‘Capitalism’: When and How Ayn Rand Embraced the Term (Pt. 1)

Capitalism, wrote Ayn Rand, is “the only system geared to the life of a rational being.”¹ She was an outspoken, enthusiastic, uncompromising advocate of capitalism, a self-described “radical for capitalism.”² Her 1957 best seller, the novel Atlas Shrugged, celebrates production and business. She is known for eloquent articles on the topic (e.g., “America’s Persecuted Minority: Big Business”), many of them collected in the 1966 volume Capitalism: The Unknown Ideal.

But at what age did she first come to view business itself positively? When did she recognize free enterprise as not only an efficient economic system, but as the only moral political system? When did she begin to make salient use of the term “capitalism” and think of it as naming her political ideal? The present article is a biographical answer.  I begin with her youth, continue through her university education and her early Russian publications, cross the Atlantic with her to the United States, follow her reading and writing about individualism in politics, and examine the advocacy in her private and public writing of the principles of free enterprise — and the appearance there of the word “capitalism.”

Ayn Rand’s youth and education in Russia

Where did it all start for her? As a young person, she valued reason and individualism, and she opposed the Soviet state, specifically the idea that the individual’s life belonged to the state. But at the time of the Russian Revolution of 1917, when she was twelve, she did not yet think of America or its political or economic system as constituting a principled alternative to the statism of Soviet Russia. When she first gained specific information about the history of the United States, a few years later, through a single course in her high school in the Crimea, she saw America as “almost an incredible thing” — as the “country of individualism, in whichever primitive terms I would have had it.”³ She ultimately came to regard the United States as the opposite of Russia, as the representative of individualism versus collectivism. But she had not, during her youth in Russia, identified capitalism itself as being related to individualism or to her objections to the Soviet regime.

Her family background, to be sure, supported a generally positive view of business. Her father, she recalled, had started his own pharmacy business, and was proud of his success; he had sent seven of his siblings through college. He was proud mainly of being productive, of being a self-starter, of having created his work for himself. He had, moreover, “very firm convictions on ethics, and they would be strictly his own”; these convictions pertained to “free enterprise and fair trade.” She believed, though, that he did not particularly like the field of his work; because there were quotas for university subjects and he had been allowed to study chemistry, his choice of field was a “forced choice,” rather than a distinctly personal goal. His business, then, was a way to be independent, a “self-made man,” although he did not (as far as she could tell) love the particular business in which he was engaged.

Her university education at the University of Petrograd did not provide her with historical, economic, or philosophical information about the positive aspects of the world of business. On the contrary. Her courses did not describe capitalism in any depth or detail; the term was simply a name for that which had, according to Marx and Lenin, needed to be discarded or superseded, one way or another. Her studies included required subjects such as Historical Materialism, History of Socialism, and General Theory of the State Structure in the USSR. “Historical Materialism,” she said, “was the history of the Communist philosophy. . . . They had an official textbook — which was sort of like the Bible for all students, and everybody had to know it. . . . It started with Plato, the next big stopping point was Hegel, then Marx and Lenin.”⁴ The likely textbook was Nikolai Ivanovich Bukharin’s Theory of Historical Materialism: Popular Textbook of Marxist Sociology, the standard textbook for the course in historical materialism. It was published in 1921.⁵ To read it is to see how the young Ayn Rand would have seen capitalism handled (or mishandled).

In We the Living (1936), her first novel, she included references to the popular version of Bukharin’s book, Azbuka Kommunizma, or The ABC of Communism, co-written by Bukharin with Evgenii Preobrazhenskii and designed for workers, or for rank-and-file Party members. The reference makes clear that the book is well known, and that it had become a cliché to see “capitalism” as an outmoded economic system. For example: At a meeting of the Marxist Club in the library of the “House of the Peasant,” Kira Argounova, the protagonist, reads aloud her thesis on “Marxism and Leninism”: “Leninism is Marxism adapted to Russian reality. Karl Marx, the great founder of Communism, believed that Socialism was to be the logical outcome of Capitalism in a country of highly developed Industrialism and with a proletariat attuned to a high degree of class-consciousness. But our great leader, Comrade Lenin, proved that . . .” (Notice that the passage ends with an ellipsis, as if to imply a familiar formula, or the Russian equivalent of yada-yada-yada.) The novel’s narration then explains: “She had copied her thesis, barely changing the words, from the ‘ABC of Communism,’ a book whose study was compulsory in every school in the country. She knew that all her listeners had read it, that they had also read her thesis, time and time again, in every editorial of every newspaper for the last six years.”⁶ 

Decades later, Ayn Rand recognized the same clichés and intonation in an answer given by Nikita Khrushchev in 1959 about “the grounds of his faith in communism.” Khrushchev, she wrote, “began to recite the credo of dialectical materialism in the exact words and tone in which I had heard it recited at exams, in my college days . . . the same uninflected monotonous tone of a memorized lesson, the same automatic progression of sounds rather than meaning. . . .”⁷

From her education, Ayn Rand herself, like Kira, was familiar with “capitalism” as the economic system Marx expected to see replaced by socialism. But other than recognizing it as a target of Marx and Lenin, she had learned little about it. From the standpoint of vocabulary, she was accustomed to seeing “capitalist” as a synonym for factory-owner, rather than as a term that might be used to describe an opponent of statism in principle, or an enemy of Communism, or, say, someone like herself. Her education had identified capitalism as the enemy of her enemies, to be sure, but this fact was not sufficient to justify its becoming the marker of her personal cause.

Ayn Rand’s early writings on the cinema, in Russia

Her earliest published writings, moreover, did not celebrate capitalism, and the publishing venue was explicitly hostile to capitalism. After completing in 1924 her degree in History and Pedagogy at the University of Petrograd, she enrolled in a program at the State Institute of Cinematography. During this time, she not only had free access to many films (notably foreign films), but she wrote about Hollywood films. Her publisher, Kinopechat’ [Movie-Print] specialized in sixteen-page biographies of individual stars, collectible photos of film stars, and some longer treatments of film artists and production. It was, at times, critical of the world of business.

In 1925, Kinopechat’ published her biography of the film star Pola Negri; it appeared anonymously. Gollivud: Amerikanskii Kino-Gorod [Hollywood: American Movie City] appeared in 1926, after Ayn Rand had left Russia permanently. The book itself, with a text of thirty-seven pages (including illustrations), was credited to her (A. Rozenbaum) on the cover and on the title page. The chapter on American movie directors describes the interference these artists experience in their creative work:

But directors have an enemy. An omnipotent and indomitable enemy. An enemy whom it is difficult to fight — the firm’s owner. At any moment in his work, any director may be interrupted by the appearance of a decisive businessman, who states categorically: “This must be changed. This must be cut. This character must be omitted entirely. Cut out the ending.” And the studio’s sovereign dares not argue.

The owners and presidents of film studios force their views and demands on the directors. They greedily pursue the public’s tastes. Like obedient slaves, they strive to satisfy every desire of the omnipotent public. They want to release only that which is popular. They are frightened by the new and unusual.⁸ 

The chapter includes specific examples of complaints by the directors Monta Bell, Joseph von Sternberg, and Erich von Stroheim about the creative intrusion on their work. The text portrays the “decisive businessman,” the studio owner, as a villain, as someone who panders to the mob at the expense of artistic quality, and in defiance of the judgment of the artistic creator. The text also states that “the cinema businessmen squeeze out their million dollar profits.”⁹ It refers to the producers as “movie-sharks.”¹⁰ It is possible, to be sure, that her text was altered after she left the country, and that she herself did not originally write all of those words. It is true, moreover, that the criticism of the business of film studios was not tantamount to an attack on business in general. Nonetheless, she may (if she wrote those words) have been willing to portray a “decisive businessman” as an enemy of quality, a slave to the mob, a mangler of art itself.

The three-page introduction, which is credited to B. Filippov, is even more explicitly negative regarding business and capitalism. Filippov’s introduction criticizes Hollywood for being run as a business, motivated by financial considerations; the writer implies that business itself is degrading. The first words of this read: “‘Hollywood’: a unique ‘agitprop’ [or, propaganda division] of capitalistic America.”¹¹ On the next page: “Capitalist fever: this is the most correct diagnosis of the illness of the American movie-city.”¹²

It would not be fair to say that Ayn Rand herself attacked business or capitalism. She may not have read Filippov’s introduction; she may not even have written the attack, in the body of the text, on the “decisive businessman.” What is evident from Gollivud, however, is that attacks on American capitalism found their way into a publication that paid tribute to American cinema, and there is at least a possibility that Ayn Rand herself had a similarly negative view.

The novelist and playwright, at the start of her American career

Some overtly negative references, for example, appear in her private notes from 1935 for the novel that became The Fountainhead. In her notes, she comments: “Communism, at least, offers a definite goal, inspiration, a positive faith and ideal. Nothing else in modern life does. The old Capitalism has nothing better to offer than the dreary, shop-worn, mildewed ideology of Christianity, outgrown by everyone and long since past any practical usefulness it might have had — even for the Capitalistic system.”¹³ In later notes, she added: “The Capitalistic world is low, unprincipled and corrupt. But how can it have any incentive toward principles when its teachings, its ‘ideology,’ has killed the source of all principles, the only source — man’s ‘I’?”¹⁴ At this time, she was critical of capitalism for lacking principle, notably the principle of individualism. The “capitalist world,” at that time, meant to her not the economic system of the free market, but the conventional culture of 1930s America — and she found it empty of values.

When she began her writing career in the United States, she did not, in her early fictional writings, celebrate business or businessmen. On the contrary. The hero of her first play, Night of January 16th (composed in 1932, premiered in 1934), was a financier who was a swindler, and the villain of that play was a banker who plots murder. She clearly did not intend to say that all financiers are frauds, any more than presenting a banker as a murderer was intended to tarnish all bankers. It is nonetheless true that this play does not present any heroic business people.

This practice continued in her first novel — largely, to be sure, on account of its setting. We the Living (1936), her first novel, is set in Soviet Russia, a background inhospitable to free enterprise. Successful businesses, such as Kira’s father’s textile factory and her uncle’s fur business, had existed in the past, but are not part of the novel’s contemporary concerns except as targets of suspicion and condemnation. There are no heroic businessmen operating during the novel. Such people simply are not part of the novel’s world, as they were not part of the Soviet world of the 1920s.

The 1936 edition of the novel, moreover, contained a few lines that hinted at negative implications regarding business. Ayn Rand herself made changes in the text, when she revised it for publication in 1959. Decades later, she saw in the earlier work some phrases that she wanted to adjust or remove.¹⁵

One such change, describing the financial failure under Communism of the heroine’s father, involved the following line: “the dreaded word ‘speculator’ gave him a cold shiver; and he was not born a business man.” The line implies that businessmen and speculators amount to the same thing, and that Kira’s father, the former head of a textile factory, had somehow not been a businessman. The line even suggests that being a businessman is a bad thing to be. For the 1959 edition, accordingly, Ayn Rand changed the line to remove these negative implications, these aspersions on businessmen in general. The line became: “he lacked the talents of a racketeer.” She had removed the implication that she was criticizing businessmen in general, rather than speculators and racketeers ¹⁶

Later in the novel, in a speech by a Communist attempting to justify compromises for the sake of expediency, she replaced the expression “victorious capitalism” with “private profiteering.” She cut the lines “We are a lonely oasis in a world ruled by capitalism” and “What if we do have private stores and private profit? What if we are learning capitalistic methods of production?”

Why did she make these changes?  Perhaps, as Robert Mayhew suggests, because she considered the character’s positive remarks about capitalism to be unrealistic for even a compromiser, or perhaps because she did not want to leave open the implication that private profiteering in Russia was similar to actual capitalism, or that the world in general was ruled by capitalism.¹⁷ In any event, we see that, in 1959, looking back at her own writing, she resolved to remove from her novel anything that could be read as a slur against capitalism.

Learning more about American politics

In the late 1930s and 1940s, she had become more informed about contemporary American politics. She began to read magazines, notably the American Mercury, and newspaper editorials. She later recalled that she had read “quite a large number of journalists and politicians, political speeches, pamphlets, articles, newspaper editorials, that were quite consistent and outspoken”; their statements were “kept within terms of ‘capitalism versus collectivism.’”¹⁸ She saw that the journalists and politicians who seemed to be her political allies (or, at any rate, the enemies of what she saw as the political enemy) were describing the alternative as capitalism versus collectivism, and she began to do likewise.

She continued to learn. By 1940, she was not only “very actively interested in politics,” but she had found a political candidate to support (rather than merely one to oppose). She became interested in Wendell Willkie because he had defended private utility companies (notably Commonwealth and Southern, which he served first as counsel and then as president) against the Tennessee Valley Authority (a New Deal program). She was impressed by Willkie’s defending their right to property, “in a period where the utility companies were particular examples of capitalistic evils, so called.”¹⁹  Wendell Willkie had defended “free enterprise” as practical and moral: “we still have by far the highest standard of living; not only the highest in material comforts, but the highest in spiritual possession; not only better machines, but more freedom. And we have achieved this because we have maintained the system of free enterprise. . . .”²⁰ In his speech of acceptance of the presidential nomination, he had stated:

The ability to grow, the ability to make things, is the measure of man’s welfare on earth. To be free, man must be creative. . . .

I say that we must substitute for the philosophy of distributed scarcity the philosophy of unlimited productivity. I stand for the restoration of full production and reemployment by private enterprise in America. . . .

It is from weakness that people reach for dictators and concentrated government power. Only the strong can be free.

And only the productive can be strong.²¹

Willkie made explicit the connections between freedom and productivity, between freedom and creativity.

The same point was featured in the title of an important book: Carl Snyder’s Capitalism the Creator: The Economic Foundations of Modern Industrial Society (1940).

Ayn Rand later described this book as the first full-length treatment she read on contemporary politics and economics. She was, she said, reading reviews in the New York Times in order to find promising books. Snyder’s Capitalism the Creator was reviewed there on April 7, 1940; the review, which she may have read, described the book as “frankly and belligerently a defense of capitalism, and as such it is one of the most original and interesting this reviewer has ever seen.”²² (The reviewer was Henry Hazlitt, later the author of Economics in One Lesson and many other works, and, in later years, a personal friend of hers.) Capitalism the Creator, which contains information about the Federal Reserve Bank and other technical matters, also included a philosophical statement that established “capitalism” as the expression of individualism.

The very title not only praised capitalism, but did so by labeling it the “creator.”  This was a key point for Snyder, and it was important for Ayn Rand, who was then engaged in writing the novel that became The Fountainhead. Her novel calls attention to the rights and requirements of the creator:

The basic need of the creator is independence. The reasoning mind cannot work under any form of compulsion. It cannot be curbed, sacrificed or subordinated to any consideration whatsoever. It demands total independence in function and in motive.²³

Snyder not only showed that capitalism as an economic system had promoted unprecedented progress and prosperity, but that it had done so not through the “achievement of the human race as a whole,” but rather through the actions of the creators, those on whom the world depends. “These are the discoverers, the inventors, the contrivers, the enterprisers, the organizers. . . . To these and these alone we owe all, for without them and their creations, their energy, their drive, their organizing power, our modern world simply would never have been, nor any civilization more than of the most primitive type.”²⁴ There would be no modern world, he said, without the creators, and without “capitalism the creator,” the system under which the creators function. They are fundamentally necessary.

In The Fountainhead, Ayn Rand’s protagonist underlines the same necessity: “What would happen to the world without those who do, think, work, produce?”²⁵ And the creators were necessary even though they were rarely acknowledged and appreciated. “The great creators — the thinkers, the artists, the scientists, the inventors — stood alone against the men of their time.”²⁶ “The creator — denied, opposed, persecuted, exploited — went on, moved forward and carried all humanity along on his energy.”²⁷

Snyder’s vision of capitalism as the creator — not only because it creates values, but because it fosters the creative activity of inventors and discoverers — coheres well with the ideas and language of The Fountainhead. The title of his first chapter was “The Mainsprings of Civilization.” “Mainspring” was a title Ayn Rand had considered for her novel.²⁸ And readers who are familiar with Atlas Shrugged will recognize the emphasis on what the world owes to the inventors, the discoverers, the producers.

This article is concluded here.

1. Introduction, Capitalism: The Unknown Ideal, New York: New American Library, 1967, vii.
2. “Choose Your Issues,” Objectivist Newsletter 1.1 (January 1962), 1. She used the term to identify her political position, especially in circumstances where she might be wrongly labeled a conservative. In a letter (February 4, 1963), she wrote to William M. Jones, professor of English at the University of Missouri, stating that, contrary to the comments he had sent her, she was not a “conservative.” In providing context for his choice to include her “Faith and Force: The Destroyers of the Modern World” in Stages of Composition: A College Reader (Boston: Heath, 1964), Jones had tried to make a connection with James H. Justus’s “A New Liberalism to Pay Old Debts,” another essay in his textbook: “In the past few years Miss Rand has become one of the leaders of the New Conservatism that Mr. Justus mentions.” See Ayn Rand Papers 141_IJx_036_001 and 141_IJx_037_001. She asked him to correct that misleading description and to write, instead: “In the past few years Miss Rand has become one of the leaders of a movement advocating capitalism.” “I describe myself,” she wrote in her letter,” as a ‘radical for capitalism.’” Letters of Ayn Rand, edited by Michael S. Berliner (NY: Dutton, 1995), 602. For another occasion on which she stated, “I call myself a radical for capitalism” (instead of accepting and endorsing the conservative label), see letter to John E. Marshall, October 18, 1980, Letters of Ayn Rand, edited by Michael S. Berliner (NY: Dutton, 1995), 666.
3. Biographical interviews of Ayn Rand conducted by Barbara Branden and Nathaniel Branden in 1960–1961. Interview #1, taped December 18, 1960. The information about her high school and about her impressions of her father can be found in this interview.
4. Biographical interviews with Ayn Rand conducted by Barbara Branden and Nathaniel Branden in 1960–1961. Interview #6, taped January 2, 1961.
5. For an English translation, see Nikolai Bukharin, Historical Materialism: A System of Sociology, translated from the third Russian edition (Ann Arbor: Univ. of Michigan Press, 1969). For more information about Ayn Rand’s reading of Bukharin, see Shoshana Milgram, “The Education of Kira Argounova and Leo Kovalensky,” Essays on Ayn Rand’s “We the Living,” edited by Robert Mayhew, 2nd edition (Lanham, MD: Lexington, 2012), especially 94–97.
6. We the Living (New York: Random House, 1959), 182. For a brief discussion of Lenin’s revision of Marx, see John Ridpath, “Russian Revolutionary Ideology and We the Living,” Essays on Ayn Rand’s “We the Living,” 2ndedition, edited by Robert Mayhew (Lanham, MD: Lexington, 2012), especially 134–35.
7. Ayn Rand, “To Dream the Non-Commercial Dream,” Ayn Rand Letter II.7 (January 1, 1973), 6.
8. The volume Russian Writings on Hollywood, edited by Michael S. Berliner, was published in 1999 by the Ayn Rand Institute Press, then in Marina del Rey, Calfiornia. It contains facsimiles of Pola Negri and of Gollivud: Amerikanskii Kino-Gorod, along with translations by Dina Schein Federman of Ayn Rand’s writing. The quotations here from the text of Gollivud are taken from Dina Federman’s English translations, with reference to the original Russian text. The English translation appears on 80–81 of the volume; the Russian appears on 13 of the facsimile of the Russian text, as reprinted on 52 in the volume. The Russian predprinimatel’ is rendered “film’s owner”; reshitel’nogo “delovogo” cheloveka is rendered “a decisive businessman.”
9. The English translation appears on 78 of the volume; the Russian appears on 11 of the facsimile of the Russian text, as reprinted on 51 in the volume. The Russian kino-del’tsy is rendered “the cinema businessmen.”
10. The English translation appears on 81 of the volume; the Russian appears on 14 of the facsimile of the Russian text, as reprinted on 53 in the volume. The Russian kino-akul is rendered “movie-sharks.”
11. This passage appears on 3 of the Russian text, as reprinted on 47 in the volume. The introduction to Gollivud is not translated in the volume; I have provided my own translation. In Russian: “‘Gollivud’: svoeobraznyi ‘agitprop’ kapitalicheskoi Ameriki.”
12. This passage appears on 4 of the Russian text, as reprinted on 48 in the volume; I have provided my own translation. In Russian: “Kapitalicheskaia goriachka—vot naibolee pravil’nyi diagnoz bolezni Amerikanskogo kino-goroda.”
13. Ayn Rand Papers 167_01B_001_010 and 167_01B_001-011. Notes (December 4, 1935).
14. Ayn Rand Papers 167_01B_001_020. Notes (December 22, 1935).
15. See Robert Mayhew, “We the Living: ’36 and ’59,” Essays on Ayn Rand’s “We the Living,” 2nd edition, edited by Robert Mayhew (Lanham, MD: Lexington, 2012), especially 226–28. He has identified and analyzed several changes regarding capitalism, including the two changes I discuss here.
16. Compare: Ayn Rand, We the Living (New York: Macmillan, 1936), 97; Ayn Rand, We the Living (New York: Random House, 1959), 74.
17. Compare: Ayn Rand, We the Living (New York: Macmillan, 1936), 374–75; Ayn Rand, We the Living (New York: Random House, 1959), 284–85.
18. Biographical interviews with Ayn Rand, conducted by Barbara Branden and Nathaniel Branden in 1960–1961. Interview #10, taped January 26, 1961. Information about her reading and the Willkie campaign is drawn from this interview.
19. Looking back, she noted that Willkie “was nominated by popular acclamation, to stand for uncompromising pro-capitalism” (although that “wouldn’t be the names used, but free enterprise”), and had not lived up to that principle.
20. Wendell Willkie, “An Address at the University of Indiana on Foundation Day,” 4 May 1938; rpt. This Is Wendell Willkie (New York: Dodd, Mead, 1940), 169–70.
21. Wendell Willkie, “Speech of Acceptance,” 17 August 1940; rpt. This Is Wendell Willkie (New York: Dodd, Mead, 1940), 273–74.
22. Henry Hazlitt, “Studies in Money and Power” (an omnibus review of several books, including Capitalism the Creator), New York Times, April 7, 1940, 98.
23. The Fountainhead (New York: Bobbs-Merrill, 1943), 738. (Part IV, Chapter XVIII)
24. Carl Snyder, Capitalism the Creator: The Economic Foundations of Modern Industrial Society (New York: Macmillan, 1940), 9.
25. The Fountainhead, 659. (Part IV, Chapter 11)
26. The Fountainhead, 736. (Part IV, Chapter 18)
27. The Fountainhead, 741. (Part IV, Chapter 18)
28. For the story of the selection of the novel’s title, see Biographical Interviews with Ayn Rand, conducted by Barbara Branden and Nathaniel Branden in 1960–1961, interview #19, taped on May 3, 1961. The novel’s original title was “Second-Hand Lives.” Archibald Ogden, her editor at Bobbs-Merrill, pointed out that this title featured the dependent characters, the negative characters, rather than the positive value of first-handedness or independence. In devising a new title, she looked in a thesaurus for the equivalent of “prime mover” (which conveyed her idea, but was not a term widely known and understood). She considered “mainspring,” the chief spring (or power source) in a mechanism, but which had already been used as the title for V. H. Friedlaender’s Mainspring: The Growth of a Soul (1923). She then chose “fountainhead,” the original source of a stream, a near-synonym of “mainspring.”