A particularly mystifying paradox of ideas has overwhelmed the sphere of political debate over the past several decades. The government is now believed to be the sole proprietor of welfare for the masses of impoverished individuals, families, and communities. Anyone who holds the intellectual fortitude to question the necessity of a welfare state is often chastised for being heartless, selfish, and apathetic towards the economically and socially oppressed. Indeed, only a corporate hack would oppose such humanist programs. As models of the state’s success for providing such welfare we are shown story, after story, after story of poor, single mothers being given a place to live, food stamps to provide sustenance for their children, and healthcare to keep them all well. What is not shown is these poor and downtrodden single mothers, families, and communities are poor precisely because of politics and interventions at the federal, state, and local levels. In the spirit of Harry Browne, the government has broken their legs and given them crutches, and has the audacity to ask what these people would do without the government.
Before we take a more in-depth look at what creates perpetual poverty here in the United States, as well as analyzing a seemingly permanent state of poverty in other countries, I would like to first define poverty. There is an intellectual bankruptcy that comes with any attempt to define poverty and wealth by income, percentage of GDP, or any other statistic or set threshold. Wealth and poverty are both far to relative and subjective to be given a number. Here in America, if you are at the so-called poverty line you still have a higher income than the vast majority of the world. There are individuals who will make millions of dollars and still feel they are not wealthy until they make tens of millions of dollars. Conversely, there are individuals in mountains who have almost no material goods except the bare minimum who consider themselves very wealthy, at least in mind and spirit. Some measure wealth by happiness, others by income, and others by their closeness to god, and that is just to name a few subjective measurements of wealth.
Poverty, as I have observed, is a state of oppression and forced exclusion. It is when (1) an individual or particular group is partially or completely stripped of their property rights, (2) are essentially removed or “sheltered” from markets, and (3) are treated as if they are children or an inferior race. In countries with pervasive poverty, as well as certain communities here in the United States, all three of these themes are overwhelmingly common. Bad luck and bad ideas can be blamed for temporary poverty, or temporary economic downturns, but we are dealing with perpetual and pervasive poverty. This sort of poverty can only occur through oppression and exclusion.
Indian reservations are the quintessential example of oppression and exclusion creating poverty, and it is right here in the United States. I have personally spent time on Indian reservations in Montana, as well as having a close friend who grew up on an Indian reservation in South Dakota, and nowhere is it more clear how important property rights are in a community. The reason poverty is so pervasive is because those living on the reservations cannot, by federal law, own land on the reservation they live in. This means Native Americans cannot manage the lands resources, or even use their land as collateral for loans. The titles are held by the federal government, not the tribes, much less the individuals. Not only is the land legally not their own, they are forcibly excluded from markets by government agencies like the Bureau of Indian Affairs which imposes huge economic and regulatory burdens on using natural resources to create energy. The government has assumed the position, without consent, of paternal guardians over the Indian Nations, thus rendering the Natives as wards of the state. The result has been an undeniably perpetual state of poverty.
In impoverished urban communities throughout the United States we see comparable government actions to those on Indian reservations. The poor are also excluded from markets. They are not allowed to sell drugs, or even start their own business at home without first spending money and time they don’t have to get the proper permits and meet all regulations, and meet all building and health codes, and they are placed in public housing which is not their own, so they cannot sell or use their home as collateral for a loan as well. They don’t have their own land, and are not allowed to use their own resources to produce goods or services to sell from their publicly funded homes due to zoning laws. They essentially have nothing to call their own, and any attempts to make something of themselves is met with hostility from federal, state, and local law enforcement.
Even the lack of healthcare coverage for many poor Americans is a result of government exclusion. It is a myth that, if the markets are left to their own devices, the poor will be exploited by insurance companies. Corporate insurance agencies are products of government intervention, and never existed with any sort of dominance resembling what we see today prior to government intervention in healthcare. Mutual credit and savings associations, also known as friendly societies, were once the dominant providers of unemployment benefits, emergency health insurance, maternity leave, disability insurance, funeral costs, and even retirement in the United States, the UK, and Western Europe. These were non-profit, cooperative, and voluntary associations of people – unions if you will – who put their money and heads together to provide for one another. Such associations greatly empowered the poor. In fact, they were so empowering that business insurance companies could not compete with friendly societies, thus leaving them small and highly irrelevant.
The collapse of friendly societies in the United States, the UK, and Western Europe was not because of inefficiency, market failures, or an inability to provide adequate coverage. They collapsed because governments either mounted a full-fledged legislative attack on friendly societies (the UK) or they gently phased them out and replaced them with business insurance agencies through legislation that removed competition from the markets (the US). With programs like Medicaid, Medicare, Social Security, and now the ACA, the poor have been thrust out of the self-empowered mutual associations that gave them leverage and power in the matter of how they live their own lives and into the corporate dominated, for-profit world of large insurance agencies. Make no mistake, corporations and big pharmaceutical companies amass grotesque amounts of revenue from welfare programs alone. These corporations were once nonexistent because they could not compete with the efficiency of direct democracy within friendly societies. The state took away this power and built a corporate dominated healthcare market in its place. Now the poor answer to government bureaucrats instead of answering to themselves. It was the self-empowerment of the poor and oppressed communities prior to government breaking them down that led the oppressed African Americans to hold equal or greater employment rates than whites from 1900 to the early 1960’s.
For proponents of the welfare state, the argument for its necessity stands as it being the sole hedge against corporations. As partially explained in the paragraph above, the government is responsible for big-business and corporate takeovers, especially in healthcare and insurance. Intellectual Property laws (monopolies on ideas), subsidies, special tax breaks, state privileged rent-seeking, and the regulations which remove competition from markets, all produce an environment conducive for the formation of big-business. It becomes even more absurd to hold such a belief that welfare programs protect the poor from corporations when we realize the United States federal government was founded and framed with corporate interests in mind.
The ratification of the United States Constitution was really the first act of mercantilism, i.e. corporatism, on a large scale. It is odd that people think a group of wealthy elites, who established a central government over a heavily decentralized Articles of Confederation, had small-government in their interests. Despite the romantic fables we have been told, the Founders consisted of four-fifths public creditors, one-third land speculators, and one-fifth representing the interests of established businesses in manufacturing, shipping, and merchandising. Albert J. Nock was correct when he made the assertion, Vilescit origine tali (The dice were loaded from the beginning).
Even when we extend our research on poverty to other countries we see almost the exact same themes. Western governments often perpetuate poverty and stagnate any semblance of an economy in impoverished countries, like those in Africa, with trade barriers, protectionist tariffs, subsidies to Western businesses, fair trade initiatives and laws, foreign aid, charity, and sanctions. The governments in these African countries rarely respect property rights as well, which is why foreign aid hardly ever gets to the poor anyways. These policies, like the laws for Indian Reservations and poor urban communities, exclude poor countries from the global market. Financial Aid only worsens the problem by diverting their attention away from production entirely and directs it to focus entirely on receiving aid instead. In countries like Somalia, where the EU, US, and UN offer aid to groups that can prove they are a functioning government, violent outbreaks erupt because warlords try to assert their power so they can receive massive amounts of money.
Muhammad Yunus showed the world with his Nobel Peace Prize winning effort that charity and exclusion from markets is precisely what perpetuates poverty in the world. It was his micro-credit banks that gave small loans to people in impoverished communities which led to economic development. It was not foreign aid that led to this, nor was it welfare programs, or regulations, or the exclusion from markets at all. It was humdrum business, and the inclusion of markets in poor communities. With governments (foreign and domestic) oppressing the ability for impoverished individuals, communities, and countries to grow the economic pie, there cannot be any reasonable expectation of them rising out of poverty. As Yunus writes in his book, Banker to the Poor:
When we want to help the poor, we usually offer them charity. Most often we use charity to avoid recognizing the problem and finding the solution for it. Charity becomes a way to shrug off our responsibility. But charity is no solution to poverty. Charity only perpetuates poverty by taking the initiative away from the poor. Charity allows us to go ahead with our own lives without worrying about the lives of the poor. Charity appeases our consciences.
We often think it is charity, i.e. welfare programs and private charity, that best aids the poor, but this is hardly verifiable in history. Charity, at best, stagnates poverty rather than eliminates it. Markets, and the growth of the proverbial economic pie, is what has historically been the only way to move a community, country, or even continent out of poverty. This is how every major Western country grew out of the dark ages. Prior to the industrial revolution, mankind was no better off than our hunter-gatherer ancestors (Netherlands and England being the only exceptions). This all changed with the massive growth of the economic pie called the industrial revolution. In the preindustrial agrarian societies half or more of the national income normally went to the owners of land and capital. In the modern post-Industrial revolution society, however, the owners of land and capital typically accounted for less than a quarter of the share of income. Unfortunately, this natural market distribution of wealth has been thwarted time and time again by governments around the world.
It is important to note the countries that did not experience the economic boom of the industrial revolution were those that did not recognize property rights, and continued to exclude those who were not wealthy or politically connected.
The presupposition that government is to be the solution for such a pervasive societal problem as poverty is as paradoxical and benighted a notion as there can possibly be. It requires removing the poor and least politically connected from the markets, and laying them at the mercy of a politically dominated system of privileged elites. It also requires one to reject trickle-down economics while paradoxically and wholeheartedly advocating trickle-down politics. It even requires a view of the poor as being either inferior, thus needing help, or a bunch of children caught with their pants down who need proper parenting. Either way, it is a ridiculous and elitist notion to say the least. In the context of human history, and the role of governments in society, rarely have the impoverished been anything other than victims of state politics and intervention. They have always been objects of exploitation for political and corporate means, and nothing else. It’s time we start treating them like adults and human beings, instead of pretending they are some inferior race.
Anderson, Terry, and Shawn Regan. “Unlocking the Wealth of Indian Nations.” PERC.org. Property and Environment Research Center, 27 Sept. 2013. Web. 3 Oct. 2013.
Clark, Gregory. A Farewell to Alms: A Brief Economic History of the World. Princeton: Princeton UP, 2007. Print.
Green, David G. Reinventing Civil Society: The Rediscovery of Welfare without Politics. London: IEA Health and Welfare Unit, 1993. Print.
Nock, Albert Jay. Jefferson,. New York: Harcourt, Brace and, 1926. Print.
Sowell, Thomas. Intellectuals and Race. N.p.: Basic, 2013. Print.
Williams, Walter E. Race & Economics: How Much Can Be Blamed on Discrimination? Stanford, CA: Hoover Institution, 2011. Print.
Yunus, Muhammad, and Alan Jolis. Banker to the Poor: Micro-lending and the Battle against World Poverty. New York: PublicAffairs, 1999. Print