Atlas Shrugged: Regulatory Capture

Atlas Shrugged, p.48-53

Orren Boyle, Jim Taggart, Hank’s friend Paul Larkin, and someone named Wesley Mouch are having a conversation over drinks in a bar on top of a skyscraper in New York City. Boyle is complaining bitterly about being snubbed by Taggart Transcontinental, insisting that his failure to deliver the rail they needed isn’t his fault.

“My purpose,” said Orren Boyle, “is the preservation of a free economy…. Unless it proves its social value and assumes its social responsibilities, the people won’t stand for it… After all, private property is a trusteeship held for the benefit of society as a whole.” [p.49]

Obviously, Ayn Rand considers “social responsibility” a dirty word, and since these assertions are placed in the mouth of an evil socialist, we’re meant to reject them outright. (John Milton did the same trick in Paradise Lost, giving Satan some perfectly reasonable arguments against Christian theology.)

But it’s worth asking, regardless: What does an Objectivist world offer the vast majority of humanity? No matter our talents, most real people aren’t inexhaustible, omnicompetent super-capitalists like Rand’s protagonists. What would make Rand’s ideal civilization different from a feudal oligarchy, where a handful of ultra-rich control all the property and extract rents from everyone else, consigning us all to perpetual debt slavery? We’ve seen societies like that, many times, and they often don’t end well for the rich. (Pre-revolutionary France comes to mind.)

Like it or not, you can’t build a civilization with just a handful of corporate executives. Any functioning society, whether it’s capitalist, socialist or something else entirely, requires the assent and the cooperation of great numbers of people. And if you want people to cooperate, you need to answer the question of what your society offers them in return. If the answer is “nothing”, there’s no reason to expect them to play along. And make no mistake, a peaceful free market isn’t a spontaneously arising state of affairs; it absolutely requires the supervision and protection of a government to thrive. I’ll discuss this in more detail later.

Orren Boyle had appeared from nowhere, five years ago… He had started out with a hundred thousand dollars of his own and a two-hundred-million-dollar loan from the government. Now he headed an enormous concern which had swallowed many smaller companies. This proved, he liked to say, that individual ability still had a chance to succeed in the world.

We’re meant to laugh scornfully at this line, and in isolation I suppose it’s pretty funny. But the humor seems more than a little hypocritical when we find out that most of Rand’s protagonists are the scions of rich families, and inherited their own immense wealth and privilege. I’ll write more about this later as well.

Getting back to that bar, the four of them are discussing a national policy aimed at “giving everybody a chance at his fair share of iron ore”, by which they mean taking over Hank Rearden’s mines. This is meant to set alarm bells ringing, especially because one of the four, Wesley Mouch, is Rearden’s Washington lobbyist.

Let’s just quickly check off the implausibilities here. First: How does a huge steel company employ just one lobbyist? This doesn’t seem at all probable. In the real world, in 2013, U.S. Steel alone had nine lobbyists, plus many industry coalitions and trade groups employ their own. This makes sense when you consider that a large corporation would want to lobby all the hundreds of members of Congress who might cast votes on bills that concern it, not to mention all the government agencies that might create rules or make purchasing decisions involving its product.

Second: How is Rearden so disconnected from the workings of government that he apparently doesn’t even know who his own lobbyist is talking to? How does he not deal with the government regularly, even as a customer? Don’t they buy steel to build bridges or to make reinforced concrete for roads and buildings? Doesn’t the military buy steel to make missiles and tanks?

Third: How did this guy get hired in the first place? As is obvious, Mouch is about to stab his employer in the back. Clearly, he’s one of the evil socialists who has no concern for private property or free enterprise (because people with those beliefs are very common among private-sector corporate lobbyists, don’t you know). So what did Rearden ever see in him? What did Mouch say in the job interview?

I just want to dwell on this bizarre idea of a corporate lobbyist willingly siding with the government against his own employer. In the real world, most countries have to grapple with the problem of “regulatory capture“, where government agencies whose purpose is to enforce the law are gradually taken over by the industries they’re supposed to be overseeing. Usually, regulatory capture is the product of a revolving door between government and industry, where regulators who turn a blind eye to violations or hand out lucrative no-bid contracts are rewarded with a cushy job offer at the firms they used to regulate. The Japanese name for the same phenomenon is “amakudari“, which literally means “descent from heaven”.

Rand appears to be positing a reverse regulatory capture, where richly-paid private-sector lobbyists are seduced and corrupted by the temptation of a coveted job in the government bureaucracy. Needless to say, this never happens in real life, but it does fit into her vision of a bizarro world in which wealthy businessmen are powerless outsiders cruelly mistreated by the government. The reality is that the wealthy have always had enormous power and influence, if not outright control of politics.

As I’ve mentioned before, you could come up with an explanation for how the rich came to be so despised, but that might require treading on dangerous ground for Rand. It might involve things like sweatshops, factory fires, building collapses, colonialism, banana republics – in short, some suggestion that the rich might have done something wrong at some point. And that’s a possibility she steers well clear of. It’s safer for her to say that the opposition to capitalism is entirely irrational, that people hate the rich for no reason at all.

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