The Pessimists’ Dead-End

Originally published in Flourishing January 2012

In 1957, Bennett Cerf, then CEO of Random House, took a chance on a wildly dystopian and philosophically radical novel.  You may have heard of it—more than seven million copies have been sold, and many of its author’s personal papers are now housed in the Smithsonian—Atlas Shrugged, by Ayn Rand.

I mention Atlas here, because its author is now widely perceived to have been incredibly prescient.  For example: One of the most interesting characters in the novel, Ellis Wyatt, had figured out how to get oil from shale, a crazy idea back in 1957.  Like today’s high tech oil and gas producers, Wyatt’s genius had the potential to lift the nation’s economy out of a deep recession. In the novel, government leaders conspired with their business cronies and political supporters to destroy a railroad needed to transport crude oil from Wyatt’sColorado oil fields to distant refineries.  Equivalently today (December 20, 2011), after three years of environmental studies, our President and Congress are still fighting over the construction of a similarly needed pipeline.

But pessimists and dystopians, please make a note:

In the real world—sooner or later—rational economic self-interest trumps political ideology, always. 

And, increased oil and natural gas production, along with an efficient transportation and pipeline system, are in the best interests of American businesses, American job-seekers, and American consumers.  So, let’s get right to the good news.

Shale gas production is not just increasing, it’s growing almost exponentially.  In 2010, shale gas production represented 29% of natural gas wells completed and 27% of total natural gas production in the U.S.  By 2020, it’s expected that shale gas production will more than double, and by 2035 shale gas will represent 60% of all American natural gas production. IHS Global1, a respected worldwide research firm, estimates that the value of the natural gas extracted from shale will grow from about $26 billion in 2010 to $72 billion in 2020, and more than $153 billion by 2035; and that estimate assumes that natural gas prices will increase at a rate less than the overall inflation rate.

In 2010, shale gas production contributed about $76 billion to domestic GDP, and more than $18.6 billion to federal, state, and local government tax and royalty revenues.  Those numbers are expected to triple to $231 billion and $57 billion by 2035.

At a time (2010) when jobs were—as they are now—seemingly in short supply, the shale gas industry supported more than 600,000 American jobs.  By 2035, that number is expected to grow to 1.6 million.

And, here is why I’m really excited about the potential expansion of the shale gas industry:  Increasing production of natural gas could mean lower energy costs, and lower energy costs could mean a new industrial renaissance forAmerica.  According to the IHS study, increasing production of shale gas could lower the cost of manufacturing in many critical American industries. 

Among the possible beneficiaries, the electric utility industry is likely to move away from coal and toward natural gas as a fuel for its generating plants.  Exports of PVC and related products manufactured in theU.S.have already tripled since 2007 as a percentage of total production.  Other chemical producers, including agricultural chemical manufacturers, and aluminum, steel, and cement producers could benefit, too.

This is all confirmed by another new study2 by Pricewaterhouse-Coopers,   which found that seventeen chemical, metal, and industrial manufacturers commented in their 2011 SEC filings that shale gas developments drove demand for their products, compared to no—zero—such statements just three years ago.

 The PwC study also says that it’s very likely that there will be a significant return of manufacturing from offshore in coming years—as many as one million new jobs by 2025—especially to areas of the country friendly to shale gas production and/or with easy pipeline access. 

Labor costs overseas and corporate tax rates at home could be negative factors, but don’t pooh-pooh these more positive conclusions too quickly, as tax and labor conditions could change suddenly, dramatically, and favorably, too.

Like the heroes in Atlas Shrugged, I have an implicit trust in the American entrepreneurial spirit. I first witnessed that spirit as a teenager among the roughnecks of Ellis County, which at the time was the highest oil producing county in Kansas.  That spirit still lives in America—especially in the shale gas and oil industry—and that’s why I’m so sure the pessimists are wrong. mh

 

  1. The Economic and Employment Contributions of Shale Gas in the United States, IHS Global Insight (USA) Inc., December 2011.
  2. Shale Gas: A renaissance in U.S. manufacturing? PricewaterhouseCoopers LLP, December 2011.

Age of Rand?

First published in Flourishing May 2011.

Ayn Rand, born Alisa Rosenbaum in St. Petersburg, Russia, on February 2nd, 1905, was one of the 20th century’s foremost voices for human freedom.  Some of you, no doubt, have read some of her work.  Recently, her most famous work, Atlas Shrugged, was adapted for the silver screen, and Atlas Shrugged, Part 1, was released to more than three hundred theaters in eighty U.S. cities on April 15.  Rand was not just one of the 20th century’s most famous and articulate champions of freedom, she was also the most misunderstood and most slandered.  Since I’m a great fan of her work, and having just seen the movie, I want to share with you a little of what I know about Ayn Rand.

After living through the Bolshevik Revolution, and the economic chaos and political repression that ensued, young Alisa fled the Soviet Union for the United Statesin 1926.  Already conversant in French and able to get around in English, she began her career in the movie industry working for such notables as Cecil B. De Mille.  She later became an accomplished playwright, most famously authoring The Night of January 16.  (My sweetie played Magda Svenson in the Beloit High School Junior Class Play, c. 1963.)

In 1936, Ayn Rand’s first novel, We the Living, which she said was the nearest to an autobiography as she would ever write, was published by McMillan.  It has since sold more than 3 million copies.  Remarkably, in 1942 it was adapted for the movies inItaly.  Though it was censored only a few weeks after its introduction, a digitized version is now available with English subtitles.  I own the 2-DVD set and it is a beautiful film, which one would expect, since it stars Alido Valli and Rossano Brazzi, two ofItaly’s movie legends.

Ayn Rand’s first financially liberating success came in 1943 with the publication of The Fountainheadby Bobbs-Merrill. The book has now sold 6.5 million copies.  Fourteen years later, Atlas Shrugged was published by Random House, championed by that firm’s Chief Executive, Bennett Cerf. Atlas Shrugged has sold over 7 million copies; more than 500,000 in the last year.

The success of her novels enabled Ayn Rand to devote the remainder of her life to building a system of thought – a philosophy – that she would call “Objectivism”.  She wrote and edited several periodicals containing philosophical essays, and cultural and political commentaries.  She played a critical role developing new advocates for laissez-faire capitalism, including, as you may have guessed, moi.  Her influence on American culture has, likewise, been profound. A 1991 survey by the Library of Congress and The Book-of-the Month Club placed Atlas Shrugged second only to the Bible in influence among American readers; admittedly and appropriately, a distant second.

Ayn Rand owed much of her success to the power and directness of her writing style. She was a master of reducing an idea to its clearest and most effective formulation.  For example, she wrote that, “If some men are entitled by right to the products of the work of others, it means that those others are deprived of rights and condemned to slave labor.”  Or, when challenging the view that human perception is unreliable, because it’s limited by the nature of our sensory organs, she would write satirically, “Man is blind, because he has eyes — deaf, because he has ears.” 

Ayn Rand called big business “America’s persecuted minority”, so she is often characterized as a naïve apologist for crony capitalism; but nothing could be further from the truth.  She vehemently condemned the “type of businessmen who sought special advantages by government action.”   

The most controversial aspect of Ayn Rand’s philosophy, ethical egoism (not to be confused with psychological egoism), is also one of the most misunderstood. The point of her egoism was not to advocate the pursuit of one’s own interests at the expense of other people.  Rather, she rejected the model of conflicting interests. She rejected not only the subordination of one’s own interests to those of others, but also the subordination of others’ interests to one’s own.  Though her ideas were original, in practice they were not a radical departure from what most of us regard as mere “common sense”.  In everyday parlance, she was an advocate of “win, win”.

Ayn Rand identified the roots of the 18th century Age of Enlightenment—the philosophical movement that led to America’s founding—in the rediscovery of Aristotle by St. Thomas Aquinas.  She always insisted that Aristotle was the greatest of all philosophers, and that St. Thomas Aquinas was the second greatest, her own atheism notwithstanding. For Ayn Rand, as for Thomas Jefferson and others among our founders, the Aristotelian recognition of the fact that rational human interests, however diverse, are naturally harmonious was (and is) the proper moral foundation of human relationships and a free society.  Preserve that thought.

Human progress is often driven by creative and controversial people working outside of the so-called establishment, and Ayn Rand was certainly that.  But, her philosophy is in many ways an extension, clarification, and moral defense of the principles that guided our founding fathers; and thanks to the popularity of her novels, her inspiring vision of the majesty of the human mind, and her defense of the ethical necessity of human liberty Ayn Rand has already affected and improved the lives of millions.  I think it’s very likely that in fifty years her ideas will be the foundation of America’s predominant secular philosophy.  Unfortunately, I won’t be there—well, I might not be there—to see how it all works out.  mh