What Is Capitalism?

by Ayn Rand
From Capitalism: The Unknown Ideal
Capitalism: The Unknown Ideal
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It is from the work and the inviolate integrity of such minds — from the intransigent innovators — that all of mankind’s knowledge and achievements have come. (See The Fountainhead.) It is to such minds that mankind owes its survival. (See Atlas Shrugged.)

The same principle applies to all men, on every level of ability and ambition. To the extent that a man is guided by his rational judgment, he acts in accordance with the requirements of his nature and, to that extent, succeeds in achieving a human form of survival and well-being; to the extent that he acts irrationally, he acts as his own destroyer.

The social recognition of man’s rational nature — of the connection between his survival and his use of reason — is the concept of individual rightsA “right” is a moral principle defining and sanctioning a man’s freedom of action in a social context...
Man’s Rights, 93View Full Lexicon Entry
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I shall remind you that “rights” are a moral principle defining and sanctioning a man’s freedom of action in a social context, that they are derived from man’s nature as a rational being and represent a necessary condition of his particular mode of survival. I shall remind you also that the right to life is the source of all rights, including the right to property.3 For a fuller discussion of rights, I refer you to my articles “Man’s Rights” in the appendix, and “Collectivized ‘Rights’” in The Virtue of Selfishness.

In regard to political economy, this last requires special emphasis: man has to work and produce in order to support his life. He has to support his life by his own effort and by the guidance of his own mind. If he cannot dispose of the product of his effort, he cannot dispose of his effort; if he cannot dispose of his effort, he cannot dispose of his life. Without property rights, no other rights can be practiced.

Now, bearing these facts in mind, consider the question of what social systemA social system is a set of moral-political-economic principles embodied in a society’s laws, institutions, and government, which determine the relationships, the terms of association, among the men living in a given geographical area...
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is appropriate to man.

A social system is a set of moral-political-economic principles embodied in a society’s laws, institutions, and government, which determine the relationships, the terms of association, among the men living in a given geographical area. It is obvious that these terms and relationships depend on an identification of man’s nature, that they would be different if they pertain to a society of rational beings or to a colony of ants. It is obvious that they will be radically different if men deal with one another as free, independent individuals, on the premise that every man is an end in himself — or as members of a pack, each regarding the others as the means to his ends and to the ends of “the pack as a whole.”

There are only two fundamental questions (or two aspects of the same question) that determine the nature of any social system: Does a social system recognize individual rights? — and: Does a social system ban physical force from human relationships? The answer to the second question is the practical implementation of the answer to the first.

Is man a sovereign individual who owns his person, his mind, his life, his work and its products — or is he the property of the tribe (the state, the society, the collective) that may dispose of him in any way it pleases, that may dictate his convictions, prescribe the course of his life, control his work and expropriate his products? Does man have the right to exist for his own sake — or is he born in bondage, as an indentured servant who must keep buying his life by serving the tribe but can never acquire it free and clear?

This is the first question to answer. The rest is consequences and practical implementations. The basic issue is only: Is man free?

In mankind’s history, capitalism is the only system that answers: Yes.

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.4For a fuller discussion of this subject, see my article “The Nature of Government” in the appendix.

It is the basic, metaphysical fact of man’s nature — the connection between his survival and his use of reason — that capitalism recognizes and protects.

It is the basic, metaphysical fact of man’s nature — the connection between his survival and his use of reason — that capitalism recognizes and protects.

In a capitalist society, all human relationships are voluntary. Men are free to cooperate or not, to deal with one another or not, as their own individual judgments, convictions, and interests dictate. They can deal with one another only in terms of and by means of reason, i.e., by means of discussion, persuasion, and contractual agreement, by voluntary choice to mutual benefit. The right to agree with others is not a problem in any society; it is the right to disagree that is crucial. It is the institution of private property that protects and implements the right to disagree — and thus keeps the road open to man’s most valuable attribute (valuable personally, socially, and objectively): the creative mind.

This is the cardinal difference between capitalism and collectivismCollectivism means the subjugation of the individual to a group--whether to a race, class or state does not matter...
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The power that determines the establishment, the changes, the evolution, and the destruction of social systems is philosophy. The role of chance, accident, or tradition, in this context, is the same as their role in the life of an individual: their power stands in inverse ratio to the power of a culture’s (or an individual’s) philosophical equipment, and grows as philosophy collapses. It is, therefore, by reference to philosophy that the character of a social system has to be defined and evaluated. Corresponding to the four branches of philosophy, the four keystones of capitalism are: metaphysically, the requirements of man’s nature and survival — epistemologically, reason — ethically, individual rights — politically, freedom.

This, in substance, is the base of the proper approach to political economy and to an understanding of capitalism — not the tribal premise inherited from prehistorical traditions.

The “practical” justification of capitalism does not lie in the collectivist claim that it effects “the best allocation of national resources.” Man is not a “national resource” and neither is his mind — and without the creative power of man’s intelligence, raw materials remain just so many useless raw materials.

The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does — if that catch-phrase has any meaning — but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival qua man, and that its ruling principle is:  justiceJustice is the recognition of the fact that you cannot fake the character of men as you cannot fake the character of nature, that you must judge all men as conscientiously as you judge inanimate objects, with the same respect for truth, with the same incorruptible vision, by as pure and as rational a process of identification—that every man must be judged for what he is and treated accordingly, that just as you do not pay a higher price for a rusty chunk of scrap than for a piece of shining metal, so you do not value a rotter above a hero—that your moral appraisal is the coin paying men for their virtues or vices, and this payment demands of you as scrupulous an honor as you bring to financial transactions—that to withhold your contempt from men’s vices is an act of moral counterfeiting, and to withhold your admiration from their virtues is an act of moral embezzlement—that to place any other concern higher than justice is to devaluate your moral currency and defraud the good in favor of the evil, since only the good can lose by a default of justice and only the evil can profit—and that the bottom of the pit at the end of that road, the act of moral bankruptcy, is to punish men for their virtues and reward them for their vices, that that is the collapse to full depravity, the Black Mass of the worship of death, the dedication of your consciousness to the destruction of existence...
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About the Author
Ayn Rand
Ayn Rand
Learn more about Ayn Rand’s life and writings at AynRand.org.
CITATIONS & NOTES

Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet, 1967).

  • 1 Encyclopedia Britannica, 1964. Vol. IV, pp. 839-845.
  • 2 Ayn Rand, “The Objectivist Ethics,” in The Virtue of Selfishness.
  • 3 For a fuller discussion of rights, I refer you to my articles “Man's Rights” in the appendix, and “Collectivized Rights'” in The Virtue of Selfishness.
  • 4 For a fuller discussion of this subject, see my article “The Nature of Government” in the appendix.
  • 5 For a discussion of the philosophers' default in regard to capitalism, the title essay in my book For the New Intellectual.