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John Galt is victorious again

Bill Rinner | Sunday, February 20, 2005

Either you get the title’s reference or you don’t. To those asking themselves, “Who is John Galt?” you’re already on the right track. Rather than keeping everyone in suspense or losing casual readers, I’ll explain – John Galt is the mystery figure of Ayn Rand’s culminating work “Atlas Shrugged,” which offers a fictional account of Western society’s downfall at the hands of looters (government regulators, free riders, university professors) who persecute the truly accomplished producers (a few dozen rogue capitalists whose unhindered profit motive is mankind’s last hope for redemption).

Rand’s philosophical school of “Objectivism,” a form of romantic libertarianism, is driven by the four notions of freedom, achievement, individualism and reason. In the appendix of “Atlas Shrugged,” Rand champions “the concept of man as a heroic being, with his own happiness as the moral purpose of his life, with productive achievement as his noblest activity, and reason as his only absolute.”

Critics often regard Rand’s axiomatic rejection of the welfare state as merely reactionary and devoid of scholarly concern, though a joint survey by the Library of Congress and the Book of the Month Club found “Atlas Shrugged” the “second most influential book for Americans today” after the Bible. Granted, Hillary Clinton’s “Living History” was not yet published at the time of the survey.

Today, Rand would likely feel alienated from both major political parties, as Democrats advocate stiffer punishments for the most productive and Republicans promise the era of big government is, well … hopefully on its last leg. Nevertheless, one recent bill to pass both the House and Senate would give Rand’s fictional heroes Howard Roark, Dagny Taggart and John Galt reason to celebrate.

The Class Action Fairness Act, signed by President George W. Bush on Friday, strikes a devastating blow to the mass litigation industry, whose success hinges on the ability of trial lawyers to force big business into enormous settlements. Manhattan Institute scholar Walter Olsen explains when lawyers search for jackpot cases, such as the $246 billion tobacco settlement, the established rule of law stands as only a minor nuisance for the few lawyers who profit from massive redistributions of wealth.

The previously unbounded success of the class action industry has been fueled by the ability of lawyers to file lawsuits in virtually any state court, many serving as magnets that invariably favor the plaintiff. Such assured losses for business force settlements to the tune of millions or billions of dollars, regardless of each case’s individual merit. A number of claims eventually turn out to be based on junk science or fabricated damages, such as Sen. John Edwards’ later disproved claim that doctors cause cerebral palsy by waiting too long to perform caesarean sections. When the cost of defending themselves against faulty claims is high and the chances of winning so low, businesses settle early to avoid incurring even greater losses.

The new bill will divert the largest, multi-state class actions from state courts to the federal level, where judges typically display greater impartiality and less knee-jerk anti-business populism. Presumably, the class action engine will decelerate, at least until trial lawyers discover a more efficient means of siphoning off hefty fees that often leave individual class members with miniscule settlements. In the instance of one consumer class action suit, Martinez v. Allstate/Sendejo v. Farmers, the average cash payment to each plaintiff was $5.75, while the class counsel received over $11 million in fees.

The matter of attorney compensation rates remains to be addressed through legislation, but the climate for small businesses dreaming to be large and large businesses hoping to continue their success has vastly improved. Class actions serve the important purpose of curbing the dangerous and damaging behavior of consumer-good producers, financial firms and medical practitioners, but allowing lawyers free rein to pick and choose sympathetic juries or judges to overcorrect for whatever maladies these firms may cause.

Massachusetts Rep. Edward Markey challenged the rationale of the new bill, claiming that “today, Republican leaders in Washington have issued a new challenge – ‘Ask not what your country can do for you, but what you can do for your country club.'” While the class warfare mantra is old news for Democrat critics of big business, Markey fails to acknowledge the bill merely shifts the benefit from the country club’s JDs to its MBAs, and allows the latter to create employment opportunities without a climate of fear.

Ayn Rand envisioned a future when regulatory hurdles would grow to such heights as to discourage the truly productive from even competing in a marketplace that punishes innovation and ability. Her capitalist utopia (an oxymoron to some) may never bear fruition, but the spirit of objectivism can claim one minor victory this week. Rand’s “Fountainhead” hero Howard Roark ultimately defends himself and his accomplishments before an unsympathetic court; the Class Action Fairness Act may allow lesser Howard Roarks and John Galts to avoid the courts entirely.

Bill Rinner is a senior economics major. He can be reached at [email protected].

The views expressed in this column are those of the author and not necessarily those of The Observer.