objectivism to the rescue?
Capitalism is a tool, not a deity to be worshipped, much less with the inherent arrogance of Objectivism.
BusinessWeek’s Debate Room, to which yours truly has submitted his share of essays, is asking readers whether in today’s economic turmoil we need to heed the doctrines of Ayn Rand and her philosophy of Objectivism. Upset that the government is now an ever present force in business, philosopher Onkar Ghate argues that Rand’s idea that selfishness is a virtue and we shouldn’t be taking orders from society and government, is just as relevant as ever. And in doing so, he manages to woefully misjudge the current situation or get a grip on exactly why government intervention in corporations is so common today.
The Ayn Rand Institute isn’t new to the Debate Room. It’s executive director, Yaron Book, wrote a number of essays over the last year in which he promoted Objectivist doctrines as a solution to whatever ails society and every time, he draws in fellow Objectivists to comment on just how right he is and debate with anyone who disagrees. Now Ghate has picked up the baton and tried to convince readers that the greed of lenders and banks who got carried away with making vast loan packages is not to blame for the current financial crisis. Apparently, it’s the government’s fault. If not for all the regulations in the financial industry, Ghate says, there’d be no problem. It was all Fannie May and Freddie Mac rather than Countrywide and Wall Street. I suppose it really does take a philosopher to justify such a backwards conclusion.
One upon a time there was a rule that organizations that gave loans wouldn’t be able to simply take their loan packages and turn them into investments in order to avoid a conflict of interest and encourage competition in the banking sector. That rule was defined by the Glass-Steagall Act which was repealed in 1999 and over the next decade, banks did exactly that. Only now, an alluring source of income were subprime loans made by lenders like Countrywide which relied on warehouse lending to issue mortgages, then packaged their loans and sold them to anyone who was interested. This list of buyers included Fannie and Freddie who were assured that what they were buying were good loans and the risk was perfectly managed. Yes, it’s true that under the initiative of former president Clinton both of the GSEs were encouraged to provide access to home loans for more borrowers but they were still supposed to take on loans with proof of income and other assurances. Subprime loans often didn’t even require that.
Now what happens next is really funny. Wall Street turns to these mortgages as the brand new, must have investment opportunity and uses virtual cash to create bonds. Under the regulation of the Glass-Steagall Act, they couldn’t do that unless they actually had funding for them but if you remember, that law was repealed. Suddenly, one day, the market begins to drop because a large number of these mortgages aren’t being paid. The bonds lose value. Banks panic and ask the government for help. And keep asking it for another billion or two or ten or twenty. And all this is the fault of government regulation? Banks being given leeway to do as they wish, making bad bets then running to Uncle Sam for a bailout is an example of collectivist smothering? Isn’t philosophy supposed to be about looking at the big picture to make logical conclusions rather than just plug the tomes of your favorite author?
Let’s be brutally honest here. Rand’s popularity was based on telling people that they’re special, important and that if they think they’re right, they are. It’s something that’s very nice to hear in college when you want praise and encouragement but that’s not the best approach to the world at large. You don’t always know best. You’re not always the smartest and when you bet against the world, you won’t run into some one-dimensional cardboard villains you can destroy with a three hour long monologue of hackneyed cliches about “rational self-interest” and large doses of self praise coupled with standard red-baiting that was woven into American culture over the decades of the Cold War and punctuated during Red Scares. There are a lot of very wise people out there who will disagree with you and you need to admit that you don’t have the gateway to the world just because you read a long and self-indulgent book by an author with the ability to turn any line of dialogue into ten pages of thick, bombastic indoctrination.
When it comes to her philosophy, Objectivism seems to be a very ironic name since I’ve yet to meet an objective Objectivist who didn’t tell me that the only reason I disagree is because I just don’t have what it takes to understand the works of his or her guru. No semantics or historical revisionism will change the fact that greed for the sake of greed leads people to make mistakes and that those same people will try to ask for bailouts after having spent years railing against a government that tries to prevent having to give another bailout by creating new rules.