I. Atlas Shrugged in Brazil
In 1988, at the ripe age of 27, I first delved into the world of Ayn Rand through her novel Atlas Shrugged, freshly translated into Portuguese. At that point, I fancied myself a classical liberal of sorts, though my grasp of political philosophy was more akin to a toddler’s understanding of quantum mechanics. Reading Rand was a pivotal moment, granting me the libertarian perspective I still embrace, albeit with a more nuanced understanding. My initial foray into business and involvement in Brazil’s classical liberal movement stemmed more from a reaction against a military dictatorship and a left-leaning populist government than from a well-considered ideology.
During this period, Brazil was grappling with the fallout from the 1986 “Cruzado” economic plan, which imposed price controls across the board. This led to a spectacular display of economic disarray, forcing the government to intervene in business decisions more frequently. In layman’s terms, it was pure economic chaos.
As I immersed myself in Atlas Shrugged, I found eerie parallels between my reality and the fictional United States depicted in the novel. The government’s seizure of industries, imposition of price and wage controls, and rampant interventionism resonated alarmingly with my experiences in Brazil.
Fast forward to early 1990, and under the “Collor” plan, the Brazilian government executed a freeze on all bank assets—checking accounts, savings, you name it. Each citizen was effectively left with a paltry 50 USD to start anew.
Once again, this brought to mind the freeze on railroad debentures in Atlas Shrugged.
The lesson from those tumultuous years is clear: the economically disastrous consequences of political intervention, once thought unimaginable in a thriving society like the United States, become all too plausible when interventionism gains momentum.
It’s also worth noting that Rand recognized something many of her detractors overlook: the antagonists in Atlas Shrugged aren’t typically ideological socialists. They’re pragmatists who intervene not out of a desire for collective ownership but because they believe every societal issue requires a new exercise of power. The true adversary is not merely socialism. It’s the conviction that no aspect of social life should escape political oversight.
The Brazilian government pushed its intervention so far that, upon reaching an economic nadir, it had no choice but to embark on a wave of privatizations, deregulations, and fiscal responsibility. This shift laid the groundwork for a recovery that could withstand future populist waves and further interventionism. It turns out the “strike of wealth creators” depicted in Atlas Shrugged mirrored real-life Brazil!
II. What I Didn’t Know About Atlas Shrugged
It wasn’t until much later that I discovered the context in which Ayn Rand wrote her novel. During the early 1950s, the United States was under the thumb of an Office of Price Stabilization (OPS) that enforced price controls, alongside a Wage Stabilization Board (WSB) that capped wage increases for workers. This culminated in the 1952 seizure of steel mills by the Truman administration and the 1958 Transportation Act, which led to the federalization and eventual nationalization of most rail services with the establishment of Amtrak.
When I read the novel in late 1980s Brazil, blissfully ignorant of the historical context behind Rand’s writing, I perceived it as a futuristic narrative. In reality, she was reflecting the United States of her era.
Americans made significant sacrifices during World War II, accepting not just the loss of life and resources but also a fundamental shift in their way of life. These changes, rooted in the Progressive era, intensified during the Great War and the Great Depression, and were largely solidified during WWII. Many of these changes remain entrenched today.
For instance, federally mandated rent controls in New York began in 1943, while employment-linked health care emerged in 1942. The current version of withholding income tax started in 1943, and the subordination of monetary policy to the fiscal goals of the Federal Government began around 1942, only formally ceasing with the 1951 accord. Whether we can genuinely claim to have moved past this is up for debate.
III. The Real Puzzle
The United States has gradually shifted away from the limited and representative government envisioned by the Constitution, a trend arguably initiated during the Civil War. The immense costs associated with preserving the Union and reconciling the principles of the American Republic with slavery were staggering. However, the adherence to foundational principles post-war largely reversed the encroachments on freedom of contract and private property necessitated for that conflict. In stark contrast, the institutional changes brought about by the establishment of the Federal Reserve in 1913 have led us down a path toward the fiscal chaos we currently experience, compounded by socialist policies enacted at various levels of government across the nation. Notable examples include progressive income taxes (in Massachusetts), expropriatory rent freezes (in New York City), and wealth taxes (in California and Washington).
This leads us to a critical question: rather than asking why governments intervene in times of crisis, we should ponder why these interventions persist long after the crises have passed.
IV. The Ratchet
Indeed, after vanquishing the existential threats of Nazi-fascism and international Communism during WWII and the Cold War, the U.S. saw a reduction in some of the most intrusive government regulations. Private enterprise was allowed to thrive once again.
For instance, public spending and federal debt as a percentage of GDP were significantly reduced early in the post-war period, creating space for private investment to flourish.
However, as Robert Higgs’ thesis illustrates, despite a temporary decrease to around 12% of GDP in the late 1940s, federal spending has steadily “ratcheted up,” ultimately doubling to current levels. Meanwhile, the federal debt, after a surge during WWII (1941–1946) and a prolonged decline thereafter (1946–1980), has been on a continuous upward trajectory since the 1980s, accelerating post-2008 and 2020.
This analysis only scratches the surface regarding the share of the economy (GDP) directly controlled by the federal government. To truly gauge the extent of state control over economic life in America, we must include state and local government expenditures, which have averaged about 10.8% of GDP since the 1970s.
Furthermore, we must consider the indirect control the state exerts over our economic lives. For instance, in highly regulated sectors such as healthcare, where the freedom of contract is virtually nonexistent, the total expenditure on healthcare accounts for about 18% of GDP, with the private sector comprising roughly half of that—approximately 9% of GDP. Other heavily regulated industries, like real estate and automotive manufacturing, follow suit. This increasing politicization of economic life has also resulted in a diminishing sphere of personal autonomy, effectively eroding our property rights.
In the limited space of this essay, I cannot recount the entire history of interventionism in the United States since WWII, but it suffices to say that the same pattern has prevailed. The first phase is marked by an “Emergency,” such as a war, depression, financial crisis, or pandemic, which prompts the introduction of a supposedly temporary intervention. The next stage is “Institutionalization,” where agencies, regulations, subsidies, and entitlement programs become entrenched. Finally, we reach “Normalization,” a phase where a generation grows up assuming these arrangements are the norm. At this juncture, the debate shifts from whether government should intervene to how intervention should be administered.
Through this essay, I aim to highlight not just the partial retreats following the Civil War, the Progressive Era, the New Deal, WWII, and more recent financial crises and the COVID pandemic. The persistent upward trajectory of state intervention has been thoroughly documented by Higgs in his work, Crisis and Leviathan.
V. Why the Ratchet Works
The fact remains that postwar America underwent a cultural transformation that eroded support for limited government. The ideals of individual freedom and responsibility have been increasingly overshadowed by a significant portion of the population’s yearning for the unattainable dream of equality of outcomes and the pressing demands of equity. Originally, equity referred to equality before the law; however, it has been co-opted by the left to galvanize political support.
This brings us to our current political landscape, where, from the right, we witness initiatives that seek to acquire shares in private enterprises through a mix of incentives and coercion.
Conversely, from the left, we see a myriad of encroachments on private property rights, with rent controls serving as a prime example.
Amid this gradual increase in interventionism, often met with apathy or even support from large segments of the American electorate, there have been pushbacks from various quarters. The law and economics critique highlights the disconnect between personal incentives and outcomes in the public sector, while the public choice critique posits that politicians, bureaucrats, and corporate interests are often as self-serving as their private-sector counterparts. The difference lies in the incentives that drive them to maximize personal gain in different ways. Expecting a strong commitment to the common good from them is unrealistic.
Additionally, the Austrian economics critique underscores the inherent limitations in the knowledge of public planners. The information necessary for the most efficient allocation of resources cannot merely be distilled into statistics; it only emerges through the interactions of economic agents in free markets. For instance, the farmers at a Sunday market do not know what they will find, nor can they predict the best use of their resources ahead of time. When applied to the broader economy, the implications are staggering. This is a challenge that cannot be resolved through computing power, goodwill, or rigid adherence to socialist doctrines. The requisite information simply does not exist unless free markets are permitted to function. The lack of understanding regarding this “epistemological” dilemma, as so thoroughly articulated by Hayek, remains a crucial reason why individuals on both the left and right, often with sincerity, continue to advocate for interventionism.
Finally, we must consider the political and moral critiques offered by both Christian doctrine and Neo-Aristotelian philosophies, including Rand’s own. Humans, by their nature, must provide for themselves and their loved ones. To obtain what they need, individuals can either produce or resort to looting, which is ultimately a zero-sum game. Looting or taxing—often indistinguishable—can only occur if someone has previously produced. Whether viewed through the lens of Imago Dei or a naturalistic perspective, the justification for state coercion rests on its role in safeguarding individuals’ rights to secure their material needs, with protection against violence and fraud being established collectively through political society. Marxists and others who presume to know what is best for others often dismiss these moral arguments, crafting collectivist rationales to justify their lust for power.
In this sense, the advocacy for a classical liberal order, as drawn from public choice theory, law & economics, Austrian economics, and the moral defenses of individual autonomy from both Christian and Neo-Aristotelian philosophies, are not disparate but rather complementary explanations for why liberty remains the most effective organizing principle for society.
VI. Why It Now Comes from Both Left and Right
As we approach the conclusion of this discussion, we can observe that the defining political trend of the last century has been the gradual morphing of temporary emergency measures into permanent institutions. Political power often justifies intervention in economic matters when sufficiently significant goals are at stake, allowing both the left and right to rationalize the constriction of individual autonomy. Their disagreement lies more in objectives than in methods, which elucidates why emergency measures persist even after the crises that birthed them have receded and why interventionism now emanates from both political flanks.
VII. Conclusion
Let’s return briefly to Brazil. My upbringing there granted me insights that many Americans overlook. Policies that seem commonplace in one generation were once extraordinary innovations in another. This historical lens prompts us to question whether these institutions serve a free society or merely persist because they have become familiar.
The threat to liberty does not merely stem from interventions during crises; it is society’s tendency to forget that those interventions were once deemed extraordinary.
I chose America because it was—at least in theory—the nation most devoted to liberty and individual initiative. Today’s challenge lies not only in resisting new interventions but also in critically examining the old ones. The United States, despite the gradual erosion of free society ideals by a significant portion of its populace, still embodies the best hope for individual human flourishing, especially as it approaches its 250th anniversary. Let us hope that the trend against its founding civic ideals can be reversed. I came here from Brazil seeking freedom; if the United States cannot provide it, where else can one turn?
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Leonidas Zelmanovitz is a Senior Fellow at Liberty Fund and teaches part-time at Hillsdale College.
