The Poor Worse Off? The Character of the Majority

Because libertarians want to abolish tax-funded welfare handouts, many people automatically assume that the poorer classes would be worse off in a libertarian society. Most people, especially modern liberal statists, believe that the welfare state is needed to care for the poor. When I write “welfare”, I’m referring generally to any policy of wealth distribution to the poor, including entitlement programs like Medicaid. Here and elsewhere, I will argue that poor people would not be worse off in a libertarian society than in a welfare state run by a democratic majority. I will argue this with many different arguments about many different aspects of libertarianism. However, this one post below will only tackle some of the question. Understandably, it may not completely convince you, but this is because it is only part of the whole argument. The below argument admittedly has a hole in it, as I will discuss at the end. But, the hole is not devastating and will be filled in by other arguments in other posts. Note that these arguments are of the consequentialist type. The other way of arguing these issues is to simply say that the welfare state is immoral because it involves stealing (taxation), regardless of the outcome for the poor. However, most people would also want a consequentialist argument that focuses on outcome, and that is what this and many other posts will focus on.

Now, let’s consider the current condition that most people adhere to:  a welfare state run by a representative democratic majority. I will not at this time consider other government systems, just the one aforementioned and a libertarian society. So, a democratic statist system works as follows:  the mass of people vote in such a way that generally reflects their preferences, and the policies that the government carries out generally reflect the preferences of the majority of people. This is, after all, the basic idea of a democracy, that the governmental actions reflect the will of the people.

Of course, there are some, or plenty, of individual governmental actions that don’t match up with the preference of the populace, but these actions are usually not in the spotlight of day-to-day public discussion. The government may get away with unpopular actions when such actions are not heavily publicized, but usually heavily publicized actions reflect the will of the voting populace. Welfare programs are not secret actions of the government, they are well known and heavily publicized. For this reason, it is safe to assume that the existence of welfare programs is a reflection of the will of the majority of people.

In the democratic welfare state, most people feel concerned about the poor, so they vote for the welfare state. They vote for representatives that favor welfare programs. So, in a democratic state, the only way that state welfare programs can exist is if most people want them to exist and if most people accept and favor the idea of giving up some of their own money (through taxes) to support the poor.

Let’s consider a given society of a group of people. We might wonder how poor people would fare under a democratic big state or a libertarian system. If the people like big government and so the society adopts the democratic big state option, then the existence of state welfare programs depends on the will of the majority. Under this system, if the majority of people don’t care about the poor, then they won’t vote for welfare programs. If the majority of people does care about the poor and also are willing to release some of their money to the poor, then they would vote for welfare programs, and the welfare state would result. If the people instead adopted a libertarian society, then individual free people and any voluntary associations (churches, charities, organizations, etc.) would be in charge of the decisions of giving to the poor. Under this system, if the majority of people don’t care about the poor, then most people wouldn’t give money to support the poor. If the majority of people do care about the poor and also are willing to release some of their money to the poor, then most people would voluntarily give money to support the poor.

As you can see, under either governmental system, democratic big government or libertarian, the existence of plentiful assistance to the poor is dependent on the will and character of the populace, not the governmental system. Under either governmental system, the amount of assistance to the poor is generally reflected by the will and character of the populace. To put this more directly in our nation’s circumstances, we currently have a welfare state. This is because most people voted for the welfare programs. This is evidence that most people care about the poor and are willing to release some of their own money to the poor (through taxes). Furthermore, if these same U.S. citizens were instead in a free libertarian society, then they would also be willing to voluntarily give some of their money to the poor, because we already know that that is their will and character. In this way, it is clear that the very existence of a welfare state in a democracy is evidence that that same society would still take care of its poor even if the government did not force them to. In summation, if a society adopts a democratic big state system and this results in a welfare state, then that same society has enough people to take care of the poor voluntarily in a libertarian society. This is part of the reason why the poor are not worse off in a libertarian society as compared to a democratic big state society. Because the U.S. has a welfare state, this is evidence that it doesn’t need a welfare state.

On the other hand, what if we encountered a libertarian society that didn’t care about the poor, where the vast majority didn’t voluntarily give any money to the poor. You might conclude that the reason why the poor are not taken care of is that they live in a libertarian society, and you might conclude that a better alternative would be a democratic big state. This would be incorrect, for, if these same people had a democratic big state system, they also would not vote for welfare programs because most people in this society don’t care about the poor and don’t favor the idea of releasing some of their money to them. So, the welfare state would not exist in this hypothetical society, even if it was democratic statist. No matter which government system you choose, ample supply of assistance to the poor is mainly a matter of the will and character of the populace, not the government system.

Now, we turn to the manageable hole in the above argument. This hole does not negate the whole argument of libertarianism being good for the poor, nor does it even negate the one above argument completely, but it does present an issue for this one argument above. The above argument partly neglects the effects of differences in the distributions of income, character, and tax rate. It is possible that poor people can receive less monetary assistance in a libertarian society than in a welfare state, so it is possible that such poor people would indeed be worse off in a libertarian society, if we are only narrowly considering the above argument about the character of the majority. An example of this is our own U.S., where most tax revenue comes from the few rich people. Even if all people were taxed at the same rate (no progressive tax rate), it would still be the case that the few very rich people would pay much more tax money in absolute dollars than other people of lesser income. This is basic math. A 10% tax on an income of $1,000,000 would be a large $100,000, while a 10% tax on an income of $50,000 would only be $5,000. In the U.S., the richest few (roughly the top 4%) actually pay about half of all the tax dollars. So, when we consider government spending on welfare, about half of that spending is funded by the few rich people.

Under this scenario, what if the rich people were heartless and didn’t care about the poor and didn’t want to give any money at all to the poor, but the rest of the populace was generally kind toward the poor. In a democratic welfare state, where a majority of people (who aren’t rich) vote to create a welfare state, a lot of money would be available to the poor because you can get a lot of tax money from the few resisting rich people. But, in a libertarian society, even though the majority of people would still care about the poor and want to assist them, there might not be as much money to do so because the rich people might not give up their money voluntarily. In the U.S., if a libertarian society were adopted, and the state did NOT tax the people for welfare purposes, and if most people took the would-be tax money and instead spent it voluntarily on the poor, then the total amount of money being spent on the poor would still only be about half that as in the welfare state because the rich would supposedly keep their share entirely. Because they pay half the taxes in a welfare state, the libertarian society would only spend half as much on the poor if the rich decided not to help at all. So, one might claim that if we were in a libertarian society instead of a welfare state, then the poor would be worse off because they would only receive half the monetary assistance, even if all the non-rich average people still assisted them with kind hears.  But, this frightening claim would still be untrue.

Before continuing, note that this “hole” did not completely negate the above argument about the character of the majority. It is still true that the majority of people in a democratic welfare state would still strive to help the poor if they were instead in a free society, because that very welfare state is evidence of the caring character of the majority. However, what the “hole” does is present the issue of exactly how much monetary funds may be available to assist the poor.

Despite the above problematic consideration of tax revenue distribution, we still have a good overall consequentialist argument that libertarianism is sufficiently good (and maybe even better than a statist society) for the poor once we consider other factors and truths. The “hole” may have revealed a drop in the amount of available funds in one way, but this drop can be made up for in many other ways. These other factors will be discussed in greater detail in many other posts. However, here is a preview of just some of these factors:

  1. The frightening scenario above that the few rich people in the U.S. (who pay half the tax dollars) wouldn’t voluntarily give any money at all to the poor is ridiculous. Many very rich people give lots of money for charitable and philanthropic causes. Even in the 19th century industrial era before the welfare state existed, it was actually fashionable for the rich to do large philanthropic works, including starting schools, nonprofit hospitals in every city, and libraries. So, this itself can largely fill the “hole” and alleviate our worries.
  2. People usually give to the poor if they believe that there is a real need to give. A lot of people who don’t give now don’t because they consider that the government already provides that role. However, once the welfare state ends in a libertarian society, there would be an awareness of real need to give to the poor, so most people would then be more willing to give to the poor.
  3. In a libertarian society with a very low (or zero?) tax rate on everyone, then everyone, including the middle class, would have much more money in the first place, making it a lot easier to give money to the few who are needy. For example, if we stopped going to war everywhere around the world for stupid reasons, that would save a lot of tax revenue that could be given back to people, part of which could be used for charity.
  4. A government that interferes with the market usually makes products and services more expensive. A free market usually lowers these costs, making it easier for poor people to live so that they wouldn’t need as much assistance in the first place.
  5. A free market is the best vehicle to allow poor people to move up the economic ladder. So, a libertarian society would have less poor people to begin with than we have now (we don’t have a free market now).
  6. A libertarian society wouldn’t have minimum wage laws. Such laws actually hurt the poor because it increases unemployment and raises costs of products and services. Again, a libertarian society would have less people in extreme poverty to begin with.
  7. A libertarian society wouldn’t have high inflation, which hurts the poor.
  8. A libertarian society wouldn’t have the drug war, which hurts the poor and devastates whole communities and families, and is expensive.
  9. A LOT of welfare spending does not actually go to the poor, but to the government employees who run the bureaucracy. The cost of helping the poor would be much lower in a libertarian society.
  10. A significant fraction of the current welfare money that does get to the poor people should not go to the poor in the first place. And, I’m not even talking about fraud here. Some money does not go to the truly poor, and some assistance is unjustified. (More on that elsewhere.)
  11. The private sector is more efficient at helping the poor (higher effectiveness even if voluntary funding is low if rich people didn’t help as much as we want them to).
  12. The private sector philanthropy focuses on actual results and finds innovative ways to help poor people in the long term, not just short term. The private sector can experiment in many ways, instead of the one-size-fits-all approach of the government.
  13. Voluntary giving is more personalized and accountability greatly increases because the giver has incentive to make sure the poor person is actually taking proper long term steps. Personal interaction also helps the poor in other ways (say, emotionally) besides just material assistance.
  14. A fully privatized school system would be much more innovative and effective at preparing students for the workforce than public schools, reducing the poverty rate to begin with.

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