BY J.H. FREEMAN- MEDILL NEWS SERVICE
In times of crisis, we look for lessons from history, or on the rare occasion, in literature. Published in 1957, Ayn Rand’s “Atlas Shrugged,” a novel about industries and businesses boycotting a fiscally manipulating government, has been seized upon mostly by free market trumpeters as the encapsulation of the crisis and the loss of liberal economic ideals.
In a Wall Street Journal opinion piece published in January, Stephen Moore wrote the following paean to the novel.
Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read ‘Atlas Shrugged’ a ‘virgin.’ Being conversant in Ayn Rand’s classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only ‘Atlas’ were required reading for every member of Congress and political appointee in the Obama administration. I’m confident that we’d get out of the current financial mess a lot faster.
The Guardian books blog posted a review of the novel last week, which began with “If recent reports are to be believed, people have started seeing parallels between our current economic meltdown and the world collapse outlined in the 1200 pages of Ayn Rand’s libertarian classic Atlas Shrugged.”
And today, Don Watkins, a writer for the The Ayn Rand Institute posted a column entitled, you guessed it, “The Resurgence of Central Planning.”
Whether or not it speaks to the lack of literary pedigree in our journalists and commentators of the free market disposition is impossible to know, but ask any expert or graduate student in Russian literature and you will quickly find there is already a more prescient novel about the causes of the economic crisis, and it was written almost 170 years ago in the land of central planning itself.
Nikolai Gogol’s “Dead Souls”, published in post-Napoleanic Russia in 1842, is the first novel in the history of literature that concerns itself almost entirely with derivatives. The protagonist, Chichikov, arrives in a small Russian town and begins buying from landowners the certificates of serfs (“souls”) who have died but remain registered “living” with the government because the census is slow to record the changes. The landowners are forced to pay taxes on serfs that are dead, and Chichikov offers to relieve them of this economic burden.
Chichikov’s end-game is to acquire enough dead souls and put them up as collateral, secure a large loan, and set himself up in the style of a gentleman landowner. This all sounds dreadfully familiar, as Wall Street brokers as well as Main Street homeowners refinanced and leveraged against a mortgage market in which prices were believed to keep rising.
But like the dead souls in Gogol’s novel, the prices didn’t rise and the schemes backfired, leaving those involved, like Chichikov at the end of the book, to leave town in disgrace. It’s not a coincidence that the term “mortgage” derives from an old French phrase meaning “dead pledge,” referring to the reversion of ownership to the lender if the homeowner dies.
If Stephen Moore gets his way and the Obama administration is compelled to read “Atlas Shrugged,” I submit that Stephen Moore and the outfits who peddled the dead souls of credit default swaps should have some required reading of their own.