I. Atlas Shrugged in Brazil
In 1988, at the age of 27, I picked up Ayn Rand‘s work for the first time. It was her renowned novel Atlas Shrugged, freshly released in Portuguese. By then, I had already identified as a classical liberal, though my limited understanding of political philosophy left my beliefs somewhat unconvincing. Reading her novel profoundly shaped my libertarian perspective, which I largely maintain today. At the time, I was involved in business and active in Brazil’s classical liberal movement, a reaction largely motivated by my upbringing under a military dictatorship and the subsequent populist governance, rather than a product of thorough contemplation.
During this period, Brazil was grappling with the fallout from the 1986 “Cruzado” economic plan, which enforced price controls across the board. This led to significant economic disarray, compelling the government to increasingly intervene in business operations, resulting in widespread chaos.
As I delved into Atlas Shrugged, the parallels between my reality and the interventionist policies depicted in the novel’s fictional United States were striking. The narrative featured property seizures and various controls on prices, wages, and rents—resonating eerily with my own experiences.
Shortly thereafter, in early 1990, the “Collor plan took a drastic turn: the Brazilian government froze all bank assets across the nation—checking and savings accounts alike—leaving citizens with only the equivalent of 50 USD to begin anew.
Once again, this closely echoed the scenario in Atlas Shrugged, particularly the freeze on railroad debentures.
A key takeaway from these events is that economic disarray, often perceived as inconceivable in prosperous nations like the United States, can become reality when interventionism gains traction.
It’s also noteworthy that Rand grasped a point many critics overlook: the antagonists in Atlas Shrugged are frequently not ideological socialists but rather pragmatists. They employ discretionary power to address issues, not necessarily aiming for collective ownership. The real adversary is not merely socialism but the idea that no area of societal existence should be left outside political influence.
After the Brazilian government’s significant overreach into social life, it eventually faced the dire consequences of economic mismanagement. This prompted a series of privatizations, deregulations, and fiscal reforms, paving the way for recovery despite recurring populism, corruption, and heightened interventionism. Remarkably, the withdrawal of wealth creators described in Atlas Shrugged manifested in real-life Brazil!
II. What I Didn’t Know About Atlas Shrugged
It wasn’t until later that I discovered during the early 1950s, when Ayn Rand penned her novel about a “dystopian future,” the United States had an Office of Price Stabilization (OPS) implementing price controls, along with a Wage Stabilization Board (WSB) capping wage increases. This climaxed with the 1952 seizure of steel mills by the Truman administration and the 1958 Transportation Act, which federalized railroad regulation, ultimately leading to the creation of Amtrak in 1971.
As I read the novel in late 1980s Brazil, unaware of the historical context of Rand’s work, it seemed futuristic. In reality, she was reflecting the circumstances of her own time in the United States.
During World War II, Americans made considerable sacrifices. Beyond the tangible costs of lives and resources, they accepted fundamental changes to their lifestyles originating from the Progressive Era, intensifying during the Great War and the Great Depression. Most of these alterations remained prevalent through the 1950s.
For instance, federally enforced rent controls in New York were introduced in 1943, employment-linked health care began in 1942, the current form of withholding income tax emerged in 1943, and the alignment of monetary policy with the Federal Government’s fiscal requirements began in 1942, only formally ceasing with the 1951 agreement. It’s for you to determine whether any progress has been made since then.
III. The Real Puzzle
The United States started to drift from its foundational principles of limited and representative governance, as set by the Constitution, notably during the Civil War. The exorbitant costs tied to preserving the Union and reconciling the ideals of the American Republic with the reality of slavery were immense. Nonetheless, the adherence to the principles established at the nation’s inception reversed most, if not all, encroachments on individual freedoms and property rights necessitated by that conflict. In stark contrast, recent institutional shifts, such as the establishment of the Federal Reserve in 1913, have not seen similar retreat, contributing to the ongoing fiscal challenges we currently face and the rise of socialist policies at local and state levels.
What we need to question, then, is not why governments intervene in crises, but rather why these interventions persist long after the crises have passed.
IV. The Ratchet
Indeed, after the defeat of Nazi-fascism and international Communism during WWII and the Cold War, many of the most intrusive government regulations began to ease, allowing private enterprise to flourish.
For instance, there was a marked decrease in public spending and the federal debt relative to GDP early in the post-war era, creating space for private investment.
However, as illustrated by the chart above and in line with Robert Higgs’ thesis, what once dipped to around 12% of GDP in the late 1940s has since “ratcheted up,” gradually doubling to present levels. The federal debt, following a significant spike during WWII (1941–1946) and a prolonged reduction (1946–1980), began a steady ascent in the 1980s, accelerating post-2008 and again after 2020.
It’s important to note that this data reflects only the portion of economic activity controlled directly by the Federal Government. To truly assess state control over American economic life, one must incorporate state and local government expenditures, which have averaged around 10.8% of GDP since the 1970s.
Furthermore, we must also consider the indirect ways the state controls economic life. In sectors heavily regulated, such as healthcare, where freedom of contract is significantly constrained, healthcare spending represents about 18% of GDP, with the private portion constituting roughly half, or 9% of GDP. Additional heavily regulated sectors include real estate and car manufacturing. Alongside this rise in state involvement, there has been a parallel decline in individual autonomy, effectively diminishing private property rights.
Due to space limitations, I cannot detail all developments of interventionism in the U.S. since WWII. However, the cyclical nature of these patterns is clear. The initial phase typically involves an “Emergency,” such as war or economic crisis, prompting temporary intervention. The subsequent phase is “Institutionalization,” wherein agencies, regulations, and other forms of intervention become permanent. Finally, we reach the “Normalization” stage, where a new generation assumes these measures are a natural part of life. The debate then shifts from whether government should intervene to how such intervention should occur.
This essay seeks to illuminate not only the partial retreats following historical events like the Civil War, the Progressive Era, the New Deal, World War II, and contemporary crises such as the Financial collapse and the COVID pandemic but also to underscore that the baseline of state intervention continually rises, a notion supported by Higgs in Crisis and Leviathan.
V. Why the Ratchet Works
The reality is that America post-war underwent a cultural shift that undermined support for limited government. Many began to regard ideals of individual freedom and responsibility as less critical than other societal values, specifically an unattainable equality of outcomes. The concept of equity, originally referring to legal equality, was sidelined by the left to galvanize political backing.
Today, the landscape reflects initiatives from the right—utilizing incentives and pressure to acquire stakes in private enterprises—coupled with the left’s encroachments on property rights, as exemplified by rent controls.
Despite the gradual rise of interventionism, marked by cycles of ebb and flow and accompanied by apathetic or even supportive public sentiment, there remains pushback from various perspectives. Critiques emerging from law and economics highlight the disconnection between individual incentives and public outcomes, while public choice theories suggest no less self-interest from politicians or bureaucrats than from private-sector individuals. The differences lie only in their incentivization to achieve personal gain in distinct manners. Furthermore, Austrian economics critiques emphasize the limitations of knowledge possessed by public planners, asserting that vital information about efficient resource allocation can only emerge from free-market interactions.
Moreover, both Christian and Neo-Aristotelian philosophical critiques argue that the inherent nature of human beings necessitates self-provisioning for themselves and their families. This reality leads to either productive or parasitic behaviors. The act of looting or taxing depends on prior production, signifying that the true justification for state coercion is to protect individuals’ rights to secure their needs within a political society established for collective protection against violence and fraud. Collectivist arguments seeking to impose will upon others are often met with resistance from those valuing individual moral autonomy.
In this light, classical liberalism’s appeals, drawn from public choice, law and economics, Austrian economics, and moral philosophy, collectively affirm why liberty is the optimal societal framework.
VI. Why It Now Comes from Both Left and Right
In conclusion, it becomes evident that the prevailing political trend over the past century has been the transition of temporary measures into permanent structures. With the belief that governmental authority may justifiably steer economic activity in pursuit of significant goals, both the left and right discover rationales to encroach upon individual autonomy. Their contention lies in objectives rather than methodologies, illuminating why interventionism is now a commonality across the political spectrum.
VII. Conclusion
Reflecting on my experiences in Brazil, I recognize the subtle distinctions that current generations may overlook. Policies once deemed extraordinary can evolve into normalized practices. With this historical context, we must critically evaluate whether these institutions genuinely serve a free society or merely persist due to their familiarity.
The threat to liberty extends beyond interventions during crises; it encompasses society’s gradual amnesia regarding the extraordinary nature of these interventions.
I chose to come to America because it remains a bastion of liberty and entrepreneurial spirit. Today’s challenge is not solely to resist new interventions but to begin questioning long-standing ones. As the United States approaches its 250th anniversary, despite the drift from its foundational ideals, it captures the last best opportunity for individual flourishing. I hope fervently that we can reverse this trend. Having left Brazil in pursuit of freedom, I recognize that if the United States falters in safeguarding that ideal, there may be no other refuge left.
Leonidas Zelmanovitz is a Senior Fellow at Liberty Fund and teaches part-time at Hillsdale College.
