Get Government out of the welfare business!

Lee Friday – November 17, 2017

Fighting poverty is a favorite pastime of government because politicians get to portray themselves as champions of the poor. However, the unfortunate few tend to be far fewer in number when aid is extended privately instead of through tax funded programs.

Government Bureaucracies Benefit from Welfare Programs

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. I live in Canada, where the number of federal government welfare program employees increased by 43% between 2006 and 2012. Clearly, it serves the interests of politicians and bureaucrats to create (impose) a culture of dependency. As Murray Rothbard wrote in For a New Liberty:

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.

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.

The government exacerbates the problems it is supposedly trying to solve.

Poverty is Lower when Aid is Voluntary

The poverty rate in New York state is 14.7%. What was the rate before the imposition of massive government welfare programs? In their book Free Market Revolution, Yaron Brook and Don Watkins wrote:

. . . 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.

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 wrote:

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.”

Why Private Aid is Superior to Public Aid

Private charity was more effective than government welfare because private persons contributing their own money are highly incentivized to identify genuine needs. 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 does not mean government employees are uncaring and lack empathy. It means they deal with countless welfare recipients who they can’t possibly know personally, and perhaps are forbidden from doing so. Coupled with the fact that they are giving away someone else’s money, incentives for determining genuine need are very weak. Thus, the indolent know how to milk the modern public system, but were 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 – a 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.”

Is Reform Possible?

Politicians say they can alleviate poverty, which they often blame on ‘greedy capitalists’ and ‘inequality’ – assertions which Ryan McMaken has disproven. Consistent with McMaken’s article, when markets are hampered by government intervention, poverty increases. As Ludwig von Mises wrote in Human Action:

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.

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 individuals are deploying their own resources – their own money. As such, this is impossible to duplicate within the coercive institutional structure of government.

Conclusion

Government welfare discourages productive work, encourages dependency, and places an enormous economic burden on the backs of resentful, hard-working taxpayers. As 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.

Politicians are constantly dreaming up new schemes to tackle poverty, and they insist their plans are grounded in the best available research, but they are mistaken. There is a wealth of literature, reports, and studies on the subject of poverty which they ignore. If they ignore this information because it does not support their agenda, so be it. However, if they are simply ignorant about the existence of such information, and are eager to learn more, I suggest they start with Rothbard’s book For a New Liberty (Free PDF) – chapter 8 (pages 175 – 212).

All governments should exit the welfare business. Private individuals and organizations will more effectively identify genuine needs and allocate resources accordingly. Governments wishing to play a role in the process can do so by repealing all forms of interventionism.

 

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