I attended a very interesting and thought provoking lecture at Brown University Wednesday evening (9/28/11) , featuring Dr. Yaron Brook, President of the Ayn Rand Institute. Dr. Brook, a free-market activist, provided a 30-40 minute lecture, entitled “Capitalism Without Guilt”, then took questions from the over 100 or so people in attendance, with a fair portion of them being students from Brown and other local colleges.
Here, based on my notes and personal paraphrasing, is a synopsis.
Initiating the discussion, Yaron Brook, rhetorically thanked President Obama for his plan to “fundamentally change America”. Obama’s resulting policies, he claims, have kicked off a vigorous national debate about the proper role of government, how to best create jobs, and what are free-markets and capitalism, in reality? He believes the debate will end up benefittng our country.
Brook talked about how our country is currently struggling with jobs and who creates them – the government or the private sector? He states that this issue was settled over 60 years ago; that “consumption” (as the liberals wants us to believe) is not the root of economic growth, but rather that it’s “production” and “investment”. Government stimulus programs, he says, are geared to stimulate consumption … and says this is the reason why they have never worked … anywhere, anytime for anyone. He cites the recent failed US stimulus programs that resulted in fewer jobs, and pointed to Japan, where the government re-distributed massive amounts of wealth, with the result being predictably disastrous for that once proud country.
Most stimulus created government jobs mean only in increased consumption. They are paid for by taking money away from potential investors where the money otherwise could be used to create production as well as privae sector jobs that would also result in consumption. The beaurocracy also bleeds off its share when redistributing money. Dr. Brook claims that 2-4 private may be lost for every 1 stimulus job.
Brook then spoke about the philosophy of “free” markets … that this means, barring force or fraud, that they are free to conduct business without excessive government regulation and that the matching of products and services with consumer demand is the best way to ensure a quality product at the lowest possible price, and to provide for steady economic activity and growth.
Excessive regulations and taxes, he claims, destroy free-markets and are the reason certain industry sectors can fail. He cited the 3 major sectors that collapsed in the US leading up to the 2009 recession – housing, banking, and automobiles. The common mantra was “See, capitalism failed, so government must step into to lend a helping hand”. WRONG says, Brook.
He asked: ‘What are the 3 most regulated industries and sectors in the US economy’? His answer: housing, banking, and automobiles. That it was because of over-regulation and government intervention that these industries failed. Fannie Mae (a government created, semi-private entity), he said, experienced the largest financial collapse of any entity in the history of the United States.
Each of these 3 industries, he stated, have their very own governmental Regulatory Agencies … proof positive that these sectors were not “free market” sectors; that it wasn’t the free-market (or capitalism) that failed, but rather government regulated markets that failed.
Government intervention interferes with normal market forces, by messing with the supply & demand mechanism, and more importantly, by removing the “risk” factor that is so important in regulating normal market activity. The risk of failure and loss of capital is a major incentive to behave prudently. With the current bailout/stimulus mentality, it is only natural that companies and industries would take on more risk than they normally would, knowing that the government will come to their rescue. This leads to economic bubbles, and then, economic collapse when these excessive risks begin to fail.
Brook then spoke about the creation of wealth as the primary measure of a successful economy. He asked us to think about the economic contrast of East vs West Berlin; or China (decades ago) vs Hong Kong … dramatic instances where capitalistic vs socialistic forces were at play, and the economic results were so dramatically opposite.
He then moved into the main theme of his lecture, the morality of capitalism. We have to overcome a psychological and emotional hurdle if we want to have a successful economy again.
GET OVER IT … BE SELFISH. He avers that markets exist for people to enhance their lives, meaning some people will make money – lots of it – and consumers will receive, in return, products and services that will make their lives better. He offers this as the definition of “selfishness” … a natural , self-preserving kind of attitude vs the evil connotation that we too often place on the term. That this is a human thing … a good thing. That in a true free-market, mutual selfishness and mutual profit transaction we choose to make. Even that “naked selfishness” is in everyone’s best self-interests.
Dr. Brook then stated what I felt was the crux of his provocative lecture: that our evolved and perverse sense of morality is what is destroying the American free-enterprise system. That in being politically correct, that people are viewed in positive way only when they put others first, instead of prioritizing their own rational self-interests. That philanthropists, for example, hold a much higher esteem in today’s society, than the wealthy. That the only way the wealthy, like Bill Gates for example, can obtain a positive public image is by giving away their money … not for risking their own capital, conceiving and producing a product that consumers demand, hiring lots of people, and yes, making a ton of money. That Bill Gates was initially derided publicly for being a successful businessman (the scorned capitalist), but is now more loved and accepted because of his Foundation (the beloved philanthropist). That if he gave up ALL of his fortune, and lived in a hut, we might even consider him a saint.
This standard of judgment, Brook says, is far too high a bar if we want free-markets to work effectively. That we must accept being “rationally selfish” and encourage risk and success for the greater public benefit.
What about Bernie Madoff? Wasn’t that selfishness? NO, says Brook. How could it possibly be in his long-term self interest to rip off his family, his friends, and many others, knowing all along that he would be caught someday? Brook referred to Madoff’s Ponzi-scheme as more of a delusional kind of near-term emotionally driven action vs a well thought-out plan to pursue self-happiness. It is this latter kind of selfishness that Brook promotes.
That pursuit of one’s own self-interests, or happiness, via mutually beneficial transactions, is a positive and necessary economic stimulus on its own. Conversely, what many believe as selfishness “at the expense” of others … is a very different thing.
He then asked us to consider the uniqueness and individuality of every single person. In what environment would a person with some wealth best be able to invest and prosper even more? In what environment could underprivileged people best find a way to climb out of the morass and pursue whatever might make them happy? A government controlled environment, where everyone is considered homogenous, and incentivized against acting on their own best judgment; or a free environment where people can determine their own futures based on their own unique dreams and capabilities?
Free-markets, Brook strongly contends, are the only way for each person to achieve their highest level of self-interest, or happiness. Happiness is not purely materialistic; it’s whatever rationally chosen goal we want it to be.
That this pursuit of self-interest is NOT immoral. That “sacrifice” is not the only way to be moral, as our society now seems to believe.
That our nation’s founding fathers wrote about pursuit of individual happiness: They did not write about sacrifice or being responsible to others; that charity is an individual choice, and that it should not be the role of our government to legislate economic equality, or even to have a position on whether or not that is a good thing.
That sacrifice, can actually be a bad thing, especially when government mandates it, by taking wealth or property from one person and giving it to another.
What is sacrifice, he asks? The act of sacrifice is giving something (time or money, for example) and getting something less in return; a win-lose scenario.
Alternatively, free-markets encourage win-win scenarios. People trade for something that has equal or greater value than what they give up. When we buy a car for $20,000, we get a car we believe has more than that much value. The car-dealer gives up a product that cost him less than that much to sell. Both sides win.
Why would our society value win-lose propositions over win-win propositions?
At this point, Dr. Brook ended his lecture and accepted questions from the crowd. Most of the questions, especially from the student attendees, challenged many of Brook’s premises with the expected angles: Why are the top-7 rated cities in terms of standard of living based in what Brook would call ‘socialist’ Europe, not the US? Didn’t the founding fathers allow slavery? Isn’t sacrifice a good thing, for instance, for our children? Didn’t the founders talk about equality for all? What about individual property rights, shouldn’t there be more of collective, common ownership? Doesn’t industry and pollution infringe on another person’s property and rights? What about the Christian values of loving your neighbor as yourself … vs Dr. Brooks’ selfishness philosophy? What about welfare, don’t we have an obligation to help the disadvantaged?
While Brook struggled for responses to only one or two very pointed questions, he provided fascinating responses to most of these queries.
Europe, he said, is a dying region. That what the economic crisis there now will only get worse as more and more of the unsustainable promises that have been made to too many workers and retirees grows in the coming years. While he questioned the standards by which those cities were rated, he also admitted that America, in his view, is no longer a true free-market economy, and that our cities and national standard of living is slowly being destroyed by the big government, anti capitalistic economy. He does not understand why many look at Europe with such admiration. It’s the past, he says, full of rich history – yes, but a doomed society. Asian economies (even China to some extent) are the future, where certain capitalistic principles have been embraced and where wealth is growing in enormous strides. America must choose which way to go.
Regarding slavery, he stated that it was the way of the world 250 years ago. That America was not alone, that the slave trade thrived in Africa, that Europe had serfs, etc
He argued THAT IS WAS INDEED THE VERY PRINCIPLES OF ‘FREEDOM’ IN OUR OWN U.S. FOUNDING DOCUMENTS THAT INVITABLY LED TO THE ABOLITION OF SLAVERY IN AMERICA! That our founders were not always perfect in practice, but they were much more so in theory.
Regarding sacrifice, Brook, said that he doesn’t sacrifice for his children. That staying home with his kids, instead of going out with his friends, is not a sacrifice, but rather, a free-market choice that enhances both him and his kids by spending time together, worth more to him (and to them) than spending time apart. Providing money or material goods to his kids is not considered a sacrifice either, any more than buying a car is a sacrifice. Why would we call something a sacrifice if we invest in our kids (with their well-being as what we receive in return), yet not consider investing in a car a sacrifice?
On the constitutional question of equality, Dr. Brook states that equality was intended only in terms of the law. That in the eyes of the law, unlike in Europe, from whence our forefathers fled, that everyone would be treated equally. That it wouldn’t matter what your race, creed, gender, status, or wealth was … that the law would treat everyone the same. This has nothing to do with equal outcomes among citizens.
Protecting individual property rights, he said is a critical component of a free-economy. That via a just court-system, that disputes and infringements of rights would be settled in a natural and moral kind of way. That contingency legal fees were created so that the poor could also have a way to bring suit if they were wronged. That the proper role of government is not to create massive amounts of new regulations in an attempt to restrict property rights so as to not potentially harm someone else or some fuzzy common good, but rather to protect property rights, and institute only those few common-sense laws that serve this purpose.
Regarding pollution of common items such as water or air, Brook gave perhaps his most provocative response: that POLLUTION SHOULD BE CELEBRATED! Pollution is a by-product of industrial progress, that it is a necessary cost to moving a society forward. He posed this scenario: think of London in the 1800’s and the huge particles of ash that most citizens inhaled from coal-powered factories. That if we applied today’s conventional solutions to that problem, we would have shut down those factories … and the INDUSTRIAL REVOLUTION WOULD NEVER HAVE OCCURRED! All of the advances in transportation and construction would never have happened.
Pollution, once industry advances and becomes wealthy enough and technologically capable of dealing with it, can be solved. Then, the next technological innovation produces a new pollution concern, which should be tolerated for a while before being solved … repeating this cycle which goes on and on. This is merely progress. And, society only improves with each cycle. He asked us, with all of our talk of pollution ruining our planet and our lives, to think about life expectancy progress: In the 1800’s, humans were expected to live not much past their forties-fifties. In the 1900’s it was sixties-seventies. Now it is seventies-eighties.
Continuing with the pollution issue, he said, people decide where to live and work, and that it’s their personal choice whether or not to put up with pollution, traffic, or any other problem in any given area. Look how many millions choose to live in LA, despite these issues. He talked about Simi Valley, right outside of LA. Before the hi-tech industry, it was nothing, just land. But because of the great job opportunities created, thousands migrated there from all over the country, putting up with LA smog and traffic, because overall, it offered them a better chance at life than where they came from. The free-market at work.
Finishing up the pollution issue, Brook asked us to think about Cambodia, for example, a country he had visited in recent years. Most of their citizens live in abject poverty, in huts in swamp areas. Brook proclaimed that the only way that Cambodia could raise itself into prosperity would be to bring on industry, and yes, the pollution that goes with it. That pollution in this case should be welcomed, if not celebrated … as a necessary transitional phase and as a sign of progress!
He dismissed the so-asked premise of Christian love for thy neighbor as thyself. He said this is unrealistic, that everyone loves themselves and their own families more than thy neighbor, and that it is nothing more than religions trying to impose “guilt” on people, as a way to have them conform with the impossible goal of ‘equal outcomes’ for everyone. He said none of us should feel guilt for loving ourselves more than our neighbors; that this kind of selfishness is natural and healthy for humans and for our economic well-being. I would personally add, that individuals freely choosing to help their neighbors, is a noble thing … but that government forcing people to help others is nothing short of tyranny.
The final session I participated in, dealt with welfare – a kind of an extension of the love thy neighbor theme. It was discussed that the way taxes and subsidies work in the real world is not a matter of debate. Laws of economics dictate that when we tax something, we get less of it (the premise behind taxing cigarettes, because society believes it is a bad thing to smoke, so therefore we should craft tax policies that discourage the activity). Conversely, when we subsidize something, we get more of it, like tax-deductions for buying a home (a good thing, society says). So, if this is the case, why do we tax work and investments when it means we will get less of each? … while at the same time we subsidize unemployment and idleness, which means we will get more of each of those?
Dr. Brook went on to claim that the biggest victims of the big government, forced responsibility for thy neighbor mentality, are the very people that the policies portend to serve. Only true freedom – to pursue their own dreams – can allow them to prosper. Welfare and other entitlement type programs condemn them to dependence and low expectations; in a way, institutionalizing them. This is not the America our founders envisioned.
In fact, Brook claims, it is IMMORAL to consider the poor as a homogeneous lot that is incapable of raising itself out of whatever morass they may be in. IT IS INSULTING! He went on to say that all people, including the underprivileged, will be more content when they achieve something based on their own merit and work …that selfishness and the resulting self-esteem is the true measure of happiness … and the only way to achieve prosperity!
This was a fascinating 90-minute program, which continued after I had to leave. A few of the students were appalled at some of Dr. Brook’s assertions, while many of the adults were part of the choir. No matter your views, the issues discussed are indeed at the core of the critical debate now underway throughout our nation.
I encourage every single American to take the time and effort to think through these issues, with the goal of arriving at some economic/political philosophy that rings true to you, whether or not you agree with Mr. Brook. Then remain vigilant, stay involved, speak out, support whatever cause you believe in, and adjust your views, as necessary.
“The price of freedom is eternal vigilance” … Thomas Jefferson
Citizens vigilance is the only way our uniquely American form of government can best protect the freedoms of our citizens and allow us to pursue our own idea of happiness and to achieve prosperity.
Mike Stenhouse is the CEO for the Rhode Island Center for Freedom, the leading free-enterprise think-tank in Rhode Island.