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Atlas Shrugged: The Philosophy and Its Energy Implications (Part IV: The Moral Obligation of Capitalists)

“In [Atlas Shrugged], I glorify the real kind of productive, free-enterprise businessman in a way he has never been glorified before…. But I make mincemeat out of the kind of businessman who calls himself a ‘middle-of-the-roader’ and talks about a ‘mixed economy’—the kind that runs to government for assistance, subsidies, legislation and regulation.”

- Ayn Rand (1949) (1)

As the public face of capitalism, business leaders are well positioned to explain the logic of free markets from a moral and economic viewpoint—and to demonstrate by example the non-coercive nature of trade by eschewing the political exploitation of consumers, taxpayers, and rivals.

The words and deeds of corporate executives are quite different, however. Rand was very disappointed in what she saw–and she would be more disappointed today, particularly in the energy industry. Think of Enron’s Ken Lay and BP’s John Browne a few decades ago–and and Duke Energy’s Jim Rogers and T. Boone Pickens today.

Rand did identify “businessmen as the greatest victims of the present philosophical trend (particularly of the altruist morality).”(2)  Muckrakers from different generations, indeed, have criticized and demeaned the great wealth-creators, even those who benefited the masses without resorting to political means, such as John D. Rockefeller and Cornelius Vanderbilt.(3)

Appeasement

Rand noticed the propensity of business leaders to not stand up for self-interest, individual rights, and capitalism proper. She  complained:

As a group, businessmen have been withdrawing for decades from the ideological battlefield, disarmed by the deadly combination of altruism and Pragmatism. Their public policy has consisted in appeasing, compromising and apologizing: appeasing their crudest, loudest antagonists; compromising with any attack, any lie, any insult; apologizing for their own existence. Abandoning the field of ideas to their enemies, they have been relying on lobbying, i.e., on private manipulations, on pull, on seeking momentary favors from government officials. Today, the last group one can expect to fight for capitalism is the capitalists. (4)

Adam Smith fretted about capitalists-versus-capitalism, and the Adam Smith of our era, Milton Friedman, observed: “The two greatest enemies of free enterprise in the United States … have been, on the one hand, my fellow intellectuals and, on the other hand, the business corporations of this country.”(5)

Appeasement of capitalism’s opponents was philosophical surrender to Rand:

Appeasement is a betrayal not only of one’s own values, but of all those who share one’s values…. It would be better if they kept silent rather than spread the horrible advertisements that make us cringe with embarrassment. By “us” I mean advocates of capitalism. Mobil Oil ran ads in the New York Times which stated the following (I quote from memory): “‘Of the expression free, private, responsible enterprise, we strike out ‘free’ and ‘private’ as ‘nonessential.’”(6)

The Mobil Oil of her day would be the BP, Duke Energy, DuPont, Enron, Exelon, Conoco-Phillips and Shell of more recent times, all of whom succumbed to ideologically motivated critics of carbon-based energy and timorously implicated their own emissions in producing potentially deleterious climate change from an enhanced greenhouse effect. Only recently, with the collapse of cap-and-trade legislation and the “permitorium” on drilling permits, have the oil majors shifted gears to a more-energy-now stance.

Rent-seeking—calculated profit-seeking through the political process–is alive and well today. The natural gas industry, in particular, is working overtime in Washington, DC to get special favor at the expense of oil in the transportation sector and coal in the electricity sector. The “energy sustainability” debate is not only back-pedaling by businessmen (as Rand saw) but front-pedaling for pecuniary gain at the expense of competitors—and consumers and/or taxpayers.

“Real Businessmen”

Rand aspired for “the real businessmen—the first raters” to “give one hour of their eighteen hour work-day” to “check their philosophical premises—and their Public Relations Departments.”(7)

Rand’s intellectual businessman was akin to Adam Smith’s “prudent man,” who “always studies seriously and earnestly to understand whatever he professes to understand, and not merely to persuade other people that he understands it.”(8) Rand’s businessman would use his daily intellectual hour to read and contemplate the cultural and political forces necessary for wealth creation or wealth destruction—and seize opportunities to foster the first and fight the second.

Rand’s thinker-doers would then “stop apologizing for their ability and their success” and use their speeches and resources to defend free-market capitalism.(9) Her plea in the Atlantic Economic Review in 1958 was scarcely heeded during her era of American political capitalism, but it remains an ideal for a post-Enron, post-corporate-welfare era.

The eighteen-hour workday Rand posited for her executives reflected her own capacity for work. But long hours also reflected the growing rigors of a job where ever more distractions and responsibilities were on the shoulders of business Atlases.

Writing in 1946, one business historian noted how the entrepreneur had to “synthesize more appraisals of experts and advisers … be cognizant of more services from more service institutions … relate his decisions to a longer time space of past and future … [and be aware] of the data that he does not possess.”(10) The leader had to also appreciate the impact of actions and strategies not only for different parts of the company but also on competitors, customers, the general public, and government.

Pragmatism to Political Capitalism

Pragmatism in the mixed economy naturally encouraged political entrepreneurship and second-hander strategies. The firm’s decision-making shifted, in part, from the home office to Washington, D.C., and other seats of political power. Management attention was diverted from employees, customers, and owners to pressure groups, regulators, and legislators.

Here is an example that is from chapter 9 of my forthcoming book, Edison to Enron: Energy Markets and Political Strategies (Scrivener Publishing/John Wiley & Sons, 2011). It concerns a federally regulated interstate pipeline company, Transcontinental Gas Pipe Line, in the 1970s.

“Our Company’s level of activity in Washington is on the increase with no relief in sight,” [Transco CEO] Bowen informed his Houston board of directors in mid-1975. Federal work had become too much for the D.C. branch of Transco’s outside law firm and its consulting company. Transco needed its own office in the nation’s capital. The company had issues before the FPC (curtailment plans, rate cases, gas-supply incentive programs), Federal Energy Office, Department of Interior, Securities and Exchange Commission, and congressional subcommittees.

A Washington government affairs office was needed, explained Bowen, “to assist the Company in administrative details of getting in and out of Washington, rooms, appearances, getting copies of various documents, but most important … persuad[ing] various members of Congress, or their administrative staffs, of Transco’s position.” Bowen also had some proactive proposals for the nation’s capital that were not about simple deregulation.

A hotel suite of two bedrooms and living room were recommended. “Nearly all the pipelines have established hotel suites, and most of them have offices in Washington,” Bowen closed. “We have so much at stake, we feel it is necessary to be as efficient as we can in going about our business in Washington.” Bowen was tight when it came to spending, but he also knew that prudently incurred government-affairs costs would ultimately be borne by ratepayers, not shareholders.

Conclusion

Public utility regulation of much of the natural gas and electricity industries; myriad regulation of the petroleum industry; mega-subsidies for politically correct renewable energy….  The master resource of energy is highly regulated in ways that only political trends–not economic and philosophy–and explain and justify.

Part V in our series on Ayn Rand and energy (Monday) will examine the energy crises in the fictional world of Atlas Shrugged and energy crises in the real world.

———————-FOOTNOTES —————-

(1) Rand (1949), quoted in Harry Binswanger, ed. The Ayn Rand Lexicon: Objectivism from A to Z. New York: Meridian, 1982, pp. 441–42.

(2) Rand, in Michael Berliner, ed. Letters of Ayn Rand. New York: Dutton, 1995, p. 583.

(3)] See Robert Bradley, Capitalism at Work: Business, Government, and Energy. Salem, MA: Scrivener Press, 2009, pp. 149–50.

(4) Rand (1971) quoted in Harry Binswanger ed. The Ayn Rand Lexicon: Objectivism from A to Z. New York: Meridian, 1982, p. 54.

(5) Friedman, Milton. “Which Way for Capitalism?” Reason, May 1977, p. 21.

(6) Rand, “The Sanction of the Victims.” 1981. In The Voice of Reason: Essays in Objectivist Thought, by Rand et al. New York: New American Library, 1990, p. 152.

(7) Rand, Ayn (1958). “Modern Management.” In The Ayn Rand Column, edited by Peter Schwartz. New Milford, CT: Second Renaissance Books, 1998, p. 113.

(8) Smith, Adam. The Theory of Moral Sentiments. 1759. Edited by D. D. Raphael and A. L. Mcfie. Reprint, Indianapolis: LibertyPress, 1984, p. 213.

(9) Rand (1958), p. 113.

(10) Cole, Arthur. “An Approach to the Study of Entrepreneurship: A Tribute to Edwin F. Gay.” The Journal of Economic History 6 (Supplement): (May 1946), p. 11.

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APPENDIX: Some Political Capitalism Posts at MasterResource

Dear U.S. Chamber of Commerce: Why Attempt to Resuscitate a Brain Dead Climate Bill?

“[Nuclear] Fortunes in Cap-and-Trade” (Part III of “Political Capitalism: Understanding the Beast that Broke the Cage”)

Origins of the Gasoline Tax (Part II of “Political Capitalism: Understanding the Beast that Broke the Cage”)

Political Capitalism: Understanding the Beast that Broke the Cage (Part I: what is political capitalism?)

Why Natural Gas Should Not Play the Cap-and-Trade Game (the real enemy is mandated renewables/conservation, not coal)Waxman–Markey’s Gravy Train: Why the Electric Industry Got on Board (Getting favors, adding pages to H.R. 2454)

Rent Seeking, Crony Capitalism, and U.S. Energy Politics: Who Wins from the Racket?

The Left’s Civil War on Cap-and-Trade: Who Likes Political Capitalism?

Cap-and-Trade: The Temple of Enron (James Hansen makes an important political point)

A Texas-Sized Energy Problem: Republicans, Democrats, and ‘Baptists & Bootleggers’ Running Wild in the Lone Star State (Obama sends his thanks)

5 comments

1 JavalinaTex { 04.21.11 at 5:25 am }

Rob, in regard to “Randian Heros” (John Allison, Charles Koch) where is the “love” for Steve Jobs in here? It would seem that Jobs would be a good example of the dynamic visonary who at times lost to all manner of skeptics not to mention his own Board of Directors. I can’t think of a whole lot of government interference sought by Apple (I think most of the Microsoft ant-trust attacks came out of other companys).

I realize your mentions tend to come out of Rand supporters; but I think Jobs and his work is pretty accessable to most people.

2 rbradley { 04.21.11 at 8:32 am }

JT:

Thanks for the suggestion. There are a number of quiet market ‘doers’ that deserve praise. Jobs could be a perfect example….

I mentioned these two (Allison is very Rand-oriented; Koch is less so) because they explicitly have taken on the political side of political capitalism.

Lee Raymond, former CEO of ExxonMobil, was a tell-it-like-it-is, free-market-oriented doer.

Any other suggestions from readers–market doers and explicit business critics of political capitalism?

3 Andreas { 04.22.11 at 9:47 am }

I am 100% free market but what I do not understand about this blog is the complete failure to expose the other side of the story. Namely how Western oil companies have for decades and until this day benefited from Western military might and threat. How do you put a value on the subsidy of US military presence in the mid East, Africa and protection of oil transport throughout the oceans of the world? What about all the granted monopolies to local electric and gas utilities? I agree with much of what you have to say about renewables but let’s not call the stodgy, old-guard corporate energy industry “free-market”. There is not a perfect solution at this point, and you are right to state that we need a return to human creativity and individualism before we will have a solution. Did I miss something?

4 rbradley { 04.22.11 at 10:00 am }

U.S. foreign policy toward oil is an area that deserves more attention given the historical interest of MasterResource in all things energy.

There is a real question whether U.S. military actions intended to keep the price of oil down has had the unintended consequences of raising prices more than lowering them.

5 Andreas { 04.23.11 at 9:58 am }

I agree that I would like to see more critical analysis of foreign policy on this blog. I also agree that it is not clear that intervention of military has raised prices or lowered them. Given the extensive tentacles of the government in every area of the economy and market space, I am not sure we could ever really predict what we would have in a true free market. Is $5 today really the same as $5 from a decade ago for example? I think we will agree it is not. I also do not believe in corporate person hood and believe large business could survive within a completely private insurance system rather than government granted limits on liability.

On the one hand upward pressure would be put on prices since oil companies would need to protect their own supply chains. These companies would also be more liable to fail for disasters unlike BP. On the other hand downward pressure would be put on the market as a whole since we wouldn’t be paying for a huge military empire and likely instead be paying indirectly for more efficient private defense companies. Further there would be less restriction on drilling where it makes sense.

I’d be happy to contribute some on these topics if it at all helped.

Thanks for your blog!

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