Below, read fascinating articles on Ayn Rand's "Virtue of Selfishness" philosophy, her drug habit, and a personal story from one of her followers.
Alan Shrugged: Greenspan, Ayn Rand and Their God That Failed
In a historic moment, former Fed chair Alan Greenspan acknowledged he had been wrong for years to assume that government regulation was bad for markets. Whoops—there goes decades of Ayn Rand down the drain.
by David Corn
In a congressional hearing room on Thursday, former Fed Chairman Alan Greenspan, one of the most influential civil servants of the past century, saw his stock plummet—and his entire career lose its moorings. More important, the ideological battle over economic theory and the role of government in markets—a fight that has played out in the current presidential campaign—took a historic turn.
With members of the House oversight and government reform committee blasting Greenspan for his past decisions that helped pave the way for the current financial crisis, he acknowledged that his libertarian view of markets and the financial world had not worked out so well. "You know," he told the legislators, "that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well." While Greenspan did defend his various decisions, he admitted that his faith in the ability of free and loosely-regulated markets to produce the best outcomes had been shaken: "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms."
In other words, whoops—there goes decades of Ayn Rand down the drain.
Democrats on the committee made Greenspan eat ideological crow. And after the hearing, Democratic Senator Dianne Feinstein of California released letters Greenspan had written to legislators in 2002 and 2003 that now cast the former chief banker as out of touch with financial reality.
Back then, Feinstein was pushing for regulating financial instruments known as derivatives—particularly those called swaps. In 2000, Republican Senator Phil Gramm, then the chairman of the Senate banking committee, had used a sly legislative maneuver to pass a bill keeping swaps free from federal regulation. (Lobbyists for financial firms had helped to write the bill.) The swaps market subsequently exploded, as financial firms bought and sold swaps as insurance to cover their trading in subprime securities and other freewheeling financial products. In a nutshell: the rise of unregulated swaps enabled the growth of the shaky subprime securities at the heart of the current financial crisis. Greenspan was an ardent supporter of keeping swaps virtually unregulated.
In 2001, Enron, having gone crazy with energy derivatives, collapsed—after the firm had manipulated the California electricity market, costing residents of Feinstein's states billions of dollars. Following that fiasco, Feinstein decided the derivatives market needed to be reined in. As The Wall Street Journal reported in 2004, "When she telephoned Mr. Greenspan for support, he declined, telling her the proposal threatened the multitrillion dollar derivatives industry, which he considers an important stabilizing force that diffuses financial risk."
In September 2002, Greenspan, Treasury Secretary Paul O'Neill, Securities and Exchange Commission chairman Harvey Pitt, and Commodity Futures Trading Commission chairman James Newsome wrote a letter to members of Congress to note their opposition to legislation that would regulate derivatives. They wrote:
We believe that the [over-the-counter] derivatives markets in question have been a major contributor to our economy's ability to respond to the stresses and challenges of the last two years. This proposal would limit this contribution, thereby increasing the vulnerability of our economy to potential future stresses....
We do not believe a public policy case exists to justify this governmental intervention. The OTC markets trade a wide variety of instruments. Many of these are idiosyncratic in nature....
While the derivatives markets may seem far removed from the interests and concerns of consumers, the efficiency gains that these markets have fostered are enormously important to consumers and to our economy.
Greenspan and the others urged Congress "to be aware of the potential unintended consequences" of legislation to regulate derivatives.
They got it exactly wrong. Swaps and derivatives ended up undermining, not bolstering, the economy.
Feinstein was not convinced by Greenspan's argument, and she continued to press for legislation to regulate swaps. And Greenspan continued to resist. In a June 11, 2003 letter—also signed by the new Treasury secretary. John Snow, the new SEC chairman, William Donaldson, and CFTC chairman Newsome—Greenspan praised derivatives and called them an essential part of the economy:
Businesss, financial institutions, and investors throughout the economy rely upon derivatives to protect themselves from market volatility triggered by unexpected economic events. This ability to manage risks makes the economy more resilient and its importance cannot be underestimated. In our judgment, the ability of private counterparty surveillance to effectively regulate these markets can be undermined by inappropriate extensions of government regulations.
They were asserting that government regulation undercuts market-driven self-regulation. But as events have demonstrated, unregulated swaps did not protect Big Finance firms; they weakened the entire financial industry in the United States and overseas.
In a November 5, 2003 letter, signed only by Greenspan, the Fed chair again took a shot at Feinstein's proposal to control derivatives. He noted that "enhanced market discipline" would address concerns about the manipulation of markets.
Before the oversight committee, Greenspan said that he had been "partially" wrong to believe that swaps did not need regulation. But he did seek cover by claiming he had not been alone in screwing up: "The Federal Reserve had as good an economic organization as exists. If all those extraordinarily capable people were unable to foresee the development of this critical problem...we have to ask ourselves: Why is that? And the answer is that we're not smart enough as people. We just cannot see events that far in advance."
But not everyone got it wrong. In the late 1990s, regulators at the CFTC wanted to regulate swaps. Gramm, Greenspan and others—including senior members of the Clinton administration—did not. Following the Enron debacle, Feinstein took a run at this. But Greenspan and Bush administration officials said no. And it was not an issue of smarts; it was a matter of ideology.
In fact, it was always a matter of ideology for Greenspan, a libertarian champion. In 1963, writing in Rand's "Objectivist" newsletter, he noted, "It is in the self-interest of every businessman to have a reputation for honest dealings and a quality product." Regulation, he maintained, undermines this "superlatively moral system." Self-governance by choice, he said, would be more effective than governance through government. Regulation, Greenspan maintained, was the enemy of freedom: "At the bottom of the endless pile of paper work which characterizes all regulation lies a gun."
Well, it turns out that at the bottom of the system that Greenspan oversaw for years, there was nothing but a pile of bad paper. And testifying to the House oversight committee, Greenspan, one of the more ideological Washington players of the past few decades, essentially said that Ayn Randism had let him—and the entire world—down. It was truly a God that failed.
David Corn is Mother Jones' Washington bureau chief.
© 2008 Mother Jones
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. —Ayn Rand, Atlas Shrugged 35th anniversary edition
Comment from Lydia:
I'm sure that wherever she is in the vast consciousness of the afterlife -- she has found by now that love is all that matters. Losing interest in selfish things is all that really matters. Smashing the ego, not building a shrine to it.
Now I realize why Ayn Rand never spoke of love and seemed to be so disconnected from humanity.
Now I see why Rush Limbaugh is such a fan of Ayn Rand's "virtue of selfishness" principle. Whether or not Rush is still taking pharmaceutical heroin (Oxycontin) he is at least numbing himself with self-righteousness, megalomania, resentment and ego (as a lot of us are!) These are drugs in themselves.
FAQ: I heard that Rand was addicted to speed. Is this true?
As with many claims about Rand, this one is rather exaggerated. According to the most reliable information available on the matter, Rand had an ongoing prescription from a doctor for a diet drug that included dextroamphetamine as one of its active ingredients. She took two pills per day until the early 1970s, when another doctor told her to stop taking them. If you refer to any and all amphetamines as "speed," then she did take "speed," although it is probably not accurate to say she was addicted to it. She certainly did not take the street drugs to which the term 'speed' is more commonly applied.
The documentary evidence on this subject is limited. Nathaniel Branden mentions the matter very briefly in his memoirs. All he says is the following:
I did not attach significance to the fact that, since her late twenties, she had been taking amphetamines daily for weight control, on the advice of a physician. I do not think the discovery had yet been made that a protracted use of amphetamines can precipitate paranoid reactions.
In a magazine interview, he expounded only slightly more on the topic:
She was taking a relatively small quantity of a drug called Dexedrine which in those days doctors were prescribing very freely for people who wanted to control their appetite. Today of course Dexedrine has a bad name and it's no longer recommended. But it was recommended to her, I think, when she was only twenty-eight years of age, and she had been taking two pills a day, I believe almost as long as she lived. I don't think she took heavy doses.[*]
Barbara Branden discusses the matter with more detail in The Passion of Ayn Rand. Her discussion in full is as follows:
It was during this period of nonstop work on The Fountainhead that Ayn went to see a doctor. She had heard there was a harmless pill one could take to increase one's energy and lessen one's appetite. The doctor, telling her there would be no negative consequences, prescribed a low dosage of a small green tablet which doctors had begun prescribing rather routinely. Its trade name was Dexamyl. Ayn took two of these pills each day for more than thirty years. They appeared to work: she felt that her physical energy had increased, although it was never high, and her weight stayed under reasonable control. In fact, medical opinion today suggests that they soon ceased to be a source of physical energy; their effect shortly became that of a placebo.
Dexamyl consists of two chemicals: an amphetamine and a barbiturate. It was not until the sixties that researchers investigated the effects of large doses of these chemicals. They found that extremely high doses were harmful, sometimes even resulting in paranoid symptoms; but to this day, there is only the most fragmentary and contradictory scientific evidence to suggest that low doses such as Ayn took could be harmful. As one pharmacological specialist has said: "Perhaps they hurt her, and perhaps they didn't."
WHO IS AYN RAND?
Ayn Rand characterized Objectivism as "a philosophy for living on earth," grounded in reality, and aimed at defining man's nature and the nature of the world in which he lives. Rand initially expressed these ideas in her novels The Fountainhead, Atlas Shrugged, and other works. She further elaborated on them in The Objectivist Newsletter, The Objectivist, The Ayn Rand Letter, Introduction to Objectivist Epistemology, and other non-fiction books.
Objectivism holds: ... that the proper moral purpose of one's life is the pursuit of one's own happiness or rational self-interest; that the only social system consistent with this morality is full respect for individual rights, embodied in pure laissez-faire capitalism; and that the role of art in human life is to transform man's widest metaphysical ideas, by selective reproduction of reality, into a physical form—a work of art—that he can comprehend and to which he can respond emotionally.
I know my Ayn Rand. In fact, when it comes to Rand and her philosophy of Objectivism I'll put put my Ayn Cred up against almost anyone.
I attended her funeral in 1982. I was one of two students at experimental Objectivist high school back in 1980s. I did the audio taping on a lecture course taught by her 'intellectual heir', Leonard Peikoff. I've attended Objectivist conferences, owned first edition copies of Atlas Shrugged and I was personally kicked off the lawn of the Canadian power trio Rush's drummer by Neil Peart himself asserting his property rights.
Today, I realize that Rand's philosophy isn't just wrong or misguided - it's actually been destructive and dangerous.
This destructiveness has been true on a personal, human level for years. I'm not just talking about teenagers devouring The Virtue Of Selfishness and turning into belligerent, arrogant pricks - pubescent pontificating Penn Jillettes capable of quoting passages about epistemology and almost immediately killing any social occasion.
There were darker personal tragedies, too; fans of Ayn Rand in 1960s who had the misfortune to be in her circle and gay, something that Ms. Rand did not approve of. There were whispered rumors of an Objectivist therapist who broke with Rand after one of his gay patients committed suicide after being unable to reconcile his sexuality with the Objectivist philosophy.
It's even more than the shameful fact that the Objectivist movement and its purported belief in individual rights stayed completely on the sidelines during the Rand's intellectual heyday of the 1960s while the single biggest advance in individual liberty was going on - namely, the civil rights movement. Well, Rand did knock out a few pages in an article called Racism in 1963 that spent as much time blaming 'the Negro leaders' as it did the 'Southern Racists'.The reality is that Ayn Rand is pretty directly responsible for the economic destruction we see around us today.
It's a Rand-worthy ironic plot twist that people like Michelle Malkin are invoking her name today with their Tea Party and "Going Galt' dramatics. One thing, Malkin doesn't even know how to pronounce Rand's name. It's not 'Ann' Rand - it's Ayn, rhymes with MINE.
The real irony is that Malkin and the other Fauxjectivists don't really understand a lot about the specifics of Rand's ideas at all. A twisted version of Rand's thought is the basis for a lot of NeoCon movement, much of the modern libertarian / Ron Paul movement and much of the right wing economic rhetoric used by the tattered remains of the Republican party.
For decades now, Rand's work has given comfort and ammunition to brazen bozos like Rush Limbaugh and McCain economic advisor Phil "Don't Worry Be Happy" Gramm. Its defense of selfishness and unrestricted capitalism provided an air of intellectualism to bad behavior and horrible policy.
Behind of the ideological tossed salad nature of many of the self professed Ayn Rand fans, I don't think it's fair to criticize Rand's ideas on the basis of the scatterbrain sloganeer like Malkin. And besides, just looking at the work of Rand and her official band of lunatics still leaves one with so much to be critical of.
One direct result of Rand is Alan Greenspan. This will be met with hue and cry from Objectivists who will claim that Greenspan doesn't pass their purity, which means he should have wanted even LESS regulation than he did and should have never have run the Federal Reserve but instead blown it up with dynamite and replaced it with the Gold Standard.
But Greenspan himself has admitted that he was tragically wrong about how people would act in unrestricted, unregulated markets. And this philosophy is part of what trigged the current economic crisis.
The ultimate horrible truth is that most of Rand's 'philosophy of the real world' has worked out very badly in the real world. It's a collection of ideas that haven't been tested or just don't work but its adherents still have a Bush-like unshakable faith in it because...well, it's just RIGHT and reality be damned.
Sadly, it's damned a lot of the rest of us, too.