“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)
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.
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.
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.
(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.
APPENDIX: Some Political Capitalism Posts at MasterResource
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)