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free market revolution

Copyright ©, Ayn Rand Institute, 2012.
All rights reserved.

First published in 2012 by PALGRAVE MACMILLAN® in the United States—a

division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010.

Where this book is distributed in the UK, Europe and the rest of the world, this is
by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in
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ISBN: 978-0-230-34169-2

Library of Congress Cataloging-in-Publication Data

Brook, Yaron.
  Free market revolution : how Ayn Rand’s ideas can end big government / by
Yaron Brook and Don Watkins.
  p. cm.
  Includes index.
  ISBN 978-0-230-34169-2
  1. Free enterprise. 2. Capitalism. 3. Self-interest. 4. Rand, Ayn. I. Watkins, Don,
1982– II. Title.
HB95.B76 2012
330.12’2—dc23
2012002899

A catalogue record of the book is available from the British Library.

Design by Letra Libre Inc.

First edition: September 2012

10 9 8 7 6 5 4 3 2 1

Printed in the United States of America.

Note: Some material from chapter 1 has appeared in a somewhat different form
in the journal The Objective Standard. Material from chapters 7, 9, and 12 has
appeared in a somewhat different form in the authors’ Forbes.com column, The
Objectivist.
 Contents

Acknowledgments xi
Introduction 1

Part I
The Problem

1 The Incredible Unshrinking Government 7

The Wealth of Free Nations, 9
Why the Last Swing to the Right Failed, 12
Conclusion: The Situation Today, 16

2 Why Government Grows 19

The Least Controversial Idea, 21
The Argument from Greed and the Argument
from Need, 26
Conclusion: A Moral Crisis, 35

3 With Friends Like These . . . 39

Free Marketers versus the Market, 40
The Right’s Crusade for Big Government, 44
Conclusion: In Search of a Defense of “More,” 46
 4 The 2008 Housing Meltdown:
A Crisis That Government Built 47
The Federal Reserve Spikes the Punch, 49
Housing Policy Made Things Worse, 50
Financial Regulation Made Things a Disaster, 52
The Unlearned Lessons, 56
Conclusion: Freeing the Unfree Market, 58

Part II
The Solution

5 Rethinking Selfishness 63
The Prisoner and the Producer, 64
A Package Deal, 67
Conclusion: Unpacking the Package Deal, 68
6 The Morality of Success 69
It’s Hard to Be Selfish, 70
Principle 1: Rationality, 72
Principle 2: Productiveness, 75
Principle 3: Trade, 77
A New Concept of Selfishness, 79
The Evil of Self-Sacrifice, 81
Conclusion: The Only Way to Be Selfish, 85
7 The Business of Business 87
The Businessman: Parasite or Producer? 89
A Fellowship of Traders, 95
Conclusion: The Great Liberator, 99
8 The Nobility of the Profit Motive 101
What It Shall Profit a Man, 102
Profitable Principles, 104
The Altruistic Attack on Business Success, 113
Conclusion: The “Public Good” Be Damned, 116
 9 Selfishness Unleashed 119
A Society of Producers, 121
Protecting the Profit Motive, 124
Laissez-Faire, 133
Conclusion: Markets Are Moral, 135

10 The Dynamism of the Market 137

The Division of Labor, 138
Prices, 142
Competition, 146
Innovation, 150
Government Intervention, 153
Conclusion: The Profit System, 159

11 The Regulatory State and Its Victims 161

Protecting the Consumer, 162
Protecting the Worker, 169
Punishing the Producer, 172
Conclusion: Answering the Argument from
Greed, 175

12 The Immoral Entitlement State 177

Before the Entitlement State, 179
Born of Ideology, 181
The Entitlement State’s War on the Rational
and Productive, 185
From Entitlement Morality to Entitlement Mentality, 188
Conclusion: Answering the Argument from Need, 190

13 You Are Not Your Brother’s Health Care

Provider 193
The Cause: How Government Made Health Care
Inefficient and Expensive, 194
The Cure: Toward a Free Market in Health Care, 202
Conclusion: Freeing the Unfree Health Care Market, 206
 14 Stopping the Growth of the State 209
Why Only Rational Selfishness Will Do, 209
The Basic Contradiction, 214
Ayn Rand and the Free Market Revolution, 216

Notes 223
Index 247
About the Authors 253
 Introduction

I n 2007, Ayn Rand’s novel Atlas Shrugged sold 185,000

copies, an all-time record for the book. Fifty years after it was first pub-
lished, readers were still captivated by Atlas’s unforgettable characters, its
gripping plot, and its challenging ideas. We at the Ayn Rand Institute were
elated but not entirely surprised. Thanks in part to our efforts, sales of
Atlas Shrugged have been growing since Rand’s death in 1982. But even we
did not expect what came next.
In late 2008, as the economy experienced a devastating financial cri-
sis followed by an avalanche of government intervention, sales of Atlas
Shrugged skyrocketed. By the end of the year, it would sell more than
200,000 copies. In 2009, that number would reach half a million. In a world
where 98 percent of new books sell fewer than 1,000 copies and the typical
best seller doesn’t break 100,000, Atlas Shrugged was a phenomenon.
And it wasn’t just book sales. Referring to Atlas, bloggers debated
whether it was time to “Go Galt.” Tea Party activists carried signs declar-
ing “Ayn Rand Was Right.” Pundits, TV hosts, talk radio personalities, and
even politicians were praising Rand and recommending her books. Ayn
Rand was everywhere.
Why were people turning en masse to an author who had been dead
for more than a quarter century? On one level it was the striking paral-
lels between Atlas Shrugged and present-day America. Atlas describes a
world hit by economic ruin, a world where every problem is blamed on
“greedy” businessmen, and where the “solution” is invariably to cede more
power to the state. After eight years of Bush and eight minutes of Obama,
it sounded all too familiar.
2 Free Market Revolution

The deeper reason, however, was that Americans were looking for an-
swers. What had gone wrong? Was it too much greed or perhaps too much
government? Had the state grown too big? How could it be limited to its
proper purpose? What is the proper purpose of government? What should
be my purpose as an individual? Is it right to pursue wealth, success, and
happiness—or is that selfish and immoral? Can I even trust my own mind
in such complex issues, or should I listen to some authority, such as my
teacher, my minister, Glenn Beck, or Jon Stewart?
Rand provides challenging new answers to just these questions. Her
answers defy convention, but that is part of their appeal. It was a con-
ventional path, after all, that led to economic meltdown and an ever-ex-
panding government. A growing number of Americans were ready to hear
Rand’s message: that many of our standard views about morality, politics,
economics, and life are corrupt and need to be thrown out. (Some people
mistakenly believed that Rand’s ideas were mainstream and in fact helped
shape the economic policies that created the financial crisis. As we show in
chapter 4, this wasn’t even close to true.)
Rand, however, is not primarily a critic. She does not simply censure
the mainstream—she defines and fights for a revolutionary ideal to re-
place it: a new philosophy of individualism. “My philosophy, in essence, is
the concept of man as a heroic being, with his own happiness as the moral
purpose of his life, with productive achievement as his noblest activity,
and reason as his only absolute.”1
This book is written from the perspective of Ayn Rand’s philosophy,
and all of the philosophic ideas in it are hers. (This is true even in the
many cases where we don’t reference her directly.) But the focus of the
book is not Rand’s philosophy as a whole but one element of it: her moral
defense of free markets. We aim to show how the ideas of Atlas Shrugged
help explain today’s political and economic world and provide the intel-
lectual ammunition to take down Big Government.
“Big Government,” by the way, is not our favorite term. The problem
with government today is not its size per se but its role in the economy
and in our lives. The problem is what government does: Instead of per-
forming the delimited function the Founders assigned it—protecting in-
dividual rights—the government intervenes in our lives in countless ways,
restricting our freedom, redistributing our wealth, and erecting barriers
to our pursuit of happiness. Yes, it is too big, but it’s too big because it is
 Introduction 3
no longer limited by the principles of the Declaration of Independence.
If it was up to us, we would label the threat “Statist Government.” But
“Big Government,” as inexact as it is, does suggest the essential idea: The
Founders’ vision of limited government has been replaced by an unlimited
government, and something has to be done to restore those limits.
This book is written in the conviction that those limits cannot be re-
stored until Americans understand and reject the ideas that cause govern-
ment to grow. Although many of us claim to want smaller government,
we keep electing politicians who openly tell us that they intend to make
government bigger. We don’t like the idea of Big Government, but many of
us do like the individual handouts, subsidies, regulations, and government
favors that it entails. We think these are necessary, good, and noble. When
a politician does try to cut government, popular support for his efforts
almost always erodes in the face of charges that he is cruel, hardhearted,
mean-spirited.
To change the trajectory of the country, we have to change the way we
look at free markets. This is what we call the Free Market Revolution. It is
a revolution in the way people think about markets and about the central
activity that takes place on them: the self-interested pursuit of profit. It
is the moral attack on self-interest and the profit motive that has led us
farther and farther away from the profit system, and only a moral defense
of self-interest and the profit motive can save us.
We are not the first to observe that behind the growth of the state
lies a moral attack on the free market. A number of recent works have
tried to argue that capitalism is a moral system, but for reasons very dif-
ferent from ours.2 Free markets, they say, need not celebrate self-interest.
Self-interest can be tolerated without being glorified. Capitalism—so long
as it is tempered by appropriate levels of regulation and wealth redistri-
bution—is good despite being fueled by man’s “lower motives”; good,
because it raises up the poor, because it promotes hard work and other
“bourgeois” virtues; good because, despite its flaws, the alternatives are
worse. As economist Deirdre McCloskey puts it in The Bourgeois Virtues, a
work touted as a powerful moral defense of capitalism, “markets and the
bourgeois life are not always bad for the human spirit.”3
If the best that capitalism’s defenders can muster is that vice some-
times, somehow, leads to good, that capitalism is “not always bad for the
human spirit,” that a free market is to be embraced because it is less awful
4 Free Market Revolution

than a socialist dictatorship, is it any wonder that government’s power

over the market has been growing, decade after decade?
If we are going to succeed in ending Big Government, we have to rec-
ognize that a halfhearted defense of free markets is worse than no defense
at all. We have to recognize that capitalism—full, unregulated, uncon-
trolled, laissez-faire capitalism—is not simply “less bad” than any alterna-
tive: It is the only moral economic system in history. And, further, that it
is moral not because it helps the poor or teaches us to be good citizens
but because it enables the individual to make the most of his own life—to
exercise his mind, take risks, make money, pursue and achieve his own
happiness.
This is the Free Market Revolution: It is the idea that economic free-
dom can flourish only in an America that celebrates selfishness—the indi-
vidual’s pursuit of his rational, long-term self-interest—as a virtue.
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Free Market Revolution

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