How A Dead Woman Brought Down The World Economy
The roots of the sub-prime mortgage implosion, and subsequent recession, can be traced back to novelist, Ayn Rand, who passed away in 1982. Ms Rand, who was a Russian born immigrant, wrote many works based upon her philosophical concept of ?Objectivism?. Her most famous Objectivist work was the 1957 novel, ?Atlas Shrugged?.
Objectivism derives its name from the idea that both knowledge and values are objective, and not subjective. The main tenants of Objectivism include, but are not limited to:
? Reality exists independent of consciousness.
? Individuals are in contact with this reality through sensory perception.
? People can gain objective knowledge from perception through the process of concept formation and deductive logic.
? The proper moral purpose of one’s life is the pursuit of one’s own happiness or self-interest.
? The only social system consistent with this morality is full respect for individual rights, embodied in laissez-faire capitalism.
Ayn Rand described the objectivist theory of capitalism in the following quote: “When I say “capitalism”, I mean a full, pure, uncontrolled, unregulated laissez-faire capitalism-with a separation of state and economics, in the same way and for the same reasons as the separation of state and church.”
Rand?s writings and laissez-faire economic philosophy earned her a devoted following, including a young Alan Greenspan. When Alan Greenspan moved into his role as Chairman of the Federal Reserve, he brought along the objectivist theory that the markets would work best if self-interested capitalists ran them. During his tenure, Greenspan chose to allow market players to bring on sub-prime mortgages, debt securitization, and derivatives. He allowed these unregulated players to run amok by providing exotic mortgages to people who had little or no chance of repaying them, selling slices of those mortgages upstream to greater fools, and then taking bets on whether or not they would default.
Following the collapse of the credit markets and the World economy, Alan Greenspan testified to the House Committee on Oversight and Reform. During that testimony, he reluctantly made the following admission: ?Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief.? Rand and Greenspan should have considered the possibility that the self-interest of some will be contradictory to the self-interest of others.
In an ironic twist, sales of ?Atlas Shrugged? are now hitting all time highs, as right wing conservatives point to the novel for reasons why the Obama administration?s social and economic policies will fail. If there?s one thing we?ve learned from history, it?s that we never learn from history.