Ayn Rand’s Atlas Shrugged is set in a world in which the death dance of capitalism has reached its final stages, the state itself becoming an instrument of direct appropriation of surplus value generated by the workers. As industrialists become aware of the extractive nature of the process in which they are participating, one by one, they convert to the radical anarchism of an agitator named John Galt,* and “go on strike” to an utopian community hidden in the mountains of Colorado: Galt’s Gulch.
In Galt’s Gulch, resources are allocated to whomever can use them most productively, in an informal process; since everyone can see how their interests converge, levels of trust are high, and hoarding and shirking are basically nonproblems. People pick up whatever tasks seem needed, regardless of their profession or the ability such tasks might give them to extract rents.
This raises the obvious question: Why does anyone use money in Galt’s Gulch?
In nearly every transaction in the Gulch in which a plausibly marketable good or service is provided, money - actual, physical precious metal coins - changes hands. When it is not hard currency, it is a claim on the same at a locally operated bank that appears to serve no other function than to enable this precious-metal fetishism.
We can dismiss out of hand the theory that they use money because they are capitalists. It serves no pragmatic purpose in the Gulch. The relevant markets are simply not liquid enough for price discovery, the social network is small enough to facilitate tracking debts directly, and everyone expects repeated in-person transactions so there is little need to settle accounts.
Nor does it serve as a symbol of what the settlers value, despite their protestations to the contrary. While the strikers in Galt’s gulch have adopted an argot that makes them sound like fanatical supporters of capitalism, in order to disguise their true agenda, it is worth noting that their explicit organizing principle is that no person has any moral claim on any other person’s productive capacity. And what is money, but the generalized form of a claim on the productive capacity of others?
The strikers’ fanatical capitalist propaganda is also belied by their behavior outside the gulch. Near the end of the story, the strikers, making plans to improve the Gulch’s productive capacity, joke about taking each other for all they’re worth. But when we see them actually have the chance to do so, they decline. At one point in the story, steel magnate Hank Rearden faces political pressure to transport his steel via a subsidized but unsustainable shipping concern instead of his usual, but politically unconnected, rail transportation. The shipping concern is able to offer a slightly lower price due to their subsidies. Here, the veneer of profit-maximization slips; Rearden dismisses the profit-maximizing move out of hand. He needs the railways in business next year. He does not extract what the market can bear; instead, he allocates business to the railway like a benevolent central planner, for the greater good.
Having dismissed the absurd notion that the Galt’s Gulch uses money because it is a capitalist commune, let us examine the most prominent monetary transaction that occurs in the Gulch: John Galt’s employment of Dagny Taggart.
Taggart, then a railway executive not yet radicalized, was following an engineer in her employ whom she suspected of radical tendencies, and wanted to dissuade him from going on strike. This escalated to an airplane chase, at the end of which she crash-landed in the Gulch. Galt rescues her, injured, from the plane, and brings her to his house.
Galt is her host. He is her caretaker initially, as she was injured from the crash and temporarily incapacitated. He is also her jailer, since she is not permitted to leave the Gulch immediately, for security reasons. The problem this presents is that while Taggart and Galt very much want to carry on a love affair with each other, the manifest power imbalance makes the prospect unethical.
Taggart decides to resolve the difficulty by demanding that Galt offer her employment as a housekeeper and cook. Galt accepts, and they can now ethically make love as equals.
What is it about the employment relationship - which is so often a relationship of domination in the mundane world - that rectifies the power imbalance?
As noted before, the market is not liquid. Taggart could easily have used her monopoly power as Galt’s only guest-prisoner-lover-potential-employee, to demand a higher price. Alternately, Galt could have used his monopsony power to pay her less, or nothing but room and board, or even pay her less than the cost of her room and board, in the time-honored company town tradition.
In situations with a broad zone of possible agreement, prices will tend towards natural thresholds or other points that naturally call on our attention or are easy to remember. This class of points are called Schelling points. In this case, the Schelling point for the transaction would be to simply value the services provided on each side equally, so that no money changes hands. The deviation is worth explaining.
The important thing is that money changes hands as part of the ritual.
If Taggart simply paid Galt for his hospitality and imprisonment services in kind, the transaction would be in the realm of primitive reciprocity, in which strict accounts are not kept, and it is never entirely clear whether you have paid off a debt precisely. In some business cultures, to pay off all of one’s debts to a business partner is a signal that you intend to dissolve the relationship - otherwise you would be happy to roll over small balances in either direction.
But that is precisely what Taggart and Galt mean to do: dissolve the web of connection that their prior transactions have created. If Taggart is Galt’s houseguest-prisoner, it is not clear which things she is doing for him in exchange for being permitted to continue to exist as his guest. But currency-transfer ritual transforms this into a contract, in which, so long as either party fulfills their part of the deal, they have moral standing to insist on performance by the other party. Anything not specified is understood not to be part of the deal. All future transactions start from a neutral position, in which neither party is implicitly indebted to the other. It is this understanding that permits them to be lovers, since Galt is not her feudal lord; he has merely engaged in a business transaction, which is fundamentally a relation between equals.
Here we see the true extent of the Gulch’s utopianism; its norms assume a world populated entirely by people who are not only morally competent to enter into arbitrary contracts (itself a tall order), but righteous enough to reliably execute the letter and the spirit of such obligations, once entered into.
* Galt’s former profession before his radicalization was engineer, which allows him to be an educated man without compromising his status as a member of labor, rather than management or capital.
Pingback: Rational Feed – deluks917
Several of my roommates are more on the hippie end of the spectrum, which seems inclined to allow little debts to be traded back and forth. I used to feel a need to use money in exactly this way: a contract to make all involved explicit that they are satisfied that they are not taken advantage of. Even if they just picked up eggs and I'll do the same for them in the near future. Now I see the difference in norms: it's part and parcel of living in community, to be more interdependent with the people involved in your life. If you don't use money to clean the slate you bond more fully with everyone.
Intellectually this is great; good social support systems allow us to use our strengths where they are needed and accept the same from others without gating every exchange of value with money. There's good faith, maybe because everyone is doing better than they would on their own, or for other reasons perhaps. But strong Calvinist background is individualistic enough (at least in the way I processed it) to make mutual support feel like mutual debt rather than part of creating a larger interconnected organism which wants to look out for all its members.
I used to love Rand (long before becoming agnostic/atheist) probably because at her core she has an iron-clad Calvinist way of thinking.
Pingback: Nightmare of the Perfectly Principled | Compass Rose
On the fetishization of money in Galt’s Gulch
Fetishization? Nonsense.
===============
The problem this presents is that while Taggart and Galt very much want to carry on a love affair with each other, the manifest power imbalance makes the prospect unethical.
Unethical? Egalitarian rubbish.
============
If Taggart is Galt’s houseguest-prisoner...
Prisoner? What's next, a 'sub-human dungeon sex slave'?
(I think the first draft of this comment was too polite, so I've rewritten it.)
I'm sorry, but this post is for people who can read more carefully and thoughtfully than you seem to be able to. For anyone else who was confused by the "fetishization" term, look up commodity fetishism - I've added the link to the body of the post.
[Comment deleted because it contained no useful information, only boasts and insults. -Ben]
The first half of this post is onto something. But you've completely misrepresented the facts of the Taggart-Galt transaction.
"The problem this presents is that while Taggart and Galt very much want to carry on a love affair with each other, the manifest power imbalance makes the prospect unethical."
Maybe you meant this is the real, subtextual reason? If so, you should say so, because it is absolutely not the stated reason.
In fact, Galt expects Taggart to pay him using her account at the bank you allude to--another striker has been engaging in high seas piracy to steal back the money the government stole from the strikers as taxes*, and Taggart is entitled to a share. Taggart refuses to claim this money because it would require her to admit the illegitimacy of the nation she still hopes to return to, and so chooses to work as a housekeeper instead.
*A project itself quite subject to this post's criticisms.
She is, in effect, a political prisoner, and part of that dynamic is that she can't access "her" money without effectively declaring the new regime legitimate. The power imbalance isn't quite as bad as if she didn't even have the option to do that, but having money conditional on legitimating Galt's revolutionary regime isn't the same thing as having money simpliciter.
The reason is subtextual, but I don't think anyone actually articulates an alternative reason. There's the general principle that "here, people pay for things," but there's not really a consistent application of that principle (nor can there be), nor a particularly clear rationale given, so we have to look at examples to figure out what exactly is going on.
The people in Galt's Gulch use money because they expect it to have value in the future, including in the outside world once their strike has succeeded. This latter part of the rationale is stated almost explicitly by Ragnar Danneskjöld when he argues that having "capital" in the right hands will save a lot of time. The question is not so much why they use money but why their prices are so trivially small, considering time preference and diminishing marginal utility. Since basically all its inhabitants can afford to buy whatever services or goods they want to buy, Galt's Gulch is effectively a communist utopia.
> And what is money, but the generalized form of a claim on the productive capacity of others?
Money has two essential natures, sometimes found in a single good and sometimes not. Firstly, money is a token of exchange that must have very high liquidity, be easy to carry around, be easily divisible, and at least not perish immediately. Grain serves this function, and has for this reason historically been used for trading (eg. in grain markets). It need not have high durability, however, since you can always trade it for things like fine pottery, cattle, etc. and trade them back for grain when you need more liquidity. Thus we see the second type of money: a store of value, which must be durable and have enough liquidity that you can trade it back for a token of exchange fairly quickly, but it does not need to have much more liquidity than that. Thus, a token of exchange has diminishing returns with regard to durability, whereas a store of value has diminishing returns with regard to liquidity. These properties are all about the expectation of marketability, whether acutely or long term, and do not have a direct relation to being a claim on productive capacities of others, although taxes of course make them into such a claim. Here, we can simply note that the members of Galt's Gulch are opposed to compulsory taxation, and therefore they do not see money as a claim on the productive capacity of others.
> Galt is her host. He is her caretaker initially, as she was injured from the crash and temporarily incapacitated. He is also her jailer, since she is not permitted to leave the Gulch immediately, for security reasons. The problem this presents is that while Taggart and Galt very much want to carry on a love affair with each other, the manifest power imbalance makes the prospect unethical.
That is not the problem Galt is hinting at when he says "payment of a kind I am not yet entitled to collect" (paraphrasing). He is referring rather to her relationship with Hank Rearden, and the fact that he hasn't won Dagny Taggart over yet.
> Taggart decides to resolve the difficulty by demanding that Galt offer her employment as a housekeeper and cook. Galt accepts, and they can now ethically make love as equals.
They don't, though. Even after the employment, Dagny Taggart still describes John Galt as a man she "might never have".
It is rather the fact that they are not lovers that makes it necessary for Dagny Taggart to come up with some other form of payment. If they were lovers, there would be reciprocity.
> But that is precisely what Taggart and Galt mean to do: dissolve the web of connection that their prior transactions have created. If Taggart is Galt’s houseguest-prisoner, it is not clear which things she is doing for him in exchange for being permitted to continue to exist as his guest.
Ayn Rand, and her characters, are perfectly okay with primitive reciprocity. Consider for example where Dagny Taggart explains to Cheryl Brooks that giving her attention and compassion does not constitute alms but instead just desert, or when Hank Rearden argues that Dagny Taggart pays for his attention. "I pay for it, Hank?" - "Don't look innocent, you know exactly what I mean".
This seems confused and substantively unresponsive to the arguments in the post. If the amounts of money exchanged are much smaller than an economic explanation would predict, then the economic explanation does not work.
The prices being unrealistically small was precisely my point in declaring it effectively a communist utopia.
The explanation for that is simply that Ayn Rand was no economist and did not have a firm grip of how time preference compounds exponentially. If not for steep time preferences, exchanging small amounts of money for small services makes sense, as people would be unwilling to part with larger amounts that will buy them much greater services later, and on account of the same reason, people would not require larger amounts in order to be willing to perform small services.
This theoretical oversight of Ayn Rand in no way undermines the money-demand explanation for those trades.
> unresponsive to the arguments in the post.
What would you say is the central argument? It still seems to me like I have given a direct refutation of the central thesis in the post.