Bet On It Book Club: For a New Liberty, Chapter 8

Summary
This chapter, on “Welfare and the Welfare State,” argues that the welfare state gives the poor perverse incentives.  A superficial reader might say, “However original this was in 1973 when it was first written, it’s now old hat.  Clinton made the same arguments for welfare reform.”  However, on closer examination, Rothbard’s analysis remains distinctive both positively and normatively.

Positively, Rothbard unapologetically affirms that the poor are typically poor because of their own short-sighted, impulsive values.  He heaps praise on Harvard’s Edward Banfield – probably because Banfield was one of the few scholars who actually said what middle-class observers of the poor can’t help but think:

[U]pper- and middle-class members tend to be future-oriented, purposeful, rational, and self-disciplined.  Lower-class people… tend to have a strong present-orientation, are capricious, hedonistic, purposeless, and therefore unwilling to pursue a job or a career with any consistency. People with the former values therefore tend to have higher incomes and better jobs, and lower-class people tend to be poor, jobless, or on welfare. In short, the economic fortunes of people tend over the long run to be their own internal responsibility, rather than to be determined — as liberals always insist — by external factors.

Strange as it may seem in our post-Bell Curve age, though, Rothbard does not mention low intelligence as a contributing factor.

Normatively, Rothbard breaks with mainstream critics of the welfare state with his abolitionist stance: The only acceptable form of relief for even the “deserving poor” is private, voluntary charity; as for “the undeserving poor,” they should straighten up and fly right:

The spirit that used to animate the social work profession was a far different–and a libertarian–one. There were two basic principles: (a) that all relief and welfare payments should be voluntary, by private agencies, rather than by the coercive levy of government; and (b) that the object of giving should be to help the recipient become independent and productive as soon as possible. Of course, in ultimate logic, (b) follows from (a), since no private agency is able to tap the virtually unlimited funds that can be mulcted from the long-suffering taxpayer…As a further corollary of the limitation on funds, the social workers also realized that there was no room for aid to malingerers, those who refused to work, or who used the aid as a racket; hence came the concept of the “deserving” as against the “undeserving” poor.

Other highlights: Rothbard celebrates the private welfare system of the Mormons and points out a number of ways that regulation hurts the poor.  He also heaps scorn on – and misrepresents – Friedman’s “negative income tax,” never mentioning that the whole point is to reduce the effective 100% marginal tax rate that welfare recipients typically face.

Critical Comments
I remain a huge fan of this chapter.  While Rothbard neglects the IQ-poverty connection, modern scholars continue to neglect the Conscientiousness-poverty connection.  Frankly, it’s a ridiculous oversight.  It’s intuitively obvious: How could laziness and impulsiveness not lead to poverty?  And you don’t need fancy econometrics to detect it empirically: Kids from low-income areas were bused into my suburban elementary, junior high, and high schools, and all of Rothbard’s claims about “lower-class values” described them to a tee.

I also find his abolitionism refreshing.  Sure, private charity couldn’t maintain anything like the modern welfare state.  But I see no reason why it couldn’t provide a modest safety net for indigent children and the severely handicapped.  Private charity in the U.S. is about $300B annually – 2.2% of GDP.  Admittedly, only a small fraction of that goes to the poor now; but clearly that would change if the welfare state were abolished.  If it seems unrealistic to rely on donations to provide for the poor, consider: Back in the era of established churches, wouldn’t it have seemed equally unrealistic to rely on donations to provide for religion?

My main empirical complaints: Even in the 1970s, Rothbard should have spent more time explaining that the welfare state is primarily about helping the old, not the poor.   And he should have spent more time explaining that by world standards, the American “poor” are already well-off.  Then he could have easily moved on to the most philosophically devastating critique of the welfare state: Our immigration laws are a massive, shameful effort to prevent the free market from lifting millions of foreigners out of absolute poverty.

Of course, if Rothbard had focused on global poverty, he would have had to admit the awkward point that voluntary charity does little to alleviate the truly horrific plight of the world’s bottom billion.  If the U.S. abolished the welfare state, Americans would open their checkbooks to poor children and the handicapped who happen to be American citizens.  But the absence of a world welfare state has manifestly not led to robust private substitutes.  Modern markets are international, but modern charity remains a largely national affair.

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