John Singleton with Bob Howard, Rip Van Australia (Stanmore: Cassell Australia, 1977), pp. 267-73, under the heading “Welfare”.
Of all the ideas that have gained popular acceptance in this day and age, all over the world, there is none more deeply entrenched or endowed with greater respectability than that of government welfare. Any person who is so bold as to criticise the fundamental idea of it is immediately branded as a cruel, heartless, inhumane person with no social conscience whatsoever. And, as the welfare States of the world follow one another like lemmings into the sea of economic stagnation and decline, social disintegration and political totalitarianism, this fundamental premise remains, secure and safe, deep at the bottom of the well-intentioned, generous and deadly hearts of unthinking people.
What do you think would happen if you ran a company on the same basis as governments run their welfare States? What would happen if you ran any company on the basis of “from each according to their ability, to each according to their need?”1 What would happen if you paid everyone the same wage, from cleaner to managing director? What would happen if you paid wages regardless of whether or not your employees worked, or regardless of how much they produced, or the quality of their production?
It doesn’t take much imagination to see that very soon your humanitarian experiment would have some most anti-humanitarian results: your staff would lose their self-respect, and the best whingers and whiners would get the most: the proud independent workers would get the least — and such people are usually the best workers; your factory production would drop alarmingly, as would its quality, for few would care about it — there would be no incentive to care and eventually all your staff would lose their jobs as the company went bankrupt.
A country is just like a large, complex company, and the Welfare State, in the name of humanitarianism, will have the same inevitable anti-humanitarian results.
The Federal Government budgeted to spend, for the year 1976-77, $6,187,100,000 on Social Security and Welfare, $2,908,700,000 on Health, $567,900,000 on Housing, $223,600,000 on Labour and Employment Services and $2,204,000,000 on Education. Most of this can be classed as welfare — the main possible exception being some of education spending. This adds up to a massive total of $12,091,300,000 — or just under 50 per cent of the total estimated Federal Government expenditure. It is 74 per cent of the total “General Public Service” expenditure of the government. If education is not included, it amounts to just over 40 per cent of the total Federal Government estimated outlays for 1976-77. For the year 1975-76, government cash benefits to persons accounted for $6,333,000,000, or 10 per cent of all household income.
These figures quoted for Federal Government expenditures do not, of course, include State and local Government expenses, which would add about one-third as much again to the total figures.
What do these figures represent? For a start, where does the money come from? Only from taxation and inflation (the creation of money by the government). Three things can be said about this: (1) it provides a negative incentive for all people to work and produce; (2) it creates welfare recipients because of its economic consequences — it contributes to unemployment, poverty, economic stagnation and high prices for example; and (3) the burden of taxation and inflation falls most heavily on precisely those people that the welfare is supposed to help — on the underprivileged, the old, the sick, the handicapped and the unemployed — because taxation reduces wages and raises prices (especially indirect taxes, which double the price of most commodities) and inflation erodes savings and the purchasing power of everyone’s money. We see once again an example of our governments making work for themselves by seeking to solve with one hand the problems they create with the other.
This tendency becomes even more obvious when you consider the number of welfare recipients that are created by compulsory retirement rules, prohibitions on young people working, wage legislation and the generally destructive effects of most, if not all, economic regulations. As we have seen elsewhere, unemployment could not realistically be a problem on a free market, inflation would be eliminated, and taxation, would at least and at last be dramatically reduced. The tendency of the market competition to produce the best quality products at the lower possible prices would further benefit those who currently depend on government handouts.
Even way back in the Industrial Revolution government activity was one of the greatest impediments to improving the lot of poor people. Everyone has heard of the pre-revolution’s terrible housing conditions, the small, airless houses. But few know that the government of the day had imposed a tax on windows, bricks and tiles, and tariffs on imported building materials.2
The same lessons are to be found in Governor Bradford’s famous history of the Pilgrim Father’s communistic experiment in the Plymouth Bay Colony. The colony was very poor, and the people took to stealing from each other. “So it well appeard,” Governor Bradford wrote, “that famine must still insue the next year also, if not some way prevented.”
[Thus the colonists] begane to thinke how they might raise as much corne as they could, and obtaine a beter crope than they had done, that they might not still languish in miserie. At length [in 1623] after much debate of things, the Gov. (with the advice of the chiefest amongest them) gave way that they should set corne every man for his owne perticuler, and in that regard trust to them selves … and so assigned to every family a parcell of land … This had very good success: for it made all hands very industrious, so as much more corne was planted than other waise would have bene by any means the Gov. or any other could use, and saved him a great deal of trouble, and gave farr better contente.
The women now wente willingly to the field, and tooke their little-ons with them to set corne which before would aledg weakness and inabilitie, whom to have compelled would have bene thought great tiranie and oppression.
The experience that was had in this commone cause and condition, tried sundrie years, and that amongst godly and sober men, may well evince the vanitie of that conceite of Platos and other ancients, applauded by some later times; — that the taking away of propertie, and bringing in communitie into a commone wealth, would make them happy and florishing, as if they were wiser than God. For this communitie (so farr as it was) was found to breed much confusion and discontent, and retard much imployment that would have been to their benefite and comforte.
For the young men that were most able and fitte for labour and service did repine that they should spend their time and streingth to worke for other mens wives and children without any recompense. The strong, or man of parts, had no more devission of victails and cloaths, than he that was weake and not able to doe quarter the other could, this was thought injustice …
And for men’s wives to be commanded to doe servise for other men, as dressing their meate, washing their clothes, etc., they deemed it a kind of slaverie, neither could many husbands will brooke it …
By the time harvest was come, and instead of famine, now God gave them plentie, and the face of things was changed, to the rejoysing of the harts of many for which they blessed God. And the effect of their particular [private] planting was well seene, for all had, one way and other, pretty well to bring the year aboute, and some of the abler sorte and more industrious had to spare, and sell to others, so as any generall wante or famine hath not been amongst them to this day.3
A more eloquent demonstration of the function of incentive in improving the general welfare would be hard to find.
In the U.S.A. the number of individuals receiving Aid to Families with Dependent Children (A.F.D.C.) rose 33 per cent, or from 8.3 million to 11 million individuals, in the period from 1970 to 1973. In New York City, the number of welfare recipients grew from 328,000 in 1960 to 1,275,000 in 1972. No wonder New York is bankrupt today. More than 10 per cent of the residents of the twenty largest cities in the U.S.A. were on welfare by 1973. Over the whole country, welfare recipients grew from 6,052,000 in 1950 to 15,069,000 in 1972.4
The efficiency of government in administering welfare can be seen in figures quoted elsewhere, for example, Aborigines in Australia (see Aborigines). A U.S. example in San Diego’s programme for Dependent Children of the Court, which in 1973 spent $944,532 on administration and $372,384 for the actual support of and care for the children.5 The welfare State destroyed the old Roman Empire and is now destroying Sri Lanka, Great Britain, Uruguay, New York and even its mecca, Sweden.
Sweden suffers from serious housing shortages, among the highest rents in Europe, overcrowded and overstaffed hospitals, shortages of doctors and nurses, scarcity of homes for the retired and disabled, plummeting educational standards, rising crime rates, the worst alcoholism and drug abuse problems in Europe, serious industrial problems resulting in frequent strikes, rising unemployment, inflation, and absolutely massive tax burdens.6
It is our argument that these consequences are caused by government interference in the economy and such grandiose schemes as the Welfare State. The idea of welfare as we have said, is immensely respectable. But it has to be pointed out nevertheless that we are suffering under a sad delusion of we believe it actually helps people the way it is handled by States.
The Australian Henderson Committee Report on Poverty admitted that even with all our welfare spending, the major source of welfare assistance today for people in need is the networks of family, friends and neighbours. It also emphasised the role of private welfare agencies, which it saw as offering more choice, flexibility, and individual consideration in their services. The low efficiency of Aboriginal welfare expenditure led the Henderson Committee to comment: “As happens so often in other spheres of activity, Australia is following the trend in the U.S.A. and poverty is becoming professionalised and bureaucratised. In the process it is becoming a lucrative business — for professional welfare workers, administrators, researchers and consultants.”
In their efforts to help people avail themselves of their “right” to welfare, some government agencies even employ people to go into the communities to tell people what they are eligible for, and to encourage them to apply for it. In this regard, our situation in Australia is getting to be a bit like the U.S.A., where no one seems to know precisely how many programmes there are. In 1971, the U.S.A. spent $171 billion on welfare.
In 1969, a Democratic Congresswoman, Mrs Edith Green, asked the Library of Congress to compile the total amount of funds a family could receive from the Federal Government if the family took advantage of all the assistance that was available. They found that a hypothetical family of mother and four children — one in elementary school, one in high school and one in college — was eligible for a total of $11,503 a year in benefits and services. In 1969, a hypothetical family of eight children could collect $21,093 a year.7 In 1969! Without doing one minute’s work. Who’d bother?
Consideration of these sort of benefits brings us to the most psychologically destructive element of welfare — its effect on incentive. The taxation and inflation necessary to pay for it decrease the incentives to work, produce and be independent. Simultaneously the benefits available from welfare increase the incentives to do nothing. It is no accident that the numbers of people dependent on welfare continue to grow every year.
Welfare recipients are always used as political footballs as rival parties attempt to buy their votes, but taxation and inflation always kill any gains they make, and more.
We must seriously ask ourselves whether, for all our good intentions, we might be actually doing more harm than good with government welfare. The Chinese have an old proverb which says, “Give a man a fish, and he’ll eat well today. Teach him how to fish and he’ll eat well for the rest of his life.”
Welfare (while we have it at all) should aim at helping people to help themselves. To do this welfare cannot be guaranteed because if it is, people will depend upon it and plan for it. Furthermore, it should only provide temporary assistance and that at a level of bare necessity. Any more than that attracts people to stay on welfare. And most importantly, welfare must never be allowed in any way to act as a brake on production, for we must first produce that which is distributed.
What alternatives are there to current welfare systems? The first thing to be said is that while we must accept the fact that there will always be some people who will need welfare, we can affect how many there will be. Our welfare system can be either structured so as to tend to maximise the number (as it is now) or so as to minimise the numbers (as it should be). To minimise the number we must remove the guarantees of assistance.
No one has a right to welfare, because all welfare is paid for by other people. To admit such a right would, to that extent, turn those who pay it into slaves.
The next thing to do is to remove all those laws which prohibit people currently on welfare from becoming independent: for example, wage level laws and prohibitions on young and old people working. Many old, young and handicapped people could get work if employers were allowed to pay them in accordance with their (probable) low productivity. Even if the wage was not enough to ensure complete independence, it would take some load off the welfare agencies, and also do a lot for the wage earners’ self-respect.
If we could greatly reduce taxation and eliminate inflation by reducing government spending, and de-regulate the economy, the resulting economic boom would raise the standard of living of all, thus greatly increasing the money available for welfare and at the same time decreasing the need for it. Reduced prices, for example, that resulted from it would be a relief for pensioners and the poor.
Insurance schemes could cater for the possibilities of children being born permanently handicapped (local G.P.s could act as agents selling this insurance) or for accidents, sickness, and other medical problems.
The sense of community that would develop in a free society would further enhance what the Henderson Report called the network of family, friends and neighbours. Finally, private agencies, such as the Smith Family, St Vincent de Paul, the Autistic Childrens Association, Royal Blind Society and the ideal example, the Wayside Chapel, could continue to do their very fine work.
Private welfare can cater for our needs if it is given an opportunity. Government welfare, well-intentioned though it may be, will kill our economy, continue to be abused by politicians, and foster social breakdown by killing independence, self-respect, and basic human decency.
All the incentives in a government welfare State are the wrong way round, thus resulting in a progressively smaller economic cake to be shared among an increasing number of demanding mouths. If this, as it inevitably will, bankrupts our society, how will that help the old, the sick, the poor and under-privileged? It won’t.
And that in the end is the stupidity and absolute futility of government welfare.
- For a chilling portrayal of the results of this see Ayn Rand, Atlas Shrugged, Random House, New York, N.Y., 1957, pp. 661-672. ↩
- See T.S. Ashton, “Treatment of Capitalism by Historians” in F.A. Hayek, Capitalism and the Historians. University of Chicago Press, Chicago, Ill., 1954, p. 50. ↩
- Quoted by Henry Hazlitt in Cliches of Socialism, Foundation for Economic Education, New York, N.Y., 1970, PP. 173-175. For the full story of the Plymouth Settlement see William Bradford, Of Plymouth Plantation 1620-1647, The Modern Library, New York, N.Y., 1952. The above quote appears on pp. 120-132 in this book. ↩
- Henry Hazlitt, The Conquest of Poverty, Arlington House, New Rochelle, N.Y., 1973. Figures quoted in Susan Love Brown, et al. The Incredible Bread Machine, World Research Inc., Campus Studies Institute Division, San Diego, Calif., 1974, p. 108. ↩
- C. Tudor (ed.), The Prolific Government, World Research Inc., San Diego, Calif., 1973, pp. 126-127. Quoted in Susan Love Brown, et al, Op cit, p. 109. ↩
- Figures quoted in Susan Love Brown, et al, Op cit, pp. 106-107. ↩
- Human Events, 13 December, 1969. Quoted in Henry Hazlitt, The Conquest of Poverty, Arlington House, New Rochelle, N.Y., 1973, p. 98. ↩
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