Yaron Brook, president and executive director of The Ayn Rand Institute and a regular contributor to CNN and the Fox News Channel, spoke to a packed room in the Chemistry Building last night about what he believes to be the reason behind the current economic crisis — and it’s not one you’d expect.
In the lecture, titled “Capitalism Without Guilt: The Moral Case for Freedom,” Brook, who holds a Ph.D. in finance, argued that the government, and not the failure of the free market, caused the nation’s economic recession.
“The newspapers, the media, everybody, many of your professors have declared capitalism has basically failed, that free markets don’t work,” he said.
Instead, Brook made the case that the main culprit was the Federal Reserve.
Brook said the Fed set interest rates too low prior to the collapse.
“We borrowed money on credit cards. We borrowed money on our homes. Everybody borrowed money because the Fed was giving it away,” Brook said.
According to Brook this caused the recession because it encouraged Americans to take on large amounts of debt they could not afford.
“I don’t think this is rocket science. I don’t think this is hard,” he said.
Though Brook said that “[m]ost economists these days blame the Fed, not the market,” there are no real metrics by which this assertion can be validated. Many economists point to the subprime mortgage crisis and related problems in the housing market as the major impetus for the downturn.
He also pointed to government intervention in the mortgage industry as another reason for the economic collapse.
“There is no free market in the mortgage business,” Brook said. “Government had its tentacles in every aspect of that business.”
Brook blamed government incentives that encouraged homeowners to take out mortgages they could not afford.
Brook said that prior to the recession government regulators held Wall Street back.
He said the Federal Securities and Exchange Commission exerted control over Wall Street agencies that rated the risk of investments, and that they downplayed the risk of some mortgage securities.
Brook concluded that the system set up prior to the economic recession wasn’t even capitalism.
“It’s a bold-faced lie to say that free markets and capitalism failed. There were no free markets or capitalism to fail,” Brook said. “This crisis was caused by government from ‘A’ to ‘Z.’”
Brook thinks the blame fell on capitalism because it’s seen as an immoral system governed by self interest. He argued that people need to start viewing self-interest as a positive value, pointing to current examples from the business world.
“Steve Jobs is a selfish bastard, right? He’s about self-interest,” Brook said jokingly, as he pulled out his iPhone to praise the product.
Brook argued that capitalism’s survival relies on convincing people that self-interest is a virtue.
“We need a righteous defense of capitalism. We need to stand up and say that capitalism not only works that it is the only ethical system known to man,” Brook said.
Brook worried about what the collapse of capitalism could bring.
“I think this country is going to Hell,” Brook said. “I think of it as a raft drifting on a river about to hit a waterfall, it’s not a question if we are going to hit it but when.”
He said that if capitalism isn’t saved, in a few decades it may disappear.
“There’s an urgency in the fight, now is the time,” Brook said, “There isn’t a second chance, if we don’t put everything we have in (capitalism), in the next 20 years we wouldn’t have done our best and the failure will be awful.”
LSA senior Pablo Zamith, who is an exchange student from France and attended the event, said he disagrees with Brook’s argument.
“Collectivism and cooperation makes us great,” Zamith said. “The main thing that differentiates us from animals is that we care about some people that are not genetically related to us.”
After Zamith asked a question about the difference between the Western European economy and American capitalism, Brook attacked countries like Sweden and France, saying “they live under an evil system.”
Zamith, however, said he believes there can also be a lack of freedom in a capitalist system.
“Capitalism is not entire freedom,” he said. “I believe that average people who didn’t obviously go to school are not making reasonable choices when they are a consumer.”