Lee Friday – April 12, 2017
The London Free Press is a model of consistency, subjecting us to a steady stream of articles bemoaning the effects of poverty. One-sided reporting from this liberal newspaper seems designed to evoke sympathy for the less fortunate, and hence – drum roll please – support for, or at least minimal resistance to, more government welfare programs.
I have grown weary of these articles, and since we are already taxed up to our eyeballs and in debt over our heads, let us explore a different point of view. And maybe, just maybe, we can readjust our thinking.
Many of you are familiar with that hotbed of socialism, London City Council. Mayor Matt Brown and twelve of fourteen councillors attended the April 18, 2016 meeting of the Strategic Priorities and Policy Committee (councillors Park and Zaifman were absent). One of the items on the agenda was the Mayor’s Advisory Panel on Poverty Final Report, titled “London For All: A Roadmap to End Poverty” (the Report). Committee members voted (13 – 0) to:
- Formally receive the Report, and acknowledge its contribution towards the goal of reducing poverty and its effects in the City of London
- Direct the Civic Administration to support implementation of the Report, within specified limits
I will explain why the vote would not have been unanimous had I been a member of the committee. A detailed analysis of all the faulty assumptions contained in the Report would require a lengthy book. Therefore, I will limit myself to reviewing some of the key premises on which the Report is based. I begin with two politically incorrect statements, both of which tend to drive poverty warriors crazy:
First Statement – All government welfare programs are immoral. Such wealth redistribution schemes are based on the premise that some people have a right to a portion of the wealth produced by others i.e. a right to the property of others.
Second Statement – In an imperfect world, there have always been and will always be an unfortunate few who genuinely require temporary or permanent assistance. When aid is extended privately (funded voluntarily), history shows the unfortunate few to be far fewer in number, as compared to aid extended publicly (funded coercively through taxation).
The Report’s authors (page 5) and supporters espouse a confused notion of rights. The Report tells us (page 8) every person has “the right to work; the right to adequate food; and the right to housing.” However, rights automatically impose obligations. If you believe someone has a right to food, you must also believe someone else has an obligation to provide the food. But then who provides food for the provider? We quickly find ourselves in a vicious circle. A ten-year-old can understand this concept.
I do not have a right to food, clothing, a job, a house, or any other material goods, because dear reader, this would mean I believe it is acceptable to steal these things directly from you, or indirectly from you, through taxation. However, and this is the important distinction, I do have a right to acquire any of these things through my own efforts, as long as I do no harm to other persons or their property. In this way, I am not interfering with the efforts of others to acquire the things they desire. Author and philosopher Ayn Rand elaborates on the concept of rights:
. . . rights are moral principles which define and protect a man’s freedom of action, but impose no obligations on other men . . .
. . . Jobs, food, clothing, recreation, homes, medical care, education, etc., do not grow in nature. These are man-made values – goods and services produced by men. Who is to provide them?
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. . . . There can be no such thing as “the right to enslave.” . .
Any alleged “right” of one man, which necessitates the violation of the rights of another, is not and cannot be a right.
A right does not include the material implementation of that right by other men; it includes only the freedom to earn that implementation by one’s own effort.
Observe, in this context, the intellectual precision of the Founding Fathers: they spoke of the right to the pursuit of happiness – not of the right to happiness. It means that a man has the right to take the actions he deems necessary to achieve his happiness; it does not mean that others must make him happy.
The right to life means that a man has the right to support his life by his own work (on any economic level, as high as his ability will carry him); it does not mean that others must provide him with the necessities of life.
The right to property means that a man has a right to take the economic actions necessary to earn property, to use it and to dispose of it; it does not mean that others must provide him with property. . . .
. . . There is no such thing as “a right to a job” – there is only the right of free trade, that is: a man’s right to take a job if another man chooses to hire him. There is no “right to a home,” only the right of free trade: the right to build a home or to buy it. There are no “rights to a ‘fair’ wage or a ‘fair’ price” if no one chooses to pay it, to hire a man or to buy his product. . . .
. . . There are no “rights” of special groups . . . There are only the Rights of Man – rights possessed by every individual man and by all men as individuals. . . . there are, in fact, no “economic rights,” no “collective rights,” no “public-interest rights.” The term “individual rights” is a redundancy: there is no other kind of rights and no one else to possess them.
Can you imagine a definition of rights which is morally superior to this? By any other definition, rights would be unequal. What other definition could we possibly employ without impinging the rights of some in order to benefit others?
Each human being is unique, different than every other human in some way, and often in a significant way. No two humans are equal, nor will they ever be. This definition of rights upholds equality of rights, as stated. It does not countenance the sacrificing of the rights of some humans in the name of making other humans more equal. Such a philosophy would be immoral, as it sanctions the use of force by some humans against others. Sadly, it is difficult to find any government in today’s world which does not claim to occupy the moral high ground by virtue of their adherence to this immoral philosophy. When a few individuals (authoritarian law-makers) have absolute power to define rights, we get:
(a) perverted definitions of rights, which leads to
(b) finely crafted definitions of poverty, such that the number of people eligible for public aid rarely decreases and often increases, which leads to
(c) large government bureaucracies benefitting directly from (a) and (b). These authorities champion the rights of the poor, while slicing off a portion of welfare tax dollars to pay their own salaries. The conflict of interest is palpable.
In their book Free Market Revolution, Yaron Brook and Don Watkins wrote (emphasis added):
The entitlement state came into existence not because Americans were starving in the streets but because a growing number of Americans were ideologically committed to expanding the size and power of the state . . . the American Progressives of the late nineteenth century attacked the Founding Fathers’ ideals of individual rights and limited government . . . They wanted to expand the power of government so it could redistribute wealth in the name of taking care of its citizens “from cradle to grave.”
Coercion is used to acquire the revenue (taxes) to finance welfare programs. As evidenced by the commission it retains prior to redistributing this wealth, government bureaucracies are one of the beneficiaries of these programs, and thus highly incentivized to claim a perpetual need for the programs. In Canada, the number of federal government welfare program employees increased by 43% between 2006 and 2012. It serves the interests of politicians and bureaucrats to create (impose) a culture of dependency. As economist, historian, and political philosopher Murray Rothbard wrote:
Since welfare families are paid proportionately to the number of their children, the system provides an important subsidy for the production or more children. Furthermore, the people being induced to have more children are precisely those who can afford it least; the result can only be to perpetuate their dependence on welfare, and, in fact, to develop generations who are permanently dependent on the welfare dole.
Rothbard’s observation is evident in the Report (pp. 43 – 44). Of course, the Report’s authors fail to identify the government’s subsidy as a major contributing factor to a culture of dependency which continues to spread. Economist Thomas Sowell wrote:
The black family, which had survived centuries of slavery and discrimination, began rapidly disintegrating in the liberal welfare state that subsidized unwed pregnancy and changed welfare from an emergency rescue to a way of life.
Creating a culture of dependency is not consistent with addressing genuine need. Government welfare programs often exacerbate the problems they are supposedly intended to solve. The Report tells us the poverty rate in London is 17% (pp. 4, 11). Similarly, the poverty rate in New York State is 15.9%. What was the rate before the imposition of massive government welfare programs? Consider the following, from Brook and Watkins:
It was a minority of a minority who depended on assistance and aid. It’s hard to pin down exact numbers, but in 1824, the Yates Report put the number of paupers in New York state at . . . less than 2% . . . And sociologist Charles Richmond Henderson estimates that as of 1890, the ratio of paupers to population was 1,166 : 1,000,000 (0.1%).
Whatever the exact figure, the evidence suggests that by the time the Industrial Revolution was in full swing, less than 1 percent of the adult population were paupers. And this small sliver was on the receiving end of an astonishing amount of private aid. By the mid-nineteenth century, groups aiming to help widows, orphans, and other “worthy poor” were launched in every major city in America. There were some government welfare programs, but they were minuscule compared to private efforts.
In fact [writes historian Walter Trattner], so rapidly did private agencies multiply that before long America’s larger cities had what to many people was an embarrassing number of them. Charity directories took as many as 100 pages to list and describe the numerous voluntary agencies that sought to alleviate misery, and combat every imaginable emergency.
Formal, private – voluntary – charitable agencies were ubiquitous, but informal private aid was also substantial. In his book From Mutual Aid to the Welfare State, David Beito writes (emphasis added):
Reciprocal relief was far more prevalent than either governmental or private hierarchical relief. Its most basic expression was informal giving, the countless and unrecorded acts of kindness from neighbors, fellow employees, relatives, and friends. . . .
. . . The self-help and informal neighborly arrangements created by the poor themselves dwarfed the efforts of formal social welfare agencies. In this regard Edward T. Devine, a prominent social worker, used an article in the Survey to warn his colleagues against the sin of self-importance. He reiterated that millions of poor people were able to survive and progress without recourse to organized charities and governmental aid: “We who are engaged in relief work . . . are apt to get very distorted impressions about the importance, in the social economy, of the funds which we are distributing or of the social schemes which we are promoting. . . . If there were no resources in times of exceptional distress except the provision which people would voluntarily make on their own account and the informal neighborly help which people would give to one another . . . most of the misfortunes would still be provided for.”
WHAT SHOULD GOVERNMENT DO ABOUT POVERTY ?
Why was private charity more effective than government welfare? Private aid was personal, and private persons contributing their own money were highly incentivized to identify genuine needs, thereby minimizing waste. Permanent needs are easily identified and addressed. Temporary needs are more numerous, and on the local level it is easy to monitor recipients to ensure they are making every effort to become independent. Indeed, long ago, much of the aid provided came from those who personally knew the recipients. In contrast, centralized government bureaucracies are impersonal by nature. This doesn’t mean government employees are uncaring and lack empathy. However, they deal with so many welfare recipients that they can’t possibly know any one of them personally, and perhaps are forbidden from doing so. Coupled with the fact they are giving away someone else’s money, incentives for determining genuine need are quite weak. Thus, the indolent know how to milk the modern public system, but were quickly denied aid in the private system of the nineteenth century.
There is a big difference between those who are incapable of supporting themselves, and those who are capable but unwilling. If you fall into the latter group, you are undeserving of assistance – another concept a ten-year-old can understand. Yet, socialists are aghast at such a statement. It is not for us to assess personal character and habits, they say. When a person says they are in need, we must automatically open our wallets, but we must never judge (which, by the way, simply means to express an opinion). As William Gairdner unhappily noted in his book The Trouble With Canada . . . Still!, “Canada’s National Council of Welfare deplores any effort to distinguish between the “deserving” and the “undeserving” poor.” Likewise, the authors of the Report made no such effort.
The government should exit the welfare business. Private individuals and organizations will more effectively identify legitimate needs and allocate resources accordingly. Can government welfare programs be reformed in order to match the superior incentives possessed by private individuals? No. The superior nature of private incentives derives from the fact that private individuals are deploying their own resources – their own money. As such, this is impossible to duplicate within the coercive institutional structure of government.
There are many things the government can stop doing, which would greatly improve the economic opportunities for able and willing people to escape poverty. The words of the great economist Ludwig von Mises are as applicable today as they were when he wrote in 1949:
It is highly probable that the funds of the charitable institutions would be sufficient in the capitalist countries if interventionism were not to sabotage the essential institutions of the market economy. . . . The greater part of those assisted by charitable institutions are needy only because interventionism has made them so.
Mises is correct. Governments intervene in the economy by enacting thousands of laws and regulations which favour special interest groups at the expense of everyone else. The extent of the practice is mind boggling. Elimination of all forms of intervention would make us all wealthier. Yes, all of us, and not just wealthier, but significantly wealthier. It is beyond the scope of this essay to explore this in detail, but I have written about the negative economic effects of government interventionism here and here. Read it. It will blow you away.
I will briefly cover one example – Minimum Wage Laws. Most economists agree a legally mandated minimum wage reduces employment, particularly for unskilled young people with little work experience. Example – an employer estimates an inexperienced unskilled worker will add value to the company equal to $8.00 per hour. The employer is willing to hire this person at a rate lower than $8.00, but if the government mandated minimum wage is $8.00 or higher, the person will not be hired. Thus, such applicants cannot accept jobs which pay wages commensurate with the value they might offer an employer. In this way, the government discriminates against inexperience unskilled workers by ‘legally’ denying them the opportunity to gain experience and develop skills which would enhance their future economic prospects.
The government says the objective of minimum wage laws is to decrease poverty, yet the law produces the opposite effect. For all their pontification about discrimination (Report, pp. 8, 11, 17, 47), the Report’s authors should redirect their criticism toward the most discriminatory institution in the country – the government. If city councillors and authors of the Report are sincerely concerned about poverty, they should vigorously support the repeal of minimum wage laws. For those wishing to explore the issue further, see here, here, here, here, here, here, here, here, and here.
Government welfare programs discourage productive work, encourage dependency, and place an enormous economic burden on the backs of hard working taxpayers. There are many honourable individuals who would never even consider living their lives at the expense of other people, but human nature dictates there will always be countless others who take the attitude: “Why should I get a job if I can live off welfare payments from taxpayers?” As author William Gairdner wrote:
Like iron fillings drawn to magnets, the country divides into those who produce and want to protect what they have earned, and those who want to share by right (and so, by force) in what the former have produced. In this respect, the shift from the idea of a State set up to provide and protect equal opportunity, to one that is expected to provide equal outcomes, or results, has been decisive, and has resulted in what the insurance industry calls a “moral hazard.” George Gilder summed up the misguided policy effects as follows: 
“The moral hazards of current programs are clear. Unemployment compensation promotes unemployment. Aid for families with dependent children . . . makes more families dependent and fatherless. Disability insurance in all its multiple forms encourages the promotion of small ills into temporary disabilities and partial disabilities into total and permanent ones. Social security payments may discourage concern for the aged and dissolve the links between generations . . . All means-tested programs . . . promote the value of being “poor” (the credentials of poverty), and thus perpetuate poverty.”
I encourage you to read the Report, as it recommends various government actions too numerous to list here. The Report’s authors and City Councillors appear eager to increase the burden of taxes, or debt (or both), though they fail to acknowledge this point – much like campaigning politicians avoiding the question of how they intend to finance their promised bag of goodies. However, there can be no doubt that it is higher taxes and/or higher debt to which these socialists (Report’s authors, City Councillors, and other levels of government) must certainly resort if they are to successfully impose their grand vision on the citizenry. However, taxes are at nosebleed levels now, and the debt is already unsustainable.
As of 2011/12, Federal, Provincial, and Municipal debt, debt guarantees, and unfunded liabilities totalled $4.1 trillion, which is equal to $118,000 for each Canadian citizen. Remember dear reader, the government creates these obligations on your behalf. How will you pay your fair share? The fact is that 99% of us cannot pay. It is literally impossible, and the 1% will never agree to pay for everybody. This is an unsustainable situation, and when something cannot be sustained, it will not be sustained. At a future date, a severe reduction in government spending is unavoidable, including welfare programs. Political considerations, not considerations of genuine need, will determine which programs will be cancelled or scaled back.
The Report’s authors continually pat themselves on the back, assuring us they have done their homework, saying not once, but four times: “The recommendations contained in this report . . . are grounded in the best available research . . .” (pages 4, 7, 31, 34).
They are mistaken. There is a wealth of literature, reports, and studies on the subject of poverty which they seem to have ignored. If they ignored this information because it does not support their agenda, so be it, though they remain in error with their claim of accessing the “best available research.” However, if they were simply ignorant about the existence of such information, and are eager to learn more, I suggest they start with this book (free PDF): For a New Liberty, by Murray Rothbard – chapter 8 (pages 175 – 212).
Seemingly the intent of the Report’s authors, and City Councillors, is to force the independent productive class to increase their support of the non-productive dependent class. However, as government welfare programs grow, so grows the culture of dependency, as more individuals are incentivized to join the latter group, thereby reducing the total amount of wealth produced. These poverty warriors seem oblivious to the fact that their own policies promote the growth of problems which they are supposedly trying to solve.
 Ayn Rand The Virtue of Selfishness (New American Library, 1964) pp 113 – 115, 117
 Yaron Brook and Don Watkins, Free Market Revolution (Palgrave Macmillan, 2012) pp 181 – 182
 Murray N. Rothbard, For a New Liberty (Ludwig von Mises Institute, Auburn, Alabama, 2006) p 194
 Yaron Brook and Don Watkins, Free Market Revolution (Palgrave Macmillan, 2012) p 180
 David T. Beito, From Mutual Aid to the Welfare State (The University of North Carolina Press, 2000) pp 19 – 20
 William D. Gairdner The Trouble With Canada . . . Still! (Key Porter Books Limited, Toronto, 2010) p 186
 William D. Gairdner The Trouble With Canada . . . Still! (Key Porter Books Limited, Toronto, 2010) p 185
 Ibid., Source provided by Gairdner: George Gilder, Wealth and Poverty (New York: Basic Books, 1981) p 111