Objectivism: Capitalism

So, continuing on from my discussions of Objectivism started here, here I’d like to talk about how Rand comes to decide that capitalism is, in fact, the best economic system and the one we must follow. A common misconception about Rand — although some of the scenes in “Atlas Shrugged”, if read shallowly, support this — is that for Rand money itself is some kind of ultimate ideal or ultimate goal, and that money is worth having for the sake of having money. This misconception, I think, follows from the numerous times were Rand talks about money in very reverent terms, almost as if it was an object of worship, but also — and probably more strongly — from the idea that strong capitalists do in fact care about money for its own sake. This confusion is only deepened by the fact that Rand doesn’t think of money as either an end it itself or merely as a means to other ends. Instead, she reveres what money represents, and what that represents is something crucial to her underlying philosophy.

As I noted last time, for Rand everything boils down to self-interest. We, as individuals, can have no other ethical obligations than to our own self-interest. And we, as individuals, have needs; definitely basic survival needs but also, as conscious beings, other needs. And we need to be able to achieve those needs if we are going to have any kind of meaningful and appropriate life. But how can we go about achieving those needs? Rand starts from the idea, that follows from Egoism, that no one is required to provide our needs for us simply because we have those needs. If we can’t rely on people to just give us what we need because we need it, then we have to go out and get what we need somehow. And then it becomes clear that the only way we can achieve our needs is to work for it, to use our physical and mental labour to in some way “produce” the things we need. If we can live all on our own and can provide for our own needs completely on our own, this becomes simple … but we can’t provide all of our needs ourselves, and so need other people, at least at times, to help us get what we need. And this help must be purchased through our labour, and in a sense we trade the fruits of our labour for the fruits of their labour.

But of course this immediately raises a question: how do we determine what our labour is worth? Obviously, we all want to maximize the return we get from our labour, and so get as much for our labour as we reasonably can. But since this applies to everyone else as well, we need a way to determine how much is reasonable in a way that respects everyone’s desire to maximize what they get for their labour. This isn’t out of any kind of overarching principle of “fairness”, but simply a recognition that if someone isn’t getting full value for their labour and discovers that, they are likely to stop trading with us and seek out other options that maximize their return on their labour investment. So if I really do need what they can provide, and I don’t want them to do that, I definitely want to ensure that they are paid fairly for their labour, just as I want to make sure that I am paid fairly for my labour.

But we have to return to the question: how do we know what our labour is worth? We need some kind of objective system so that we can determine what the market value of our labour is so that we know what to focus on if we want to get what we need. If we can just trade directly — I need some milk, you have a cow that you milk, you need some turnips, I grow turnips — then this is easier, as we can negotiate between the two of us, but if there are more stages involved things get complicated. Additionally, even there we need some standard to appeal to in our negotiations. And if you start from that simple model, you’ll start to see what standard we end up applying, which is the standard of how much we need each others’ services, which ends up being the standard of supply and demand.

If you have the only cow that can provide milk, and lots of people can provide turnips, then your milk is more valuable to me, specifically, than my turnips are to you. Given that, I’ll have to make you a better deal on my turnips than you have to on your milk in order for you to agree to the trade. However, if I know that there are a lot of turnips around, I might decide to grow potatoes instead and thus provide a protect that fewer people are providing. If that’s the case, then I might have something that you need more than I need your milk, or at least as much as, and so then I don’t have to provide as good a deal. Also, it might be the case that I need your milk, but you don’t care for turnips and so don’t need them. Thus, I won’t be able to trade my turnips to you at any reasonable price. But if there’s someone who needs turnips and has lots of potatoes, I might be able to trade my turnips to him for some potatoes, which I can then trade to you for some milk.

So the idea is that you end up trading things you need but have lots of for other things you need but don’t have enough of. And since all of the things you produce are things that you produce with your labour, you always want to get the best possible return on that labour. So if you have lots of something, you won’t simply hoard it — or, at least, not most of the time — because you need to use those products of your labour to get what you want. You would only hoard it to drive up the price if the exchange is so low that you take a “labour loss” on the deal; you work too hard on it to trade it for that price. Otherwise, even a low price still gets you the ability to get things that you need in exchange for things that you don’t need at the moment, and so the products of your labour still work for you, to your benefit.

Now, we can immediately see how this fits into the common path of the development of currency. Once I start dealing with lots of other people, it starts to become inconvenient for me to have to trade my turnips for potatoes, and then the potatoes for milk, and then the milk for bread, and so on and so forth. It’d just be so much easier here if I could just trade my turnips to the first person and get something that I could just take directly to the person with the bread and then let them take that to the person with the milk if they want milk. And that thing is commonly called “money”.

But for Rand, the use of money doesn’t stop there, because we have to trace all the way back up the chain to see what money represents here: not some abstract value or promissory note, but instead it represents my labour. Under this system, if I have a lot of money it doesn’t (just) mean that I have a lot of purchasing power and so can achieve a lot of my needs (or even desires). No, it also means that my work is, in fact, particularly valuable. I produce a lot of things that a lot of people really want or need, and so they are willing to pay me a lot to provide it. Note that this doesn’t make it “valuable” in the sense that we argue that a doctor’s services are, say, more valuable than Britney Spears’ (even as she makes so much more money). Everyone will agree that I generally need doctor — when I need one — far more than I need to listen to Britney Spears. But this is reflected in how whenever I go to the doctor I, generally, am willing to pay them far more than I’m willing to pay to listen to or watch Britney Spears. However, the nature of Britney Spears’ work is that she can provide that service efficiently, in that she provides relatively cheap services to thousands of people a day, which a doctor simply couldn’t. Thus, Britney Spears is full value for the money she has, because she simply provides services for more people than the doctor does. That doesn’t that we don’t value the doctor’s services more than hers, because at the individual level we clearly do. It’s only in the aggregate where Spears wins.

Thus, the constant wondering about why Rand’s producers don’t just gouge people and try to make as much money as they can has a simple answer: in doing so, they’d devalue their own labour. Remember, money only represents the value of our labour. If we allow it to be the case that people can make more money without in some way having their labour be more valuable, we devalue the system, but that system is the very system that we use to determine what our labour is worth, and we need to know what our labour is worth in order to be able to properly pursue our needs. If we undermine that system, we undermine the very thing that we need to ensure our survival, either basic survival or our survival as conscious beings. Additionally, if we try to extract more money from the system than our labour is worth by gouging others, we are admitting that our labour just isn’t all that valuable. But that, in a real sense, is critical to who we are for Rand. So no True Objectivist will admit that they are trying to extract more value from labour that is less valuable, because it means that the others are in a real sense better than they are, but they are trying to appear more valuable than they really are. At a minimum, such fraudulence is dangerous when or if they get found out, and it also reveals an irrationality in them that they must pretend that things aren’t really the way they are.

So, when Rand and her characters revere money, it’s not money they revere, it’s productive labour. And, in Objectivism, all people should take pride in and try to maximize their actually productive labour, because it’s all they have to make their way in the world.

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One Response to “Objectivism: Capitalism”

  1. ontologicalrealist Says:

    “for Rand everything boils down to self-interest.”

    Person A may think that it is in his own self-interest to sacrifice other people so that he can live, while Person B may think that it is in his own self-interest to die for his country, ideology or religion etc.
    A crucial question is that what is in one’s own self-interest and what is not.

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