Capitalism: the Unknown Ideal
Encyclopedia
Capitalism: The Unknown Ideal is a collection of essays, mostly by Ayn Rand
, with additional essays by her associates Nathaniel Branden
, Alan Greenspan
and Robert Hessen
. The book focuses on the moral nature of laissez-faire
capitalism
and private property. The book has a very specific definition of capitalism, a system it regards as broader than simply property rights or free enterprise. It was originally published in 1966.
.
After an introduction by Rand, the book is divided into two main sections. The first section, "Theory and History", contains essays that focus on the theoretical basis for capitalism and historical arguments related to it. This section includes essays arguing against common objections to capitalism. The second section, "Current State", focuses on contemporary political issues from the 1960s. The topics covered in this section include the Vietnam War
, student protests, and the papal encyclical
Populorum progressio
. An "Appendix" section reprints two essays on political theory previously published in Rand's earlier book, The Virtue of Selfishness
. A recommended reading list about capitalism is also provided.
to the subject of politics. When Rand talks of capitalism, she means laissez-faire capitalism, in which there is a complete separation of state and economics "in the same way and for the same reasons as the separation of church and state." Rand says, "Objectivists are not 'conservatives'. We are radicals for capitalism; we are fighting for that philosophical base which capitalism did not have and without which it was doomed to perish."
Rand says that most people do not know what capitalism is, which is why it is "the unknown ideal."
Rand regarded a mixed economy
as a dangerous and unstable combination of freedom and controls which tends to develop into ever increasing statism
.
. The creation of wealth, according to Rand, is a fusion of mind and matter, and she argued that reason
is the most fundamental tool of survival for human beings. However, rational thought is rendered inoperative under conditions of compulsion, coercion or, as she puts it, the initiation of physical force. Whether it is the force of an armed robber or the force of a law, an actor's own judgment is rendered irrelevant to his actions by a threat of force, compelling him to act on the judgment or will of another, thus neutralizing the source of wealth and survival itself. Only voluntary trade can ensure that human interaction is mutually beneficial, and an analysis of history shows that only economic and political freedom has worked to create significant growth and economic development, precisely by liberating the rational faculties of ever wider numbers of individuals, according to Rand.
interests can never rationally entail the use of physical force or violence against the person or the property of another. Rand saw humans as thriving only as independent beings, reason being a faculty of the individual, with each freely expending his own time, effort and reason to sustain his own life.
Rand suggested that through the division of labor, specialization and voluntary trade, other people are of enormous value to an individual. Moreover, knowledge, skills and interests vary from human to human. One person may be better at shaping flint into arrowheads, another may have acquired the skill to turn mud into pottery. If the first wants a pot to cook in, he may trade
an arrowhead for a pot. The central feature of free trade is that each participant judges that he or she has gained from the transaction.
When physical force is banned, according to Rand, persuasion alone can organize or coordinate human activity, and, consequently, the use of reason is both liberated and rewarded. The technological innovation which characterizes capitalist systems is thus directly related to conditions of economic freedom. A producer profits and becomes wealthy only by satisfying the voluntary choices of other market participants and in direct proportion to the value those participants find in transactions with that producer.
In this way, individuals who themselves could have never invented, for example, the light bulb or the steam engine can none the less benefit from the creativity of others – but this can be only ensured when both the innovator and the consumer are free to refuse the proposed trade. This, according to Rand, is the mechanism behind America's rapid economic development, its liberation of human reason.
Freedom being the primary condition for the practical use of reason, the role of government in protecting individual rights
is therefore fundamental, according to Rand, and it is equally fundamental that the government itself be limited to its role of protecting rights, for only by rendering all human interaction voluntary, i.e., free from the initiated coercion of criminals and laws, can the market operate to radically improve the lives of everyone. To the extent that it has been permitted to operate, this is what a free market has done, argued Rand.
Thus, she held, "a free mind and a free market are corollaries."
and the Houston Chronicle
, and Barron's Magazine
published a review by Rand's associate Leonard Peikoff
. A negative review appeared in Book Week, and another negative review, in The New Republic
was titled, "Here We Go Gathering Nuts".
Economist Walter E. Williams
has described the work as "one of the best defenses and explanations of capitalism one is likely to read."
Ayn Rand
Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....
, with additional essays by her associates Nathaniel Branden
Nathaniel Branden
Nathaniel Branden, né Nathan Blumenthal , is a psychotherapist and writer best known today for his work in the psychology of self-esteem from a humanistic perspective...
, Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
and Robert Hessen
Robert Hessen
Robert Hessen, Ph.D., is an American economic and business historian, a widely published author, a professor in the Graduate School of Business at Stanford, and a senior research fellow at Stanford University's Hoover Institution. Among the books he has written or edited are Steel Titan: The Life...
. The book focuses on the moral nature of laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
and private property. The book has a very specific definition of capitalism, a system it regards as broader than simply property rights or free enterprise. It was originally published in 1966.
Publication history
Most of the essays originally appeared in The Objectivist Newsletter or The Objectivist. The hardcover first edition was published by New American Library in 1966. When the book was published in paperback in 1967, it was revised to include two additional essays. In 1970, Rand revised the introduction to reflect her break with Nathaniel BrandenNathaniel Branden
Nathaniel Branden, né Nathan Blumenthal , is a psychotherapist and writer best known today for his work in the psychology of self-esteem from a humanistic perspective...
.
Contents
Capitalism: The Unknown Ideal is, in Rand's words, a comprehensive defense of the only social system consistent with man's requirements as a rational being: laissez-faire capitalism.After an introduction by Rand, the book is divided into two main sections. The first section, "Theory and History", contains essays that focus on the theoretical basis for capitalism and historical arguments related to it. This section includes essays arguing against common objections to capitalism. The second section, "Current State", focuses on contemporary political issues from the 1960s. The topics covered in this section include the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...
, student protests, and the papal encyclical
Encyclical
An encyclical was originally a circular letter sent to all the churches of a particular area in the ancient Catholic Church. At that time, the word could be used for a letter sent out by any bishop...
Populorum progressio
Populorum Progressio
Populorum progressio is the encyclical written by Pope Paul VI on the topic of "the development of peoples" and that the economy of the world should serve mankind and not just the few...
. An "Appendix" section reprints two essays on political theory previously published in Rand's earlier book, The Virtue of Selfishness
The Virtue of Selfishness
The Virtue of Selfishness: A New Concept of Egoism is a 1964 collection of essays and papers by Ayn Rand and Nathaniel Branden. Most of the essays originally appeared in The Objectivist Newsletter, except for "The Objectivist Ethics", which was a paper Rand delivered at the University of Wisconsin...
. A recommended reading list about capitalism is also provided.
Themes
Rand applies her philosophy of ObjectivismObjectivism (Ayn Rand)
Objectivism is a philosophy created by the Russian-American philosopher and novelist Ayn Rand . Objectivism holds that reality exists independent of consciousness, that human beings have direct contact with reality through sense perception, that one can attain objective knowledge from perception...
to the subject of politics. When Rand talks of capitalism, she means laissez-faire capitalism, in which there is a complete separation of state and economics "in the same way and for the same reasons as the separation of church and state." Rand says, "Objectivists are not 'conservatives'. We are radicals for capitalism; we are fighting for that philosophical base which capitalism did not have and without which it was doomed to perish."
Rand says that most people do not know what capitalism is, which is why it is "the unknown ideal."
What is capitalism?
As understood by Rand, capitalism is the system that emerges among a group of free individuals, each applying time and reason to sustain his or her own life, each the owner of the means to do so, freely trading among themselves.Rand regarded a mixed economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
as a dangerous and unstable combination of freedom and controls which tends to develop into ever increasing statism
Statism
Statism is a term usually describing a political philosophy, whether of the right or the left, that emphasises the role of the state in politics or supports the use of the state to achieve economic, military or social goals...
.
Reason and values
Rand held capitalism to be the only moral social system, that is, one consistent with an objective theory of value and ethical individualismEthical egoism
Ethical egoism is the normative ethical position that moral agents ought to do what is in their own self-interest. It differs from psychological egoism, which claims that people can only act in their self-interest. Ethical egoism also differs from rational egoism, which holds merely that it is...
. The creation of wealth, according to Rand, is a fusion of mind and matter, and she argued that reason
Reason
Reason is a term that refers to the capacity human beings have to make sense of things, to establish and verify facts, and to change or justify practices, institutions, and beliefs. It is closely associated with such characteristically human activities as philosophy, science, language, ...
is the most fundamental tool of survival for human beings. However, rational thought is rendered inoperative under conditions of compulsion, coercion or, as she puts it, the initiation of physical force. Whether it is the force of an armed robber or the force of a law, an actor's own judgment is rendered irrelevant to his actions by a threat of force, compelling him to act on the judgment or will of another, thus neutralizing the source of wealth and survival itself. Only voluntary trade can ensure that human interaction is mutually beneficial, and an analysis of history shows that only economic and political freedom has worked to create significant growth and economic development, precisely by liberating the rational faculties of ever wider numbers of individuals, according to Rand.
Individual rights
In its most basic form, the right to life (as understood by Rand) is the right of each human to do any and all activities necessary to sustain his or her own life. Rand further argued that one's selfishEthical egoism
Ethical egoism is the normative ethical position that moral agents ought to do what is in their own self-interest. It differs from psychological egoism, which claims that people can only act in their self-interest. Ethical egoism also differs from rational egoism, which holds merely that it is...
interests can never rationally entail the use of physical force or violence against the person or the property of another. Rand saw humans as thriving only as independent beings, reason being a faculty of the individual, with each freely expending his own time, effort and reason to sustain his own life.
Rand suggested that through the division of labor, specialization and voluntary trade, other people are of enormous value to an individual. Moreover, knowledge, skills and interests vary from human to human. One person may be better at shaping flint into arrowheads, another may have acquired the skill to turn mud into pottery. If the first wants a pot to cook in, he may trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
an arrowhead for a pot. The central feature of free trade is that each participant judges that he or she has gained from the transaction.
When physical force is banned, according to Rand, persuasion alone can organize or coordinate human activity, and, consequently, the use of reason is both liberated and rewarded. The technological innovation which characterizes capitalist systems is thus directly related to conditions of economic freedom. A producer profits and becomes wealthy only by satisfying the voluntary choices of other market participants and in direct proportion to the value those participants find in transactions with that producer.
In this way, individuals who themselves could have never invented, for example, the light bulb or the steam engine can none the less benefit from the creativity of others – but this can be only ensured when both the innovator and the consumer are free to refuse the proposed trade. This, according to Rand, is the mechanism behind America's rapid economic development, its liberation of human reason.
Freedom being the primary condition for the practical use of reason, the role of government in protecting individual rights
Natural rights
Natural and legal rights are two types of rights theoretically distinct according to philosophers and political scientists. Natural rights are rights not contingent upon the laws, customs, or beliefs of any particular culture or government, and therefore universal and inalienable...
is therefore fundamental, according to Rand, and it is equally fundamental that the government itself be limited to its role of protecting rights, for only by rendering all human interaction voluntary, i.e., free from the initiated coercion of criminals and laws, can the market operate to radically improve the lives of everyone. To the extent that it has been permitted to operate, this is what a free market has done, argued Rand.
Thus, she held, "a free mind and a free market are corollaries."
Reception
Compared to Rand's earlier books, Capitalism: The Unknown Ideal received relatively few reviews. Positive reviews appeared in The FreemanThe Freeman
The Freeman: Ideas on Liberty is one of the oldest and most respected libertarian journals in the United States. It is published by the Foundation for Economic Education . It started as a digest sized monthly study journal; it currently appears 10 times per year and is a larger-sized magazine. FEE...
and the Houston Chronicle
Houston Chronicle
The Houston Chronicle is the largest daily newspaper in Texas, USA, headquartered in the Houston Chronicle Building in Downtown Houston. , it is the ninth-largest newspaper by circulation in the United States...
, and Barron's Magazine
Barron's Magazine
Barron's is an American weekly newspaper covering U.S. financial information, market developments, and relevant statistics. Each issue provides a wrap-up of the previous week's market activity, news reports, and an informative outlook on the week to come....
published a review by Rand's associate Leonard Peikoff
Leonard Peikoff
Leonard S. Peikoff is a Canadian-American philosopher. He is an author, a leading advocate of Objectivism and the founder of the Ayn Rand Institute. A former professor of philosophy, he was designated by the novelist Ayn Rand as heir to her estate...
. A negative review appeared in Book Week, and another negative review, in The New Republic
The New Republic
The magazine has also published two articles concerning income inequality, largely criticizing conservative economists for their attempts to deny the existence or negative effect increasing income inequality is having on the United States...
was titled, "Here We Go Gathering Nuts".
Economist Walter E. Williams
Walter E. Williams
Walter E. Williams, is an American economist, commentator, and academic. He is the John M. Olin Distinguished Professor of Economics at George Mason University, as well as a syndicated columnist and author known for his libertarian views.- Early life and education :Williams family during childhood...
has described the work as "one of the best defenses and explanations of capitalism one is likely to read."
External links
- Capitalism - Theory, The Ayn Rand Lexicon.