Making money without being productive: does it fit the Capitalist ideal?

Work, Careers and Money
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The heroes that Ayn Rand writes about have achieved great things, and made their fortunes, by producing goods, often of their own invention or design, and selling to a market that didn’t need to be created. They work very hard at this and risk their own money and careers. So far so good, and there are many real-life entrepreneurs who have done the same: e.g Mark Zuckerberg may not have created a physical product but he certainly came up with an idea for a product that people want.

But what about the Financial Traders, who do not produce anything but move other people’s money between different markets, and do not take risks with their own money? Essentially, paid gamblers.

And what about loan sharks who make money by lending at huge rates of interest, often to poor people?

Does it matter to Objectivism how people make their money?

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In a sense, Dagny Taggart’s company produced no goods, but it offered a service - transportation - for which people were ready to pay. Thus, Dagny Taggart was productive.

Same for the financial traders and the money lenders; you find out if they are productive by looking if there are people who buy voluntarily their services.

This also answers your last question.

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If people will pay knowingly and voluntarily for what you’re selling, you’re productive. Whether or not Rand would write a novel about you is a separate question. I’ve noticed, as you have, that her novels favor producers of palpable goods and services over pure traders. This looks to me like a literary matter: what they do doesn’t lend itself to stories and to visual spectacles the way the activities of industrialists does. Midas Mulligan is an exception, but he made his money, so far as we see, lending to hard-goods producers such as Rearden. Hopton Stoddard, Roark’s client, got rich purely by spotting good investments, and she treats him dismissively.

Futures traders. arbitrageurs and the like move capital and information from where it is to where it is most wanted. The money they make is a measure of the value of what they’re doing.

Lenders provide money now in place of money later. Interest is the value people place on this. People with verifiable credit histories are safer to lend to, so lenders are willing to charge them less. People without such records are riskier, so they pay a higher price for credit. If you want to call the lenders they patronize “loan sharks”, be my guest.

Walter Block’s Defending the Undefendible has a reputation as the best source on this question.

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55 minutes ago, Adrian Roberts said:

The heroes that Ayn Rand writes about have achieved great things, and made their fortunes, by producing goods, often of their own invention or design, and selling to a market that didn’t need to be created. They work very hard at this and risk their own money and careers. So far so good, and there are many real-life entrepreneurs who have done the same: e.g Mark Zuckerberg may not have created a physical product but he certainly came up with an idea for a product that people want.

But what about the Financial Traders, who do not produce anything but move other people’s money between different markets, and do not take risks with their own money? Essentially, paid gamblers.

And what about loan sharks who make money by lending at huge rates of interest, often to poor people?

Does it matter to Objectivism how people make their money?

Capitalism is about freedom and equal rights, not about your evaluation of who is and who isn’t being productive. To be a capitalist, you have to first believe in humanity: you have to believe that your fellow human beings do in fact have the ability to make their own decisions, and you do not have to use force to make their decisions for them.

So yes, Capitalism IS about the financial traders who people freely entrust with their investments and savings. Whether you think that is a productive business or not is only relevant to the extent it’s YOUR money. Capitalism is about each individual deciding for themselves what business arrangement is or isn’t worth getting into. If you don’t wish to hire a “paid gambler” or a loan shark, you don’t have to. But you do not have the right to stop others from doing so.

You do not have the right to arrogantly claim superiority over those “poor people” who, in your judgement, aren’t smart enough to stay away from a loan shark.

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21 hours ago, Nicky said:

Capitalism is about freedom and equal rights, not about your evaluation of who is and who isn’t being productive. To be a capitalist, you have to first believe in humanity: you have to believe that your fellow human beings do in fact have the ability to make their own decisions, and you do not have to use force to make their decisions for them.

So yes, Capitalism IS about the financial traders who people freely entrust with their investments and savings. Whether you think that is a productive business or not is only relevant to the extent it’s YOUR money. Capitalism is about each individual deciding for themselves what business arrangement is or isn’t worth getting into. If you don’t wish to hire a “paid gambler” or a loan shark, you don’t have to. But you do not have the right to stop others from doing so.

You do not have the right to arrogantly claim superiority over those “poor people” who, in your judgement, aren’t smart enough to stay away from a loan shark.

Once more, Objectivism is challenging my thinking in areas that I had not been open about before. I became interested in Objectivism because I had always admired individualism, heroism and achievement, but had balked at some of the implications - such as those I cited above. But now I can see that this was based on assumptions that I had never questioned, but that are very deeply ingrained (perhaps more so in Europe where I come from, than in the USA).

I read the Amazon review that Reidy posted a link to, of Block’s Defending the Undefendible. There is a quote from the forward by Hayek that sums it up:

"Looking through Defending the Undefendable made me feel that I was once more exposed to the shock therapy by which, more than fifty years ago, the late Ludwig von Mises converted me to a consistent free market position. … Some may find it too strong a medicine, but it will still do them good even if they hate it. A real understanding of economics demands that one disabuses oneself of many dear prejudices and illusions…"

I’ve always liked to think of myself as open-minded but there are clearly some sacred cows that I haven’t thought to question.

However, this leads to another question. Block, Hayek, etc are Libertarians, and this is a position that I find attractive. One of the Amazon reviews of the book pointed out that Ayn Rand opposed the Libertarian position. I was aware of this from reading “The Voice of Reason”, but it is not very clear from that book (which is a selection of essays, not always in a clear context) what the distinction is between Objectivism and Libertarianism. Can someone sum up the distinction and the reasons for AR’s opposition, please?

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Here are a few examples provided in the Ayn Rand Lexicon for Libertarians. (The latter link providing the examples, the former providing links to other terms.)

 

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1 hour ago, Adrian Roberts said:

However, this leads to another question. Block, Hayek, etc are Libertarians, and this is a position that I find attractive. One of the Amazon reviews of the book pointed out that Ayn Rand opposed the Libertarian position. I was aware of this from reading “The Voice of Reason”, but it is not very clear from that book (which is a selection of essays, not always in a clear context) what the distinction is between Objectivism and Libertarianism. Can someone sum up the distinction and the reasons for AR’s opposition, please?

It’s tricky to “sum it up”, for a couple of reasons:

  1. Libertarianism isn’t a single, consistent, homogeneous position. Libertarians often contradict each other, and the movement has evolved over time.

  2. There are a lot of common elements between Objectivism and the beliefs of many Libertarians. It’s important to note that Ayn Rand was opposed to the Libertarian movement, as it existed at a given point in time (especially when Murray Rothbard was the most notable, or at least the most noticeable, Libertarian figure). We shouldn’t assume that she would still be as strongly opposed to them today.

In my experience, many Libertarians have in fact since adopted a more rational approach to politics and philosophy in general…often thanks to the direct influence of Ayn Rand’s writings. So I think she would be a lot more pleased with the level of political discourse among at least some Libertarians.

She wouldn’t be pleased with others, though. There is still a strong anarchist movement among Libertarians, and there are few things Rand despised more than anarchism. And rightfully so, anarchism is just a shallow understanding of capitalism taken out of context. Anarchists look at the effects of capitalism (competition, justice, prosperity, freedom), and instead of understanding the cause of those effects, think that those effects are causeless, natural occurrences that we could achieve simply by doing nothing.

So yeah, Ayn Rand looked at the anarchist streak among Libertarians, and saw a corrupted, out of context, poorly understood version of her own philosophy. Understandably, she didn’t care for it. But, to the extent Libertarians embrace capitalism instead of anarchism, they are a positive movement Objectivists should have no problem working with.

 

 

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One thing to keep in mind Adrian, is that the task of validating an economic system is not primarily one of determining whether it “works” according to some economic goal or economic ideal, because “economic system” generally means something which may or not be imposed upon people, it must be validated ethically, i.e. morally validated in accordance with justice and man’s rights.

Capitalism as such is “hands off”, it is not a “system” of economics in that it is not a managed, regulated, imposed machination (aka system), it is merely recognition that insofar as the justice system and protection of individual rights is in place there ought to be no interference in the economy by the state, i.e. a separation of “economy and state”.

Capitalism is valid, but not because it “works”, in fact Rand herself emphasized the moral justification of capitalism was not related to its being the best way of achieving some arbitrary “greatest common good”, but that it is valid because it is the only morally just system.

A true capitalist is one who acts and upholds the rights of others to so act freely in the economic sphere (free from government controls) and consistent with (valid) individual rights (i.e. in accordance with the trader principle, respecting contracts, avoiding fraud etc.).

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That makes sense; so it is the Anarchist element of Libertarianism that is the problem; Anarchy will inevitably lead to a statist government emerging out of the strongest gangs in a lawless environment; and Objectivism is much better defined and thought-through than Libertarianism.

Going back to “Defending the Undefendable”: I’m going to have to think through the implications. I don’t see a problem with prostitution being legal, so long as the sex workers concerned have chosen this role voluntarily, i.e are not victims of trafficking. But when it comes to drugs: some of the clients that I work with are drug users; there is an ongoing debate about to what extent their addiction is medical rather than moral, and I am not sure whether legalising drugs would help.

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26 minutes ago, Adrian Roberts said:

Going back to “Defending the Undefendable”: I’m going to have to think through the implications. I don’t see a problem with prostitution being legal, so long as the sex workers concerned have chosen this role voluntarily, i.e are not victims of trafficking. But when it comes to drugs: some of the clients that I work with are drug users; there is an ongoing debate about to what extent their addiction is medical rather than moral, and I am not sure whether legalising drugs would help.

Adrian,

Many of the thornier problems of addictive behavior will linger in any society. Alcoholism and other means of “self-medicating” are conditions best left up to the individual, although consuming anything that would impair one’s ability to operate equipment safely could be a matter of regulated policy, such as through an employer and insurance agencies. If a person is unable to cope with life, nothing will stop them from finding a way to alter their own consciousness, or even destroy themselves. Of course, you deal with such people as a professional, and obviously these people are seeking help with their problems. Personally, I believe the decriminalization and ultimate legalization of illicit drugs should logically follow a new social norm, a norm of holding one’s sanity, sobriety, and rationality as virtuous, rather than one in which lighting up a cigarette is the normal behavior of a person in early adolescence transitioning to adulthood. Of course, this is a bit of a pipe dream (no pun intended). But if Western Civilization is to survive, it will be through the broad understanding that one’s mind is of primary value to the individual’s survival, and that the use of medications is best limited to professional oversight. For the time being, I think it’s best to keep government controls on the most dangerous drugs.

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Quote

…logically follow a new social norm, a norm of holding one’s sanity, sobriety, and rationality as virtuous,…

You would have thought this would be self-evident, but sadly not. As Richard Feynman said when asked (in the 60s) why he didn’t experiment with drugs “I don’t like to mess with the machine” [his mind]. Sadly, there were plenty of pseudo-intellectuals at the time, the Timothy Learys of this world, who were only too willing to do so. And sadly, experimenting with drugs has become a rite of passage for young people which leads some into addiction. I would like to be able to say that if it is “only cannabis” it is less of a problem than alcohol, but unfortunately the latest, stronger varieties, called “skunk” in the UK, almost certainly cause or at least exacerbate psychosis.

So perhaps legalisation would be a step too far in the Libertarian direction.

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Adrian,

We do not live in what I’d like to call, The New Age of Reason. Neither did we in the 1960s. In fact, the prevailing philosophy of Western Civilization is one that combines mysticism, science, and a general belief that man has some sort of inherent limitation to all knowledge. We certainly did not apply the Objectivist principles in the 1960s. Ayn Rand had made comments about the use of psychedelic drugs, with a somewhat wry, “what did you expect,” theory that the elders of that generation had willfully accepted philosophies and theologies that left the young to seek refuge in hallucinogenic experience, as well as Eastern mysticism. Her philosophic alternatives had only just been introduced. The social norms of the times included such rationalizations as, “pot is less harmful than drinking, so why not?” And of course, any of us who remember those times can remember “sex and drugs and rock and roll,” whether it was Ian Dury shouting it or your best friend. Just as with poverty and violence, substance abuse, as with many of our social evils, are inherited from our more savage past. Perhaps the “gateway drug” is not the filter tipped cigarette, but rather a social norm that fails to address the root cause of addictive behavior. While the 60s offered a much wider variety of trendy chemical amusement aids, the message of beautifying and strengthening the mind was muted by a continual message of hedonism and rebellion. Objectivism has only begun to influence a new generation, and with the spread of its influence, there is hope for a New Age of Reason.

Addendum: As for Libertarian preferences, it is my understanding that any law that restricts the consumption of anything would be unacceptable. And for that reason, I do not identify as Libertarian, although I have openly admitted to voting in that direction, as it is a formal party and an option that better reflects my political philosophy. (I think it is likely that I will cast my presidential vote in that direction again this year, and if you’ve been following that American elections, you understand why.) My primary point is that our society at present is too muddled with altruism, collectivism, socialism, and mysticism, and that any change toward a more rational norm, if forthcoming at all, will be gradual. And any changes in law cannot be expected to be any less gradual.

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Adrian,

Realizing that the above post has little to do with the title heading, I want to offer this item to the conversation, being that the subject of Libertarian policy-making has come up. The profit incentive for growing cannabis in Mexico has taken a beating:

http://www.latimes.com/world/mexico-americas/la-fg-mexico-marijuana-20151230-story.html

Merchandising marijuana legally in the US has had an effect on the illegal trade. As it relates to your opening post, these farmers, whether legal or illegal, are producing a product for a willing market. The free-market solution to an illegal trade is to make it a legitimate trade. Of course, this does not address the problem of substance abuse or addictive behavior. In a truly moral society, might I add, an Objectivist society, the individual must be the arbiter of his/her own consumptive habits. For twenty-five years, I’ve watched the effects of legitimized gambling in a nation were it was once illegal, or at least very limited. I haven’t researched any statistics on the matter, but I would venture to say there are more degenerative gamblers today than before. And operating illegal gambling has not been eliminated either, but the option for consumers to experience this form of entertainment is much less likely to become a stigmatizing and unlawful act, but neither is it likely to directly expand the loan-sharking industry. Nonetheless, casinos can be a source of income for some, even if they are merely transferring or redistributing the wealth. It is being done voluntarily.

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I didn’t realise that marijuana was now legal in the USA; is it just in some states?

Over here, on the whole consumption of hard drugs such has heroin has declined, though cocaine use has risen. I do think that on the whole, young people take life and their career more seriously than we did in the 1970s. Perhaps having to pay for university tuition fees is creating a sense of ownership! Certainly it is not “cool” among youngsters to have no ambition or purpose in life, so maybe things have improved since the 60s. I said on another thread that Margaret Thatcher introduced ideals in the 1980s that were essentially objective; people like me who were young in the 80s thought we knew better, but in fact her premiership was a watershed in British culture. State ownership of utilities was dismantled in that decade.

(I am not sure what is the current term for “cool” these days; my children tell me that if I say “cool”, I’m not).

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Adrian Roberts,

You’re cool. (However, in the US, the term, “awesome,” is now the adjective of choice for positive affirmation among the younger set.) Indeed, decades of marijuana liberation campaigns, mostly focused on medical use, have led to legal sales and use in some states, Colorado, for one. So, the times they are a changin’. I am impressed by the fact that marijuana will someday carry no legal penalties; I am not as optimistic for a generation of habitual stoners no longer restrained by legal penalties. You mentioned the rise of cocaine use and the waning of heroin; here in the States, heroin is on the rise, along with other opium-based pharmaceuticals. This has been a hot topic in the news lately; the source of this trend, from what I understand, is the increase of such prescribed medication from licensed physicians, not the illicit vendor. So, even when a commodity of this sort falls under the category of “controlled substance,” mistakes can happen. In any case, there are a great many people, young and old, who don’t understand their responsibility to themselves, and seem to shun the idea that they have the ability to do so. I am quite sure you understand this common problem more than I do. But in all honesty, I remember well the '80s, and it was in those years that I straightened out my own life, recognizing the errors of my chosen circle of associations and friends. As with British leadership under Margret Thatcher, Ronald Reagan often spoke of self-reliance and reduced dependency on government. The “Culture War” in America had already been established, and we could debate as to when it started, but suffice it to say, the 1960s drew very clear lines between those now known as “conservatives and liberals.” The efforts to launch anti-drug campaigns were mixed, if not futile. And as you mentioned, young people today realize that their own lives are at stake in the pursuit of better life-styles, a sign that reason is in vogue for some. Selfishness is awesome. Nonetheless, the political agenda, as viewed by the typical American conservative, in broad terms, is one that prefers a somewhat authoritarian form of capitalism linked to a moral standard based on Christianity, (or Judeo-Christianity, if one wishes to be more inclusive.) The liberal camp seeks some sort of wealth equality, something utterly unrealistic. Their justification for this equality is essentially an altruistic goal. I can assure you, no good will come of either approach, if taken to its extreme. I don’t believe I’ll see the worst of either scenario in my lifetime. But if Western Civilization is to endure, its citizens must identify the problems honestly for what they are, rather than grasping for short-term legal solutions and Ole Time religion. Every time another economic disaster happens, the solution seems to be to add another lair of government bureaucracy on top of it, often promoted by some superstar celebrity politician. I have no idea what a totally free-market/laissez faire economy would look like in the 21st century, one that is dynamic and moral, with a minimum of government restraint. But I know that the people are not demanding it. And therein lies the problem.

I have a theory that people are more inclined to use mind-altering drugs, and turn to mysticism, when they find that they can no longer trust the institutions that they were told to trust. When the authorities can no longer be trusted, and the economic situation seems ever more hopeless, people become ever more desperate. Ms Thatcher restored some trust in government and its institutions, in spite of the controversies of her privatizing policies. There are many who will scream of the “injustice” of privatizing national industries and institutions. This is why it is so important for people to seek the answers through an ideology based on reason before it is too late. My recommendation: Objectivism.

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In the UK, religion doesn’t have the same influence as in the USA, though when people reject organised religion they tend to take refuge in some kind of vague spirituality. They will say “my dead relative is now an angel in heaven”, which isn’t even Christian theology, but avoids the reasonable but unpalatable conclusion that there is no afterlife. And the politically correct brigade seek to impose a new kind of puritanism on us, and of course its fine to criticise Christianity but we must never criticise Islam.

As you say, people are not demanding a laissez-faire economy. To be fair, I don’t think it occurs to most people that we need an alternative to what we have got. The Welfare state has become part of our national psyche. The answer to any problem is to spend more money on it. There are howls of protest and on-line petitions if someone is denied a new and very expensive medical treatment on the grounds that it will take money away from other needy people. I don’t think I could go as far as dismantling the welfare system altogether, but the unpalatable truth is that there is just not enough money to for the government to do all that people think it should do. “Wishing it was true don’t make it so”.

The nightmare scenario would be Jeremy Corbyn getting into power and trying to turn the clock back to the 1970s. If the electorate are really fed up he may just get the vote in the same way as Donald Trump might.

 

 

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11 minutes ago, Adrian Roberts said:

 And the politically correct brigade seek to impose a new kind of puritanism on us, and of course its fine to criticise Christianity but we must never criticise Islam.

 

Yes, of course. The Left/liberal political wing advocate moral relativism; “diversity” is the objective for all organizations, rather than productivity.

But, breaking the news to people that their faith is irrelevant is not going to end well, either. So, I normally avoid that one, opting for a discussion on capitalism, which has more solid examples to draw from. If it is clear that someone is an incurable altruist or socialist, that conversation will be a short one.