Atlas Shrugged: The Workers’ Paradise

Atlas Shrugged: The Workers’ Paradise July 3, 2015


Atlas Shrugged, part III, chapter I

Although the capitalists all going on strike was John Galt’s idea, the valley where they’re hiding out is Midas Mulligan’s possession. This raises some obvious questions about how their society would work in practice, but Dagny seems resolutely uninterested in exploring the matter, and Mulligan never volunteers more than the most basic information. For once, just when we need a Randian Monologue, we don’t get one!

She turned to him. “It was you who established this valley?”

“Yes,” said Mulligan. “It was just my own private retreat, at first. I bought it years ago, I bought miles of these mountains, section by section, from ranchers and cattlemen who didn’t know what they owned.”

… “It’s the destruction of Colorado that started the growth of this valley,” said Midas Mulligan. “Ellis Wyatt and the others came to live here permanently, because they had to hide. Whatever part of their wealth they could salvage, they converted into gold or machines, as I had, and they brought it here… I own the valley and I sell the land to the others, when they want it.”

I pointed out earlier how Rand shrinks from following her philosophy to its logical conclusion, by having her ruthless capitalists live in harmonious cooperation rather than actually competing or trying to drive each other out of business, which by all rights they should do. This is another big example.

Midas Mulligan’s offhand comment about selling land to the others raises some major questions. We know that Galt’s Gulch is a veritable cornucopia: the mountains contain oil, iron and copper deposits; there’s virgin timber to be cut and fish to be harvested. Even the ordinary land can be used to set up large, highly profitable businesses like farms and foundries, not to mention homes.

Why would Mulligan just sell these natural resources at a fixed fee, without knowing in advance how much value might be created from them? Remember, he bought the land “section by section” from ranchers who “didn’t know what they owned” – but if he knows its true value, why would he replicate their mistake by selling it off one piece at a time? Wouldn’t it make more sense for him to lease parcels of land to the other capitalists and charge them rent? In fact, if he wants to make the most money possible (which, as a ruthlessly self-interested capitalist, he surely does), why wouldn’t he set the rent not at a fixed rate, but as a percentage of the profit they use his land and his resources to produce? Does Galt’s Gulch have… taxes?

Long-time readers may remember that this is the exact scenario I set out in “Some Thoughts on Libertarianism“, where I pointed out that there’s no difference between a government controlling a region and imposing taxes on all its citizens, and a private landowner controlling that same region and charging rent to everyone who wants to live there. Or, to put it in more business-oriented terms: If Mulligan is providing the initial investment that allows the others to start up businesses, why isn’t he demanding equity?

It’s not as if Rand was unfamiliar with the concept. You may remember this scene from a much earlier section of the book, where Dagny is trying to raise money to build the John Galt Line, and Hank agrees to be one of her investors:

He reached for his fountain pen, wrote at the bottom of the list “Henry Rearden, Rearden Steel, Pennsylvania — $1,000,000” and tossed the list back to her.

… “Incidentally, I don’t expect to lose this money. I am aware of the conditions under which these bonds can be converted into stock at my option. I therefore expect to make an inordinate profit — and you’re going to earn it for me.”

This is the kind of hard bargaining you’d expect from naked self-interest, but we don’t see it in Galt’s Gulch. Midas Mulligan, the ruthless lender so hard-hearted that he changed his name to “Midas” as a middle finger to his critics, mysteriously transforms into a veritable George Bailey, a kindly-hearted banker who just wants to help out his neighbors.

If the valley is all his land, then Mulligan is the keystone without whom this society wouldn’t be possible, regardless of whether or not they have perpetual motion machines. He should be bleeding the others dry for the privilege of living there. Remember, they have nowhere else to go! They have no choice but to pay what he asks, so he should charge usurious rents that leave even the most productive of them struggling to find the money. He should be ruling like a king and making the others his serfs.

In fact, rent-seeking hardly ever comes up in Atlas Shrugged, period. Rent-seeking is the concept that people who own critical resources can charge for the use of those resources, even though doing so doesn’t create any additional value. The classic example is a feudal lord who owns part of a navigable river and charges a toll to every ship that passes by. But there are more modern, abstract examples: So-called “patent troll” firms that buy up patents, not to make or sell anything themselves, but just so they can sue other, profitable companies whom they accuse of infringing, are the definition of rent-seekers.

Wall Street has also been accused of profiting mostly from rent-seeking, through strategies like high-frequency trading that shift money around more rapidly but create no overall value for society. (In case you’re wondering, yes, someone did rewrite Atlas to be about the financial industry, and it’s glorious.)

Rand sidesteps this by making all her heroes dynamic thinkers and innovators, but outside the bounds of fiction, rent-seeking plays an outsize role in global capitalism. Most of the present distribution of wealth can be attributed to inherited ownership of capital. Needless to say, Atlas would be a very different – but arguably more realistic – book if Hank Rearden or John Galt, rather than being supergenius inventors, were the “heroic” executive officers of hedge funds that managed the inherited wealth of super-rich clients, or real-estate firms that owned portfolios of land and office buildings and made all their profits by charging rent to other companies to live and work there.

Image credit: Public domain, via Wikimedia Commons

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