The American Interest

Books, Film, and History

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Greenspan Shrugged

Are Ayn Rand and her adept Alan Greenspan to blame for our economic woes? Answering that question requires something more than parody and less than unqualified praise.

Published on March 1, 2009

Atlas Shrugged (1957) Ayn Rand

Politics has been defined as who gets what, when and how. And for the most part that’s just what it is—men and women jockeying for power and the spoils that go with it. Occasionally, however, we’re able to catch a glimpse of some of the deeper currents below the surface of the power game. Here we see the various sediments of ideas, philosophies and half-baked ideologies that influence which way the political tides roll, at least for a time. One such moment came this past October when Alan Greenspan, the former Chairman of the Federal Reserve Board, appeared before Congress to comment on the most serious economic crisis since the Great Depression. In a rather vague, somewhat rambling testimony Greenspan referred obliquely to an “ideology” that had shaped his thinking for the past forty years or so; and Greenspan added that he was “distressed” and “shocked” to discover that this ideology may have been wrong.

Alan Greenspan testifies before Congress on the financial crisis, October 23, 2008. [credit: Reuters/Kevin Lamarque]

Now, it is a rare individual whose ideology is nurtured from a single source. Most folks go into the world with some unexamined assumptions, perhaps picked up from their parents and ministers; they learn a few things in college, read a bit of this and that, gain some lessons in the “real world”, and out of all this they stitch together their “take” on reality. In Greenspan’s case, by contrast, we can be pretty certain of the main source of his thinking—of how, in his own words, he came to “deal with reality.” The source was Ayn Rand (1905–82).

As Greenspan relates in his recently published autobiography, The Age of Turbulence, he was introduced to the philosopher-novelist in the 1950s, quickly becoming a part of her inner circle and attending regular weekly meetings in her New York City apartment. Rand even had a nickname for him, “the Undertaker.” Greenspan became not only intellectually but socially indebted to her. He describes her small group as his “first social circle” outside of school, and himself as a convert. “Ayn Rand became a stabilizing force in my life”, he writes. “It hadn’t taken long for us to have a meeting of the minds—mostly my mind meeting hers.” He found her “broader philosophy of unfettered market competition compelling”, and he says of himself, “I was intellectually limited until I met her.” Under her influence he wrote for her newsletter, “The Objectivist”, and several of his essays appeared in Rand’s 1966 book Capitalism: The Unknown Ideal. Rand was with him when he took his oath of office as Chairman of the Council of Economic Advisors in the Ford Administration, and he writes of staying in touch with her until her death in 1982: “I’m grateful for the influence she had on my life.”

The extent of that influence is hard to measure, and it would certainly be a mistake to attribute the policies Greenspan pursued as head of the Fed for nearly twenty years solely to Rand. It would also be a mistake—it should go without saying—to find the roots of today’s economic malaise in the pages of Ayn Rand’s novels. She’s hardly to blame for the present crisis, and her defenders are quick to argue that at least certain aspects of the economic meltdown confirm her free-market, objectivist philosophy. The move by the government-subsidized Fannie Mae in the late 1990s to ease credit requirements for subprime borrowers, which some believe contributed to our current difficulties, was anathema to the laissez faire principles Rand espoused. Indeed, the very existence of Fannie Mae would probably have stirred Rand to the very edge of damning poetry.

That said, Rand has been a significant cultural force in American public life. She was an avid political pamphleteer, the founder of institutes and societies, a seeker of acolytes (Greenspan being only the most notable). She wrote several monstrously long novels, all of which did fantastically well on the bookstands. Her most famous novel, the one she claimed best embodied her worldview, Atlas Shrugged, has sold millions of copies. The 1,200-page behemoth, first published in 1957, has never been out of print, and regularly ranks in the 300s and 400s on’s best-seller list. It was recently recognized by a Library of Congress/Book of the Month Club survey as one of the most influential books in American life. According to some surveys, more than 8 percent of Americans have read the book, and in the Modern Library’s reader survey of the one hundred best novels in the English language, Atlas Shrugged ranked first. So if a look back at Atlas Shrugged won’t tell us about how we got into the present mess, or how to get out of it, perhaps it can shed some light on how at least some Americans came to understand the meaning of capitalism.

USPS tribute released in 1999 [credit: ]

A relentlessly didactic novel on behalf of capitalism, Atlas Shrugged was published to highly critical, negative reviews. Perhaps not surprisingly, it was panned by the New York Times, which led the young Greenspan in a letter to the editor to vehemently defend his mentor. Even today the novel seems to attract either blind worship or guffaws, when it really deserves something in between. Atlas Shrugged is grandiose and silly, to be sure, but it is also a book with a large ambition, and Rand herself was in possession of a considerable talent. Some of her lampoons of Washington insiders and ivory tower poseurs still hold up pretty well after all these years. And while she was no Orwell (but who is?) she was not without insight. Take for example the following speech of one of the novel’s villains:


There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What’s there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced nor objectively interpreted—and you create a nation of law-breakers—and then you cash in on guilt.


That’s not bad as an analysis of a key aspect of dictatorial rule, and it is not to be found in your run-of-the-mill bestseller. My point is this: We should not belittle Rand’s work but try to understand what her ambition was in writing Atlas Shrugged, and weigh what her project might tell us about capitalism today.


The novel’s action takes place in the midst of a global economic crisis. With the exception of the United States, the world seems to be populated by various destitute communist dictatorships; Rand has occasion to mention the People’s States of Argentina, China, France, Germany, Mexico and Turkey. Only America remains somewhat economically and politically free. However, over the course of the novel, America too becomes a corrupt People’s State. The country’s ruin is brought about by collectivist-minded politicians and bureaucrats (as well as some corrupt businessmen). In the name of altruism and the public interest, they seek to undermine the morality of capitalism (as Rand understood that morality) and to spread the wealth around, Marxist-style. In the words of one of Rand’s characters, “The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.”

Such policies lead the country down the path of economic stagnation and eventually severe destitution, poverty and political upheaval. Yet it is not the socialist policies by themselves that usher in this dystopian nightmare. What expedites the collapse is when the good capitalists of the world unite, and go on strike. In rebellion against the collectivists, these good capitalists flee to a new Atlantis, a utopian city-state in a mountain fastness, where capitalists, unmolested by state bureaucrats, may devote themselves to the true sources of wealth and human genius.

There are absolutely no shades of gray in Atlas Shrugged, which often reads like an inverted Marxist vision of human life. On the side of the angels are, most notably, the beautiful railroad executive Dagny Taggart, along with the three übermenschen who compete for her affections—Hank Rearden, the creator of a stronger metal, Francisco d’Anconia, the cosmopolitan copper magnate, and John Galt, the brilliant inventor of a super energy-efficient engine. On the other, the dark side, are the “looters”, mediocrities like Dagny’s brother James Taggart, who, though also a business executive, spends his time cultivating political connections rather than turning a profit. Then there is Wesley Mouch, the hapless lobbyist turned sinister bureaucrat; the Stalinesque Mr. Thompson, who rises to become America’s dictator; and Floyd Ferris, the genocidal head of the nation’s State Science Institute.

The novel’s free marketeers, led by John Galt, engage in a stealth strike against the socialists. Mayhem, carnage and starvation on a colossal scale ensue, with entire cities being wasted, and though Armageddon draws near, in the end the free marketeers prevail, returning eventually from their Atlantis hideaway to redeem a fallen, nearly dead world.

The book’s political and economic message is complemented by a cultural aesthetic that is perhaps more important than is sometimes realized to the novel’s overall message, as well as its popular success. The novel’s bad guys, its socialists, are invariably described by Rand as having “soft, sullen” faces, “swollen flesh”, complexions “the tinge of butter”, and “filmy eyes” with “pale brownish pupils.” These second-raters have banal, pleasureless sex.


There was no passion in [their relationships], no desire, no actual pleasure, not even a sense of shame. To them, the act of sex was neither joy nor sin. It meant nothing. They had heard that men and women were supposed to sleep together, so they did.


By contrast, the novel’s heroes, d’Anconia, Rearden and Galt, are made of different stuff—they of the “gaunt muscles”, “angular” features, “prominent cheekbones”, and eyes of “pale blue ice.” These supermen all fall for Dagny Taggart, and Ayn Rand has some fun describing the exuberant sex they enjoy with her.

Dagny, really the novel’s main character, illustrates the novel’s crossover appeal. Though Hollywood could not accept Rand’s politics, they belatedly came around to embracing Rand’s ultra-progressive notion of feminism. Dagny—brainy, gorgeous and athletic, the engineering whiz, ruthless business executive and passionate lover who dispassionately kills those who would stand in her way—could easily serve as the prototype for today’s Hollywood heroine. Think Angelina Jolie, for example, who according to rumor will play the part of Dagny in an upcoming Hollywood film.

Though in the end Dagny, who is as much the pursuer as pursued, chooses Galt, and though Galt, Rearden and d’Anconia are aware of their rival’s love, Dagny and her lovers still remain fast and loyal friends. There is plenty of sex in the novel (by the standard of the 1950s, anyway), but absolutely no children and not a single intact, reasonably functional or happy family. One may imagine the frisson of excitement all this “free love” provided the novel’s early readers, before the sexual revolution came to America. One of the novel’s core messages seems to be that good sex and capitalism go together, and need not involve marriage, children or families.

In this sense Rand was not a creature of the 1950s, but was well ahead of her time. And the cultural significance of Atlas Shrugged is to be found here, I believe—in what it sought to rebel against. For this is not a conservative’s novel, but a novel of youthful rebellion. (I have known some who in their twenties became entranced by Rand, but none among my middle-aged friends.) Indeed, Rand wished to claim for those who would follow her cause the sobriquet of “new radicals.” Her rebellion, as Atlas Shrugged suggests, was as much against the bourgeois liberal order as against socialist collectivism.

To see this more clearly, let’s reconsider Rand’s philosophy in light of some of the masters she sought to replace. Karl Marx and the communist movement he gave life to represented a wholesale rejection of the bourgeois liberal order. It is beyond doubt that Rand’s Atlas Shrugged, together with her political essays, was in reaction against Marxism as it came to be embodied in the Soviet Union. Interestingly, though, Rand did not attempt a return to, or revitalization of, capitalism in the mode of Adam Smith. Her book Capitalism: The Unknown Ideal, to which Alan Greenspan contributed, contains no references to Smith. And in retrospect this may be the most significant fact about Ayn Rand. That is, in reading her today, one is struck less by her critique of Soviet collectivism (a critique that many would have shared); no, what stands out most today about Rand’s project is her deliberate break from liberal capitalism as Adam Smith would have understood it.

Smith’s defense of liberal capitalism, what he called “the system of natural liberty”, is noteworthy for its sobriety. He was not a celebrant of the new order he wished to help promote, but rather a cautious, even somewhat torn advocate. Smith delineated in The Wealth of Nations the devastating effects capitalism could have on the laboring classes, a critique upon which Marx would build, and Smith was also severely critical of the commercial class. No heroic Dagnys or John Galts populate Smith’s works. The production of wealth was for Smith not an end in itself but a means to other goals, such as civil and religious liberty in the broadest sense. Smith’s elevation of the pursuit of private interest never led him to forsake a notion of the public interest. Indeed, Smith’s famous notion of the “invisible hand” was still tied to a conception of the public interest. As he wrote in The Wealth of Nations, an individual in pursuing his own interest is


led by an invisible hand to promote an end which was no part of his intention. . . . By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Moreover, Smith was no advocate of laissez faire; he was not willing to leave the public interest entirely to the invisible hand. He saw a role for government in restraining the self-interested behavior of the commercial class, just as he saw a role, though small, for government in correcting for capitalism’s ruinous effects upon the laboring class. Similarly, the same philosopher who famously declared that “we do not appeal to the benevolence of the butcher and baker, but to their self-interest and advantage to gain the ends of society” could also write warmly of the older virtues of benevolence, altruism and compassion. Though Adam Smith was unwilling to bet the public good on the virtue of benevolence, as pre-modern thinkers did with less than satisfactory results, he nonetheless maintained that “to feel and to indulge our benevolent affections, constitutes the perfection of human nature.”

On every one of these points, which are integral to Smith’s understanding of capitalism, Ayn Rand loudly dissents. For her the public interest is nothing but a smokescreen used by socialists to cover their power grab. Only the most loathsome characters in Atlas Shrugged speak of the public interest or the general welfare. Yet Rand’s objection went deeper than this, to the very notion of the public interest, which for her simply did not exist. As she explained in one of her philosophic essays,


Since there is no such entity as ‘the public,’ since the public is merely a number of individuals, any claimed or implied conflict of ‘the public interest’ with private interest means that the interest of some men are to be sacrificed to the interests and wishes of others. Since the concept is so conveniently undefinable, its use rests only on any given gang’s ability to proclaim that ‘The public, c’est moi’—and to maintain the claim at the point of a gun.


In calling for a “full, pure, uncontrolled, unregulated laissez faire capitalism”, she not surprisingly saw almost no role for government, even advocating that taxes be voluntary. There was little or no room for corrective governmental action in the market or society more broadly. Rand was also at war with the virtue of benevolence, which she considered the root of nearly all evil in the world. In one of her essays, she calls it a “cancer”, and Atlas Shrugged is meant to dramatize how benevolence leads to utter ruin, both to society and the individuals who aspire to it.

Rand’s dissent from Adam Smith’s approach led her also to cast aspersions on the American constitutional system. Atlas Shrugged ends with the suggestion that in the new order of John Galt and the super-capitalists the U.S. Constitution be amended to include the clause, “Congress shall make no law abridging the freedom of production and trade.” She was similarly critical of the United States in her essays, calling for the need to complete the American revolution in government, a revolution she considered fatally flawed:

Ayn Rand [credit: ]


But this moral principle [that man has the right to exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself] was merely implied in the American political system: it was not stated explicitly, it was not identified, it was not formulated into a full, philosophical code of ethics. This was the unfulfilled task which remained as a deadly flaw in our culture and which is destroying America today. Capitalism is perishing for lack of a moral base and a full philosophical defense.


Adam Smith and the U.S. Constitution were in these important respects Rand’s nemesis, as much in need of defeat as Marx and Soviet communism. Rand inveighed heavily against socialist collectivism, to be sure, but she equally opposed liberal capitalism of the Smithian, traditional American variety, in its devotion to the public good, its carving out of a limited but still important role for government, its awareness of capitalism’s shortcomings and its lingering respect for such counter-capitalistic virtues as benevolence and compassion.

Likewise, though Rand claimed to be indebted to Aristotle, her philosophic approach, as dramatized in Atlas Shrugged, in fact rejected classical rationalism’s sense of natural limits. Rand was accordingly not a hero of the early conservative movement any more than of the New York Times. Her books were pilloried in the pages of William F. Buckley’s National Review, most famously by Whittaker Chambers. Such conservative critics were perhaps more troubled by her anti-Christian, neo-Nietzschean stance than by her rejection of Adam Smith, but these two aspects of her thought were not unrelated insofar as both religion and Smithian economics became supports of the emerging bourgeois order. And Rand clearly had no influence on neoconservatives who sought to return to a more Smithian approach to political economy. (Why Ayn Rand began to receive a more respectful hearing in the pages of National Review as the magazine and the movement “grew up” is an interesting question that cannot detain us here.)

In truth, Rand belongs less to any ideological persuasion than to America’s popular culture. Through her novels she contributed to creating an ethos that justified what critics and defenders alike came to describe in the last decades of the 20th century as America’s “cowboy capitalism.” It is the sort of capitalism that enshrines America’s Wall Street magnates as “masters of the universe” while loudly proclaiming that “greed is good”, that leads our business class to believe itself exempt from public responsibility, and that persuades some that since markets are good they will always regulate themselves. The ideology that facilitated this drift—Ayn Rand’s ideology—is arguably not capitalistic per se; rather, it is at bottom some species of hyper-individualism. As Rand herself wrote in 1971 in the Objectivist, “I am not primarily an advocate of capitalism, but of egoism . . . .”

It is impossible to say whether Smith’s liberal capitalism, with its sober expectations, its defense of the public interest, and its regard for such older virtues as benevolence, could have avoided the present economic hurricane. Perhaps not. What does seem likely is that such an approach to political economy would have weathered the storm better, or perhaps produced less windy weather in the first place.

Adam Wolfson is a visiting assistant professor in Claremont McKenna College’s Washington, DC Program and an adjunct fellow at the Hudson Institute. He served as an editor of The Public Interest from 1994 to 2005.