FREEDOM

Capitalism And The Endless Quest For Freedom with Lawrence Reed

TWS 5 | Capitalism And Freedom

 

Alongside our basic need for shelter, food, and clothing, a person’s yearning for freedom and liberty has always been present no matter what era and time. Lawrence Reed, President of the Foundation for Economic Education, talks about freedom and capitalism. He believes that each individual that comes into this world has the right to do anything that’s peaceful. He recounts what brought him to this quest and perspective which was the Soviet invasion of Czechoslovakia in 1968, and explains the philosophy of capitalism which he believes is the economic component of a free society. He also relates the importance of understanding freedom on different aspects of life and how everyone will benefit from it.

Listen to the podcast here:

Capitalism And The Endless Quest For Freedom with Lawrence Reed

You’re going to love my guest. One of the most brilliant minds out there in relation to freedom and liberty. He is the President of the Foundation for Economic Education and he is also the author of bestselling books. Those include Excuse Me, Professor: Challenging the Myths of Progressivism. He also has authored a number of pamphlets including the Great Myths of the Great Depression and his Real Heroes. My guest is Lawrence Reed. Larry, it’s great to have you on. Thank you so much for taking the time.

It’s my pleasure. Thank you for having me. I appreciate it.

You’re an incredible wealth of knowledge. I want to dive straight into a description. How you would describe to somebody your philosophical views of life and business, which is part of life too.

I’ve always been a little bit hesitant to assign a label because labels often are shorthand for things that may or may not be true. People jump to conclusions. I always try to stress to people that you should judge another person’s views by the value of their content, not by some label you or others may ascribe to them. If I had to put a label on my philosophy, I would be comfortable with classical liberal, that means liberal in the 19th-century sense or in the sense that Europeans use the term even now. I would also be comfortable with the term libertarian. The bottom line is that I believe that each individual comes into this world with the right to do anything that’s peaceful. By peaceful I mean as long as you do no harm to another, as long as you respect the life and the property and the contracts and the choices and the decisions of your fellow man, you commit no fraud or force or violence or deception, then the burden should be on those who think in some way you should be restricted. I think you then as a peaceful person who has the right to live your life as you see fit.

We’re going to get into what the commonly held description is of how life should be for the collective good. Before that, I would be intrigued to know what helped bring you to this perspective you have that you very eloquently defined.

We can delude ourselves into all kinds of fallacies or we can enlighten ourselves with the truth. Click To Tweet

For me, I can say was my parents because, in my mother’s case, she never had any political or economic or current events viewpoints. She was a very nice lady that had no inkling about these things and I respect her for that. My father had some good instincts. He was a small business owner and so he bristled at the thought that some distant government might tell him how to run his business. He was in some ways hostile to authoritarianism and very respectful of the individual. He planted some good instincts in me. The most jarring early episode in my life that proved to be pivotal in the development of my thinking was the Soviet invasion of Czechoslovakia in 1968. I was only fourteen at that time. I had begun to be interested in current affairs and I was watching these people in Czechoslovakia increasingly move toward freedom. A new regime had come into power in the early part of 1968 and they were moving away from hardline communism, even talking about free elections.

I was cheering them on because I instinctively thought this is great. They should be allowed to do these things. Then when the Soviets invaded, I remember watching that on television. I was outraged that for no reason other than to bring people under control, to push them around, to live their lives for them and to use force to get it done, you had these foreign powers invading their country and it moved me. Within days, I went to Pittsburgh on a bus from my home, which was at that time about 30 miles away to participate in a demonstration against the Soviet invasion. It was put on by a youth group that I joined. One of the first things they did with new members was they put them on the mailing list to receive materials from the foundation that I now run. My reading then deepened dramatically. I got into this from an anticommunist angle, but my philosophy has blossomed into a full-blown appreciation for human liberty across the board.

Before we get to that, as you look back on that pivotal experience, how would you define or describe that instinct that was compelling enough that you felt for people that didn’t speak English that lived across the world? They were pursuing freedom and were essentially invaded under the guise of being able to control and make their life better. What was that instinct? How would you describe that?

Probably an anti-authoritarianism that I inherited from my father. I remember in third grade, I would have been eight. He wanted to take me to Florida for a week to visit relatives in February. I was a student in the local public school in Western Pennsylvania and I mentioned to my teacher that we were going to Florida. She said, “He can’t do that. He can’t take you to Florida. I’m going to talk to the principal.” I went home thinking we’re not going to be able to go. I told my dad that and he said, “I’ll take care of it.” Sure enough, when the principal called, I heard my dad’s side of the conversation. He was generally a quiet shy guy, but he put his foot down on many occasions. I recall vividly him saying at one point to the principal on the phone, “He’s my son, we’re going to Florida. Don’t call here again,” and he hung up on him. He was my hero. Skepticism of authority, especially authority that had little more going for other than just guns, have always been with me from the earliest of ages. Then I saw those scenes in Prague in 1968. I know it touched me to see people who were not much older than me, students in 1968 being hosed down by water cannon and being arrested and rolled over with tanks. That deeply touched me.

I look at the degrees there because I would say most people would say that type of behavior and how individual liberties were being violated by the hose spraying. Most people would agree to that, but most people would not agree to the notion of you going to Florida during the winter as essentially the same idea. Where is the disconnect there? There are degrees, but how do you typically address that?

TWS 5 | Capitalism And Freedom

Capitalism And Freedom: You should judge another person’s views by the value of their content, not by some labels.

 

That’s rather ordinary and automatic for people to think that the two are not in any way connected. The more I came to understand and appreciate liberty, the more I realized that it’s a very precious and unique thing. Not many people in the history of the world have enjoyed it. Most who have had it have sooner or later lost it and not by one fell swoop by some dramatic radical invasion by another country. Most of them lost it by a steady and slow drip, erosion where they say, “In this area of life, we can trust the government to run our affairs.” Later it’s, “Now, we have to do this for us.” It’s the old slippery slope once you begin to abandon things like self-reliance, personal responsibility, and character taking charge of your life and trusting to politicians to do those things for you. The big question that every Socialist need to answer but never does is, “Where you got to draw the line? How are you going to stop that?” What about the next group that comes along and says, “I want something too” or “I need the government to give me this or that.” I became a much more appreciative of the slippery slope that societies have engaged and that have taken them from free societies to tyranny. Often, slowly enough that they didn’t realize it until it was too late.

Maybe talk if you would about when something like that is done where a person is impeded from doing something that they want. I would say, give something to somebody because they’re less fortunate than the other. What does that do to a person?

It means so much more to all concerned when people do good things like giving to those in need from the heart and by choice entirely voluntarily. So much more good is accomplished by that method than by beating it out of them or sending in the tanks if they don’t do it or taxing the life out of them. For the same reason that you don’t take a person to church on a Sunday morning at gunpoint and then pat yourself on the back later and say, “I made him religious.” It probably had the opposite effect. One of the most important observations about humans is that each of us is extraordinarily and completely unique. No two people who have ever lived have been precisely the same. For me, that screams freedom because you can’t be who you are. You can’t be fully human unless you have broad sway, as long as you don’t harm another, if you don’t have broad sway over how your life goes. If somebody else is telling you all those things, you’re not really living your life. Somebody else is living their life through you at the point of the gun. That’s so anti-human nature. It’s unthinkable.

One thing I’ve come to realize is there seems to be at least, I’m not going to speak absolutely, but there seems to be this natural curiosity that we have as human beings. Children have it at incredible levels. The stifling takes place sometimes when that curiosity is interrupted. I would say the interruption can be to the degree of being invaded by Russia, as far as pursuing things that you want to pursue. I would also say from a school perspective where the curriculum is dictated and essentially, I wouldn’t say forced, but highly coerced as far as what you should be studying, what you should be reading, what’s right, what’s wrong from an academic perspective. That’s how I see it. How does that relate to the importance of understanding freedom when it comes to taking the uniqueness of who we are and having the greatest experience that we can in life by pursuing curiosity and pursuing our desires?

You’re exactly right. You’re on to a very important point. Everyone develops in his or her own way at their own speed and interruptions in that through the use of force or dictation by someone outside. Especially if they’re remotely connected to you. It tends to send people down the wrong path. It tends to discourage their lust for knowledge. The most effective teachers are the ones who don’t just open up a kid’s skull and pour in the facts and figures. The most effective teachers are the ones who strike a match in the mind and the heart of a student. To ignite that lust for learning, to get the kids to appreciate the importance of learning and make them want to do it on their own by inspiring them. That’s the most effective way to teach, not to treat a kid as if he’s a robot that needs to be programmed at every turn. That runs counter to all that we know about human nature.

Labels are often our shorthand for things that may or may not be true. Click To Tweet

We could go to a completely different direction talking about academia and grades and what determines that you’re a smarter student. I won’t go there, but I do want to pivot to what we’ve chosen as a theme, which is Capitalism. All of these talking points that we have been discussing so far relate to that in a very peculiar way. Capitalism, to me at least, is a structure that can bring out incredible things from human beings. Maybe as it relates to your role with FEE and the discovery that you made of the principles of liberty and with your specialty in public policy, how do you view or have come to understand what Capitalism is and what its principles are?

Capitalism is the economic component of a free society and that’s pretty important. Nobody should say that economics has everything. Economics is the means by which we solve an awful lot of problems. It’s the means by which we feed and clothe and house people. It’s the means by which people’s lives materially can improve and put them in a position where they can do wonderful things, including helping those less fortunate. One of Capitalism’s greatest virtues of many is that it’s the one system that doesn’t require a mastermind or a central planner. Some guy in an ivory tower somewhere who says, “If I have enough cops that I can send out to tell people what to do, I can play in society.”

Capitalism is what happens when you leave people alone. You don’t have to tell them to do things like trade, invent, create, employ, or build. They do that as long as the incentives are there and they’re free to be themselves. We are naturally a creative being as human beings. That’s one of the greatest shortcomings of every other system. All the others, non-capitalist systems are contrivances. They are Rube Goldberg contraptions. They are individual humans pretending to be what they can’t possibly be and constructing stuff and then imposing it on other people. That is fraught with failure from the word go.

How would you associate that with the previous topics that we were mentioning in the general notion of liberty and specifically to your experience in school and how school dictates and how curiosity is the fire that can be ignited to create some of the most amazing learning? How do you associate that with Capitalism?

Capitalism by its very nature sparks and nurtures. It inflames in a positive way that natural human curiosity. Capitalism basically says, “If you have an idea that you want to try to put in place. You think it will meet a need or somebody will like what you do and give you money for it and therefore you can do better in the process. You’re free to do that, go to town.” It also says you can’t just do these things without regard to the desires of other people or you’ll flop. Capitalism says you can’t put a robot around you and a crown on your head and tell the peasants to cough it up. You have to produce things that they want and need. If you’re good at it, you’ll be rewarded for it. I don’t know why anybody wouldn’t want a system that is aimed at rewarding people who actually meet the needs and desires and wants of other people.

TWS 5 | Capitalism And Freedom

Capitalism And Freedom: Appreciate liberty. Not many people in the history of the world have enjoyed it, and most who have had it have sooner or later lost it.

 

I would say the statement you just made, a lot of people would say that they don’t deserve that. They have more than they need and therefore they should share that with others. What’s wrong with that argument if it’s for the better good of other people? If somebody figures out a way to create value and be successful based on the value they create for somebody else, because they’re so successful, they have too much and others don’t have enough. Therefore, they don’t need all that. Therefore, they should share with others.

The wealthiest among us who have got that way, not because of any special favors from the government. I’m very much opposed to that when it happens, but because of their efforts, their ingenuity, their investments being at the right place at the right time and meeting the needs of a lot of people, by definition, they got there through a life of service. They’ve created value. In every case, you’ll find the so-called super rich who have accomplished great things like that and had been rewarded for it. What society in effect pays them for having done that is a minuscule fraction of the wealth they’ve added to society. I don’t care that Bill Gates has $70 billion. He created hundreds of trillions of dollars in value that didn’t exist before. The last thing you want to do is to say to such people, “If you get to where you are so successful because you’ve done such a good job at serving others, we’re going to treat you like a villain.” Why would anybody want to do that? Except for some rotten motives like envy and covetousness that never end well.

No, it doesn’t, yet that’s a pervasive feeling that exists in society right now.

I tell people all the time, “For your own mental health, count your blessings. Don’t count the other guy’s. You’ll feel a lot better about life and you won’t be wasting time trying to run somebody else down.”

What came up when you were speaking a moment ago, it was a speech you gave a while ago about the wealth and about Adam Smith and The Wealth of Nations. It wasn’t necessarily on The Wealth of Nations which most people define as the title of that book that was highly influential. You went into the actual true title of his second book. Would you maybe discuss that and what is the beginning of the title of the book? What relevance does that have to the actual title that most people subscribed to his book The Wealth of Nations?

If somebody else is telling you to do things, you're not really living your life. Somebody else is living their life through you. Click To Tweet

Most people know something about The Wealth of Nations, but most don’t know that that wasn’t the full title. This was Adam Smith’s second of only two books. The full title was An Inquiry Into the Nature and Causes of the Wealth of Nations. It’s significant to think about that because he didn’t entitle it An Inquiry Into the Nature and Causes of the Poverty of Nations. I’m pretty confident if he were here right now and we asked him, “Why didn’t you focus on poverty? That’s on everybody’s mind these days.” He would say, “Everybody knows what causes poverty. It’s what happens when you don’t do anything.” It’s what happens when the government stands in your way so that it penalizes people who create wealth and solve poverty. He was more interested in how do we go from a naturally poor society, which we all have been sooner if you go back far enough. How do you go from being a poor society to a rich one? That’s the problem we need to work out and encourage whatever it is that makes that happen.

Going from a poor society to a wealthy society, what do you say are the causes of that?

I think Adam Smith would say there are several components here. I’m not sure how he might rate their importance, but these are among the ones that he would list as most important. One is you’ve got to leave peaceful, productive people alone. You can’t stand in the way. You can’t vilify them. You can’t swipe their capital, otherwise, they’ll say, “Forget this. Why should I endure the risk and the hassle and the headaches if somebody else is going to take whatever it is I produce?” Don’t stand in the way of productive people like entrepreneurs. He would also say that self-interest is a powerful factor. I know that gets a bad rep in a lot of places. People say, “Self-interest, you mean you’re doing it for yourself. That sounds antisocial.” We all should do whatever we do for altruistic reasons just to help the other guy.

You look around the world and ask yourself, “How much of what actually gets done? How much of what’s produced that we benefit from derives from somebody’s charitable motive just to help somebody they don’t even know?” Not very much. That’s not denigrating the charitable impulse. I give to charities all the time, but I don’t underestimate the enormous benefit and power of self-interest that’s channeled into constructive, positive, wealth-creating directions by entrepreneurs and others in a free society. Think of everything you’re going to eat now. How much of that was produced because you said, “Jose, down there in Venezuela, where’s my coffee?” No, it’s because somebody said, “I can make a few bucks if I meet this need and create a new product and get it to the people who need it.” That’s a constructive and positive force. It’s one of the most powerful things for a higher standard of living, self-interest.

I wasn’t planning of talking about this, but he has his first book, The Theory of Moral Sentiments. I haven’t studied this in a long time. I know that you’re more verse here. Would you maybe get into the moralities behind the principles of Capitalism? As I understood in that book and some of the main premises were that there is this natural driving self-interest for our personal well-being. Through that, we figured out ways to exchange with others and not just benefit ourselves but better the whole. Speak about the morality side of Capitalism and how those human tendencies to be self-interested work out in the favor of others.

TWS 5 | Capitalism And Freedom

Capitalism And Freedom: The most effective teachers are the ones who strike a match in the mind and the heart of a student to ignite that lust for learning.

 

That first book of Adam Smith, The Theory of Moral Sentiments. Some Smith scholars argue and I think there’s a foundation for this, that maybe that was the more important of the two books. He laid out some of those moral foundations that later he draws out and shows the economic implications of in The Wealth of Nations. Smith was very curious about what motivates people. In particular, what motivates them to do something for other people instead of exclusively and entirely for themselves? When you look at those such things, you go down the path of realizing that people want to feel fulfilled.

If you talk to most entrepreneurs about what motivates them, you’ll find in fact, very few of them will say, “I just wanted to pile up lots of cash. I want to sit around and play with my pile of gold coins all day long.” No, that’s a byproduct of what they’re doing. What’s most fulfilling to most of them is the very idea of solving problems, interacting peacefully and productively with others. Deriving happiness from making them happy, finding common areas of interest and inventing and creating things that satisfy that lust of their curiosity. Those are far more motivating to people and Smith recognized this. Then the old caricature of the rich capitalists has the desire in one thing, just piling up cash.

That was a couple of hundred years ago, the mid-1700s to the late 1700s. Has human nature changed since then? Are those principles obsolete or do they still apply now?

I think they apply and I can’t see how human nature has changed. Remember, one of the key elements of human nature is that we are creatures of ideas. Our underlying nature may not change and I don’t think it has, but our ideas can change and ideas have real-world impact. We can delude ourselves into all kinds of fallacies or we can enlighten ourselves with the truth and with useful knowledge. At various times in history, people go down one rabbit trail or the other. I don’t think our nature has fundamentally changed, but our understanding of it or understanding of the world is too often colored by things like the political heat of the moment or a fad of the day. Those things don’t ultimately undermine our basic human nature.

That’s awesome. That’s an incredible way to explain it. Let’s end with the notion of failure. When it comes to a capitalistic society, there’s a failure that comes as a result of a person pursuing their curiosity, whether it’s entrepreneurship or business. You look at where the central powers of government have stepped in and thrown their weight around is that failure hurts people, failure is bad. In order to protect the collateral damage of failure, the government has to be involved because they’re the only ones that are going to look out for the best interest of the whole. How do you typically think through that type of logic that people use?

Capitalism is what happens when you leave people alone. Click To Tweet

I don’t know how anybody could look at the way the government operates now and say, “Somehow those guys can make up for our shortcomings.” That’s absurd. Some failures in life are inevitable and unavoidable and actually not necessarily bad. It depends more than anything else on how you react to it and what you learn from it. I don’t think we should look to any entity, Capitalism, Socialism, government, whatever, as the outfit that’s going to prevent failure. What we should be asking ourselves is what kind of system tends to minimize it, localize it, and maximize what we learned from it. That’s what we want. You don’t get that under a centrally planned top-down government-directed system because they fail all the time. They don’t have the internal incentives to ride in to ship to adjust because their concerns are elsewhere.

Their concerns are re-election, getting a bigger budget, not serving you so much as maintaining their own position and power. In Capitalism, when you fail at something because you didn’t control your costs or you didn’t meet a need that was out there, somebody else did it better than you. There’s a mechanism called profit and loss that immediately sends you a pretty powerful signal. It says right off the bat, “You need to get off this horse and get on another one.” That minimizes the waste of resources that redirects human energy. I’m grateful for a system we call Capitalism that tends to minimize failure and to maximize service which every entrepreneur is trying to do.

Failure is one of the most amazing things to attach to as far as opportunities are concerned. Now though, I look at how failure is a bad thing. I’ve had a number of employees and it’s been a very difficult thing over the years to unprogram or reprogram them to look at that making mistakes is a good thing if you handle it the right way. It’s one of the most incredible ways to learn and accelerate that learning. As you’ve spoken in the idea of what the government has done and how they’ve failed, I think most people agree with that, but because their mission is for the betterment of society, it somehow accepts it.

I find it curious right now with the government shut down. I was watching the news. There was a segment on there about how gyms were opening up to federal employees that wanted to go work out. There were food banks that were opening up their doors. There was so much charitable drive to help those that were in need because of the government shutdown and they didn’t have a paycheck. I find it interesting how people perceive government’s doing and how incredibly strong that perspective is. It made me concerned to an extent. How have you looked at what’s going on right now in the current environment and associated that with some of the stuff we’ve been talking about?

Every time I hear someone say, “We have to rely on the government for this to help those people.” I always like to say, “You’re selling yourself short.” What you’re saying is that the politicians are the ones with compassion. The rest of us dummies don’t have that. We somehow have the wisdom to select the right people because they have more compassion than we do, but we don’t have that kind of compassion. I think that is so ridiculous. It’s absurd. It’s childish. We should look around and rejoice and all the good things that people are voluntarily doing to help other people. They’re doing it in spite of the fact that the government is swiping a quarter or more of what they earn. It’s amazing how much charity there is after the government takes its cut. Don’t sell yourself short.

TWS 5 | Capitalism And Freedom

Capitalism And Freedom: Some failure in life is inevitable and unavoidable and actually not necessarily bad. It depends more than anything else on how you react to it and what you learn from it.

 

This has been amazing. I hope you enjoyed the conversation. This has been incredible. I’ve enjoyed everything you’ve said.

Thank you. You have great questions. You drew it out of me and I sure appreciate that.

It’s one thing that you and I have. I have a similar background where I didn’t have very politically-involved parents. They had strong opinions one way or the other about commerce. They were both teachers. I just had the curiosity about how things work and how people behave. I came across a lot of your material in 2005, 2006. It gave me that same feeling and I didn’t necessarily have the same experience as you did with seeing how a person’s liberty was taken at a larger scale with the Czech Republic and Russia. I start to look at myself and I start to look at what I was taught and what drives me and what drives other people and the environment associated with the healthiest grooming of a human being where they can pursue what they want in happiness and joy. It’s not something that can be dictated or force. It has to be chosen. Oftentimes, people gravitate toward this easy way of doing things. I’m not sure if that’s the purpose of life.

I looked at the incredible experience I’ve had learning from you and learning from others who understand the principles of liberty at such a deep level and how much of an impact it would have on the average individual. Let alone the society, but just the average individual where they recognize in themselves that there is something special and that they can do incredible things with their life. It’s inspiring and your website is incredible. You have so much information on there, more than can be consumed in probably ten lifetimes.

I’ve spread the word in regard to FEE and other organizations that are similar. I commend you and applaud you for all the effort you put into spreading this. I know it’s not easy and I know that these are not widely held beliefs and understood beliefs. The way in which you do it is incredible because it feels genuine and eloquent and you do it with such a great demeanor. Thank you for all the work you’ve done and keep it up and continue to charge forward and try to get more people that understand this.

You made my day. Thanks so much for the very kind words. You seem like a guy who would be great fun to have lunch with. I’ll look you up and I’ll let you know when I come out your way next. Meantime, holler anytime if I can be of any help and let us know when this goes online and we’ll be happy to help promote it on the website and on social media.

Thank you again. I really appreciate it.

It’s my pleasure. Thanks, Patrick. I really appreciate it.

Important Links:

About Lawrence Reed

TWS 5 | Capitalism And Freedom

Since 2008, Lawrence W. Reed has been President of the Foundation for Economic Education (FEE.org) in Atlanta, Georgia. Previously, he served for 21 years as President of the Mackinac Center for Public Policy in Michigan and taught economics at Northwood University. He is the author of hundreds of articles in periodicals around the world and seven books, the most recent of which are Real Heroes: Inspiring True Stories of Courage, Character and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism. His travels as a historian, lecturer, economist, and journalist have taken him to 83 countries on six continents.

 

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The Philosophy And Principles of Capitalism with Yaron Brook

TWS 3 | Capitalism

 

With all the talks, debates and different perception about capitalism, consulting an expert can best take us to in-depth understanding of the concept. Yaron Brook, an internationally sought-after speaker, writer, activist and objectivist, walks us through his strong belief in the philosophy and principles and how capitalism should be attached to individual rights and freedom. He explains how we can flourish through capitalism. He also shares how a book handed to him has started his lifelong journey and reinforcement of capitalism started.

Watch the episode here:

Listen to the podcast here:

The Philosophy And Principles of Capitalism with Yaron Brook

TWS 3 | Capitalism

Equal Is Unfair: America’s Misguided Fight Against Income Inequality

I hope you are enjoying the first couple of episodes revolving around the topic of capitalism. I have the foremost living expert on capitalism, Yaron Brook. Yaron is an Israeli-American entrepreneur, writer and activist. He is an objectivist, which we’re going to most likely talk about and what that means. He also is the current Chairman of the Board of the Ayn Rand Institute. He also is the Cofounder of BH Equity Research and is the author of several books including called Equal Is Unfair: America’s Misguided Fight Against Income Inequality. Yaron, thank you for joining us. Welcome to the show.

It’s great to be here. I’m looking forward to this.

I find your background fascinating in how you came to understand what you do and why you have such a strong belief in your philosophy and your principals. Would you mind taking a moment and informing the audience of what is your background? How did you come to understand objectivism as well as capitalism? I would say a very strong opinion if those that are in our audience have listened to you or watched you before.

If they haven’t, there are tons of videos. Google my name and you’ll find a ton of content. I was born and raised in Israel in the period of time when pretty much everybody was a socialist. It was a thing to be. The Labor Party in Israel had won every single election until 1977. You were never exposed to any ideas other than the ideas of socialism. In 1977 as it happens, I was sixteen years old. I was getting together with a friend of mine. We were talking and he was spouting these free market capitalist ideas and I looked at him and I said, “Where are you getting this nonsense from? What happened to you?” He said, “You got to read this book,” and he handed me a copy of Atlas Shrugged. I read a lot in those days and I dove right into it and it blew my mind. It completely shook my world. It challenged everything I believed in from the fundamental beliefs I had about ethics, purpose of life, happiness, morality, politics, economics and about everything. I argued with the book. I didn’t want to believe it. I threw it against the wall. I yelled at Ayn Rand, she wasn’t there.

By the end of the book, I was convinced. It completely made sense to me. It was completely logical. I thought I completely understood it. I was still quite ignorant and I didn’t know it, but I got into basics. It was the beginning of a lifelong journey of discovering Ayn Rand’s philosophy, the philosophy of objectivism and her view of capitalism, how capitalism fits into that. I ultimately became a finance professor but my interest is more on the politics and economics. It’s all grounded in this view of morality, which is key to understanding her philosophy and understanding capitalism. I’ve studied her philosophy. I’ve studied economics. I’ve studied the great capitalist economists. The more I study, the more I’m convinced that the revolution that went through my mind at age sixteen was a true one and the rest of the world needs to catch up. What are they waiting for?

Capitalism is about freedom of the individual to pursue his values as he sees fit without anybody intervening. Click To Tweet

It’s interesting that your perspective continues to be reinforced it sounds by doing debates, by debating the opposite principles. You experienced it in your childhood growing up, but also you continually challenged both sides of the argument, which is profound and continues to reinforce it. How would you come to understand capitalism? When you acknowledged that word and when you look at its relevance in society and in life what is it that is most compelling and most profound?

Capitalism is about freedom. It’s about the freedom of the individual to pursue his values as he sees fit without anybody intervening where the role of the government is to protect that freedom. The founders called it individual rights. John Locke called it individual rights and they were right. These are the individual rights by the freedoms of action. Freedom of action is the pursuit of values necessary for your survival, the rational values that you need. Capitalism at the end of the day is a socioeconomic system, political system in which the government does nothing but protect individual rights, primarily property rights where all property is privately owned.

The government has complete separation of state from economics. Pure capitalism is where the government has no economic role. There is no treasury secretary. There are no regular agencies. There’s no Federal Reserve. There is no role for government. When we get together, what we decide, how we decide to exchange, what we decide to change, how we decide to produce and how we deploy our resources is completely left to individuals. As long as I am not committing fraud, as long as I’m not punching in the face, as long as I’m not committing a crime, as long as I’m not violating your rights, the government has no business intervening in the transaction between us.

The primary argument I want you to address now and this is the primary argument that we all see in society is that mankind isn’t going to do the right thing. They’re going to exploit people. They’re going to cheat. They’re going to steal. They’re inherently evil. Looking at capitalism, doesn’t that accentuate or magnify those flaws of humankind?

Let’s assume all men are evil, they’re scheming and they’re going to screw each other. Let’s take a small group of men, call them saints and have them control everything. The bureaucrats, the politicians, we know that they’re saints. We know our politicians. Even on its own terms, it’s insane. The fact is that there’s nothing to suggest in history that this is indeed the case. Look at us now. Since the invention of capitalism about 250 years ago, since the founding of this country, which is about the same time as capitalism comes together, not an accident that the two happened at about the same time. Since then, life expectancy has more than doubled. We’re wealthier beyond the most fantastic dreams of anybody living 250, 300 years ago.

Nobody could have imagined an iPhone and the fact that we’d be videoconferencing right now. All the tools that are available to us, they barely could imagine. I don’t think they imagined automobiles, flying machines that turned out to be nothing like the jets we have now. If you look at what human beings are capable of doing, of when they’re left free they produce, of how much benevolence and help and cooperation. Think about capitalism. People think about capitalism and think about competition and cutthroat competition. The fact is that 99% of capitalism is about cooperation. It’s about me hiring you and that’s a cooperative effort.

It’s about even competitors. Do you know that Apple uses Samsung product in its iPhone even though it competes with Samsung? Some of the components in the iPhone are made by Samsung. Even as they’re competing, they are cooperating. Collaboration and cooperation is the essential characteristic of capitalism. You see that on a massive scale and versus every other regime. Look at Venezuela, socialism. Theft, cheating, backstabbing, manipulating and people say, “This is socialism,” it’s really a kleptocracy. That’s exactly what socialism is. It is a kleptocracy. Every single regime that’s not capitalist, even in America, I would argue that our politicians are more corrupt now than they were 150 years ago when we were freer. I would argue that people generally in the culture are less honest. People generally in the culture will cut more corners because the government is intervening more.

Pure capitalism is where the government has no economic role. Click To Tweet

I think it’s exactly the opposite, the freer you allow people to be. People are neither good nor bad, but people have it within them to be good. When the right incentives are provided, when they’re left free, when they can benefit or when they can reap the rewards of their own action, they tend to be good. When you try to control them, when you put mother governments on their shoulder to try to tell them what they can and cannot do, they work at corners. They will cheat. I truly believe people are born neither good nor bad, but goodness is a potential in all of us. Capitalism brings out the best in people, the innovation, the hard work, the striving to improve their lives and the value creation that benefits all of our neighbors and everybody around us.

As you debate the opposite opinion because I believe there’s a clear distinction of how humans behave within an environment that’s free. An environment that has laissez-faire, hands-off and one that is centrally planned and influenced to take care of the well-being of all. What is it about the idea of freedom that drives so much disdain amongst people, especially in our quickly changing liberal perspective on things?

I hate to give them the compliment of calling them liberals. Liberals used to be a good word. What drives it is that capitalism demands something of all of us. It demands the best of us. It demands personal responsibility, but not just personal responsibility in the way a lot of conservatives deem it in a shallow sense. Personal responsibility goes deep down on all of our choices. It demands that we pursue a life worth living. Capitalism implies a particular moral code. It implies a moral code of self-interest. Capitalism basically says, “You’re on your own. Go and make the best of your life. Nobody’s going to be responsible for you. Nobody’s going to take care of you. You need to take care of yourself.” It basically encourages that so we reward success. We penalize failure. We reward accomplishment. We encourage and promote and allow for self-interest.

We all know what our mothers taught us about self-interest, about egoism or about even selfishness. Bad things, bad people are selfish. Bad people are self-interested but is that really the case? When Steve Jobs pursued self-interest in making the iPhone and he’s clearly pursuing his interest, trying to make a lot of money and building a product he loves. Is that a bad thing? Is that hurtful to anybody else? No. When great scientists pursue with passion the discoveries they make, that’s not about sacrificing for the world. They’re doing it because they love doing it. They do it to satisfy themselves. Capitalism is about satisfying our own rational values or our own rational needs. As such, it goes against the moral code that almost everybody teaches. This is why on the right among conservatives and among people on the right, they have such a hard time defending capitalism particularly as an absolute. “We need a little bit of capitalism,” they’ll tell us. No, we need capitalism. We need complete absolute capitalism because they’re uncomfortable with the idea of self-interest. They are uncomfortable with the idea of defending and promoting egoism.

TWS 3 | Capitalism

Capitalism: The fact is that 99% of capitalism is about cooperation.

 

We have been taught since we were this big that what’s good is to be selfless. What’s good is to sacrifice. What’s noble is to think of others first. This is what blew me away in Atlas Shrugged. Ayn Rand asks a simple question, “Why is your happiness less important than other people’s happiness? Why isn’t your happiness the most important thing to you?” If you understand how you get happiness, it doesn’t come by exploiting other people. It comes by creating values, but why is your life less important than other people’s life? Why should you live for the other rather than live for yourself? To me, the real essence of capitalism is the morality of self-interest and that’s what the left but also the right, find disdainful. Why the left condemns capitalism and why the right, for the most part, cannot defend it or defend it so poorly.

These ideas are old ideas. I haven’t revisited this in a while in detail, but Adam Smith before he wrote The Wealth of Nations and The Theory of Moral Sentiments, he talked about how we’re driven as a human being where we do have this self-interest. I wouldn’t say it starts with making sure that we stay alive. We feed ourselves, we clothe our self and we fit into society. Then it gets to the point where we’re driven to make a contribution and do things and ultimately by pursuing that, you provide for the well-being of others as a result. The intention of the left, I would say, by forcing people to give up money or to do this so that they can distribute to everyone. Ultimately, the best thing for everyone comes about by a person pursuing that self-interest. What are your thoughts around that?

This is why Ayn Rand is such a revolutionary because she fundamentally disagrees with that of Smith in this sense. Adam Smith correctly observed in The Wealth of Nations and in The Theory of Moral Sentiments that the baker doesn’t bake the bread for you. He baked the bread for himself. He likes baking bread. More importantly in the context of the baker, he’s trying to make a living. He’s trying to feed his family. He’s trying to feed himself. He’s motivated by self-interest. Adam Smith says, “Self-interest is not good. It’s not a model trait. It’s not a virtue. We tolerate it because if you add up the self-interest of all these people, you get a better social outcome.”

Ayn Rand says, “I don’t care about the social outcome. What I care about is your right as an individual to pursue your happiness, your self-interest. I care about the baker as the baker, not what he does to other people but the baker. I want the baker to be able to be happy.” For the baker to be able to be happy, he must be free. Free to make his own choices. Free to have his own ideas. Free to bake whatever bread he wants to make, whether it fits into the regulatory regime or not. As long as his customers want it and as long as it doesn’t hurt them, he commits fraud or he’s putting poison in the bread. He should be able to be free to make his bed as he sees fit and pays employees as much as he wants because I care about the baker.

People are neither born good nor bad; goodness is a potential in all of us. Click To Tweet

It turns out that if you leave people free to pursue their self-interest, the society, if you can even define that term, is better off. Everybody who’s willing to work, everybody’s willing to produce is better off. That is not the reason to defend capitalism. The reason to defend capitalism is in the sense that the founders wrote in the Declaration of Independence. You have an inalienable right to pursue your own happiness. Not society’s, your own. The only political-economic social system that leaves individuals free to pursue their own happiness is capitalism. To me, that’s the moral foundation. It’s about the individual and it works because when you leave people free, they take care of their own property. That’s why capitalism also produces the cleanest environment because private property is clean. It’s a public property that’s polluted.

When the wall came down in Berlin, what we discovered was the filthiest place on the planet was communist East Europe because everything was public property and nobody cared. Everything dumped their garbage in the public space. When you have your own private property, we take care of it. You take care of yourself. In order to make a living, you have to produce values that other people want and therefore you are helping them. When I buy an iPhone for $1,000, my life is better for that. My iPhone is worth much more than $1,000, tens of thousands of dollars if this enhances my life. I’m willing to give up $1,000 because my life is better off by doing so.

Think about that. Every transaction we go through every day when we buy groceries, when we go to a restaurant, when we buy iPhones, or when we consume electricity. Whatever it is that we do, we are benefiting more than what we’re paying. Otherwise, we wouldn’t do it. Capitalism is a system through trade, through the win-win relationships that trade creates. Capitalism is a system that everybody is constantly better off through it as long as you’re working and producing something and earning something. It’s a win-win relationship. Because I’m selfish, because I want to produce, because I want to have a better life, I’m making everybody else’s life better as well because I have to trade with them. That’s the beauty of capitalism and that’s the beauty of this morality, the small defense of capitalism.

You had gone down and talked about this notion of happiness and achievement. You talked about how people pursue achievement. Achievement gives them a notion of self-worth or confidence and that happiness. Would you define happiness in another way or is it in line with that sequence?

TWS 3 | Capitalism

Capitalism: The reason to defend capitalism is, in a sense, that the founders wrote in the Declaration of Independence.

 

Happiness is the sense you get about life that comes from achieving your goals and achieving your values, as long as those values are rational. I don’t think somebody who has irrational values can be happy. If your value is to bring about socialism, you’re not going to be happy. You’re going to be miserable because the existential reality of those values is going to be detrimental to your life. The values have to be rational, pro-life values. Happiness comes from achieving those values. Ayn Rand defined happiness as a state of non-contradictory joy. You have this positive sense about the world and nothing is contradicting it. Nothing is fighting it. The world is good. It doesn’t mean you don’t have problems. It doesn’t mean you can’t be sad. It doesn’t mean tragedies don’t happen to you and you could be depressed for a while.

Overall, your attitude towards your life, your standing order in terms of life is life is good. I achieve stuff I can. I can make my goals. I can achieve my values. People sitting at home, for example, one of the great tragedies of the welfare state is that it basically prevents people who receive welfare from ever being happy. It robs them of opportunity to be happy because without work at whatever level you are capable of, without the challenge, without building, creating or making something. Whatever level you can do it, I don’t think you can be happy. You have to be able to achieve values. If you’re sitting at home playing video games and collecting a welfare check, that’s out the window for you. To me, the welfare state is immoral to a large extent because of that.

I’ve thought about that a lot. I thought about with people and what they achieve. Oftentimes, it comes as a result of hardship and error or mistakes in certain areas and their ability to overcome that and learn and achieve because of it. I don’t think there’s anything that can replace that. I look at a free society and how that allows for those opportunities. It does allow people to understand what they’re capable of. I’m not sure if there’s another way to do that. I don’t think there is.

At the end of the day, you go down to freedom. You have to have the freedom to try. You have to have the freedom to experiment. You have to have the freedom to fail, but you also have to have the freedom to succeed and to benefit from that success that so that everything else is motivated. That’s what capitalism provides. Capitalism is the system that leaves you free to do all those things. That’s how you get great innovation. People try stuff out. They come up with crazy ideas. Everybody around them I’m sure said, “That’s nuts. You’re insane. Nobody can do that,” and then they go do it.

Capitalism basically says you're on your own. Click To Tweet

Sometimes those crazy ideas turn out to be crazy and they fail. Sometimes and maybe less frequently, they turned out to be brilliant and they turn out to be what changes the world. The socialism you don’t have there, socialism under any political system where the state is involved. You basically have to get permission in order to innovate. If you take any great idea in human history and you put it in front of the committee, it’s going to fail. Is Earth going around the sun or is the sun going around the Earth? The committee of the Catholic Church decided, “The sun goes around the Earth. Galileo, you’re all wrong.” They shut him up and they imprisoned him or they put him on house arrest so he could not articulate this fallacy. In a free society, Galileo is out there, “I made this incredible discovery,” and speed at which science would have developed after that would have been so much faster. We would be so much richer now. Everything got slowed down because the committee couldn’t decide if this was a good idea or a bad idea. I always ask my audiences, “Imagine if this was designed by a government committee. What would this look like?” You don’t need to even get the answer. You know what’s going on inside of people’s heads. They can see some monstrous machine that’s too big and doesn’t work and is a disaster. Steve Jobs didn’t need to get permission. He didn’t ask anybody. He just did it.

It’s stifling and it’s interesting what’s going on in our country with the government shutdown and 800,000 people not working.

I would love to see the Federal government fire 800,000 people. We as a country would be richer. We as a country would be safer. We as a country would be far more capitalist and far more innovative if we got rid of these bureaucrats. My only concern about the government shutdown is these people are going to get back pay. I would like to see them fired. I would like to see the government shrink by 80%. You could probably get rid of 80% of government officials. Keep the military. Keep a few policemen. Get rid of everybody else. What do we need them for? They only constrain our lives. They only hinder our lives. They don’t add anything to it.

Have you been to CES before in Vegas?

TWS 3 | Capitalism

Capitalism: Happiness is the sense that you get about life that comes from achieving your goals and achieving your values, as long as those values are rational.

 

I read about it all the time. It sounds like a great time.

It’s this whole topic. You experience the results of this topic. I was in line doing a demo for the self-driving cars and I was talking to the head analyst at Intel who is creating the technological framework for that. The biggest impediment was the government. It was approving this and approving this. It’s one of those things where it can stifle innovation at that level, but it also stifles it at the lower levels primarily the welfare state. How we’re robbing individuals of an awesome experience to figure out their life and to figure out how to overcome challenges and problems and get employment. There’s so much in a human’s mind and their ability to create and prosper. It’s robbed from them over and over again. It becomes a habit and it destroys human life. I would consider one of the biggest tragedies of our day and age.

It robs us from the productive capacity and it robs them from their productive capacity and it robs us from their ideas. Just because they are on welfare, it doesn’t mean that with the right incentives, if they wouldn’t be the next innovator, the next entrepreneur or the next somebody who created something important. We robbed them when they’re children. Think about the other great tragedy. Under capitalism, education would be private, and education would be competitive. Education would have to be good. Otherwise, I wouldn’t send my kids there. Now, we have an educational system through and through. Particularly, if you’re poor we have an awful educational system that cripples these kids. It doesn’t give them the tools, it cripples them. This is socialism in practice. We have socialism in education. What is the result? Worse than mediocrity, it’s pathetic awful.

Imagine if education was competitive. If entrepreneurs instead of thinking of the next app for the iPhone thought about the next educational product, the next school that they could create, the next chain of schools that they could build where they would drive prices down and drive quality up. Imagine if we saw billboards with, “If your son is inclined towards math, our school is great. Your son or daughter likes to paint, our school is great for you.” They compete on those things and they market and advertise them. That would be a capitalist world. That would be a worthwhile world. What we’re taking is sheer human potential and destroying it by grinding it through a government educational system. I won’t even send a letter through the post. I’d rather use UPS and FedEx. Why would I send my kid to the equivalent of the post office, which is what government education is?

Happiness should not come from exploiting other people. Click To Tweet

In 2018, we focused on John Locke’s life, liberty and property and what those principles were. One of the guests wrote the book, Free To Learn, his name is Peter Gray. He talks about the Sudbury School System and how kids are creative. They’re naturally curious about life and he robbed them of that experience by shoving curriculum down their throat.

Competition is we discover which educational system is best. There will be competition and parents might disagree and there might be all kinds of schools. We would all have different preferences and some would be more successful than others. It would be innovative and we would go through the market process of discovery which educational system was best, just like in any other field. We figure out what’s best through competitive markets. The fact that we denied this of our kids and we denied this of our society and our culture is tragic.

We could probably go on and on because there’s so much to talk about because there’s so much application to human life and our experience on Earth. Let’s end with this. As you’ve researched this and debated this and thought about this to the nth degree, what would you say are the most compelling reasons at an individual level to embrace the principles of capitalism?

The most compelling reason is that you value your own life. You want to be free. You want to have opportunities. You want to pursue your own dreams. You want to be happy. It’s difficult to be happy under socialism, certainly under communism or fascism or statism of any form. The most compelling reason to want capitalism is to want to live. It’s to want to go out there and produce, create, build and make stuff. It’s not even about the money. Although money is nice and money comes with all that creation, but it’s about the sheer fun and enjoyment of pursuing something that you love doing and doing something that you love doing. Making a difference in your own life and challenging yourself and setting ambitious goals and achieving those goals.

TWS 3 | Capitalism

Capitalism: One of the great tragedies of the welfare state is that it basically prevents people who receive welfare from ever being happy.

 

It’s living. Capitalism is the only system that allows you to do that fully. One of the great tragedies in America unfortunately is we think of America now as capitalist. We’re not. We’re this mixed economy with some capitalism still, some freedom and a lot of regulation and control and fascist, socialist structures imposed on us. If we could only get rid of that and we could get richer, get happier, flourish in dimensions we can’t even imagine. Everything becomes better with freedom. The odds get better. Our spiritual life gets better. Our material life suddenly gets better.

Yaron, this has been a fascinating discussion. If you Google your name, there’s a lot of stuff out there. Why don’t you cover the best ways to follow you? Best ways to learn about the Ayn Rand Institute and learn more about capitalism.

First, I recommend everybody to read Atlas Shrugged and The Fountainhead, Ayn Rand’s books. They’re American classics. Everybody should be reading them anyway. Go pick up a copy and they’re available in every format known to man. No excuses. A lot of people are listening to them these days. Download it on Audible and take a road trip. You can find about Ayn Rand in AynRand.org. There’s a ton of content, a ton of material there. If you want to study objectivism deeper, there are lots of videos, audios and podcasts and many years’ worth of content that’s available. Some of it is Ayn Rand herself, some who are leading philosophical students who know her ideas and study them. To follow me, there are a number of ways. The easiest is probably going to YouTube and to subscribe to my YouTube channel. There are thousands of videos up on YouTube of mine and I’m constantly producing more. I do a video show at least once a week, usually three, four times a week. There’s a ton of content being produced constantly. You can do the regular follow me on Twitter and follow me on Facebook. I do have a website, YaronBrookShow.com.

The only political economic social system that leaves individuals free to pursue their own happiness is capitalism. Click To Tweet

As far as your books are concerned, they’re all available on Amazon or on your website?

They’re all available on Amazon. They’re all available in every format that is available. I have three books. One is called Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government, the second one is Equal Is Unfair and the third one In Pursuit Of Wealth: The Moral Case For Finance. It’s a book about the financial industry and why it’s a noble, productive and virtuous model industry. That will shock a few people. As a companion to that, I do on YouTube a talk called The Morality of Finance.

Yaron, it’s been a pleasure. Thank you for your time. Everyone out there, hopefully this has struck a few chords and got you to think about capitalism, the principles of capitalism and the principles of freedom at a deeper level.

Thanks, Patrick.

Important Links:

About Yaron Brook

TWS 3 | Capitalism

Yaron Brook is chairman of the board of the Ayn Rand Institute. He wears many hats at the institute and travels extensively as ARI’s spokesman.

Brook can be heard weekly on The Yaron Brook Show, which airs live on the BlogTalkRadio podcast. He is also a frequent guest on national radio and television programs.

An internationally sought-after speaker and debater, Brook also pens works that make one think. As co-author, with Don Watkins, of the national best-seller Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government, Brook and Watkins argue that the answer to our current economic woes lies not in “trickle-down government” but in Rand’s inspiring philosophy of capitalism and self-interest. Last year, Brook and Watkins released a new book, Equal Is Unfair: America’s Misguided Fight Against Income Inequality, a book that shows the real key to making America a freer, fairer, more prosperous nation is to protect and celebrate the pursuit of success―not pull down the high fliers in the name of equality. Brook is also contributing author to Neoconservatism: An Obituary for an Idea, Winning the Unwinnable War: America’s Self-Crippled Response to Islamic Totalitarianism and Big Tent: The Story of the Conservative Revolution — As Told by the Thinkers and Doers Who Made It Happen. He was a columnist at Forbes.com, and his articles have been featured in the Wall Street Journal, USA Today, Investor’s Business Daily and many other publications.

Brook was born and raised in Israel. He served as a first sergeant in Israeli military intelligence and earned a BSc in civil engineering from Technion-Israel Institute of Technology in Haifa, Israel. In 1987 he moved to the United States where he received his MBA and PhD in finance from the University of Texas at Austin; he became an American citizen in 2003. For seven years he was an award-winning finance professor at Santa Clara University, and in 1998 he cofounded BH Equity Research, a private equity and hedge fund manager, of which he is managing founder and director.

Brook serves on the boards of the Ayn Rand Institute, the Clemson Institute for the Study of Capitalism and CEHE (Center for Excellence in Higher Education), and he is a member of the Association of Private Enterprise Education and the Mont Pelerin Society.

 

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