when the costs of protecting against bad weather are borne by the property owners themselves, the economic calculation to stay or go suddenly includes some dramatic new numbers. Indeed, the cost difference may be so great as to cause entire settled areas to be abandoned.

Those who live in high-risk areas like American Bottom are counting on the rest of us—the taxpayers who fund massive levee maintenance—to keep on accepting it as our duty to spare them the risks of weather disasters. I, for one, reject that duty. I would like for situations like that in American Bottom to become a first step toward undoing decades of distortion wrought by the federally funded “weather welfare-state.” It’s high time that the taxpayers who foot the bills start thinking more seriously about the value of a free market in weather-related insurance, protection, and disaster recovery.

Image: Wikimedia Commons

In a generally excellent article, Wall Street Journal columnist Daniel Henninger felt obliged to apologize for what he was about to say. He noted that it’s “churlish” to remind the world that the rescue of the trapped Chilean miners was “a smashing victory for free-market capitalism.”

“Churlish” means rude, boorish. Why is it rude to give businessmen high moral credit for the life-giving products they create? Henninger saw no need to explain. It’s simply taken for granted—by a columnist at a pro-business newspaper, no less—that an apology is necessary in order to speak approvingly, in polite company, about the profit motive.

But notice: It isn’t deemed rude or boorish to call the rescue mission a religious miracle and say, with Chile’s president, Sebastian Pinera: “Faith has moved mountains”—despite the fact that an army of praying monks could not have lifted a single trapped miner to safety.

Henninger’s article assembles fascinating facts to show that profit-making businesses made the rescue possible. But those businessmen and engineers deserve more than a neutral accounting. They deserve moral praise—which, according to conventional morality, they haven’t any right to expect because their motives are self-interested. It’s not supposed to bother them that people ignore the moral virtue required for businessmen and engineers to develop, for example, an impact drill capable of conquering the hard Chilean lava rock.

One of Ayn Rand’s great achievements in Atlas Shrugged was to offer industrialists and engineers the gratitude they deserve but have never received. This is a good time to follow her lead and say “thank you” to all the profit-seeking capitalists whose productive virtues led to the rescue of those miners.

I don’t necessarily expect ordinary folks like those rescued miners to become the pioneers who clarify the crucial moral issue here. But I do look forward to the day when defenders of capitalism will feel free to speak out in praise of heroic industrialists without pausing to include the slightest hint of an apology.

Image: Wikimedia Commons

Carlos Slim, the world’s richest man, has made headlines by questioning the effectiveness of charity and refusing to sign the Gates-Buffett Giving Pledge. “The only way to fight poverty is with employment,” Slim is quoted as saying. “Trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything.”

I would say that the only way to fight poverty is with capitalism–there are plenty of poor, employed people in the world–and one way to fight for capitalism is through philanthropic giving. (The Ayn Rand Center for Individual Rights, for instance, is a 501(c)(3) non-profit organization.) In any case, it is heartening to hear a successful businessman challenge the idea that the only way the lot of the poor can be improved is through charity.

But what’s most interesting to me is this response from Wall Street Journal senior writer Robert Frank: “In these populist times, some might argue that Mr. Slim is being a selfish billionaire who’s simply justifying his own wealth accumulation.” But, wonders Frank, “Would Bill Gates and Warren Buffett be doing more for society by putting their time and money into new businesses rather than funding philanthropy?”

What I take issue with is the idea that accumulating wealth that one has earned via productive activity requires some non-selfish justification. The selfish justification of production is that manna doesn’t fall down from Heaven: if you want to live and enjoy life you have to work to create wealth. To say that this requires some further justification is to say that your life requires justification–that you don’t have a right to exist for your own sake, but need to buy your right to exist by proving that you are serving others.

As ARC’s Yaron Brook and I argue in a recent Forbes.com column, businessmen aren’t servants of society. Whether they should give to charity or fund new businesses is a decision they should make by thinking about what will promote their own well-being and happiness. A successful and happy life requires no “higher” justification.

Image: flickr

In today’s Washington Examiner, ARC’s Yaron Brook and I discuss the continuing political war over Toyota.

How many congressmen does it take to identify the cause of a runaway Toyota Prius? No, it’s not a trick question. A congressional panel issued a draft report recently on a case of supposed runaway acceleration in San Diego.

Why wasn’t that left to the objective assessment of the police and courts? The answer to that question was made clear during last month’s congressional hearings on the Toyota recalls.

You can read the whole article here.

Image: flickr

Here’s an unpublished letter ARC’s Yaron Brook sent to the Wall Street Journal in response to an op-ed by Heather Wilhelm:

Dear Editor,

After indulging in a truly dazzling series of ad hominem attacks on philosopher Ayn Rand, Heather Wilhelm does manage to raise one important issue: she asserts that Rand, whose books continue to sell in the hundreds of thousands a year, is not an effective salesman for capitalism. Whereas Rand is allegedly “elitist, cold and laser-focused on the supermen and superwomen of the world,” Wilhelm claims that what capitalism truly needs is an explanation of “how everyone, especially society’s neediest” benefit from economic liberty. That claim betrays an appalling ignorance of history.

Capitalism’s defenders have appealed to its beneficent effects since its inception. Accepting the conventional view that service to the needy is the essence of morality, they have downplayed and denied the essence of capitalism: the profit motive and the unrestricted pursuit of rational self-interest. This approach hasn’t worked. So long as even the free market’s defenders feel guilty and embarrassed by capitalism’s selfish nature, any attempt to reverse the anticapitalist trend is hopeless. Who is going to believe that vice is the path to the good?

What Rand offers is a radical alternative—a proper, moral defense of capitalism’s essence.

Rand argued that the proper standard of morality is the objective requirements of human life. She argued that human life requires productive achievement, and that the noblest act of moral virtue is using one’s mind to create life-sustaining values. She argued that profit is moral because it enriches the individual who achieves it—that someone like Bill Gates deserves the highest moral praise, not for giving away his wealth, but for creating it. Thus Rand advocated capitalism precisely because it is the only system that rewards the profit motive and respects the individual’s right to act on his own judgment in the pursuit of his own life and happiness. And yes, that includes not only the most intelligent and successful, but every individual committed to making his life the best life it can be. Capitalism is good, Rand argued, because selfishness, correctly understood, is a virtue.

Wilhelm’s views aside, Rand continues to be the greatest salesman capitalism has ever had. It’s not hard to discern why: whereas the rest of the world looked at capitalism and saw the hollow pursuit of material gain, Rand saw man the hero free to seek his highest values.

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I’ve just had an article on climate policy published in the journal Energy and Environment. It will appear in a special issue of the journal focusing on “Climate Policy and Energy Poverty.”

The article takes what I think is a pretty unique approach to the topic. I don’t focus on the science of climate change–i.e., I don’t specifically address the question of whether or not man-made greenhouse gases are the dominant agents driving the earth’s climate (though I don’t accept the ubiquitous assertion that they are). Instead, I address an entirely different question; one that I think the proponents of climate change alarm ignore completely.

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The Pope’s latest encyclical, Caritas in veritate, is not an isolated assault on capitalism. It is part of a longstanding antipathy toward capitalism.

For example, in 1967, Pope Paul penned a seminal encyclical in this assault, Populorum progressio – “On the Development of Peoples” — in which he (surprise) blamed all the world’s problems on the profit motive, and called for mass redistribution of wealth as the key to the “development of peoples.” By Pope Benedict’s own statement, his own “Caritas in veritate” cannot be understood without reading “Populorum Progressio.” And there is no better way to understand “Populorum Progressio” – and to understand the soul of the Vatican — than to read “Requiem for Man” — Ayn Rand’s profound analysis of “Populorum Progressio.”

Here is Benedict explaining the importance of the earlier work:

In 1967, when he issued the encyclical Populorum progressio, my venerable predecessor Pope Paul VI illuminated the great theme of the development of peoples with the splendour of truth and the gentle light of Christ’s charity.

At a distance of over forty years from the Encyclical’s publication, I intend to pay tribute and to honour the memory of the great Pope Paul VI, revisiting his teachings on integral human development and taking my place within the path that they marked out, so as to apply them to the present moment.

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A BBC story accurately summarizes a central theme of the latest encyclical (the highest form of Catholic teaching) emanating from the Vatican:

The letter, addressed to all Catholics “and people of goodwill”, reminds them of their moral duties in financial dealings.

“Profit is useful if it serves as a means toward an end,” he wrote.

“Once profit becomes the exclusive goal, if it is produced by improper means and without the common good as its ultimate end, it risks destroying wealth and creating poverty.”

He warned that globalisation, properly managed, could “open up the unprecedented possibility of large-scale redistribution of wealth on a world-wide scale”. But badly directed, it could “lead to an increase in poverty and inequality, and could even trigger a global crisis”.

The whole encyclical — all 144 pages of it — blames the profit motive for all the world’s problems, and calls for a worldwide redistribution of wealth by a world government as the solution.

A few thoughts:

• Why on earth do people take the economic advice of the Pope seriously? What is the Catholic Church’s record on economics? Creating and sustaining a Dark and Middle Ages? The Pope has about as much credibility dispensing advice on how to improve our economic lives as he does dispensing advice on how to improve our sex lives. (For more on this last, by the way, see “Of Living Death,” Ayn Rand’s essay on a Papal encyclical on sex, in The Voice of Reason. The essay was originally given as a lecture, available here.)
• There is one thing we should take seriously about this encyclical, which is that the seethingly anti-capitalist Vatican is an authority on the consistent application of religion to life. Those on the right who believe that it is possible to defend capitalism while putting faith before reason and by advocating self-sacrifice, not self-interest, as the essence of morality — let’s just say they have a lot of explaining to do, and I don’t hear any explanations.
• Yet again, the anti-capitalists cash in on the idea that capitalism has failed. We have to keep explaining that it was anti-capitalism, the mixed-economy, that failed. This is another failure of the right, very much related to its embrace of religion, religious morality, and the religious view of human nature (original sin).

I highly recommend reading the encyclical, especially if you are of the belief that religion and capitalism go together. But before you read it, there’s another essay you should read first, one that penetrates to the core of the Vatican’s assault on capitalism, and explains what it reveals about the true soul of the Catholic Church.

I will reveal this essay in my next post.

America is the nation of individualism and capitalism, but these values are being eroded—day-by-day, bailout-by-bailout, billion-by-billion, takeover-by-takeover.

That is why hundreds of thousands, maybe millions of Americans, myself included, will be protesting at Tea Parties this weekend. (I will be one of the speakers at the San Diego protest—if you’re in Southern California, please come and introduce yourself.)

Invoking the Boston Tea Party, one of the seminal events leading up to the American Revolution, we will be protesting against a government that seizes our wealth and our liberty in ways that King George could never have dreamed of.

But being against today’s government is not enough. What are we for—and why? A “free market”? Free from what, exactly? “Limited government”? Limited to what, exactly? When freedom is at stake, neither vagueness nor platitudes will do.

At the Ayn Rand Center, in the spirit of Atlas Shrugged, we stand for a separation of economy and state.

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Picking up on a press release from the Center for Economic and Policy Research, New York Times columnist Floyd Norris recently reported that the rate of unemployment in the U.S. is now equal to and may soon surpass that of Western Europe. Norris echoes the main thrust of the press release: “the current economic crisis . . . has turned the case for the U.S. model almost entirely on its head.” The CEPR authors imply that the European model of “large welfare states and high levels of labor-market regulation” should be the economic standard to which nations aspire.

Leaving aside the question of the validity of the data (unemployment data is notoriously politicized and difficult to acquire), it is telling that neither Norris nor the CEPR authors clearly identify what they take the U.S. model to be. There is only an assertion of “inherent” “flexibility” in the U.S. economic system, which Norris explains as meaning “it is easier to both hire and fire workers [in the U.S.] than in many European countries.”

The accepted premise, of course, is that the U.S. model is free market capitalism. But, as Ayn Rand argues, capitalism means a “full, pure, uncontrolled, unregulated laissez-faire capitalism—with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.” This is not the system we have in America.

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