Neoliberalism is a school of economic thought which advocates for, among other things, government deregulation—the removal of most, if not all, regulations and oversight imposed on corporations (neoliberalism, by the way, has nothing to do with the term “liberal” in the sense we commonly understand it). In order for neoliberal economies (like Rand’s Objectivism, The Austrian School, and Libertarian) to work, they require two closely related things. The first is that people must be genuinely responsible for their own actions—subject to the negative consequences of their behavior. The second is that transactions must be in good faith, the product of a mutual and informed agreement in which those making the agreement do not lie, cheat, steal, or deliberately dupe others.
Rand believed in both those principles unreservedly, though she came to the second one by a somewhat circuitous route. She believed that, in life, you are beholden only to yourself. She argued that taking advantage of other people was in fact an abdication of your own reality (forcing you to behave in a way that wasn’t “real”), an abdication which always led to a greater loss than gain. This meant that taking advantage of other people was one of the few things she found morally reprehensible, not for the victim’s sake, but because of the harm this did to yourself.
I have to stop a moment and lament the tragedy that a woman whose work of ethics was so undeniably strong and moral could have been so utterly vilified and misunderstood. More remarkable still, however, is the breathtaking naiveté it requires to think that one could build an economic system on those ethics.
Now, for the most part, I agree with what she wrote—taking advantage of other people has a lot of draw backs, and frankly not the least of them (for me) is that, whether or not I’ll get caught, I simply don’t like myself when I do it. I even find white lies discordant, like nails on a chalkboard. So I try to live these ethics. I think Rand did too; many people do.
But the population as a whole?
The truth is that it doesn’t even matter whether these ethical beliefs are true or not. What matters is: can you get the vast majority of people (especially those with wealth and power) to believe in—to truly live by—that ethical system?
The overwhelming evidence says “no.”
Indeed, if money and power can buy anything, it’s the ability to avoid the consequences of your actions, and to unfairly leverage that power (crony capitalism) into more power. There’s never been a shortage of people lining up to do just that, and the more power one has, the more one seems to believe one is justified—even privileged—in the execution of that power, exempt from the rule of both ethics and law.
Big Tobacco fully studied the addictive and hazardous nature of cigarettes long before the public was aware of it, even added toxins to boost the addictive properties of products they advertised as healthy. But their business connections, deep pockets, and army of lawyers insulated them against suffering the consequences of their actions (and while they eventually paid legal settlements of more than $256 billion, that’s far less than the profit they had made, and continue to make).
But that’s just the tip of the iceberg.
In 2008 the entire US economy nearly collapsed when a number of very powerful companies began gambling with other people’s money: creating bad products, paying off ratings agencies to certify those products, insuring them against losses they knew would be incurred, and then—just to squeeze a touch more money out of the fiasco—betting against their own products (and the clients they sold them to) in the market.
Innumerable laws had been broken, but the banks weren’t broken up nor their CEO’s fined or gone to jail. Instead they’ve been given even more power. This is because to survive they rely, not on the quality of the products they sell, but on the quality of lobbyists and politicians they can buy.
All of this violates every major tenet of Ayn Rand’ Objectivist ethics—it’s a complete reversal of her position. But since admitting that would be proof that rational self-interest alone does not protect the larger economy (a fact ceded Former Federal Reserve Chairman and Rand protégé Allen Greenspan) champions of laisse-faire libertarianism instead contort themselves into new, post-hoc defenses for why this is acceptable. If a CEO destroys his company’s long term sustainability for short term gains that goose stocks, then bails out with a golden parachute, his success must be proof, a priori, that he’s done nothing wrong—in fact, good for him; it’s the stock holders who are to blame for not being nearly as clever as he. The alternative is to acknowledge a massive failure of the Randian model, where people are actually being rewarded for abandoning her ethical system, not for following it.
This is not theoretical. This is how it works in practice, right now. Like a mob, diffusion of guilt allows a corporation collectively to commit atrocities which may be unthinkable by most, if not all, of the individual members of that company (and while individuals may use rational self-interest, the rational self-interest of a corporation take a backseat to the self-interest of those who run it).
We have car companies refusing to do recalls because the cost of litigation is less than the cost of repairs; companies putting lead and cadmium in children’s toys; banks violating international sanctions; oil companies like Chevron, Exxon, and Shell funding murderous military dictatorships in Nigeria and Chad; companies like Apple, Google, Lucasfilm, Dell, IBM, Microsoft, Comcast and a dozen more, secretly colluding to fix wages by pre-selecting and distributing employees instead of competing for them in the open market; Halliburton and Johnson & Johnson bribing Nigerian, Greek, and Polish officials; a dozen international banks conspiring to rig interest rates (the LIBOR rate)…
That’s just the last 5 years. And while a few of these companies have suffered paltry fines, in most cases no individuals have been held accountable in any way.
The solution, neoliberals explain, is more deregulation.
We can watch the quintessential expression of the neoliberal problem happening right now. Bitcoin is an online, distributed, peer-to-peer currency. It’s beloved by neoliberals because there’s no central bank, it’s virtually untraceable, inflation proof, and is completely unregulated. You create coins using a computer process called “mining,” which gets harder as more coins are made. When it became too hard for an individual to successfully mine coins, the market innovated: people began working together and created “pools” which shared their computing power. Competition between pools gave miners a wide variety of options, rates, and pools to choose from. But, following the law of diminishing returns, the process became even harder, so hard, in fact, that even several thousand new miners, or millions of dollars in new hardware, no longer gave pools much of an edge over their competition. However, since they’re all competing for the same coins, pools realized that by barraging the competition with Denial of Service attacks, hacking them to slow or altogether stop their mining, you could significantly improve your own success rate. There’s no malice in it; it’s simply that the equilibrium cost reached a point where it was much more efficient for pools to attack their competitors than to improve themselves or their product.
This happens in every business. No matter how much you deregulate (thereby increasing business efficiency), there’s always a point where it becomes more efficient to attack and sabotage those who stand in your way—rival companies, politicians, legislation, or simple bystanders, than improve your own product. Eventually, the most efficient policy becomes one of scorched earth—the victor is the one willing to risk the most, even mutual obliteration, to win. This is where Objectivists must abandon any pretense to an “Objective” understanding of reality. Economic agents attacking and subverting each other, and the money spent in defense against such attacks, is a huge drag on those businesses and the economy as a whole, and endanger people unassociated with the transaction in any way. But in a laissez-faire model, it’s considered peak efficiency! It’s an ontological trick: free markets are the most efficient markets because, well, neoliberals have defined them that way; inefficiency or waste counts only if it comes from the government.
Time and time again, when we deregulate, when we give free markets a chance to speak, they reply loud and oft that this is how they operate. This isn’t the ideal or the theory, this is simply what they’ve always done. Every time.
This kind of destruction was not what Rand wanted. It’s anathema to her philosophy. It’s the Hobbesian state of nature, a war of all against all, and it’s the natural state of an unregulated market. That, un-checked and un-regulated, corporations would, without malice aforethought, burn down the world just to make a buck (very nearly did, and are looking to do it again) is as close to an “objective” reality as you’re likely to get.
And really, could it be any other way? If we could be what Ayn Rand wanted us to be, hold ourselves to her ideal, and never lie, cheat, steal, or take advantage of other people—if that really was who we were—then yes, her system would work. It would work perfectly, just as she said it would.
Then again, so would socialism.
A rising tide lifts all boats, and a strong, vibrant economy is best for everyone. Capitalism has, thus far, proven the best tool for doing that. But the free market is by no means perfect, infallible, or even nearly as efficient as people claim, nor is it a broadsword to thrash at every social ill we face. Just as we expect and demand checks and balances in our government, so too must we do the work of checking and regulating our corporations against their voracious tendency towards profit at any cost, and check, too, our tendency to simply throw new regulation at every problem we see.
In a true capitalist system, it is not now, nor will it ever be, the primary domain or function of a publicly held corporation to ask if there’s anything more important than money. It’s simply not their job. It’s the job of the people, and their government.