Yaron Brook: On The Free Market

The Executive Director Of The Ayn Rand Institute Discusses His Newest Novel, The 2016 Elections, And The Future Of Capitalism.

On Wednesday, April 6, 2016, On The Ideal State Founder and Editor-in-Chief Samuel Oshay interviewed Dr. Yaron Brook, the Executive Director of the Ayn Rand Institute in Irvine, California, at the Commonwealth Club in San Francisco.


Dr. Brook’s newest book--Equal Is Unfair--was released one week prior; as of this transcript’s publication on April 18th, it is the number one best-selling book on income inequality, according to Amazon.


Equal Is Unfair is available for purchase at the Ayn Rand Institute eStore.


On The Ideal State: In looking at the 2016 election, I see that the frontrunners of both parties [are not particularly pro-free market]. We have Hillary Clinton for the Democrats, who apotheosizes, just as Bernie Sanders does, the Nordic countries as a sort of utopia, and we have Donald Trump on the Republican side, who, while very unclear on his economic standing, at the border and on trade is very protectionist. It seems, by and large, that fervor for the free market is on decline in the United States. Why do you think that is?


Brook: Well, I think you are absolutely right. There is no question that there is no real free market candidate--certainly no one running as a free market candidate. And I think it is because the population in America has turned against free market to the extent that they ever were free market. When have we ever had a candidate who was free market? Nominally, Ronald Reagan, but that was a long time ago. Certainly George Bush was no friend of the free market, and certainly Bill Clinton was no friend of the free market. Maybe they did not do as much damage as Obama and a potential Trump or Clinton presidency, but they did not run on a free market campaign. So I would argue that America has not really been pro-free market as a country since the 1930’s. And really what you saw is a pivot some time during the 1930’s and 1940’s away from individualism and free market towards the idea of a state as initially providing us with a safety net and later on really providing us with a big safety net: guarantees for education and health care and some minimal standard of living. And I think that we abandoned the American spirit about one hundred years ago. Why did we abandon it? That’s a long topic, but essentially, I think it is because, while the founders were geniuses of political philosophy, they never built and then sustained a philosophical framework for which to defend the two fundamental ideas on which America was founded, in my view: individual freedom/individualism and the efficacy of reason. Every human being is capable of taking care of himself because every human being is capable of using his faculty of reason. There has never been a philosophical foundation for that. And throughout the nineteenth century, that weak philosophical foundation was attacked by European philosophers, and of course, that is the philosophy that we imported into the United States in the late nineteenth century and the early twentieth century. And we are suffering the consequences of all that right now.


On The Ideal State: I see. In previous speeches, you posit that successful individuals are made to feel guilty by this imported culture that says “success is bad, selflessness is ideal,” and that is why they typically vote for politicians who promise higher taxes. Is there a specific part of the culture right now that is propagating that sense of duty to others?


Brook: Well absolutely. Certainly on the left, you see it very strongly: you didn’t build that. We built it. Or to quote Hillary Clinton, “It takes a village.” All of these are explicit attacks on individualism. They are explicit attacks on individual ability and on individual wealth creation with the idea that individuals don’t matter. What really matters is the collective. What really matters is the group. And who knows what the group wants? The leader. Whether it is Donald Trump or Hillary Clinton or Bernie Sanders, they, in a sense, can channel the group’s wishes and therefore you do what you’re told. And that’s why they also exhibit authoritarian instincts, and most collectivists ultimately end up being authoritarians. So what we have seen in America is a shift from individualism to European-style collectivism. And this is why they admire Europe so much, because Europe is already there. Europe has been collectivist from the beginning. Europe crushed its individualistic tendencies in the nineteenth century and has lived through two world wars as a consequence. Those are wars of collectivism. And it had not been really ingrained into the American spirit until recently. So that’s from the left. From the right, in support of that, basically you have religion. So religion also teaches us don’t live for yourself. Religion also teaches us that you as individual don’t count. Religion also demands us to sacrifice for the common good as defined by different leaders, by our priests or whoever. So both on the right and the left, you have a massive attack on the founding principles of this country. Basically on the idea of individualism.


"If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet. The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together."

- Barack Obama



On The Ideal State: The way I see it, the Republican party is more so in favor of a free market than the Democratic party, but the Republican party is almost more of a religious organization than the left is. How do you think Republican leaders can balance between the religion of a lot of their followers and their tendencies towards free market and individualism?


Brook: I don’t know that they can, and this is the big challenge that the Republican party faces. So in my view, what they should be doing is what Ted Cruz did once, just very recently in a speech, I don’t know where exactly the speech was, but he basically said, “Look, I am very religious. Personally, I take my faith very seriously. However, this should not manifest itself in how I govern.” Separation of church and state: your religion should be irrelevant to how you govern. You govern based on your political philosophy. And if your political philosophy is good, then I will support you whether you are religious or not. But if your political philosophy is intertwined with you religion, then it is very hard for someone who believes in liberty and believes in freedom and believes in capitalism to support this case. The Republican party has not made the case for free markets. It makes the case for lower taxes; they love lower taxes. But they never talk about lower spending. They never talk about what departments they would shut down. Not seriously. What programs they will eliminate. They never challenge the idea of Social Security or Medicare, which they used to. So if you go back in history and you look at the Republican party, after the Great Depression, the Republican party platform was basically, “We’re going to undo what FDR did. It’s statist, and it’s bad.” Then they got into power and they forgot about that, and they were just going to make it more efficient. Then came Johnson. And when Johnson passed the Great Society, everybody was against the Great Society, and the Republicans were going to undo the Great Society. Ronald Reagan gave a fabulous speech in 1964 during the Goldwater campaign, in which he talks about the evil of Medicare and how medicare is going to destroy this country and how it’s bad and how it’s socialism and how it’s awful. But when Ronald Reagan came to power, did he do anything to eliminate Medicare? No. He actually raised Social Security taxes and bailed out Social Security and did nothing about Medicare. Indeed, government spending doubled during Ronald Reagan. So the Republicans don’t actually do anything pro-capitalist, pro-free market. And I think what holds them back is ultimately their religious values. It’s both that they are not courageous enough to actually stand by capitalism and individualism, but also it’s because religion demands of us the same kind of sacrifice, the same kind of public good/common good/collectivism that does the secular left. Republicans are better marginally on the economy, but it really is only at the margin.


"You and I are told increasingly we have to choose between a left or right. Well I'd like to suggest there is no such thing as a left or right. There's only an up or down—[up] man's old—old-aged dream, the ultimate in individual freedom consistent with law and order, or down to the ant heap of totalitarianism. And regardless of their sincerity, their humanitarian motives, those who would trade our freedom for security have embarked on this downward course."

- Ronald Reagan, "A Time For Choosing"


On The Ideal State: So the idea of collectivism and the idea for a collective spirit is one of the reasons why people justify the idea that economic equality is something we should strive for. In your newest book, Equal Is Unfair, which you co-wrote with Don Watkins, it came out just about a week ago and it is doing very well. Congratulations on that.


Brook: Thank you, thank you.


On The Ideal State: But you posit that economic inequality that we see in the nation today is not really the problem that many people make it out to be, and it is rather a political inequality that is the source of our nation's ills. Can you…?


Brook: Yeah, it’s not a problem at all. And if you think about collectivism and what collectivism says, it says that what matters is the group not the individual. What creates, what produces, what makes stuff is the group, not the individual. You didn’t built that. Obama is very clear on his philosophy. Well, if I didn’t build it and if the group did it all together, then what is the ideal outcome from my wealth and income perspective? It’s equality. So when you bring a pizza home to your kids and they are sitting down at the table, the three kids expect the pizza to be divided into three. Because they didn’t build that. And they are being granted this pizza, and the fair thing to assume, given that they’re a little collective, is that it is going to be divided up equally. So collectivism demands equality. It places equality as an ideal, even though nobody today actually advocates for pure equality of outcome. They hold it as a floating ideal, as a platonic ideal. So they don’t want to get there, but they want to approach it as much as you can. So when you ask one of these equality alarmists, and if you ask, “How much equality do you want?” They’ll start hesitating and say, “More than we have today, but less than pure equality. Less than 100%. Somewhere in between.” That’s because equality is the ideal, but they realize that human beings are not good enough to attain the ideal. They still hold the idea, even though they won’t say it, that communism is a great theory, but human beings are just not good enough to live based on that theory. Don Watkins and I reject that completely. Equality as an outcome is downright evil. It requires violence on those who have ability. You did build that. It is yours. Taking it away from you is stealing. Luckily we have vast inequalities. There is Michelangelo and then there is me, in art. That’s great inequality. I thrive because there is a Michelangelo. If Michelangelo was brought down to my level, how horrible would that be? I love LeBron James; how wonderful of a basketball player he is! Imagine if they forced him to play like me, so that we could be equal. How awful would that be? That would be no fun at all. So what is the difference between that and wealth creation? It is exactly the same thing. Some people have a talent, an ability, a skill, and they have used their mind, they have developed that skill, they have practiced, they have worked hard, and they have done what it takes to produce value, and they make a lot of money doing it. Cool. That’s good for them. To bring them down to my level in the name of equality is downright evil. So there is only form of equality that is legitimate: going back to founding fathers, when they talk about “all men are created equal” in the Declaration of Independence, what they mean is equality vis-á-vis politics. What they mean is that we are all equally free, equal in our liberties, we all equally have a right to be free and to pursue our values and to pursue our happiness. Free of coercion. Free of force. The government cannot force itself on us, they cannot coerce us, we should be left alone. And any attempt to create freedom of outcome violates the idea of equality before the law and violates the idea of equality of freedom. We don’t tax the rich and the poor the same; that’s not politically equal. So it is a deviation; it is using force on some for the benefit of others, which I think is wrong. I am all for the equality of rights, but I am adamantly against any kind of equality of outcome.


On The Ideal State: Speaking of the definition of political rights and economic rights, what is the implication of the new slogan of Bernie Sanders and a lot of the Democrats that top notch health care and a college education are rights of the American people?


Brook: Well the implication of that is that those who provide those services are your slaves. They have to do it. A right means that you have it; it is part of you. And you have to be provided that, no matter the cost. No matter to whom. I have a right to live my life as I see fit; that doesn’t cost you anything. The only role of government there is to protect me from people who would use force against me. That’s it. But if you have a right to health care, the amount of money the doctor wants to charge is irrelevant. He has to provide you with that service. Even if it is for free. Even if he doesn’t get a dime. Which turns him into what? It turns him into your servant, into your slave. He has to do it. The teachers have to teach you. I, who might have a little bit of money, have to provide the money for that. So it turns the entire population into these master-slave relationships, into subservient relationships where some benefit at the expense of others. All that turns it into is pressure group politics where we are all fighting over the pizza, where we’re all trying to get our slice of the pizza, because we’ve collectivized the pizza. The pizza is everybody’s. But we can’t actually slice it up exactly equally, and we all have a different political power in a democracy, so we’re all going to fight over those pieces of the pizza. And that’s what politics today looks like. And it would be a lot, lot, lot worse if Hillary get their way. And let me add that socializing and making health care and education pseudo-rights will devastate the quality of those products. Education: we’re already suffering from public education and how horrible it is. Health care would be a disaster if it was socialized. All you need to do is see health care where it has been socialized. Not how good or bad it is for healthy people, but how good or bad it is for sick people. Sick people have a very, very, very hard time under socialized medicine.


On The Ideal State: So in your talk there, you declare that collectivism is pure evil; the idea is a war against human values such as achievement and honor and whatnot. But do collectivist ideologies have any rational merits? Is there any redeeming factor they have, other than good intentions?


Brook: No, and they don’t have good intentions. I don’t believe that have any good intentions. Collectivist ideologies are basically ideologies that were created and sustained in order to allow some people to rule over others. The tribal leader, the king, the ruling council, the Pope, the witch doctor. Basically, collectivism is a methodology that says, “Don’t live for yourself, live for the tribe. And I am the only one who knows what is good for the tribe, and therefore you really have to live by what I tell you.” So it’s a system devoted to power. The power of the few, the power of the power-lusters over everybody else. It has absolutely zero merits. Nothing has been created by a collective for the collective’s sake. It is destructive to the individual, which I think is the only thing that really counts, and I think the founding fathers believed that as well. They were very fundamentally individualists, even though they didn’t have a full philosophical understanding of what that would mean.


On The Ideal State: In your book, you write that most collectivists and most egalitarians are “compromisers who concede that beyond a certain point equality must give way to other concerns.” Do you think that proponents of the free market should adopt a similar attitude out of necessity, out of rationality and pragmatism?


Brook: But this is what the free market advocates have always done. And look at where it has gotten us. We’re losing. Big time.


On The Ideal State: This is true.


Brook: So the only thing I think that the free market advocates need to do is stand on principle. Now, that doesn’t mean that if you become president tomorrow you’re going to abolish everything. Right? Everything has to be phased out. Everything takes time. But you have to stand for phasing them out. We have to stand on principle, and yes, that means we might lose for a while. But the left lost for a long time by standing on principle. The radical left lost and lost and lost and lost until it won. Because it changed the debate. It framed the debate. They have the moral high ground because they have captured the moral high ground. They took it from those who still held onto their ideals from the founding of this country. They now dominate the moral high ground. The only way to challenge them is in morality. That is to challenge their collectivism and to advocate for something, which is rational self-interest, individualism, people’s pursuit of their own happiness as the moral standard, and government’s only job is to protect the ability of people to pursue their happiness.


On The Ideal State: When you talk about moral high ground, you say rational self-interest. What most, average people hear when they hear self-interest is a greedy con-man who will stab his brother in the back to make a dollar. Why is that a misconception in your mind?


Brook: Because no greedy bastard who will stab his neighbor is really being self-interested. They are not living a good life, they are not living a flourishing life. They are not happy. Just ask Bernie Madoff! Not just in jail, but even before he went to jail, he was a miserable, pathetic human being who couldn’t look his friends and family in the lie because he was lying, cheating, and stealing from them constantly. Self-interest requires very specific values and virtues; this is the real contribution of Ayn Rand, who makes this debate. I encourage everybody to read Atlas Shrugged, the Fountainhead, but really the Virtue of Selfishness, which is a famous non-fiction book where she has some essays articulating this case. You have to have a proper, rational, long-term conception of what self-interest is. What we’ve been presented in the history of morality is two alternatives, which you just presented: you can either live for other people and make other people the focus of all your moral action and their happiness as the standard of your success or you can be an S.O.B. Those are the two options. That’s ridiculous! Where is the third option where I live my life to make my life the happiest, best that I can be without being an S.O.B. And it turns out that actually being an S.O.B. doesn’t lead to my happiness. So, when we talk about individualism and we talk about people pursuing their own self-interest, we’re not talking about the people who are lying and stealing, and cheating, we are talking about the people who are not. We’re talking about people who create, who build, who make stuff. Steve Jobs got up every morning and went to work to have fun for himself. He loved it. And as a consequence we got iPhones and we got computers and we got iPads, we got all these beautiful things. Bill Gates went to work when he was still allowed to work before he was made to feel as guilty as he did and therefore went into charity. He went to work to build great products for himself because he loved it. And we all benefited from that. They weren’t liars, they weren’t cheaters, they weren’t stealers. They were pursuing their rational, long-term self interest, and guess what? Other people benefit when you do that. Michelangelo sculpted because he wanted to sculpt. Because he loved sculpture. He didn’t do it to make you happy, he did it to make himself happy and indeed many times his clients were not happy. Frank Lloyd Wright didn’t design for the sake of other people; he did it because he loved doing it. Thomas Edison invented the light bulb not for you and me, but because he loved the process of invention. People are motivated by their own self-interest, by the things that they are passionate about. And as long as they are not hurting other people or violating other people’s rights, it is none of anybody’s business.


On The Ideal State: There, self-interest is rational and long-term. Is there any impact of the new works that we see in behavioral economics that say that people are not truly as rational as they always have been thought to be by classical economists?


Brook: Behavioral economics is very valuable to learn where your cognitive errors might happen and to fix them. But the problem is that many behavioral economists are determinists. They think that these are cognitive errors and we are just stuck with them. Tough! But the whole point of the field is to point out to us where our biases are, so we can correct for them. And the idea that we cannot be rational is made ridiculous by all the amazing products and values that have been created throughout history. You don’t create an iPhone without reason and rationality. You don’t build a skyscraper based on emotion. There are no cognitive biases while building a skyscraper. So we must overcome our cognitive biases. Granted! That’s the sense in which it is a valuable field. Financial advisors should be there to help us overcome our financial biases, and so on and so forth. So get educated and become a better thinker.


On The Ideal State: So you use Steve Jobs as the poster child of the perfectly rational capitalist who built great things...


Brook: At least on the capitalist side, I don’t know about his personal life.


On The Ideal State: That may be true. But many people take the Apple factories in China as a representation of the seedy underbelly of capitalism where you have individuals working all day, every day building an iPhone even though they may never earn enough to own an iPhone themselves.


Brook: I view that exactly the opposite of how most people view it. I view those factories in China as a beautiful thing. As a phenomenal thing. Over the last thirty years, one billion--with a b--billion people have come out of poverty in China and India and other places around Asia. Why? Because of companies like Apple. Because of the so-called “sweatshops.” Because people who were farming and barely surviving and starving under Mao--under Mao, sixty million people died of starvation. I didn’t see any of these San Francisco bleeding hearts demonstrating against Mao Zedong when he was murdering, butchering sixty million of his own people by inflicting on them a system that led to starvation. No, they still think communism is a great idea. And what does Apple do? Apple provides them with a job that pays them better, that gives them better food, that allows them to have better housing. They even get to send money back to their families in the countryside. Many of them learn skills and advance up, and many of them become managers, and some of them leave Apple and go start businesses and become entrepreneurs. There is a thriving, growing middle class in China that was created by opportunities that companies like Apple built. When I see Apple paying whatever it is to their employees, I see that those employees are choosing that job because they do not have anything better. As they become more productive, their wages will go up, and as their wages go up, their lives will become better in general. And that’s exactly what you see in China. Visit China and you’ll see a thriving economy that was created exactly by the opportunities provided by Apple and other such companies.


On The Ideal State: In other speeches you mention Hong Kong as the closest place on Earth we have to the ideal capitalist world. How does the United States function as a model for the Eastern world, and what would be the significance of an American collapse or an American move towards collectivism for the Eastern world?


Brook: America has always historically functioned--I don’t think it does anymore--as a model for the success of capitalism. There has never been a country like America. No country in the world that has created wealth like us. There is no country richer than us, put aside those countries that are dominated by natural resources such as Kuwait and the United Arab Emirates. But for a country as large and diverse and with as many people, no country has done anything close to what the United States has. It is because of the free markets in the USA and because of the capitalist system and because of the rule of law that was established by the founding fathers. Many countries around the world have always looked to the United States as model. This is what we want to be like; this is what we want to emulate. And as America turns away from these principles, what are these other countries going to emulate? What is Africa going to emulate when they decide that they have had enough with collectivism and tribalism? Who is going to be their model? There is no model, and that is really, really sad and it is really, really unfortunate. A lot of countries that still need to come out of poverty by discovering capitalism and freedom don’t have a model by which to do it.


On The Ideal State: If we can turn back to America and talk about the American economy, in your book, you mention the Code of Federal Regulations, and this is the catalog of all the federal regulations on the economy. You mention it as a measurement for the level of government intervention. According to the Competitive Enterprise Institute, the CFR now stands at almost 175,000 pages. From your perspective, is there a single word of that that is justified?


Brook: Probably not. I can’t think of any of it. Certainly, we need laws to protect from fraud and to protect our property rights and to define property rights. But we do not need preemptive law, which is what the majority of regulation is. We do not need regulators sitting on the shoulder of McDonald’s inspecting their food or sitting on the shoulder of J.P. Morgan inspecting everything they do. Indeed, not a single regulator prevented the financial crisis, even though banks are the most regulated industry in the United States. Regulations do far, far, far, far greater damage that any positive thing they might have in the economy. So, no. I would scrap the entire code, and that is just the beginning. Because you have hundreds of thousands of other pages on the state level and the local level. Every state is different. You have licensing laws, regulations, minimum wages laws. All these laws are incredibly expensive to the lives of Americans, across the entire income spectrum. They are suffering because of these laws.


On The Ideal State: You talk about how finance is the single most regulated industry, and you yourself have a Ph.D. in Finance from UT Austin. I think that gives you a very nuanced view upon 2008 and the financial crisis. Why do you think that the hatred and the blame for what happened fell upon bankers rather than of regulators? And a lot of people point to Glass-Steagall as the one act that caused it all, but as you’ve pointed out before, Citibank, I believe was the only...


Brook: ...Glass-Steagall bank to go under. All the other banks were either pure S & L’s or pure investment banks. Glass-Steagall had nothing to do with this crisis. Why is it blamed on the bankers? Because for two thousand years, every economic crisis was being blamed on bankers. They are our go-to fall guys. And the reason they are the go-to fall guys is because, of all economic actors, financiers are the most difficult to understand. It is most difficult to understand what they do, why it is productive, why they are beneficial, what role they have in the economy. The flip side of that is that their self-interest is more naked. Financiers are there to make money. Their purpose is to make money. They can’t hide. If you’re on Wall Street trading, you are there to make money. And we have an antagonism towards self-interest and making money. We are not interested in their productive function or how much they benefit the economy. They are self-interested, therefore they are immoral. I wrote an essay on this called “The Moral Case For Usury,” which you can find online, which lays out the whole historical case around finance and why it has always been hated.


"Until usury is recognized as both economically productive and ethically praiseworthy—as both practical and moral—moneylenders will continue to be condemned as villains rather than heralded as the heroes they in fact are." 

-Yaron Brook, "The Moral Case For Usury"


On The Ideal State: I think I was just given the signal that we have to wrap up. How would individuals who are steadfast in the beliefs that you have just proclaimed for us, who believe in pure capitalism, who believe in pure individualism. How would they go about propagating their beliefs and spreading the ideas?


Brook: I would start by educating yourself. I would start with reading Ayn Rand, reading everything you can get a hold of of Ayn Rand. We have a great tool now at the Ayn Rand Institute called “ARI Campus.” If you go to AynRand.org and press on the “Campus” tab, there are tons of non-fiction essays that Ayn Rand wrote available there for free; there are video and audio courses on deep into her philosophy and what it means and how to defend it and how to argue for it. The first step is educate yourself. Get a solid understanding, which is something that people on the right do not have. They spout stuff like “Western Civilization” and individualism and they have no idea what it means. To really gain an understanding of what it means, you really need to study Ayn Rand. Ayn Rand is the only philosopher to defend individualism and capitalism properly since the beginning of time. She is the first philosophical defender of the founding fathers and America as it was first envisioned. Study Rand, and then go out there and argue with everybody you know, but in a friendly, productive, educated way. Read my book Equal Is Unfair; read my previous book Free Market Revolution, which I think lays out the whole case for capitalism. Read Ayn Rand. Follow our website. And if you have money, contribute to the Ayn Rand Institute, because there is a division of labor: we’re your spokesman out there fighting the good fight.


On The Ideal State: Well, Dr. Book, thank you so much for being here.


Brook: Thanks for having me on.


Dr. Yaron Brook is the Executive Director of the Ayn Rand Institute in Irvine, California. He is the co-author of Free Market Revolution: How Ayn Rand's Ideas Can End Big Government and Equal Is Unfair: America's Misguided Fight Against Income Inequality. To learn more about Dr. Brook, visit his website here.