Radicals For Capitalism

The group of young intellectuals who often gathered at Ayn Rand’s Manhattan home in the early 1950s had a couple of different names for themselves. One was the “Class of ’43,” after the year that Rand published her first successful novel, “The Fountainhead.” Another, with intentional irony, was “the Collective.”

To most Americans, still basking in the successes of the New Deal and victory in World War II, government , that is collective solutions, seemed to be working pretty well at the time. But to Rand and her followers, collectivism was the single greatest problem facing the country. As they saw it, government programs forced citizens to comply with goals they often did not share while stifling the creative energy of individuals and even laying the groundwork for totalitarianism. In Rand’s apartment on East 34th Street, her collective sat around imagining a better, freer world.

The movement remained on the political fringe, however, and not only because its adherents were out of step with the times. By any definition, they were also a little odd. As Brian Doherty writes in “Radicals for Capitalism,” his history of libertarianism, every member of the group had to subscribe to a series of cultish premises beginning with “Ayn Rand is the greatest human being who has ever lived.” Rand and her protégé Nathaniel Branden began an affair in 1954, with scheduled liaisons that their spouses were told to tolerate. Rand later described the group, as the only “fully moral, fully happy” people in human history.

In spite of all this, the group left a deep imprint on the culture in the years to come. Rand’s magnum opus, “Atlas Shrugged” — Branden and others read portions of the drafts — became a best seller when it was published in 1957. Its story of a strike leader who is transformed into a charismatic crusader for individual genius became “a cornerstone of the modern libertarian movement,” Doherty writes. One Rand acolyte was a young economist, Alan Greenspan, whose belief in the power of markets — or, in Randian terms, the power of individual decisions — later helped shape the American economy during his two decades as chairman of the Federal Reserve. Another young economist, Martin Anderson, who joined the group in the early 1960s, went on to advise Richard Nixon and Ronald Reagan and was instrumental in abolishing one of the most notorious collectivist policies of all, the draft.

The story of the American libertarian movement, like the story of its most famous salon, has been a combination of small numbers and big influence. It has never really emerged from the fringe, for the simple reason that most Americans want their government to educate the young and care for the old. But over the last few decades, they have also grown increasingly skeptical of collectivist policies that go beyond the basics. Libertarian thinkers — Rand, Milton Friedman, Murray Rothbard and others — have helped foment this skepticism and then enthusiastically pointed to the alternative.

Libertarianism has its roots in the writings of a pair of major 20th-century Austrian economists, Ludwig von Mises and F. A. Hayek. Both opposed economic planning and argued that only the forces of supply and demand could allocate re sources fairly and efficiently. If an item becomes scarce, its price will rise, ensuring that people who place the highest value on it — those who can use it most productively — will be able to get it. To this coolly economic argument, Rand and other writers added a moral one: laissez-faire capitalism equaled freedom.

This was a tough sell in the wake of the Depression and the war, but the ground began to shift in the 1970s. As the Vietnam War sputtered to a close and the economy stagnated, the wise men who built “big government” began to look ineffectual. In 1980, Ronald Reagan would win the presidency by campaigning on laissez-faire rhetoric. The day after his election, he was photo graphed on an airplane reading The Freeman, the flagship libertarian magazine, while Nancy Reagan rested her head on his shoulder.

In the nearly three decades since, libertarian arguments have enjoyed a nice run. Tax rates have been reduced; once-regulated industries have been opened to competition; any two consenting adults, including those of the same sex, can now marry in some places. One of today’s most fashionable political labels, “socially liberal and fiscally conservative,” Doherty shrewdly notes, is “the basic libertarian mix.”

Libertarianism has now arrived at an interesting juncture. The moment for its grandest ambitions seems to have passed. President Bush is no longer talking about privatizing Social Security, and his free-market approach to rebuilding Iraq has proven disastrous. The libertarians at the Cato Institute, meanwhile, are struggling to persuade people that global warming — the archetypal free-market failure — is a hoax. Yet in an irony worthy of Rand’s collective, the solution to climate change will probably have a libertarian tinge. The global warming debate is coalescing around a “cap and trade” solution in which energy-efficient companies would be rewarded by the market. In fact, across a range of major issues — energy policy, health care, retirement savings — a hybrid form of laissez-faire capitalism and collectivism seems to be ascendant. The market will be allowed to work its efficient magic, but government will step in to correct the market’s failures. “Libertarian paternalism” is the name two University of Chicago professors, Cass Sunstein and Richard Thaler, have devised for one version of this philosophy.

Many of the purists would surely hate an idea like libertarian paternalism. But they also might understand that they helped to make it possible.

Extract from a New York Times Book Review by David Leonhardt

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