Proposition: The State should guarantee that poor people do
not fall below a certain minimal standard of living, through redistributive
taxation and welfare payments.
Predicted Effects:
1. Guarantee that people won’t ‘die in the streets’: One of
the main appeals of a welfare system is that it provides a State-backed
guarantee that people will not become so poor that they are unable to support
their lives and those of their dependants This provides a sense of
life-security to everyone in the market society, believing that no matter how
badly their economic fortunes go, they and their family will never be at risk
of dying of poverty. For richer people, not at risk of such poverty, it could make
them feel less guilty of their own material prosperity if they know that no one
is dying due to lack of money. Politically, the existence of such a guarantee
could help diminish the persuasiveness of the silly argument for economic
egalitarianism that economic freedom is the ‘freedom to starve’.
2. Incentives: Providing a guaranteed standard of living
would act to reduce incentives to work for those at the lower end of the wage
scale. Why work at a low-paying job when you can just get the same standard of
living without working on welfare? Some say that people on welfare do not wish
to live on it any longer than they have to, and they really want to get working
again if only they could. Firstly, while this is perhaps true of many people,
it is extravagant to say that it is so for everyone.
It is near certain that some people, and probable that a fair amount of
people, on welfare are perfectly happy to collect their incomes without working
indefinitely. Secondly, monetary incentives work on the margins of decisions,
it is not the case that either there is an incentive to work or there is not.
With the importance of monetary incentives at the lower end of the wage scale
reduced, people may be inclined to work less hours, take fewer risks, stay
closer within their comfort zones, concern themselves less with
self-improvement or relevant education, reject jobs that are simply too
‘unpleasant’ or ‘boring’ for them which they would gladly take if the incentive
was stronger, etc… People at the lower end of the wage scale play an important
role in the economy, doing many of the basic jobs required to keep it operating
smoothly. Though some of these jobs could now, or in the future, be made
obsolete through the use of technology, doing so represents an investment of raw
materials, labour in other lines, and capital that is not made now because
hiring people at relatively low wages is the most economical mode of production
and service delivery given current conditions, benefitting both the
employers/the producers and the employee, who both obviously find the
employment contract mutually beneficial, or they would not enter into it.
3. Higher Taxation: To provide a guarantee of a minimum
standard of living through welfare payments requires, of course, resources, and
these resources must be obtained through higher taxation of the general
populace. Many of the effects identified in my issue analysis for higher taxes
on the wealthy apply here, given that it is most likely that some kind of
progressive income taxation will be used to finance the welfare system, or at
the very least, a proportional income taxation, which still involves taking
resources from wealthier people and giving them to poorer people. One such
effect includes weakening monetary incentives to serve the consumers in the
most economical and high-quality way for wealthier producers. Another effect is
that money is taken from people who probably would have saved a significant
fraction of it, especially when taken from truly wealthy producers, and given
to those who will almost certainly consume it all (welfare recipients). This
will result in less capital goods being produced and hence a slowing down (or
reversing if pushed far enough) of economic progress.
4. General Principle: A general principle that could be
associated with the proposition being considered is the following: Whenever
someone can demonstrate that they ‘need’ a certain amount of resources more
than the current owner of those resources, they are justified in calling for
redistribution of those resources through government action. The societal
system of property rights, under this principle, moves away from a system where
owners must create resources, be lawfully given resources, or buy resources in
order to legitimately own them, and towards a system where ‘need’ for resources
can override these considerations and result in a transfer of resources based
on this ‘need’.
5. Immigration Tensions: With a minimal guaranteed standard
of living offered to all inhabitants of a certain geographical region,
impoverished new immigrants could come in to the country and potentially take
immediate advantage of this ‘safety net’. If they do in any noticeable number,
this could create conflicts between the existing population of the region and
the new inhabitants, with the existing population perhaps being angry that
newcomers could just walk into the country and take advantage of the social
safety net paid for by the general taxpayer of the region. The government could
attempt to restrict immigrants from using the social safety net, but then cries
that they were being treated like ‘second class citizens’ would almost
certainly arise. Also, if some impoverished new immigrants really did show
signs of potentially dying of poverty, it is unlikely that the government would
be willing to stop them from using the social safety net.
Empirical Questions:
Relating to the first effect, a relevant empirical question
is this: were the government not to set up a welfare social safety net, would
private charitable efforts be sufficient to do so? A look at periods of history
where the state was not powerful enough to operate vast welfare networks would
suggest that private charitable efforts, mainly through religious
organizations, stepped in relatively effectively to fill that gap. Though these
efforts were not perfect, they were nothing to sneeze at, and there is reason
to believe that there would be more private charitable resources made available
in our modern, wealthier world than in the poorer societies of the past. The
fact is that in present-day North America, even with all the supposed
guarantees of the ‘welfare state’, private charitable endeavours to help poorer
people are still significant. Without the ‘the state’s got it covered’ effect
and the resource-drain through taxation effect engendered by the welfare state,
which serves to ‘crowd-out’ a certain amount of potential private charity, it
is very likely that without the welfare state in place, private charitable
donations for such causes would go up.
Relating to the second effect, a relevant empirical question
is this: how long are people typically on welfare for in the present system? Do
people fall into hard times, get some welfare aid, and get back on their feet?
Or is there a class of welfare recipients who are constantly receiving
payments, or who if they get off of welfare briefly, return fairly quickly? The
answer to these questions could help suggest how serious an effect a minimum
guaranteed standard of living has on the incentives to work and become
self-sufficient of people at the lower end of the wage scale. The answers to
these questions are relevant for effect #3 as well, given that the shorter
period of time people typically are on the welfare system for, the less of a
drain on the taxpayers they would be, and the lower the taxes levied for
support the system would have to be.
My Valuational Cost/Benefit List for a welfare social safety
net:
Costs: #2, #3, #4, #5.
Benefits: #1.
Valuational Comments:
#1: This effect is the real appeal of the social safety net.
Psychologically, to know that the mighty government, through the forced
contributions of your fellow citizens, will not allow you to die of poverty is
something reassuring. Even for those (such as I) who truly believe the
free-market economists when they say that economic freedom and limited
government are what enable economic progress, and their opposites hinder it, I
think there still remains some anxiety about whether you personally will be
able to make ends meet in the free-market order, even if you know it is the
most conducive order to general economic progress. Though one may be persuaded by the
libertarian arguments that it is very likely that enough private charity in
free, wealthy societies will be made available to ensure that people will not
die of poverty, that legal, official, governmental guarantee is still something
that can soothe the anxious hearts of people worried about their economic
prospects in a free-market. Also, though I hate to use the word in this
context, there does seem to be something quite humane, and eminently civilized,
in a society whose official body of organized coercion (government) will do all
in its power to not allow its subjects/citizens to die due to economic
deprivation.
#2: Though welfare supporters tend to dismiss the incentive
argument out of hand as something of no consequence, it is a quite serious
negative effect in my view. However much we may wish it to, current reality
simply does not allow every human being to have an interesting and well-paying
job. Many jobs are monotonous and may not pay as much as a middle class North
American would deem ‘adequate’, but they must be done if the consumers of the
world wish to maintain their current standards of living. Of course, economic
progress serves to increase the purchasing power of those at the bottom of the
pay scale, as is illustrated if one compares the purchasing power of those
North American workers at the bottom of the wage scale in 1830 and those North
American workers at the bottom of the wage scale in the present day.
Nevertheless, there will always be jobs that pay low wages relative to the wages of other jobs, that is how the price system
of the labor market induces people to hone certain skills and enter certain
industries, and which allows employers with the most urgent need for certain
employees to acquire their services before those employers with less urgent
need for them. The point is that weakening incentives to work at the lower end
of the wage scale is serious because of the economic importance of these jobs.
#3: See my issue analysis for higher taxes on the wealthy and
my valuational conclusions drawn. I view many of the effects of such taxes as
having serious negative effects on the rate of economic progress.
#4: I view this general principle as extremely dangerous.
This principle of a ‘need’-based right to resources was the foundational
philosophy of the disastrous communist regimes and is at the heart of
socialistic absurdities of modern governance that are disastrous on a smaller scale
such as fully socialized health care, progressive income taxation, and
mandatory public education. By attacking the free-market allocation of
resources through the price system and making property ownership less secure,
this principle serves to seriously undermine economic progress if pursued far
enough.
#5: I do not consider racism, xenophobia, or nativism to be
positive things, so I would prefer not to see their adherents encouraged in
their hatred of ‘foreigners’ by the possibility of immigrants taking immediate
advantage of the social safety net and being perceived as burdens on the ‘native’
taxpayers of the region.
Overall: I think that the costs are serious and should not be
brushed aside lightly, but neither should the benefit. I would thus propose the
following system. The basic philosophy of the system is: don’t let people die
in the streets, but don’t allow them to be too comfortable either if they
haven’t earned the money themselves. If someone really cannot make it in the
market economy, he may enter a government institution that serves the functions
of homeless shelter, food bank, basic schooling for children and career
counselling for adults, and basic healthcare provider. If a resident of one of
these institutions works a job during the day, the money earned will be held in
trust by the institution, and will be released when the resident is willing to
re-enter the market society. Life at the institution will be somewhat
regimented, though not so much as to resemble a prison or the military. The
hope is that with this system, people will want to avoid staying at these
institutions as much as possible and will try their best to make it in the
market serving their fellow men. This should work to minimize as much as
possible the inevitable weakening of the incentive to work at jobs at the lower
end of the wage scale, and with it hopefully reduce as much as possible the
cost to the taxpayer. In order for this system to work without ballooning into
an excessive welfare state, a close eye must be kept on the progress of the
general principle identified as effect #4. The differences between providing a
social safety net and ‘need’-based resource claims and the egalitarianism it
engenders should be emphasized, and it should be stressed that a government
should only be in the business of the former, not the latter. Still, the
progress of the pernicious general principle due to the concession of the
social safety net principle, serving as the thin-end of an ideological wedge, is
a serious political risk and should not be dismissed lightly. Nevertheless, I
think that for the benefits of effect #1, the risk and the negative effects of
the welfare social safety net are worth it, so long as it is kept strictly
limited and administered intelligently, as
a social safety net, and not sentimentally, as some kind of ever-expanding Robin
Hood-esque resource grab from the rich to give to the poor.
Invalid Arguments:
1. ‘A Welfare Social Safety Net resembles a society-wide
insurance plan against economic hardship and unemployment, and should be
analyzed as such, not as a redistributive government intervention.’
There are several things wrong with this argument. Firstly,
the ‘risk’ of economic hardship and unemployment is not really an insurable
risk. For a risk to be effectively covered by insurance, it should be, as much
as possible, beyond the control of the person covered. For instance, insurance
against natural disasters is one of the most purely insurable risks, as whether
such a disaster occurs or not is almost completely beyond the control of the
insured. This characteristic is
important as it prevents people in the insurance pool from deliberately drawing
on the pool by incurring ‘risks’ that could easily have been avoided, or from
drawing on the pool based on the results of their own purposeful behaviour. It
is true that sometimes, financially vulnerable people can become unemployed and
experience economic hardship due to economic crises beyond their control. But a large part of how ‘at risk’ people are
of economic hardship and unemployment is due to their purposeful actions, such
as their attentiveness on the job, ambition, industriousness, willingness to
work at ‘unpleasant’ or ‘boring’ jobs, ability to plan for the future, etc…
Being on an insurance plan against economic hardship and unemployment would, if
not encourage, at least strengthen the relative incentives to not be as
concerned about your own financial well-being and job retention, which would
undermine the financial viability and attractiveness of any conceivable private
sector insurance plan against economic hardship and unemployment. Secondly, a
government-run welfare social safety net program is financed by coercive
levies, not voluntarily through insurance contracts. Thirdly, even assuming the
viability of a private sector insurance plan against economic hardship and
unemployment, insurance pools would probably not cover the whole of society
because of the different risk levels of different segments of the population.
Also, according to the normal principles of insurance premium determination,
the most ‘at risk’ people would pay more than the less ‘at risk’ people. In
this case, that would mean that poorer people not on welfare would pay higher
premiums than richer people, because objectively, poorer people are probably
more ‘at risk’ of landing on the welfare rolls than richer people are. Due to
these considerations, analyzing government-run welfare social safety net
programs as some kind of quasi-voluntary, society-wide insurance plan is
misleading.
2. ‘Every civilized nation has a social safety net, so why
are we even discussing its pros and cons?’
This argument, used on its own, is guilty of violating tip
#18 by invoking the appeal to authority in a modified form. In this case,
rather than the authority being a purely intellectual one, it is a political
one. Also, the argument violates tip #1 by implying that the correlation
between a nation’s degree of ‘civilization’ (probably referring to the general
economic success of its populace in this context) and it having a social safety
net is in fact a causal relationship, without supplying theoretical arguments
for why this is the case. It is analogous to observing that the richest nations
in the 19th century had racist policies and overseas empires, and
concluding from this correlation that racist policies and imperialism were the cause of the prosperity of these
nations, without supplying a theoretical argument for why this is so. In order
to assert that having a social safety net is a cause of a nation’s economic success or degree of civilization, one
must supply a theoretical argument in favour of a social safety net on these
grounds. Otherwise, based on the empirical data alone, one could just as easily
assert that these nations achieved economic success and a high degree of
civilization in spite of their social
safety net policies.
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