The Shadow asked ominously:
Could Rand be the ultimate cause of the current economic diasaster with her philosophy of selfishness?
To be selfish is to be concerned with one’s own self-interest. And, assuming one wishes to remain alive, to prosper and achieve happiness, acting in one’s own self-interest requires that one plan not just for today, but for the future as well.
Is it in one’s self-interest to take out a home mortgage loan one cannot repay? No, for it ultimately leads to foreclosure, the loss of the home and the ruining of one’s credit rating.
Is it in one’s self-interest to loan money to people who cannot repay it? No, for it ultimately leads to loss of the money — which is why, left to their own devices, bankers and mortgage lenders have historically refused to make such loans. It took government action in the form of the Community Reinvestment Act, Fannie Mae and Freddie Mac, the FHA and a whole host of other government actions and agencies to force such loans to be made. The only reason all those federal agencies and programs exist is because self-interested lenders, left to their own devices, refused to make the loans the government thought poor people deserved.
Is it in one’s self-interest to buy mortgage-backed securities that contain loans that will eventually become non-performing? No, for ultimately the value of those securities will plunge when the bad loans surface and the foreclosures hit. This is why private investors would never have invested in such loans — not until the government-controlled cartel of bond rating agencies preposterously gave those securities a “AAA” rating — and even then most of those securities were purchased only by government-sponsored entities Freddie Mae and Fannie Mac.
Is it in one’s self-interest to sell insurance policies — in the form of credit default swaps — to investors that do buy mortgage-backed securities that contain loans that will ultimately become non-performing? No, just as it is not in one’s self-interest to sell life insurance polices to people who have terminal illnesses.
Is it in one’s self-interest to agree to demands by the United Automobile Workers union for wages and benefits 50% higher than those paid by one’s competitors — as was done by Ford, GM and Chrysler? No, for it ultimately makes one uncompetitive and leads to loss of market share, the shrinking and disappearance of profits and, ultimately, bankruptcy.
Was it in the self-interest of the UAW workers to make those wage and benefit demands? Ask the tens of thousands that have lost their jobs over the last decade.
Is it in one’s own self-interest to bilk investors in a Ponzi scheme? Ask Bernie Madoff, who now sits in jail facing a stiff prison sentence to be followed, if he ever gets out, by utter impoverishment.
In summary, this financial crises was not caused by the philosophy of self-interest — it was caused by it’s opposite — the philosophy of sacrifice. It was the doctrine that we must sacrifice to help the “needy” and “poor” that motivated all those government plans to force loans that private, selfish lenders and investors would not make of their own volition.
And now that the various institutions that were forced to sacrifice for the sake of the “needy” and the “poor” are in trouble, the philosophy of sacrifice demands that YOU make sacrifices for THEM. Hence, the bailouts — hence, YOU and YOUR money as the next sacrificial offering on the alter of altruism. All of which, incidentally, is the exact OPPOSITE of Rand’s philosophy.
