Blog : Atlas Revisited

by Ed Zwirn on September 12th, 2014

I lived for three years, from 1994 to 1996, in the former Soviet state of Ukraine. When I first moved to that country's capital, Kiev, I stayed with a host family, and was amused to hear them refer to household appliances that didn't work satisfactorily as "Soviet" clocks, refrigerators and (even) toilets.

There was justification for this. All items such as these had been manufactured in state factories. Operating without competition, these factories produced goods with design flaws, the kind of flaws that might have initially appeared in Western versions of these products, and got away with it due to the lack of competition.

When I came back home from my job as editor of an English-language news service (address 11 Karl Marx Street) to return to Wall Street, a colleague of mine persuaded me that I needed to read Ayn Rand's We the Living. In this masterful novel, which chronicles the tragic evolution of Russian society and politics following the 1917 Bolshevik revolution, I was amazed to read lines in which the characters jokingly referred to the Soviet clocks.

Rand herself fled this revolution. Like most emigres, and many who had not been fortunate enough to flee this brutal (and inefficient) system, she became a stalwart anti-Communist, correctly pointing out that state socialism stifled individual initiative and imposed a dulling (and, in fact, deadly) egalitarianism on those condemned to live in its grasp.

A film version of one of Rand's other masterpieces, Altas Shrugged (actually part 3 of a trilogy), premieres in theaters today, giving me the excuse to critique Rand's legacy. Atlas tells the story of an America in which capitalists, the productive part of society which, like the titan Atlas, support the world on their shoulders but have been repressed by the government. In a reversal of the Marxist dream of a workers' revolt, the result is a capitalist revolt.

The saga of John Galt may have much to say to an American society plagued by rust belts and, in fact we are living in the midst of a capitalist revolt.

But, at the same time, Rand's work is illustrative of the extent to which great literature and great ideas do not always coincide with great public policy, especially in the financial realm.

Take the case of Alan Greenspan. A convert to Rand's philosophy of Objectivism in the 1950s, when he was in his twenties, Greenspan had the chance to put much of this essentially laissez faire capitalist philosophy into practice as chairman of the U.S. Federal Reserve Bank from 1987 to 2006. Among the profound impacts of this attempt was his successful stance against any regulation of the derivatives market. His stance carried the day.

For some time, it looked like the Randian ideal of a free market unencumbered by government interference might prove to be the foundation of a new prosperity, a view widely shared by Wall Street. In fact, the colleague who had persuaded me to start reading Rand was of the firm conviction, and she was far from alone, that due to the adoption of Rand's ideas we had finally arrived at a "new paradigm," one in which economic boom-and-bust cycles would become a thing of the past.

By 2008, two stock market crashes later, Greenspan was forced to backtrack on some of this idealism, admitting that he had been "partially" wrong in opposing regulation. In Congressional hearings, he admitted that he had been "shocked" by the economic meltdown that ensued at least in part as a result of the deregulation he promoted. "I have been going for more than 40 years or more with very considerable evidence that it was working extremely well," he admitted ruefully of his Objectivist ideology.

Economics has been justly described as a "dismal science." I prefer to call it the science of what works. Innovations such as the Securities and Exchange Commission and Social Security (not to mention the Fed) may not easily fit in with the ideological purity of Rand and her Objectivism, but they have nonetheless smoothed out some of the rougher aspects of the capitalist system.

This takeaway should be especially salient to penny stock investors. It is all well and good to talk about a free market unencumbered by regulation, but the regulation of financial markets is necessary, and in fact helped the U.S. enter the golden era of prosperity which followed the Second World War by restoring confidence in the system.

Anybody who pretends to know anything about the history of the twentieth century (not to mention the 21st) knows how destructive ideological purity can be. The image of Atlas shrugging off his burden is a compelling one, and there is no doubt that Rand and her ideas have made an important contribution to the great public debates of our time. That being said, my hope is that humanity may have finally gotten past rigid dogmas like Stalinism, Nazism and unfettered capitalism, but I'm not holding my breath. Slogan-driven public policy is much more persuasive than that based on evidence.