We are entering an Age of Ayn Rand.
Remember, from Atlas Shrugged, that the non-rich are “moochers”, “looters”, and “unthinking brutes.” The rich, on the other hand, as supposed job creators, are of value.
The term ‘job creator’ has crept into the political lexicon on both sides of the Atlantic. It sounds harmless, but don’t be fooled – it is the quiet vanguard of a political and economic nightmare.
Here are more snippets from a Jan. 19th, 2015, article in _The London Economic_: The Nightmare Economics of Ayn Rand
Calling Ayn Rand a novelist is generous, calling her a philosopher borders on the ludicrous. But her corpus of regressive ideas has ignited the hard right in the United States. The coming Republican presidential primaries will give deficit hawks and would-be economic philosophers ample time to wedge their favourite heroine into public discourse. The mainstreaming of her ideas has been going on for years, but in parliament houses from Washington to London, there is a now a groundswell of support for policy decisions that consciously and unashamedly favour the rich.
Today, Rand’s policies are embodied by US politicians like Rand Paul (yes, he was named for her) and Ted Cruz, both potential Republican presidential candidates. Cruz wants to abolish the IRS and the minimum wage, Paul wants to get rid of laws that stop businesses from committing racial discrimination. The message is simple: let the rich do whatever they want and everyone will benefit. It’s important to understand what Rand’s devotees think those ‘benefits’ are. We’re used to hearing the hard right call welfare recipients ‘takers’ or even ‘parasites’ but to Ayn Rand, ordinary workers were parasites, too. Employees are a regrettable but necessary component in running a business and their cost should be kept as low as possible. The worker is a tedious commodity, like an ink cartridge for the photocopier. And the most pernicious idea is that workers should feel grateful to their super-rich bosses. No ‘job creators’ mean no jobs, right? Your subsistence wage wouldn’t get paid without the initiative of the millionaire CEO.
A philosophical system that sees workers’ rights as a barrier to business, that ignores macroeconomic reality and always blames the poor for being poor, that elevates the rich to the status of economic saviours – that is the new reality for America’s conservatives. It is slowly but consistently seeping into the mainstream conservative outlook on this side of the Atlantic. Any political party that promotes tax cuts for the rich while simultaneously cutting protections for workers and the poor is on the outer edge of the Ayn Rand economic death spiral.
John Cassidy (New Yorker) reports on how serious the incoming administration is about Randian economics - and realizing the society envisioned by Rand - in Ayn Rand and corporate tax cuts won’t mend the economy. Cassidy argues that “The theories being trumpeted by Trump and his allies have been put to the test, and they have failed.”
In a post on LinkedIn the other day, Ray Dalio, one of the world’s richest and most successful hedge-fund managers, offered some thoughts on the incoming Trump Administration. If “you haven’t read Ayn Rand lately, I suggest that you do as her books pretty well capture the mindset,” Dalio, the founder and chief executive of Bridgewater Associates, wrote. “This new administration hates weak, unproductive, socialist people and policies, and it admires strong, can-do, profit makers. It wants to, and probably will, shift the environment from one that makes profit makers villains with limited power to one that makes them heroes with significant power."
Dalio, whom I profiled, in 2011, himself holds a harsh, Darwinian view of the world. One of his sidekicks at Bridgewater, David McCormick, is being considered for a senior post in the new Administration. Dalio, however, views himself as an analyst and investor rather than a partisan, and his unvarnished post reflects the reality that Donald Trump, after running as an economic populist and tribune of the working stiff, has stuffed his Cabinet with billionaires, bankers, and conservative political ideologues.
Remember that Trump is the guy who stiffs his contractors and is now stuffing the swamp with more alligators. You gotta wonder how long it will be before those who voted for him catch on.
“This will not just be a shift in government policy, but also a shift in how government policy is pursued,” Dalio wrote. “Trump is a deal maker who negotiates hard, and doesn’t mind getting banged around or banging others around. Similarly, the people he chose are bold and hell-bent on playing hardball to make big changes happen in economics and in foreign policy (as well as other areas such as education, environmental policies, etc.).”
That view is in perfect accord with Trump’s cabinet picks in those “etc.” areas other than the military and commerce.
One of the economic claims promoted by Trump and other conservatives is that if we treat corporations and the rich very well, good things will happen. Cassidy does not see that happening. It’s already been tried and failed.
[Dalio again writes] "… if this administration can spark a virtuous cycle in which people can make money, the move out of cash (that pays them virtually nothing) to risk-on investments could be huge,” he wrote. In addition, he went on, Trump’s America could also attract a lot of capital from abroad, because a “pro-business US with its rule of law, political stability, property rights protections, and (soon to be) favorable corporate taxes offers a uniquely attractive environment for those who make money and/or have money.”
Although Dalio used some of Keynes’s language, this is not actually a Keynesian argument. It is the sort of Randian analysis long favored by many people on Wall Street, and recently promoted by some of Trump’s closest economic advisers: if you want capitalism to work more effectively, offer greater rewards to the capitalists. Cut taxes, rein in regulation, and create an environment that incentivizes financial risk-taking. The free market—or, rather, the John Galts who inhabit the free market—will do the rest.
Cassidy lays out reasons why this approach will not work.
The final, and perhaps most important, point to note is that the Randian theory now being trumpeted was put to the test, not very long ago, and it failed. In 2004, the Bush Administration introduced a “tax holiday” for corporations that repatriated profits they were holding abroad, arguing, much as Kudlow, Cohn, and others are now, that it would spur capital investment and job growth. What actually happened, according to a Senate subcommittee that surveyed twenty leading multinational companies, was that “the 2004 repatriation tax provision was followed by an increase in dollars spent on stock repurchases and executive compensation.”
Of course, things could turn out differently this time, but even some analysts at Cohn’s firm, Goldman Sachs, doubt that will happen. In a recent research note to clients, Goldman predicted that three-quarters of the money that big corporations bring back to the United States next year under the Trump tax plan will end up being spent on stock buybacks. “We estimate that $150 billion out of $780 billion of S&P 500 buybacks in 2017 will be driven by repatriated overseas cash,” the Goldman research note said. “We forecast that S&P 500 companies will repatriate close to $200 billion of their $1 trillion of total overseas cash in 2017, which will be directed primarily toward share repurchases.”
It seems unlikely, therefore, that giving big tax breaks to major corporations will do much to raise capital spending and growth, although it could give another boost to the stock market, in the short term, anyway. Indeed, this may help explain why the Dow Jones Industrial Average has risen by more than sixteen hundred points since the election and is now flirting with the twenty-thousand level. For big investors like Dalio, the Trump honeymoon is continuing. For everyone else, a large dose of skepticism is in order.
In short, in the coming Trumpworld, socioeconomic Darwinism (aka AynRandianism) is the new order. The rich will get richer, because they deserve it, and the sick and the poor will get sicker and poorer - because they, as the “moochers”, “looters”, and “unthinking brutes,” deserve it.