The Morality of John Galt, pt.4: Money

The Morality of John Galt, pt.4: Money

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Frances Coppola’s piece The Death of John Galt took issue with some of the key moral claims of Ayn Rand’s Atlas Shrugged. She and Charles Crawford have agreed to look at these issues in an e-discussion. Here is the fourth instalment – the first three were here, here and here

* * * * *

FC In the previous instalment, you said (my emphasis): “The point of the book is that their self-interest is built on a perverted instrumentalist idea of human nature that rests ultimately on coercion because it does not rely on free trade between people who respect each other – and respect themselves.”

You rejected my argument in “The Death of John Galt” that Galt wanted to receive monetary reward for his ideas, claiming that for him the non-material reward of personal integrity was more important. But if you acknowledge that rewards can be non-monetary, then everyone in Rand’s book is a trader. “You scratch my back, I’ll scratch yours” is a trade. Even doing as you are told is a trade, if you are paid for it – or, in the later stages, allowed to live because of it. That is how Rand’s dystopian world works – on favours. As Mamma puts it in the musical “Chicago”, “You do one for Mamma, she’ll do one for you”. She calls it “Reciprocity”. But in reality it is a form of barter trade. 

In what respects does this differ from the ‘free trade’ based on mutual respect envisaged by you and Rand? And where does money fit in? Francisco d’Anconia says, “the words 'to make money' hold the essence of human morality”. Is trade for money intrinsically better than barter for favours?

CC Now we move to one of the unambiguously great passages of Atlas Shrugged, Franciso d’Anconia’s Money Speech. One sizzling insight after another:

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 the moochers who claim your product by tears, or of the looters who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil? 

I love this part of the book as it highlights the moral aspect of money, something mostly ignored or (worse) not remotely understood. I read out part of the speech at a dinner in Warsaw in honour of brilliant Polish economist Leszek Balcerowicz. He agreed to take responsibility for the grim early years of Poland’s transition from communism (including shutting down many value-subtracting industries) as no-one else would do it. His steely principles gave Poland honest money for the first time in decades, thereby creating the basis for Poland’s surging economic success now.

That is not only a stunning technical success, and a testament to the power of smart modern economic thinking. It is a stunning moral success. It has opened the way for millions of Poles once again to start working and creating and trading honestly with themselves and others around the world: the positive human results of this make comparisons with (say) Bosnia, Ukraine and Russia (let alone North Korea and now Venezuela) more than instructive. 

Nothing in Atlas Shrugged denies that the corrupt moochers or greedy looters ‘trade’ in their own pernicious ways. The point is that their trading is odious because it rests directly or indirectly on grabbing for themselves value created by others:

Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow … Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money. 

John Galt does not want to earn money (preferably in the form of gold!) because he wants to buy loads of stuff, or gain power over those worse off than himself. He wants money to be symbol of his own worth, of the value that he has created as a free man striving to do his best and trading honourably (if toughly) with others like him. A more than worthy idea.

FC In that excerpt from his speech, Francisco d’Anconia identifies money as a symbol of trust. But may I present to you the vision of Eric Frank Russell, who was in many ways an even more extreme libertarian than Rand?

In his short story “And then there were none”, the entire society works on reciprocal obligations that are neither written down (paper money) nor represented as tokens (gold). In that world, money is a symbol of LACK of trust: 

“How can trade be bad if you don’t take money even when it’s good?” inquired Gleed, reasonably applying what information Harrison had given him.

Jeff’s big moon eyes went over him slowly, then turned to Harrison. “So he’s another bum off your boat. What’s he talking about?” 

“Money”, said Harrison. “It’s stuff we use to simplify trade. It’s printed stuff, like documentary obs of various sizes.”

“That tells me a lot,” Jeff Baines observed. “It tells me a crowd that has to make a printed record of every ob isn’t to be trusted – because they don’t even trust each other.” 

Trading honourably does not require money, but it does require trust. 

According to your last paragraph, money also has another function. It is a representation of personal worth. But Russell has an answer for that one too: 

“Tell me something”, Harrison insisted. “How do you get a living?”

“There’s a heck of a question. You can see for yourself. I’m on the fire squad”. 

“I know. What I mean is, who pays you?”

“Pays me?” 

“Gives you money for all this.”

“You talk kind of peculiar. What is money?” 

Personal worth does not need physical tokens. You are of value because of who you are and what you do, not because of how someone else values you in paper or gold.

I recommend reading the whole story, especially what happens to Idle Jack, whom Russell calls a “scratcher”. He would be a “moocher” in Rand-speak – taking for himself while giving nothing in return. 

As one might expect for a story in which money has no function, it is free.  

CC Interesting. The great advantage of a tangible form of money (as opposed to private ‘obs’ or mutual obligations) is that it allows much wider and more dynamic trading. It’s one thing to have a small community based on trust, where everyone knows who owes whom what and why. Quite another to have a system allowing scores of millions of people to make trades speedily and safely: there the trust issue necessarily is dealt with impersonally, in many different ways. 

The history of English money is fascinating. For centuries our forebears used tally-sticks to keep a fraud-proof record of individual transactions. As the economy grew in size and complexity, the sticks gave way to paper money. Now the role of paper-money is dwarfed by electronic transactions. Ayn Rand saw this as morally disastrous. She hankered after using freely traded gold once again as the only honest basis for reflecting value created by people: 

If you ask me to name the proudest distinction of Americans, I would choose – because it contains all the others – the fact that they were the people who created the phrase ‘to make money.’

No other language or nation had ever used these words before; men had always thought of wealth as a static quantity – to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words ‘to make money’ hold the essence of human morality… 

We now see state monopoly money coming under challenge from Bitcoin and other private e-currencies. That is a good thing. It compels us all to look at money and its many roles from first principles. Why should the state have an effective monopoly on the money we use?

FC I found it odd that Galt’s Gulch used money at all. They had no need to – after all, it was a small closed community of people who were selected BECAUSE they trusted and valued each other. I fear Rand confuses money with what it represents. 

Rand’s assertion that gold has “objective” value is simply wrong. The value of gold is as subjective as anything else. It tends to be countercyclical – gold increases in value when trust in other financial assets declines, as we saw after the 2008 financial crisis. We could say that people trust gold more when they trust each other less. I’m not sure this is a good thing. 

In both the US and the UK, private sector creation of currency was outlawed for good reasons. In the UK, it was because fractional reserve issuance of paper money by banks was inflationary. And in the US, it was for the opposite reason: the cornering of the gold market by vested financial interests seriously restricted money in circulation, making life very hard for farmers and small businesses. Now the failed arguments of the past are being brought to bear again by those who would “crucify mankind upon a cross of gold” in order to satisfy the “idle holders of idle capital”, and those who would remove from government the right to govern.

CC I’ll take your word for the issues around using gold. But gold has one advantage – you can’t (yet) decide to make more of it! Its value is in principle independent of crude manipulation. I wonder if nowadays financial vested interests could rig the gold market for very long. 

Paper money by contrast can be trivially manipulated by governments. When that fact is combined with the monopoly the state has on using force to extract money form citizens in the form of taxes, all sorts of bad things can end up happening. Fanciful? Not at all. Ayn Rand was writing these books against the background of European concentration camps and Soviet gulags, the crazed state imprisoning and killing literally millions of people.

Now today as the USA’s public debts spiral into unfathomable trillions because of sustained political irresponsibility, it’s obvious that something has gone badly wrong at the most basic levels of ethics and logic. 

This great passage of Atlas Shrugged compels readers to think hard about economic and human values that they normally take for granted. See eg this new wonderful piece about what an iPhone would have cost in 1991:

Considering only memory, processing, and broadband communications power, duplicating the iPhone back in 1991 would have (very roughly) cost: $1.44 million + $620,000 + $1.5 million = $3.56 million … This also ignores the crucial fact that no matter how much money one spent, it would have been impossible in 1991 to pack that much technological power into a form factor the size of the iPhone, or even a refrigerator

When progressives bang on about ‘inequality’ maybe they should think about what really makes us all richer - and be at least a bit grateful for the wealth that inventors and industrialists have created and shared with us mere mortals.

Further Reading

The Morality of John Galt 

The Morality of John Galt, pt.2

The Morality of John Galt, pt.3


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