TGIF: The Unfortunately Forgotten Sumner

Some things haven't changed since 1883. In that year Yale University professor William Graham Sumner, the anti-imperialist laissez-faire liberal and pioneer of American sociology, noticed that "we are told every day that great social problems stand before us and demand a solution, and we are assailed by oracles, threats, and warnings in reference to those problems." Then, as now, self-styled progressives announced that the sky would fall unless the problem that had most recently caught their fancy was addressed once by the government. Adam Smith's observation that "there is a great deal of ruin in a nation" was too complacent for these world-savers.

In What Social Classes Owe to Each Other, Sumner continued his description: "There is a school of writers who are playing quite a rôle as the heralds of the coming duty and the coming woe. They assume to speak for a large, but vague and undefined, constituency, who set the task, exact a fulfilment, and threaten punishment for default." Sumner thought it was about time someone asked some penetrating questions:

After reading and listening to a great deal of this sort of assertion I find that the question forms itself with more and more distinctness in my mind: Who are those who assume to put hard questions to other people and to demand a solution of them? How did they acquire the right to demand that others should solve their world-problems for them? Who are they who are held to consider and solve all questions, and how did they fall under this duty?

Who indeed? What did his searches unearth?

So far as I can find out what the classes are who are respectively endowed with the rights and duties of posing and solving social problems, they are as follows: Those who are bound to solve the problems are the rich, comfortable, prosperous, virtuous, respectable, educated, and healthy; those whose right it is to set the problems are those who have been less fortunate or less successful in the struggle for existence. 

The Welfare-State Paradox

"Whether ... a system of social security is a good or a bad policy is essentially a political problem. One may try to justify it by declaring that the wage earners lack the insight and the moral strength to provide spontaneously for their own future. But then it is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation’s welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs; whether it is not absurd to make those people supreme in the conduct of government who are manifestly in need of a guardian to prevent them from spending their own income foolishly. Is it reasonable to assign to wards the right to elect their guardians? It is no accident that Germany, the country that inaugurated the social security system, was the cradle of both varieties of modern disparagement of democracy, the Marxian as well as the non-Marxian."

—Ludwig von Mises, Human Action

TGIF: Beware Elitists in Populist Clothing

We're led to believe that today's political struggles are largely a contest between populists and elitists. But something besides libertarians is missing from that simple tale: the elitists in populist clothing, or elitist populists. We have no better example than a conversation the other day between the leading "right" populist Tucker Carlson and the leading "left" populist Glenn Greenwald. (The quotation marks are to indicate that these tribal labels are seriously problematic.)

To their credit, Carlson and Greenwald consistently defend a noninterventionist foreign policy and free speech. However, advocates of full individual liberty should take care because these pundits voice positions that seriously trash individual liberty. See their views on the free movement of people and goods across national boundaries. Voluntary exchange is not a priority for Carlson and Greenwald.

Even knowing this, I was unprepared for what they would say. Carlson offered this (at 28;10):

I think a lot of people have awakened to the now-demonstrable fact that libertarian economics was a scam perpetrated by the beneficiaries of the economic system that they were defending. So they created this whole intellectual framework to justify the private-equity culture that's hollowed out the country.... I think you need to ask, Does this economic system produce a lot of Dollar Stores? And if it does, it's not a system that you want because it degrades people and it makes their lives worse and it increases exponentially the amount of ugliness in your society. And anything that increases ugliness is evil. Let's just start there. So if it's such a good system, why do we have all these Dollar Stores?... If you have a Dollar Store, you're degraded. And any town that has a Dollar Store does not get better. It gets worse. And the people who live there lead lives that are worse. The counterargument, to the extent there is one, oh they buy cheaper stuff. Great. But they become more unhappy.... [The Dollar Store] is also a metaphor for your total lack of control over where you live and over the imposition of aggressively in-you-face ugly structures that send one message to you: which is you mean nothing; you are a consumer, not a human being or a citizen."

There you have it. The market is an exploitative scam, and the Dollar Store, which many of us regard as a godsend, is an ugly, degrading, and dehumanizing snare. Who knew?

Where to start? Libertarian -- in other words, consistent free-market -- economics is a self-serving scam? Really? Got proof? Were Menger, Böhm-Bawerk, Mises, Hayek, Friedman, Kirzner, Sowell, Williams, Buchanan, Rothbard, etc. actually members of a cabal that was getting rich at our expense? Is Carlson having a laugh?

He would have been on firmer ground if had said that libertarian economics is used as a cover for elitist government interventions. But libertarians have said this roughly forever.

"So they created this whole intellectual framework to justify the private-equity culture that's hollowed out the country." This is pretentious rubbish. We must always distinguish market institutions in themselves from the distorted monstrosities created by social engineers through government control. The market for private equity -- otherwise known as private property in the means of production -- is not the problem. It's indispensable for raising the living standards of eight billion people. The problem is privilege: goodies and influence bestowed by the state. How could Carlson not know that?

Now we get to that alleged symbol of ugly American modernity and degradation: the Dollar Store. This is too silly to require an answer. He doesn't the stores are just physically unsightly. Actually, they're not. He means that the very idea is ugly and destructive of good things. Has he asked people who shop there? Do they see it as symbolic of a lack of control? He would have had a point had he lamented that such stores are valued because the government central bank sucks the purchasing power out of the dollar by printing money. Or he might have noted that without the Federal Reserve, more stuff would cost only a dollar. (HT: Bob Murphy.)

Lest you think that Carlson's complaint is about 21st century America, understand that the first "five and dime" store -- officially, F.W. "Woolworth's Great Five Cent Store" -- opened in Utica, New York, in 1879. Children of the 1950s like me fondly remember the Woolworth as a cheerful fixture on the avenue. I don't recall being treated as a "mere consumer," whatever that means. (The Woolworth lunch counter in the Jim Crow South was a different story, but that's not what Carlson has in mind.) Woolworth soon had competitors, such as W.T. Grant.

Carlson's elitism is undisguised when he expresses his disdain for the Dollar Store and the people who welcome them. I'm quite sure he and his fellow millionaires don't shop there.

If you expected some pushback from Greenwald, you would have been disappointed. He laughingly recalled how he got into trouble for suggesting that Carlson and Donald Trump's one-time gray eminence Steve Bannon "are a lot more socialist in a certain limited sense than a lot of people who claim that title." He's right. That's because, he added, "you [Carlson] are focused so much on the welfare of ordinary people." I'm not seeing much focus on ordinary people.

As to Carlson's point about ugliness, Greenwald elaborated:

You go to anywhere in the world. You go to Western Europe and you see these structures that people spent 200 years building just for the sheer beauty of it and you go into nature and you see beauty like it never exists. And you go to developing countries and you see a kind of dedication to buildings even that are designed to be inspiring to stimulate things in the human soul. And then you go to places in the United States where our infrastructure is falling apart, where our new structures are designed to be as ugly as possible. And it's a very difficult thing to do to communicate the spiritual components of our politics.

Has it occurred to Greenwald that those beautiful old European structures were built by ordinary people for the government-privileged aristocracy? (HT: David Henderson) Greenwald apparently sees no beauty in the fact that the market-oriented West (despite abundant government intervention for its cronies) brought the first mass production for ordinary people in history. The upper classes of the not-too-distant past would envy the middle and lower classes over what they consume every day. You might expect that to thrill a populist -- but not these delusional champions of ordinary people.

Finally, Greenwald writes that "ultimately politics does have no purpose other than to elevate the happiness of our citizenry." But he doesn't lift a finger to defend this position, which is fraught with difficulties not least because of human differences and the universal need for individual freedom. To name just one, since the state is founded on aggressive force, what does Greenwald have planned for those of us whose happiness requires that the politicians and bureaucrats stop stealing from us and stop trying to manage society? Wouldn't it be better for the government to stay out of the happiness business and to respect freedom of association? 

No doubt Carlson and Greenwald favor a foreign policy of nonintervention for some good reasons that libertarians also embrace. But they favor it for a bad reason as well. Instead of favoring the taxpayers keeping their own money, Carlson and Greenwald want to spend the Pentagon's huge budget on a gigantic, compulsory, inflationary, wealth-destroying, coldly bureaucratic, intrusive, and condescending welfare state if not outright government ownership and control. 

Individual liberty? What's that?

TGIF: What's Wrong with the Welfare State

Let's start with what is not wrong with the welfare state.

Much criticism of the welfare state focuses on how it encourages dependence not only on the government, but dependence on others per se. In some circles the wish for a social safety net is disparaged as a moral flaw encouraged by people who want to subvert humanity in general and the original liberal, or libertarian, project in particular. The welfare state is said to clash with such alleged and desirable virtues as rugged individualism and radical self-reliance. In this view the welfare state robs human beings of their essential character as independent persons--that it corrupts them with handouts and makes them parasites on the labor of others. (Such corruption of character cannot be ruled out as a consequence and can be found in some degree in the United States, but it is not inevitable because culture surely plays a role in how people respond to political incentives. See the case of Sweden and other countries in Scandinavia, which combine a "generous" welfare benefits with a substantially free-enterprise system.)

You ought to be able to spot the problem in the first step of this criticism of the welfare state. In the original liberal project, rugged individualism and radical self-reliance were not guiding principles because it was understood that people have always lived socially. The first liberal theorists knew this and had no wish to change society or human nature in that respect. In other words, people were always interdependent and dealt with one another in continuous mutually advantageous ways. That's what society is. A human being living in isolation is not fully human.

Of course the ways of social living changed over time. For example, circles of trust grew, transcending family ties, and the division of labor expanded as technology and political institutions permitted. Dealing with strangers, once unthinkable and highly risky, became increasingly common as people glimpsed the gains from trade and other benefits of social contact. The ideal was to live interdependently to mutual advantage with others. Thinkers like Frederic Bastiat in the 19th century understood that well.

What's the appeal of social living? The question really doesn't need answering because the truth has been so obvious since antiquity. Peacefully interacting with others as a way of life magnifies our individual intellectual power, our ability to produce, and out emotional satisfaction. For example, as a practical matter, an individual may know something about a subject, but that person surely won't know everything about it. Much is to be learned, then, simply by talking to other people, not to mention reading what others have written. A person is likely to learn more about a subject even when talking to an ignorant but inquisitive counterpart because just answering questions can lead to an extension of one's knowledge though the emergence of overlooked connections. John Stuart Mill had this sort of thing in mind when he wrote in On Liberty, "He who knows only his own side of the case knows little of that."

Society extends our intelligence. But that's just one of the many benefits of social living.

Aristotle makes the point that continuous peaceful interaction with other people is the rational mind in action. As reasoning animals, we need that to live according our essential nature. Justice, respecting people's rights, that is, the commitment to interaction via reason, fosters the flourishing of everyone concerned.

An obvious fact bearing on this subject is that social life takes place in a world of uncertainty. No one can know what personal and social misfortune lies ahead. Therefore everyone has an interest in hedging against calamity. Insurance, the pooling of risk with others, is an old institution, and no one would say that someone who buys insurance against bad luck is shirking his duty of self-reliance or seeking unreasonable dependence on others.

This point should sit well with any advocate of individual liberty and global free markets in which people, goods, and money moved around according to the preferences of the individuals involved.

Superficially, the welfare state can look like nothing more than than the formalization of this legitimate liberal (libertarian) social welfare principle. That could explain why most people accept the welfare state to some degree. Welfarism can appear to be a proper plan to address our entirely reasonable concern about the risks of an uncertain future. You pay in when things are going well; you draw out when they aren't. That's where libertarian analysis comes in. For the welfare state's appearance is misleading. Moreover, the state's underlying flaws point to a better way not toward fostering fictional atomistic individualism, but toward a moral and more effective way to address our rational need to hedge against an uncertain future.

Then what is wrong with the welfare state? The two biggest flaws stem from its nature as a government institution. The welfare state is coercive, and it is monopolistic and anti-market. As a tax-financed institution, the welfare state is obviously coercive. The fig leaf of democratic representation aside, taxes are compulsory payments. They are not like club dues or prices in a shop. As a taxpayer, you cannot say no.

It follows that a tax-financed arrangement has little in common with a market or noncommercial voluntarily financed service. If consumers are free to say no and buy elsewhere--as taxpayers are not--then service providers must be responsive to customers in a way that no government must be. Otherwise, they could go out of business. Moreover, free consumers provide critical feedback to providers, which tends to improve service.

On the other hand, a government system is subject to what are known as public-choice and (Austrian-school) knowledge problems. That is, first, the bureaucrats and politicians who run the system have their own personal agendas (like career advancement and power) that may have little to do with the good of the people they ostensibly serve, and second, even if their incentives were perfectly aligned, they couldn't know what they would need to know to do the best job possible because the competition and consumer feedback that freedom generates would be absent. Ludwig von Mises showed that without market-generated prices, economic calculation and hence efficiency in the use of scarce resources are impossible, and F. A. Hayek showed that crucial knowledge related to what would serve our well-being is scattered throughout society and much of it is never articulated. The only way to obtain that knowledge in a usable form is via the prices that emerge when people are free to express their preferences through market activity.

These are serious practical flaws. Because of incentive and knowledge problems, even a modest welfare system that at first addressed only actually unfortunate people may not stay that way. Political dynamics may tend to bring expansion far beyond the original mandate, leading to fiscal problems, slowed economic growth, and liberty violations. And because of knowledge problems, blunders could abound in the absence entrepreneurship to sniff out and correct error.

In contrast, since all participants in an unmolested competitive marketplace and the larger noncommercial voluntary sector are free, providers have to work to win consumers over, that is, to persuade them that their offerings are superior to those of competitors. Hence, they must innovate, exhibit entrepreneurship, and find ways to lower prices and enhance quality. It is no accident that the market, even a heavily regulated one such as ours, displays more imagination than governmental service providers. Competition makes it in people's interest to spot and correct errors.

These considerations lead us to conclude that what's wrong with the welfare state is not that it caters to people's concern with uncertainty, but that it does so in a coercive and inferior way to other alternatives that would be available if the government did not crowd them out. That's a damning indictment. (It has also been shown that the welfare has been politically intended to keep poorer people who have been exploited through crony capitalism from rocking the boat by giving them money and other benefits and so keeping them quiet.)

What are the alternatives? We can point to two broad categories: for-profit market institutions and what were once known as mutual-aid organizations. The first group would include commercial insurance firms of all kinds. The second are voluntary organizations that are cooperatively owned by their members. The largely unknown history of mutual aid offers excellent ideas on how people can grapple with uncertainty without the coercive state. (For details see David Beito's landmark work From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967.)

In their heyday mutual-aid organizations, also known as lodges and friendly societies, were largely working-class associations that not only provided an arena for camaraderie but also elaborate methods of obtaining a variety of insurance benefits and even medical care, including hospital services. It was an extraordinary chapter in American (and British) history that holds the key to replacing the costly, debt-ridden, and ever-expanding U.S. welfare state with a free, innovative, and flexible arrangement capable of catering to a variety of needs in an uncertain world.

Who knows what services would be available today had mutual aid not been subverted by the welfare state?

TGIF--The Goal Is Freedom--appears on occasion Fridays. Topics discussed here are also addressed in my What Social Animals Owe to Each Other and Tethered Citizens: Time to Repeal the Welfare State.)

TGIF: Democracy Can't Fix Socialism

However you feel about democracy, it can’t fix what’s wrong with socialism. 

In theory, modern representative democracy — unlike ancient Greek direct democracy — means that people vote for so-called representatives to fill various executive and legislative government offices. Those officials then enact and enforce rules that people are expected to obey under threat of fine and/or imprisonment. 

In theory, socialism has mostly been understood as direct government economic planning through public, that is, state, ownership of the means of production. In no real sense can a public own — meaning control — factories, farms, etc. In reality public ownership means control by the collection of politicians and bureaucrats called the state. Thus socialism until recently has been understood to entail abolition of private property, money, and markets. Competition, cooperation, and exchange give way to monopoly, command, and compliance.

(For the record, in the late 19th and early 20th centuries, socialism in some circles was an umbrella term for any “left-wing” alternative to [state or political] capitalism. Thus some left individualist anarchist libertarians, such as Benjamin Tucker and his compatriots, embraced the term while joining with other nonstate socialists to oppose corporatism, or neomercantilism, the alliance of state and favored business interests. In a linguistically more perfect world, socialism would denote the opposite of statism. In that sense, market anarchism is socialism because the arena of decision-making is society — the network of voluntary relations — rather than the state — the network of coerced relations.)

These days, at least in America, socialism no longer means only formal government ownership of the means of production and central planning. (It’s useless to complain: like it or not, words “move” and always have.) By socialism, Bernie Sanders and his followers intend it to mean a much bigger welfare state: “free” medical care for all, higher education, etc. Sanders says his models are in Scandinavia, but those are not socialist countries; rather they are highly market-oriented welfare states. At least these days, Sanders does not propose to abolish private property and markets. He does propose, of course, to interfere with market relations through taxation and decrees such as minimum-wage legislation. He seeks not to abolish markets but to forcibly modify their outcomes more to his liking. (Not that he deserves praise for that.)

Socialism (in the older sense) and welfare-statism, along with other forms of interventionism, for all their similarities and common shortcomings, are not identical, as Ludwig von Mises noted. (For the common shortcomings, find a copy of Israel M. Kirzner’s classic essay, “The Perils of Regulation: A Market Process Approach.” Also see Kirzner’s “Competition, Regulation, and the Market Process: An ‘Austrian’ Perspective.”) For example, Medicare-for-all and free college would be better described as welfare-statist because, as envisioned, the government would not own all the hospitals and colleges or employ the doctors, nurses, and teachers. The services would be regulated by bureaucrats and paid for by the taxpayers whether they like it or not.

I hasten to add that the difference I’m alluding to between socialism and interventionism is not moral but economic and institutional. Whether politicians and bureaucrats direct our behavior directly though government ownership or indirectly through regulation of nominally private arrangements makes little difference morally. Either way, our rights and freedom are violated.

Leaving the distinction between socialism and interventionism aside for now, let’s understand that socialism, however defined, would not have its intrinsic flaws eliminated by placing democratic in front of it, that is, by having officials elected. The reason is simple. If socialism were to have any chance of delivering on its extravagant promises, politicians, bureaucrats, and the public would have to know things that they could not possibly know. Here I invoke the rich critique of centralized power provided by Mises and F. A. Hayek. 

Mises showed, beginning a century ago, that the abolition of markets — which would necessarily include the elimination of authentic money prices — would bring chaos because the prices generated by people’s marginal decisions about scarce resources in markets are indispensable for economic calculation. Calculation is important because resources are scarce and we don’t want to waste them. Prices, which contain vital information, guide action throughout society. Without them, no one could make smart economic decisions for himself, much less for an entire society.

Hayek emphasized that central planners necessarily would be ignorant not only of prices but of the scattered, incomplete, and ever-changing underlying knowledge about supply and demand, including subjective consumer tastes. Specifically, he showed that much of the information that generates prices is not explicitly known data even to the relevant actors; we all possess tacit knowledge that influences our actions when we face unanticipated alternatives between two or more goods or courses of action. Not only is it the case that central planners could not know this information; we could not convey it to them even if we had a timely way to do so. Economic planning without true prices is like flying in a fog without instruments. The choice is between free pricing (which requires private property, markets, and free exchange) or what Mises called “planned chaos.”

Relevant to this discussion, Kirzner, in The Perils of Regulation, showed that a regulatory state would suffer from a similar “knowledge problem” as socialism. The regulators could not know what they would have to know to efficiently regulate an “economy” that accorded with the preferences of the individuals they ruled. Their ignorant interventions would distort prices, leaving the hampered economy less able to serve us. (In reality, there is no “economy”; there are only people who trade goods and services. We are the economy that demagogic politicians seek to regulate.)

So we ask: how could the knowledge problem be solved by democracy? As individuals, voters may know much about their own and their families’ situations, but how much do they know about their neighbors’, not to mention the rest of the country’s. I am certainly not qualified to choose among candidates offering competing plans for how much steel, aluminum, etc. should be produced next year and at what price, what kind of cars should be manufactured, or how much wages should rise. Are you? Freed markets (unmolested by politicians) do this reasonably well. And unlike politicians, markets constantly correct for errors.

Clearly, democracy cannot fix the economic flaws of socialism or interventionism. It can’t fix the moral flaws either. However you define socialism — unless it’s in the Tuckerite sense — it must entail state interference with peaceful cooperative interaction. (I reject the bogus distinction between personal and economic activities, just as I reject the distinction between personal and economic liberty. What’s more personal than our decisions about what to buy and sell?) Whether the intrusive government officials are elected or not makes no moral difference. Just as no autocrat ought to be able to tell me what peaceful actions I may and may not engage in, so no politician appointed by 50 percent plus one of voters ought to be able to tell me what I may and may not do.

I suppose the adjective democratic is meant to convey that the advocate wants socialism without the nastiness that Castro et al. brought with them: including the jailing in labor camps of various “undesirables” and enemies of the revolution, such as gays and independent-minded librarians. (It seems odd for Sanders to praise Castro for his literacy programs when the dictator also expressly rejected freedom of the press.) But as Hayek pointed out in The Road to Serfdom, what begins as democratic socialism may not stay that way. It could become autocratic socialism as the legislators talk endlessly about how exactly the economy should be planned or guided. After all, even if everyone believed that the government should plan society, it wouldn’t follow that everyone agreed on the plan’s details. So at some point an impatient president might decide to put a stop to the idle chatter and take matters into his own hands through executive order.

Democratic or not, socialism and interventionism are unfit for human beings. 

TGIF — The Goal Is Freedom — appears occasionally on Fridays.

TGIF: To UBI or Not to UBI?

My son, Ben, asked for my take on Scott Santens's article "If You Think Basic Income is 'Free Money' or Socialism, Think Again," so here it is. 

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com.

Become a Free Association patron today!

TGIF: Libertarian versus Welfare-State Property Rights

Last week I set out Auburn University philosopher Roderick Long’s argument that libertarianism can’t be reasonably dismissed as strange. (A modest objective, to be sure.) After all, Long writes, mainstream libertarianism holds that each individual has a right not to be aggressed against, aggression being defined descriptively (not normatively) as the initiation of physical force. What’s weird about that? To those who object that libertarians believe in only that right and no others, Long responds that other alleged rights, say, positive welfare rights, would have to conflict with the right not to be aggressed against, making for an incoherent theory. As I summed up the argument:

If people had rights in addition to the right to be free from aggression, that would indicate that they had enforceable claims against others whose alleged rights violation did not entail the use of aggressive force. (If it did entail the use of aggressive force, we would ... not be talking about an additional right.) That would in turn indicate that the one whose alleged other right is violated could legitimately use force to compel others to act in a certain way. (Remember, that’s an important part of what it means to have a right.) But since by stipulation those others had not used aggressive force, the force used against them in defense of the alleged other right would itself entail aggression.

In other words, Smith’s right to be free from aggression would clash with Jones’s proposed other right. That is incoherent, unless we dump the right not to be aggressed against -- which would open up a horrendous can of worms.

But that was only one half of Long’s paper. It’s worthwhile to look at the second half.

The Welfare State Brings Out the Thickness in Thin Libertarians

There are libertarians who apparently feel they must protect the movement from the thick libertarianism that I and others espouse. (It's also been called "humanitarian libertarianism.") Thickness denotes the idea that the same principles which commit us to  nonaggression also necessarily commit us to other values not directly related to nonaggression.

However, some thin libertarians display a surprising thickness from time to time.

Take the welfare state. Libertarians who shun thick libertarianism seem to have no trouble damning the welfare state for its corrupting effects on its recipients. I understand that some thins have even defended Cliven Bundy's "analysis" of the welfare state's harm to black people.

But that is not how consistent thin libertarians should talk about the welfare state -- unless they declare that for this purpose they are taking off their libertarian hats. Why do I say this? Because no one is forced to accept welfare, food stamps, or any other government handout. Being a welfare-state client is entirely voluntary and thus in itself has no thin-libertarian implications. If libertarianism is only about force, as thin libertarians insist, then they should have nothing to say about any bad effects on welfare-state clients. All thins can and should object to is the taxation that produces the revenue distributed to recipients.

Look at it this way. If the welfare state did not harm its recipients, libertarians would still oppose it because it relies on the aggression of taxation. So why do thin libertarians focus so much attention on what they should regard, respecting libertarianism, as an irrelevant feature?

Maybe the thins are thick after all, at least when it suits them.

Romney and the 47 Percent

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it. That that's an entitlement. And the government should give it to them. . . . These are people who pay no income tax. Forty-seven percent of Americans pay no income tax. So our message of low taxes doesn't connect. . . . And so my job is not to worry about those people—I'll never convince them that they should take personal responsibility and care for their lives.

This quote is from the infamous surreptitious video made of Mitt Romney's speech at a fundraiser last spring. What are we to make of it?

The first thing to note is that Romney is typical of the right wing of the ruling elite, which often portrays lower income beneficiaries of the welfare state as a threat to the established order. In this view, they are dependent on government; they wish to remain that way; and they see themselves as victims.

Of course many people who qualify for welfare-state benefits take advantage of them, but it doesn't follow that they want to remain in that postion. Katherine S. Newman, author of Chutes and Ladders: Navigating the Low-Wage Labor Market and No Shame in My Game: The Working Poor in the Inner City, maintains that low-income people are far more industrious and ambitious, as well as determined to achieve independence, than the public generally believes. (Listen to her EconTalk conversation with Russ Roberts.)

Far less interested in independence from government are the large corporations, banks and otherwise, that exist by virtue of government contracts, guarantees, bailouts, and intellectual "property." The government's security establishment provides untold opportunities for companies to live off the taxpayers, which is much more secure than attempting to achieve market share among consenting consumers. (See Nick Turse's The Complex: How the Military Invades Our Everyday Lives.)

Strangely, Romney's speech had nothing to say about that sort of corrupting dependence.

As for feeling like victims, the working poor didn't seem to display this attitude to Newman during her extensive field research. Yet why wouldn't they be justified in regarding themselves as such? The corporate state, with its myriad barriers to competitive economic activity, including self-employment, blocks many routes to prosperity.

By the way, while many lower income people pay no income tax, they do get hit with the regressive payroll (FICA) tax, which until recently helped fund the government's general operations. While formally, employers pay one half of that tax, in fact most or all of the employer's share comes out of workers' pay.

Romney is trying to distract attention with a 14-year-old audio of then-State Senator Barack Obama endorsing a mild form of income "redistribution." Government distribution of wealth, of course, is objectionable, just as government itself is. But Romney to date has had nothing to say about the systematic upward transfer of wealth that the corporate state effects in a variety of way. To offer just two examples: Intellectual "property" law prohibits free competition, creates artificial scarcities and thus extra-market profits, and privatizes value that would have naturally been "socialized" in a freed market. Second, barriers to competition (again, including self-employment) reduce the bidding for labor and hence workers' bargaining power, resulting in lower wages than would otherwise be seen in a freed market. (See these articles by Charles W. Johnson and Gary Chartier.)

It is certainly true that no one is entitled to other people's stuff. That is just as true of the powerful and well-connected business interests that through government intervention amass great wealth at the expense of the rest of us.

When Romney begins talking about that sort of "redistribution of wealth" I will start to take him seriously.

Latest Scribblings

“Romney and Bain Capital”

“TGIF: Government Beneficence and Other Fairy Tales”

Choose Your Statism

Look, I’m not a social democrat or a welfare statist. If you’re looking for someone to promote the German model in the U.S., it ain’t me. But if you call yourself a libertarian, don’t try to kid anybody that the American system is less statist than the German one just because more of the welfare queens wear three-piece suits. And don’t kid yourself that, given equal levels of statism, most Americans wouldn’t prefer the kind where they have guaranteed healthcare and six-week vacations. Come on, I would — after all, if we’re choosing between equal levels of statism, of course I’ll take the one that weighs less heavily on my own neck.

--Kevin Carson
"Neoliberalism: All the Taxes of Social Democracy,
None of the Fun"

Center for a Stateless Society

My take on Thomas Geoghegan's Were You Born on the Wrong Continent? is here.

The Truth about the Welfare State

I can't recommend too highly Kevin Carson's latest at the Center for a Stateless Society. "Giving Back With a Spoon, Taking With a Shovel" is a brief but excellent introduction to the American political economic system and the fundamental short-coming of most right-wing "free market" analysis. Choice quote:

The main effect of most government policies is to increase entry barriers, minimum capital outlays, and overhead cost of small-scale production, and to reduce the amount of idle land and cheap capital, so as to minimize the number of self-employment opportunities that wage employers are forced to compete with for your labor. And by putting a floor under the cost of subsistence, the regulatory framework increases the size of the minimum revenue stream the average household needs just to break even, hence increasing workers’ demand for hours of employment relative to the supply....

I believe the overwhelming trend of income transfer is upward (but more indirect and less visible), and that the direct and visible downward transfers involve just the least possible fraction of this enormous sum required to reduce outright homelessness and starvation below politically destabilizing levels.

Read the entire article and you'll have an idea of what left libertariansism is about.

While you're at it, also read Carson's "Labor Struggle: A Free Market Model" (pdf) for excellent revisionist history on the labor movement.

TGIF: Who's Afraid of Socialism?

It’s not obvious to me a priori that the American variant of the welfare state is superior in every respect to the European variant. One variant may indeed cushion the victims of political privilege-granting better than others. Considering who writes the rules over here, I see no grounds for thinking that we necessarily have it better than the Germans do in every possible way.

The rest of TGIF is here.

The Welfare State

Despite what you may read at other libertarian sites, the welfare state is not the result of efforts by lazy poor people to enslave and live off the productive classes. Rather, it is the result of efforts by the political-social-corporate elite to subordinate and control the poor for a variety reasons -- the same elite, by the way, that seeks to loot the productive classes. Missing or ignoring this distinction leads to a slew of fallacies, misstatements, and attitudes.

McCarthy on Belloc

[Hilaire] Belloc's distrust of the new liberal positive state was motivated more by a fear of what the state would do to the poorer classes, which he believed would be relegated to a permanent servile status, than by any Manchesterian laissez-faire solicitude for the property rights of capitalists, whom he thought were using the new liberalism to perpetuate their plutocratic position.

--John McCarthy, Hilaire Belloc: Edwardian Radical

Pelosi Health-Insurance Bill Summarized

Happily, you need not invest the next few weeks of your life reading the 1,990-page House overhaul of the health-insurance -- and by implication, the healthcare -- industry. A convenient summary has been provided, compliments of Pierre-Joseph Proudhon.

To provide affordable, quality health care for all Americans
and reduce the growth in health care spending, and
for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled that the American people shall henceforth be:

Watched, inspected, spied upon, directed, law-driven, numbered, regulated, enrolled, indoctrinated, preached at, controlled, checked, estimated, valued, censured, commanded, by creatures who have neither the right nor the wisdom nor the virtue to do so. ... [A]t every operation, at every transaction noted, registered, counted, taxed, stamped, measured, numbered, assessed, licensed, authorized, admonished, prevented, forbidden, reformed, corrected, punished. ... [U]nder pretext of public utility, and in the name of the general interest, ... place[d] under contribution, drilled, fleeced, exploited, monopolized, extorted from, squeezed, hoaxed, robbed; then, at the slightest resistance, the first word of complaint, to be repressed, fined, vilified, harassed, hunted down, abused, clubbed, disarmed, bound, choked, imprisoned, judged, condemned, shot, deported, sacrificed, sold, betrayed; and to crown all, mocked, ridiculed, derided, outraged, dishonored.

All in favor say aye. The rest of you can go to hell.

TGIF: The Welfare State Corrupts Absolutely

Let’s begin at the beginning. Medical care is not a free good found in nature. Of course, no one really thinks it is. But that doesn’t keep most people from wanting to pretend otherwise, and the current institutional setting makes that possible. After a while, one forgets one is pretending. Yet medical care goes on being a collection of produced goods and services — subject to the laws of supply and demand, and requiring resources and labor that come with opportunity costs. Therein lies the problem.

The rest of TGIF is here.

The S-Word

So the S-word has surfaced in the presidential campaign. One candidate accuses the other candidate of being a socialist because he would raise taxes on the wealthy while "cutting taxes" for, among others, workers who pay no income taxes. The accused laughs it off, saying next he'll be called a communist for sharing his toys in kindergarten. (Of course, then he was sharing his own toys.) Meanwhile, the first candidate -- the one hurling around the "socialism" charge -- says if elected he'll buy up shaky mortgages and send checks to people who pay no income taxes so they can get medical insurance. I'm beginning to understand how Alice felt.

The rest of this week's TGIF, "The S-Word," is at the Foundation for Economic Education website.

Welfare State or Corporate State?

It's a grave mistake to portray the economic problems as consequences of the welfare state, as traditionally defined. Rather, this is a failure of the corporate state, or state capitalism. Not only is this the truth, it also knocks the state socialists off balance. Let the conservatives argue that the failing system was designed to help low-income people. We know better: it was designed to politically funnel money to bankers, home builders, and the real-estate profession. As usual, low-income people were mere pawns in a special-interest scheme to shift risk from big business to the taxpayers.

Cross-posted at Liberty & Power.

Latest Writings

I've been reading the news about soon-to-be-ex-New York Governor Eliot Spitzer with mixed feelings. Yes, mixed. On the one hand, there is something satisfying in seeing an insufferably self-righteous, politically ambitious, ham-handed, and ethically challenged former prosecutor lose his grip on power because he did what he used to prosecute other people for doing. On the other hand, he was caught in a victimless crime because the ludicrously named Patriot Act requires banks to inform the IRS when their depositors engage in "suspicious," that is, unusual, financial activity. Big Brother lives.

The rest of this week's TGF, "Big Brother Really Is Watching," is at the Foundation for Economic Education website.

When a private company screws up, there is no shortage of people demanding more government intrusion in the marketplace. But when the government screws up, they don’t call for less government. They call for more.

The economy is slowing down, and the government is at fault. But, if anything, the policymakers and pundits want the government to do more of what got us into trouble in the first place. If a lot of poison is bad, a lot more is somehow good. That’s the logic of statism.

My latest op-ed, "The Government's Chickens Are Back," is at The Future of Freedom Foundation website.