Libertarianism And The Welfare State

Today I’d like to talk about an aspect of Libertarianism that is often widely misunderstood. Those of you that have been following my series on Libertarianism will know that, around a century ago, most of the societies of the West underwent the transformation from liberal democracies to social democracies, irrespective of the political hue of ephemeral governments. Two of the the most visible manifestations of this transformation were the enormous expansion of the tax base, and the rise of the Welfare State.

In this thread I’m going to look at how this occurred, how in the process it has corrupted society and degraded its citizens, and what alternatives Libertarianism offers to the Welfare State. Most of my comments below refer specifically to Australia, but are applicable to a greater or lesser extent to the United States, Great Britain and indeed all western nations.

Like so many other great evils, the Welfare State was conceived from the noblest of motives—or more accurately, it was conceived from a variety of motives, the noblest presumably among them. Recognising that empty stomachs are the forerunner of criminality and rebellion, governments of the West set out to end poverty—by state fiat. While tracing their historical precedents to the traditional English Poor Laws, modern welfare typically takes the form of transfer payments, funded either by the income tax system, or sometimes, as in the case of unemployment benefits and compulsory superannuation schemes, through defined employer contributions, which are inevitably passed on to consumers. In either case, they are a form of involuntary wealth redistribution, and thus antithetical to the principles of Libertarianism. They are distinct from all voluntary forms of health insurance, superannuation and unemployment insurance, all of which Libertarianism welcomes and indeed promotes.

Of course, voluntary or otherwise, wealth redistribution involves giving, ideally from the richest to the poorest. The state, ideally again, functions merely as an invisible intermediary, a facilitator in a process democratically agreed to, gaining for itself in the process neither wealth, nor power, nor influence. Somewhere in the world (I am told) there are twenty or thirty people left who still believe this is how it actually works.

The reality, of course, is the exact opposite. Government-mandated welfare has gone the same way as all previous attempts by the state to coerce its citizens into being “virtuous”. At some point, welfare ceased to be a temporary safety net, made available for those affected by unfortunate circumstances beyond their control, to alleviate the direct effects of poverty. Gradually, but inexorably, the Welfare State has become a society within a society, existing less to alleviate poverty than to expand its own remit, shielding the irresponsible from the consequences of their own decisions and in the process creating a captive constituency, now grown to a sizeable proportion of the entire population. Worse, in placing themselves as an intermediary between benefactor and beneficiary, giver and recipient, they eliminate all humanity and grace between them, fostering instead resentment on the part of the former, a sense of ungrateful and irresponsible entitlement and helpless mendicancy on that of the latter, and that peculiar inhuman and heedless selfishness that is the hallmark of the authoritarian state on the part of both. The modern Welfare State knows nothing of the charity and goodwill of giving, but everything about an authoritarian and insatiable taking.

Initially, the primary goal of the modern Welfare State was to provide an old age pension, to give independence to those too old to continue working. The “retirement age” was generally set at around 70, in an age when male life expectancy was in the low 60s, the elderly were typically cared for in the homes of their adult children and the concept of a “retirement lifestyle” would have been considered ludicrous. The age pension was thus a relatively minor component of the national budget. Several trends over the last century—the gradual increase in life expectancy, the lowering of the retirement age, an increase in most people’s expectation of a prolonged, work-free retirement “lifestyle” and—above all—the decrease in family size and decay of the family as society’s core social unit—have led to the exponential growth in the age pension as a pressure on national budgets. It is only in recent years that governments have woken up to this “demographic time-bomb” and have hurriedly and without proper forethought put in place counter-measures. Most of these—compulsory superannuation schemes, a gradual rise in the age of eligibility and means testing—are doomed to failure in the long term, as they rely on long-term bipartisan political support, in a time when the elderly form an increasing proportion of the electorate, particularly in marginal seats.

The second major group gathered into the arms of the Welfare State are the unemployed. “Man was not made for work,” as Pope John Paul II memorably put it, “work was made for Man.” In earlier times, when the majority of work in industrial society was unskilled or semi-skilled labour, people could move easily between industries and the availability of work was closely linked to the state of the economy. Unemployment benefits were designed to “tide people over” as a bridging income between jobs; in times of prolonged recession, so went the theory, Keynesian-style, government-sponsored enterprises would artificially expand the demand for labour to meet supply. In Australia, the Snowy Mountains hydro-electric scheme, constructed between 1949 and 1974, was seen as a showpiece of such government intervention creating a low-skilled labour market to accommodate the rise in post-war immigration to this country.

Safety net or hammock?

The limits of this kind of thinking quickly become apparent however, in a society which is becoming increasingly technologized and the labour market correspondingly high-skilled and specialised. From the mid-1970s onward, the combination of a minimum wage and the dole system has presided over a stratification of urban Australian society. In an era of relatively good economic times, there are areas in south-western Sydney where, not only does the underlying unemployment rate exceed 50%, (official government-issued unemployment figures being routinely fiddled by excluding anyone performing at least one hour of paid work per week) but an entrenched culture of entitlement, resentment and helplessness is passed from generation to generation; many families house together teenage school drop-outs, their parents and even grandparents, none of whom have done so much as an honest day’s work in their lives. The safety net for many unemployed has become a perpetual hammock. Social unrest in such conditions lies ever-present beneath the surface, as we saw in the 2005 Macquarie Fields riots—hardly an isolated incident, as a brief perusal of today’s Sydney dailies shows. With access to free education and health care, a social wage paid directly into their account, and a plethora of free services on offer, it takes a mighty stretch of the imagination indeed to regard the unemployed in these circumstances as disadvantaged; but such they are, by the principals of the very system of state social engineering that has failed them so spectacularly.

Assistance to the disabled is the third traditional function of the Welfare State, and in many ways is having the most pernicious and corrosive effect on society. It should go without saying that any society which lays claim to be civilised must find a way, not only to give basic needs care to those afflicted with physical or mental disabilities, but to create a place for them as a functioning member of society. This means wherever possible finding useful work for them, which is both within their capacities and serves to give them dignity, fulfillment and independence. The proportion of people truly incapable of doing any useful and fulfilling work at all is very low indeed, as I can personally attest through my own experience working with privately-run sheltered workshops. Once again though, in these rare and unfortunate cases, it goes without saying that a society as wealthy as ours is easily capable of absorbing the cost of their care.

The fact is, however, among Australia’s working-age population of approximately 14 million, over 700,000, or 5%, are currently in receipt of the Disability Support Pension—a proportion that has doubled since the mid 1970s. The notion that there are nearly three-quarters of a million permanently disabled adults in Australia is risible; yet this article by a Sydney psychiatry registrar working at the coalface of the Welfare system goes some way to explain how adept many people—whose own life choices have rendered them the authors of their own unhappiness—have become at “working the system”, to portray themselves as medically unfit for work to a government which, with a nod and a wink, is all too keen to yet further take people off the official unemployment statistics and throw them onto both the public payroll and the scrapheap of uselessness.

These three areas—the age pension, unemployment benefits and disability pension—form the core areas of support of the traditional Welfare State. Like all government bureaucracies however, it has always sought to expand its brief, and hence its power. It becomes inevitable, when the central doctrine of the Welfare State is that the state assumes primary responsibility for the welfare of its citizens, with little or no proviso of reciprocity, individual responsibility, or indeed any form of social contract. The explosion in the number of unplanned teenage pregnancies cannot be unrelated to the expectation that the involuntary generosity of the taxpayer will provide the rôle of household breadwinner throughout the newborn’s childhood. Underage runaways, alcoholics and other substance abusers, society’s misfits and malcontents of all shapes, sizes and descriptions can relax, secure in the knowledge that the state will validate and enable their toxic life choices, irrespective either of their advisability, or of their cost to the rest of society.

In this discussion, which is meant to be generic to all western nations, I am avoiding the issue of the disastrous social engineering of Australia’s Aboriginal communities, particularly in Queensland and the Northern Territory. Suffice it to say here that the artificial domestication of an historically nomadic people into ill-conceived fixed outback settlements and the advent of “sit-down money” are perhaps the saddest and most poignant illustration of the failure of the Welfare State to achieve any socially desirable outcomes, and probably the most shameful one to our nation in the eyes of the rest of the world.

And the cost is growing. In Australia in 1970, there were the equivalent of thirty working-age adults supporting each full-time welfare recipient. Today, the number is closer to four; that figure is projected to decrease even further by 2050, when each welfare recipient may be supported by just two working adults, unless drastic changes are made. Clearly, the Welfare State as conceived by social democracies has failed. What alternatives does Libertarianism offer?

As you may have read in my thread What is Libertarianism?, I offered the following definition:

Libertarianism can be provisionally defined as the theory that human beings, individually and collectively, are best able to progress, develop and lead fulfilling and happy lives when afforded the maximum decision-making control over their own lives, and the power of the state to interfere in the lives of individuals is correspondingly minimized.

This has profound implications for the purpose and operation of welfare in a liberal democracy. Yet it does not tell the whole story. It is a common but misguided criticism (generally by those advocating populism and ever-increasing government control) that Libertarianism involves an attitude of every man for himself, and the devil take the hindmost. Libertarians care at least as much for their fellow man as anyone else; they simply believe that governments do not, can not, never have and never will take responsibility for the welfare of its citizens in any way that is both meaningful and produces socially desirable outcomes. No-one wants to see poverty in society, yet all mentally competent people must be free to make their own life choices, and take full responsibility for the consequences. A few basic principles impend:

No-one goes hungry.

First and foremost, in any society as wealthy as ours, there is no reason for anyone, regardless of how undeserving, dissolute or irresponsible, not to be afforded the essentials for life of food, clothing and shelter. Most people today would add a basic education and health care to this list, as the starting position from which people can begin to improve their lives. That some will refuse these things when offered is inevitable. That they should have no access to them is unthinkable.

Of course, these are the essentials of life, which a civilised society must make available to all citizens. Luxuries (as anyone in poorer societies would regard them) are to be earned, not guaranteed by right. Basic foods, possibly second-hand clothes and communal shelter meet the requirements of these essentials. Gourmet fare, the latest fashions in clothes, and publicly provided houses complete with plasma TVs, x-boxes and other assorted gizmos are goals to be attained, not rights to be demanded.

I am the master of my fate, I am the captain of my soul.

Sentient adults in society cannot begin to take charge of their own lives and create their own happiness unless they are free to make life choices on their own account, and on behalf of their children. Some will inevitably make bad choices, but there is absolutely no reason why the rest of society should be made to pay for them. No matter how hard they fall, they will always be afforded food, clothing and shelter. For those unfortunate few truly incapable of making their own decisions due to mental incompetence, there are already laws in place to have them legally certified, and power of attorney granted to an appropriate proxy.

Localise welfare wherever possible

Welfare dispensation in the hands of a vast, centralised state bureaucracy inevitably succumbs to the problems I have outlined above. Wherever possible, payments and other services to welfare recipients should be delegated to privately-run, local bodies which will operate under statute. Ideally, this would be on the scale of a village, small town or neighbourhood, though of course it is not always possible in rural or more remote areas. Church groups, service clubs and other private welfare organisations, and (where no alternative is available) local councils are the main candidates to perform this function.

This will have a number of benefits. Firstly, cases of genuine need can be readily identified, and assistance tailored to suit individual needs. Secondly, local bodies by their nature can operate autonomously and hence more speedily than any organisation run by bureaucrats several times removed from those whom they are supposed to be assisting.

But most importantly, the devolution of welfare into local operatives means that the human spirit of giving is restored. When it becomes local, and hence personal, when benefactor and beneficiary know each others’ names, must look each other in the eye and know the circumstances and feelings of the other, humanity is returned to the situation; resentfulness of the former, and ingratitude of the latter, become far less likely when each actually knows the other.

As to financing, the best-known Libertarian authors tend to minimize the significance of welfare, emphasising instead the wider availability of work in a Libertarian society, under a correspondingly minimalist government. Clearly, they have not had to personally run a government themselves, and have had no fear of having their throats cut by a starving rabble baying at the palace gates. Unless one is prepared to countenance the possibility of, at the very least, localised pockets of Dickensian penury, some form of taxpayer funding is required to support the operation of welfare at a local level.

I have read of several models detailing how this might be achieved, but I’m running overtime as it is, so I will relate just one, which forms the welfare policy of Australia’s peak Libertarian party, named (I’m not making this up) the Liberal Democratic Party^*. Their policy, which you can read here, advocates a negative income tax below a fixed threshold. The rates would vary between countries and over time of course, but the LDP have a “30/30” policy; that is, a negative flat tax, or subsidy, of 30% for the difference between a poorer citizen’s income and a $30,000 threshold, and a flat tax of 30% on all income in excess of this figure (the threshold being raised for each child in care). This policy, combined with the abolition of the minimum wage, guarantees a living income to all citizens, while increasing the availability of paid work. While it is unrelated to any reciprocal commitment on the part of the recipient (eliminating, for example, the silly and costly charade of harassing the unemployed to prove they have satisfied some sort of “work test”), it is ample enough to ensure the basics of life, while low enough to encourage those capable of it to seek to better their position, and further contribute to society. Those in extreme or exceptional need can be better helped in such a circumstance by local, private organisations, who can tailor assistance to suit individual needs.

Any welfare regime commanded by the state, whether well-intentioned or not, is inherently unsustainable. Not only does it ignore the myriad of human interactions surrounding the circumstances of those less well-off, but it inevitably succumbs to the temptation towards empire-building and the imposition of extreme ideologies, to the detriment of society generally. Less jack-booted benevolence, and more simple humanity, are Libertarianism’s prescriptions to end the abomination that has become the modern Welfare State.

^*Of which I’m not a member, or have any association.