Adam Smith, Ayn Rand, and the Power of Stories

The power of their stories as well as their theories has inspired criticism. Advocates of equality write counter-narratives associating proponents of free markets with villains from popular culture (such as Gordon Gekko) who function as metonyms for corruption. A recent example is Lisa Duggan’s Mean Girl: Ayn Rand and the Culture of Greed (2019).2 Duggan compares Rand to the “Plastics” in the cult film Mean Girls (2004), where a clique of young women maintain their popularity in high school through both fashion and cruelty. She details how Rand, “the original mean girl,” supported “corrosive capitalism” by making “acquisitive capitalists sexy.” Rand’s novels, the key to her influence, “provide a structure of feeling—optimistic cruelty—that morphs throughout the twentieth century and underwrites the form of capitalism on steroids that dominates the present.” The results are “economic exploitation and political domination.” (Duggan xi, xv, 5, 83)

Such narratives lack originality as well as accuracy, but those are not their objectives. Duggan acknowledges that she is not writing literary criticism or biography or social history (as we see in Jennifer Burns’s Goddess of the Market: Ayn Rand the American Right). Instead, Duggan is producing something that “belongs to American cultural studies, grasped through a global frame” and created “via analysis and speculation” (Duggan xvii).

Using these strategies, Duggan shapes a familiar story that affirms the cruelty of capitalism and promotes systems designed to create equality. One reviewer notes that Duggan’s book is “an exercise in emotional upheaval. One minute I was laughing out loud, the next crying into my tea.” He adds, “It is a terrific book only partly about Rand, because it is really an intellectual history of neoliberalism—and its toxic outcomes.” Another writes with obvious relief, “Lisa Duggan does a deep dive into Ayn Rand so that we don’t have to.”3 Such readers ironically replicate the snobbery of the Plastics, accepting Duggan’s disdain for Rand’s “middle-to-low brow aesthetic preferences,” as if only those with bad taste could like Rachmaninoff and free markets (Duggan 4).

How does one respond to such counter-stories? How does one make the case for the free society when that ideal has been distorted, its proponents reduced to high-school divas whose brutality is simultaneously mocked and imitated?

Economics and Story-Telling

Here I offer one answer: a short narrative about what key advocates of liberty really say, how their theories evolve, and why their stories illustrating those theories resonate. I focus on Adam Smith and Ayn Rand, two figures critical to what Nicholas Capaldi and Gordon Lloyd call the “liberty narrative,” which runs parallel to and in conversation with the “equality narrative” promoted by philosophers such as Jean-Jacques Rousseau and Karl Marx.4 Rand’s and Smith’s interests in economics, morality, and aesthetics render them a natural pairing. By examining how Smith and Rand contribute to the debate over liberty vs. equality, we can see how Duggan attempts to shut down conversation through smears rather than facts.

These writers depicted the free society from the start of a period of unprecedented prosperity in the late eighteenth century to a point when liberty seemed under attack in the mid-twentieth century. Adam Smith, often called the founding father of modern economics, wrote in the latter half of the eighteenth century, at the start of the Industrial Revolution. In his treatise An Inquiry into the Nature and Causes of the Wealth of Nations (1776), Smith examines how and why nations gain wealth, and the role of government and businessmen in furthering or hindering that growth. There and in The Theory of Moral Sentiments (1790), he often includes brief narratives illustrating his ideas. His writing at the start of the American Revolution is psychologically astute and prescient in emphasizing how the colonists “feel in themselves at this moment a degree of importance” rarely felt by those in Europe:

• From shopkeepers, tradesmen, and attornies, they are become statesmen and legislators, and are employed in contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world. (WN IV.vii.c.75, page 623)

This success of America was realized by the early twentieth century, when Ayn Rand immigrated to the United States from Russia.

Often included among the founding mothers of liberty, Rand was both impressed by the founding principles of the United States and concerned with its potential demise.5 In the dystopian Atlas Shrugged (1957), she imagines how nations lose wealth, with government and corrupt businessmen (like James Taggart) furthering or hindering that loss. Her technique is what she called “Romantic Realism.” She creates plots that could happen but presents a Romantic ideal of her heroes, who occasionally deliver philosophical statements that clarify Rand’s principles. One protagonist, Francisco D’Anconia, pays tribute to America as “a country of money,” which he argues means a country of justice and freedom. He warns, “You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it’s crumbling around you, while you’re damning its life-blood—money” (Atlas Shrugged 414).

By reading these authors together, we see a thread of values affirming the liberty narrative running from Smith to Rand.6 I focus on three related ideas made vivid through their story-telling: voluntary exchange, the connection between trade and liberty, and the preservation of liberty only when government can be restrained. Rand extends this thread but modifies it by responding to arguments by Marx and other advocates of equality. She renders the ideal of the free society particularly compelling by creating liberty-minded heroes with whom readers can sympathize, and by portraying both the morality of capitalism and the immorality of collectivist policies.7

It is this point that Duggan and other story-tellers of equality are most anxious to elide by linking Smith and Rand with the Gekkos and Plastics of popular culture. While economists may disagree about whether and how morality should enter into discussions of free markets, general audiences remain fascinated by stories with a moral component. Here I attempt to show their power.

(1) Stories of Voluntary Exchange

From Smith to Rand, advocates of liberty have endorsed voluntary exchange as the way to advance self-interest as well as national wealth. For both of these writers, such exchange affirms the dignity of traders and is one feature that distinguishes humans from animals. In Wealth of Nations, Smith famously identifies “a certain propensity in human nature… to truck, barter, and exchange one thing for another” (WN I.ii.1, page 25). This is not what dogs do with one another: “Nobody ever saw one animal by its gestures and cries signify to another, this is mine, that is yours; I am willing to give this for that.” Indeed, he notes, “a spaniel endeavours by a thousand attractions to engage the attention of its master who is at dinner, when it wants to be fed by him” (WN I.ii.2, page 26). But humans typically differ:

• It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend upon the benevolence of his fellow-citizens. (I.ii.2, pages 26-27).

Note that Smith does not simply state that traders exchange what they value. He says that “We” address people that we encounter, like “the brewer, or the baker.” We see “ourselves” buying a loaf of bread or bargaining for a cask of ale. His vivid formulation connects readers with the process of trade in eighteenth-century society.

Rand’s Atlas Shrugged reflects her view of exchange in the twentieth century. This novel begins with a character (Eddie Willers) giving a dime to a beggar, who responds, “Who is John Galt?” The question both expresses despair and signals the novel’s mystery: Where are the men of talent going, and why? The answer is that men like Galt have gone on “strike” because they refuse to live for beggars or at the mercy of looters. “The symbol of all relationships among [rational] men, the moral symbol of respect of human beings, is the trader,” Galt explains (AS 1022). A trader, he adds, earns what he has and refuses to give or take the unearned.

Her most compelling illustration is Jeff Allen’s narrative about what happened at the Twentieth-Century Motor Company when its owner died and his children “reformed” the company. Readers will recognize the variation on a slogan popularized by Karl Marx: “The plan was that everybody in the factory would work according to his ability, but would be paid according to his need” (AS 660-61). Soon, however, Allen and his friends discover that “need” would be determined by a group vote. “It took us just one meeting to discover that we had become beggars—rotten, whining, sniveling beggars, all of us, because no man could claim his pay as his rightful earnings.” But the condition of beggar was only a stopping point in the workers’ regression. When the factory’s production fell, those voted the most able were sentenced to work harder. “Do I have to tell you what happened after that—and into what sort of creatures we all started turning, we who had once been human?” Jeff asks (AS 662). He affirms that within a year, “there wasn’t an honest man left among us” (AS 665). Rand’s narrative contains the core thread of Smith’s in her focus on trade as a dignified, human activity, but she reinforces it by including an inset story about the alternative thread, figuratively dyed red to illustrate the danger that collectivism poses to humanity and morality.

(2) Stories of Commerce and Liberty

For both Rand and Smith, commerce enables not only prosperity and dignity but liberty. Smith makes this point explicitly in The Wealth of Nations:

• Thirdly, and lastly, commerce and manufactures gradually introduced order and good government, and with them, the liberty and security of individuals, among the inhabitants of the country, who had before lived almost in a continual state of war with their neighbours, and of servile dependency upon their superiors. This, though it has been the least observed, is by far the most important of all their effects. (III.iv.4, page 412)

As scholars from Dennis C. Rasmussen to Richard C. Ebeling have noted, Smith saw this freedom as a crucial benefit of commerce.8

Rand makes a similar point in Atlas Shrugged, first in a warning by Francisco D’Anconia: “Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of moochers, who claim your product by tears, or of the looters, who take it from you by force” (410). Once looters are in power, society spirals into disorder: “Blood, whips, and guns—or dollars. Take your choice—there is no other—and your time is running out” (415). By the end of the novel, the nation’s economy is failing, and society has degenerated into gangs.

A group of government and business leaders meet to discuss what to do. The heroine, Dagny Taggart, advocates using their limited resources to save the Eastern states so that they can rebuild: “Let us shrink back to the start of this country, but let us hold that start” (AS 946-47). But Dagny’s companions are eager to wield the “whips” about which Francisco had warned. “With trouble and riots everywhere, you won’t be able to keep people in line unless you have transportation—troop transportation—unless you hold your soldiers within a few days’ journey of any point on the continent,” advises the aptly named Cuffy Meigs (Rand, AS 947). Rand filters Cuffy’s speech through Dagny’s perspective to clarify the country’s terrifying regression:

• She, born of the industrial revolution, had not held as conceivable, had forgotten along with the tales of astrology and alchemy, what these men knew in their secret, furtive souls… that men who live by pulling levers at an electric switchboard, are not easily ruled, but men who live by digging the soil with their naked fingers, are—that the feudal baron did not need electronic factories in order to drink his brains away out of jeweled goblet…. (AS 948)

For Smith, the feudal baron and the “servile dependency” he enforced were the past. The future was commerce and freedom. Rand warns that such brutality and dependency would return if government were allowed to stifle commerce.

(3) Stories of the Man of System and Men of the Mind

In fact, for Rand and Smith, a key irony is that government is both the institution that should protect us and the institution that most endangers our freedom and prosperity. Both argue that commerce succeeds when individuals are left to pursue their own self-interest, which has the consequence of advancing the interests of society. Government officials cannot accurately judge an individual’s local situation and should not attempt to control it, Smith advises in Wealth of Nations. The statesman who does so would “assume an authority which could be safely trusted, not only to no single person, but to no council or senate whatever” (WN IV.ii.10). This arrogant statesman appears even more vividly in Theory of Moral Sentiments, where Smith creates narratives about how and why the “man of system” gains and abuses power. The most critical appear in a section he added after the start of the French Revolution (VI.ii.2.15-17, pages 232-234).

First, Smith examines the political consequences of the “spirit of system” during a time of disorder. People who are suffering turn to political leaders who promise not only to eliminate their distresses but to prevent their return. They do so by revising essential parts of a government system that has long enabled peace and prosperity (TMS 232). Such drastic measures achieve nothing and hinder real progress. Why, then, do the political leaders pursue this course? Here Smith offers an interesting bit of psychology, suggesting that some become “the dupes of their own sophistry,” while others fear to disappoint their followers (TMS 233).

He adds that “the man of system” persists because he is “very wise in his own conceit” and insists on every detail of his ideal plan. Again, Smith gives us access to this figure’s thoughts before analyzing his error:

• He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of its own, altogether different from that which the legislature might chuse to impress upon it. (Smith, TMS 234)

If individuals act in opposition to the hand controlling the chessboard, “the game will go on miserably,” and society will be in disorder (Smith, TMS 234.) However brilliant, a statesman cannot plan everything because he does not control individuals, who may choose to move, or refuse to move, or even leave the chessboard.

It is the last group that interests Rand, who in Atlas Shrugged depicts men of the mind who go on “strike.” Rand renders that strike appealing through showing a series of laws and directives that restrict liberty and commerce. One of them, the Equalization of Opportunity bill, prevents anyone from owning more than one business. Its name suggests fairness; its effect is injustice. Rand conveys that injustice when Hank Rearden learns he will have to sell several businesses. He reflects, “In the matter of his life being torn piece by piece out of him, he was to have no voice, no purpose, no way, no defense” (214). While meditating on his work, however, Rearden imagines a design for a new bridge, and he leaps into action. This scene engages readers in two ways that Douglas Den Uyl has shown as typical in Rand’s novels: it prompts sympathy for the injustice of Rearden’s situation, and it prompts aspirational sympathy for his virtues: purpose (a Randian virtue) and fortitude (a virtue Smith notes we admire in heroes).9

Rand shows that such bills only hasten the economic downturn, leading to further plans from the men of system: Mr. Thompson, head of state; and Wesley Mouch, “Top Co-ordinator of the Bureau of Economic Planning and National Resources” (333-34). Mouch—who has become the dupe of his own system—thinks the solution is to “hold the line” by using more control, not less (536). His new Directive 10-289 therefore replaces the existing system with a faulty one. The directive consists of eight points, including rules against changing jobs, closing businesses, or owning patents. Since Mouch consults leaders of labor and business and science (an even more corrupt version of Smith’s “council”), they exchange favors for privileges. Rather than holding still, they demand concessions that move the country backwards in what the labor leader, Fred Kinnan, calls “the anti-industrial revolution” (544).

Disorder ensues on the chessboard of society: laborers quit their jobs, businesses close, and Galt replaces an intended broadcast by Mr. Thompson with his own, urging the government, “Get out of the way.” Instead the government launches a massive hunt to find him. Once Galt is captured, Mr. Thompson decides that to regain control, he needs Galt to tell him what to do. As a man of system, he is committed to a vision of stability achieved by planning: “We’ve got to preserve the system” (AS 1099). And here is Rand’s masterstroke for liberty. When Galt refuses, Thompson’s allies physically torture Galt: “We order you to give orders!” (1143). This scene conveys the insanity of a system based on true cruelty and state control, as well as the ineptness of those who favor it. When the torture machine breaks, Galt’s captors are too stupid to repair it. He escapes with his allies on strike to “Atlantis.”

Conclusions

So what does my story show? And how does it help us respond to counter-narratives such as Duggan’s? First, this narrative returns our attention to fundamental issues that have concerned advocates of liberty from Smith to Rand, helping us to understand their arguments for resisting the equality narrative informing books such as Duggan’s. While Duggan suggests that capitalists are inspired by the sexiness of “cartoonish” heroes who advocate “cruelty,” my story suggests that advocates of liberty have long sought to understand the pragmatic and moral problems that individuals face in society: what really enables us to be free, to be just, to engage with others as dignified, virtuous human beings. And while Duggan implies that such readers embrace racism and exploitation of workers, my story shows how advocates of liberty espouse principles—and stories about principle—that free and enrich all individuals.

Duggan concludes, “Reject Ayn Rand. After all, she rejects you” (90). I argue that what we really need to reject are misreadings of each other and our stories. After all, the whole point of Mean Girls is to move past ridicule so that we can avoid becoming “Plastic” ourselves.

Footnotes

[1] Ayn Rand, Atlas Shrugged (Random House, 1957). The guidelines and creation of Directive No. 10-289 are detailed in part II, chapter VI, “Miracle Metal,” pages 532-549.

[2] Lisa Duggan’s Mean Girl: Ayn Rand and the Culture of Greed is published as part of the series American Studies Now: Critical Histories of the Present (University of California Press, 2019).

[3] Vijay Prashad’s endorsement is quoted on amazon.com; Maggie Nelson’s endorsement appears on the back cover of Duggan’s book.

[4] The Two Narratives of Political Economy, edited by Nicholas Capaldi and Gordon Lloyd (co-published by Scrivener and Wiley, 2011).

[5] See especially her Textbook of Americanism (1946), recently reprinted in A New Textbook of Americanism: The Politics of Ayn Rand, ed. Jonathan Hoenig (Capitalistpig Publications, 2018), pages 2-16.

[6] As other scholars have noted, there are, of course, significant differences. They are beyond my scope here, and do not negate the positions of Smith and Rand within the “liberty” tradition or their symbolic importance for those on the “equality” side.

[7] Rand acknowledges that capitalism is the best way to achieve “the common good,” but “this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is: justice.” See Capitalism: The Unknown Ideal (Signet, 1967), p.12.

[8] Dennis C. Rasmussen, The Infidel and the Professor: David Hume, Adam Smith, and the Friendship that Shaped Modern Thought (Princeton University Press, 2017), pages 162-63; Richard C. Ebeling “Economic Ideas: Adam Smith on Free Trade, Crony Capitalism, and the Benefits from Commercial Society,” The Future of Freedom Foundation, 16 Dec. 2016.

[9] See chapter 7, “Sympathy and Judgment,” in Douglas Den Uyl’s The Fountainhead: An American Novel (Twayne, 199), pages 74-87. On admiring heroic fortitude in characters, see Adam Smith, Lectures on Rhetoric and Belles Lettres (Oxford University Press, 1983; rpt. Liberty Fund, 1985), Lecture XXII, page 130.