01 January 2008|
Doling for Columbine
Five Reasons Why Welfare Should Be a Libertarian Cause
The libertarian rightly distrusts the welfare state. It is, at its core, the politics of illusion, fostering the socialist fantasy that income can or should come as a result of inaction. It is ripe for exploitation by those who wish to free-ride on the system. And it also encourages laziness, depriving the economy of the very productivity that allows the welfare system to exist.
But at these costs, it has important benefits - both as an economic policy and a political position.
1. It keeps criminals off the streets and on the porch. Really
Welfare discourages crime. Crime is usually the other main source of income for poor people, other than welfare. The poor and disenfranchised have shown themselves perpetually ripe for criminal activity, such as in France's recent riots, the early days of organized crime in Sicily, the 1992 Los Angeles riots, and the current gestation of jihadism in poverty-stricken Middle Eastern countries, among many others. Desperate, penurious people tend to resent the economic system (and/or society) that put them there. We don't want this. We'd rather have them contented with a basic income. Those who fradulently deceive the welfare system are rightly criticized. But wouldn't we rather have those characters laying around the house on the dole than selling crack on the street?
Welfare can also, paradoxically, assist upward mobility. Knowing one has decent welfare to rely on makes, for example, quitting a job to start a business much less risky. While the permanent dolees will always be there, it can be shown that welfare can help those truly interested in upward mobility. Would, say, J.K. Rowling have turned to writing Harry Potter if she were working instead of on welfare?
2. It makes Adam Smith sound relevant
The pursuit of welfare's outright elmination is politically impossible, even for the doctrinaire free-market advocates who think it desirable. The welfare state is political reality, whether we like it or not. Libertarians should no longer reason as if we were crafting policy in the 19th century. We can leave that to the socialists, who so oblige everywhere else.
Libertarians should seek to design the most efficient, market-friendly, and innovative welfare systems. Such is, after all, the true way of the capitalist. We should seek to maximize the empirical benefits of welfare, as the socialists continue to promote their systems that maximize its more emasculating and paternalistic features (see point 4).
But the greatest reason of all to accept welfare is that if we refuse to do so, we preclude ourselves from ever engaging in a politically-relevant discussion.
3. It's worked before, to the satisfaction of economists
While much of Western Europe (e.g. France, Italy, Germany) serves as a glimmering example of how to build a growth-zapping, parasitic welfare state, some countries there have actually gotten it right. Finland, Sweden, Austria, Ireland, the Netherlands, and a few others have built (admittedly, thanks to a small and homogenous population) highly effective welfare states. They offer generous benefits, but have strong incentives and requirements to rejoin the workforce as soon as possible. As a result, the countries have been able to weave a strong safety net yet have also enjoyed impressive economic growth and low unemployment. They have been so successful that the OECD now recommends some of their policies as methods of encouraging sustained economic growth.
Interestingly some of most effective welfare programs are found in Latin America. In this region of widespread and severe poverty, Brazil and Mexico have implemented, to great success, targeted subsidy schemes. In both countries, poor female heads of households are given substantial lump sum welfare payments, effective as income, in return for keeping their children in school and bringing them to regular doctor visits. The scheme has been praised by Western economists, is popular with voters, and has appreciably reduced extreme poverty in both countries. The plan works because it encourages upward mobility - healthy graduates make money, and the state pays the parents to raise healthy graduates. While the details of the program are intended for such high-poverty countries, the subsidy system has proven its value (see point 5).
4. America needs help
America's welfare state represents, by contrast, how not to run a welfare state. It is bureaucratic and politicized. We have spent a trillion dollars on welfare programs, and it has barely made progress in reducing deep poverty.
Worst of all, America prefers quantity over quality in its welfare system, showering the poor with piecemeal giveaways like food stamps, public housing, and other patronizing programs. Those who didn't fail microeconomics are familiar with the principle of diminishing marginal utility, or the law that the more you receive of something, the less you appreciate it. This piece of basic economics explains why such targeted programs are wasteful and pointless - the poor would be more satisfied getting a little bit of everything they need instead of a full amount of one thing they need.
5. A good solution is finally here
All welfare programs in America should be replaced by the payment of a single subsidy to every poor American. The payment should be distributed through the IRS, with eligibility determined by taxable income. The subsidy amount should be at or above the government's poverty line, adjusted to local cost of living, and adjusted according to relevant macroeconomic data.
The receipt of the payment should be contingent upon active efforts to find work, support any children, provide public services, and other similar methods of limiting free riders. The most important factor of all is ensuring that the subsidy amount itself should not become more appealing than honest employment, but not too stingy as to be ineffective at combating poverty. This balance is exceedingly difficult to achieve, but it is substantially easier through a single figure adjusted by economic factors than through a bureaucratic web of socialism.
Milton Friedman was one of the initial proponents of the negative income tax, where such subsidies are coupled with an flat tax. He recognized the economic appeal of such a system, and so should all who, like him, support free markets.
The above work is the opinion of the author, and not necessarily that of the Prometheus Institute.