Capitalism: The Unknown Ideal

Capitalism: The Unknown Ideal is a 1966 collection of essays by Ayn Rand, with contributions by Nathaniel Branden, Alan Greenspan and Robert Hessen, presenting the political and economic theory of Objectivism. Its thesis is that capitalism has never been defended on the grounds that actually justify it, and has therefore never been fully practised.

The "unknown ideal" of the title is the claim that capitalism's historical defenders conceded the moral argument to their opponents, defending the system as a regrettable necessity that produces wealth rather than as the only social system consistent with man's nature and rights.

“The moral justification of capitalism does not lie in the altruist claim that it represents the best way to achieve "the common good."”
~ Ayn Rand, "What Is Capitalism?", Capitalism: The Unknown Ideal

The argument

The book's central essay, "What Is Capitalism?", defines the system and grounds it in the preceding branches of the philosophy rather than in economics:

Man survives by reason, and reason functions only in the absence of coercion. A mind cannot be forced to think.
Therefore the requirement of human survival in a social setting is that no one may initiate physical force against anyone else. See Initiation of force.
Rights are the principle that translates that requirement into social terms, and the government's sole proper function is to bar force from human relationships.
Capitalism, defined as a system in which all property is privately owned and the state is separated from economics as it is from religion, is the only system that implements this consistently.

On this account the case for capitalism is moral before it is economic. Its productivity is a consequence of leaving minds free, not an independent justification.

Contributors and topics

Alan Greenspan contributed essays on antitrust and on "Gold and Economic Freedom", the latter arguing that the gold standard and unrestricted banking are protections against the confiscation of savings through inflation. Greenspan later chaired the U.S. Federal Reserve, from 1987 to 2006, and the essay is frequently cited against him.
Robert Hessen contributed historical essays challenging the standard accounts of the "robber barons" and of factory conditions during industrialisation.
Nathaniel Branden contributed essays on the alleged divorce between economics and morality, and on common objections to a free market.
Rand's own essays include "The Roots of War", which traces war to statism rather than to capitalism; "America's Persecuted Minority: Big Business"; "The Property Status of Airwaves"; and "Patents and Copyrights", which grounds intellectual property in the fact that a discovery is a product of a mind rather than a claim on a physical object.
The appendix reprints "Man's Rights" and "The Nature of Government", both of which also appear in The Virtue of Selfishness.

Relation to libertarian economics

Rand shared many conclusions with the Austrian economists, and recommended Ludwig von Mises's work on economics specifically. She nevertheless rejected the libertarian movement, on the grounds that a political conclusion detached from its philosophical base is not a defence of liberty but a floating abstraction. The disagreement is about foundations rather than policy: Objectivism holds that capitalism cannot be defended on utilitarian or subjectivist premises without conceding the argument. See Libertarianism.

Common misunderstandings

That "capitalism" here means the current mixed economy. It does not. Rand used the term for a system that has never existed in pure form, and treated the mixed economy as a distinct system in which businesses lobby for favours. Her essay on big business as a persecuted minority is often misread as a defence of the businesses that seek those favours; her argument is directed at the ones penalised for succeeding without them.
That the book is a work of economics. It is a work of political philosophy. It argues for the moral base of a system and largely leaves the economics to economists.
That defending capitalism means defending anything a business does. Fraud and the initiation of force are excluded by the same principle that justifies the system, and Rand treated business lobbying for state favours as a form of it.

Discussion

Threads on the Objectivism Online Forum:

Why theft is neither ethical nor practical
Intellectual property — on the patents and copyrights argument
The political compass quiz — on where Objectivism sits relative to libertarianism

References

Citations are to essays by title rather than to page numbers, because the book has been issued in many printings whose pagination differs.

Rand, Ayn, with Nathaniel Branden, Alan Greenspan and Robert Hessen. Capitalism: The Unknown Ideal. New American Library, 1966.