Ayn Rand: Capitalism, The Unknown Ideal (Part II)

Capitalist system

Read Part I here.

The role of the government

Rand's most passionate views center around the role of the government in society. She contends that the primary purpose of government is to protect individuals' rights from physical force. The police are supposed to protect individuals from criminals, the armed services protect against foreign invaders, and the courts settle disputes according to objective laws. Rand reminds us that "the Constitution was written to protect man from the government." Without it, the government could be the most dangerous threat to individual rights. "The government is not the ruler, but the servant or agent of the citizens."

Rand illustrates the public's confusion about the government's role in the economy. She postulates that many people are influenced by Marxism and believe that it is the government's role to control the economy. "Government control of the economy… has been the source of all the evils in our industrial history," says Rand. She calls for the elimination of all forms of government intervention. In a free economy, she claims, the government does not regulate, control, coerce, or interfere with economic activities. Only a free and competitive economy can produce constant improvement, progress, and innovation.

While many look to the government for help during the time of depression and unemployment, Rand argues that the government is usually the cause of the economic downturn. By interfering with the free market, either by manipulating the money supply, regulating the minimum wage, or other policies, the government disturbs the market's self-controlling equilibrium. If left alone, the law of supply and demand would prevent severe depressions and mass unemployment.

Mixed economy

Although some see socialism as the opposite of capitalism, Rand chooses a broader, more generic term "statism" as the opposite of capitalism. Statism, according to Rand, is a principle that an individual's life belongs to the state. More precisely, she defines statism as "the principle or policy of concentrating expensive economic, political, and related controls in the state at the cost of individual liberty." In polarized terms of today, capitalism resembles "right," and statism – "left."

As much as Rand advocates for pure capitalism, she acknowledges that in practice, what the United States had been experiencing is a mixed economy, "i.e., a mixture of capitalism and statism, of freedom and controls," or a semi-socialized economy. She shows some agreement with Joseph Schumpeter when postulating that a mixed economy leads to disintegration.

Rand also expresses concern in the public's perception of socialism. Socialism is "a theory or system of social organization which advocates the vesting of the ownership and control of the means of production, capital, land, etc. in the community as a whole." She cites a survey that found that millions of people had a benevolent view of socialism, a system favoring the welfare of regular people. The survey participants did not think of socialism as an ideology of government ownership or considered socialism's connection to communism.

In the United States, few people understand, advocate, or defend capitalism, but even fewer are willing to give up its advantages. Similarly, in many foreign countries, capitalism is not viewed as a safeguard of the individuals' rights. Instead, many foreigners associate capitalism with the unfair distribution of wealth and the unjustifiable influence of the rich.

Part III to follow…

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