Posted on 05/06/2007 5:29:16 PM PDT by shrinkermd
From the beginning of history, sincere reformers as well as demagogues have sought to abolish or at least to alleviate poverty through state action. In most cases their proposed remedies have only served to make the problem worse.
The most frequent and popular of these proposed remedies has been the simple one of seizing from the rich to give to the poor. This remedy has taken a thousand different forms, but they all come down to this. The wealth is to be "shared," to be "redistributed," to be "equalized." In fact, in the minds of many reformers it is not poverty that is the chief evil but inequality.
All schemes for redistributing or equalizing incomes or wealth must undermine or destroy incentives at both ends of the economic scale. They must reduce or abolish the incentives of the unskilled or shiftless to improve their condition by their own efforts; and even the able and industrious will see little point in earning anything beyond what they are allowed to keep. These redistribution schemes must inevitably reduce the size of the pie to be redistributed. They can only level down. Their long-run effect must be to reduce production and lead toward national impoverishment.
The problem we face is that the false remedies for poverty are almost infinite in number. An attempt at a thorough refutation of any single one of them would run to disproportionate length. But some of these false remedies are so widely regarded as real cures or mitigations of poverty that if I do not refer to them I may be accused of having undertaken a book on the remedies for poverty while ignoring some of the most obvious.
The most widely practiced "remedy" for low incomes in the last two centuries has been the formation of monopolistic labor unions and the use of the strike threat. In nearly every country today this has been made possible to its present extent by government policies that permit and encourage coercive union tactics and inhibit or restrict counteractions by employers.
As a result of union exclusiveness, of deliberate inefficiency, of featherbedding, of disruptive strikes and strike threats, the long-run effect of customary union policies has been to discourage capital investment and to make the average real wage of the whole body of workers lower, and not higher, than it would otherwise have been.
Nearly all of these customary union policies have been dishearteningly shortsighted. When unions insist on the employment of men who are not necessary to do a job (requiring unneeded firemen on diesel locomotives; forbidding the gang size of dock workers to be reduced below, say, twenty men no matter what the size of the task; demanding that a newspaper's own printers must duplicate advertising copy that comes in already set in type, etc.), the result may be to preserve or create a few more jobs for specific men in the short run, but only at the cost of making impossible the creation of an equivalent or greater number of more productive jobs for others.
The same criticism applies to the age-old union policy of opposing the use of labor-saving machinery. Labor-saving machinery is installed only when it promises to reduce production costs. When it does that, it either reduces prices and leads to increased production and sales of the commodity being produced, or it makes more profits available for increased reinvestment in other production. In either case its long-run effect is to substitute more productive jobs for the less productive jobs it eliminates.
A similar judgment must be passed on all "spread-the-work" schemes. The existing Federal Wage-Hour Law has been on the books for many years. It provides that the employer must pay a 50% penalty overtime rate for all hours that an employee works in excess of 40 hours a week, no matter how high the employee's standard hourly rate of pay.
This provision was inserted at the insistence of the unions. Its purpose was to make it so costly for the employer to work men overtime that he would be obliged to take on additional workers.
These redistribution schemes must inevitably reduce the size of the pie to be redistributed. They can only level down.
Experience shows that the provision has in fact had the effect of narrowly restricting the length of the working week…. But it does not follow that the hour restriction either created more long-term jobs or yielded higher total payrolls than would have existed without the compulsory 50% overtime rate.
No doubt in isolated cases more men have been employed than would otherwise have been. But the chief effect of the overtime law has been to raise production costs. Firms already working full standard time often have to refuse new orders because they cannot afford to pay the penalty overtime necessary to fill those orders. They cannot afford to take on new employees to meet what may be only a temporarily higher demand because they may also have to install an equivalent number of additional machines.
Higher production costs mean higher prices. They must therefore mean narrowed markets and smaller sales. They mean that fewer goods and services are produced. In the long run, the interests of the whole body of workers must be adversely affected by compulsory overtime penalties.
All this is not to argue that there ought to be a longer work week, but rather that the length of the work week, and the scale of overtime rates, ought to be left to voluntary agreement between individual workers or unions and their employers. In any case, legal restrictions on the length of the working week cannot in the long run increase the number of jobs. To the extent that they can do that in the short run, it must necessarily be at the expense of production and of the real income of the whole body of workers.
A Giant of Liberty--Henry Hazlitt (1894–1993) served as a founding board member of the Mises Institute. He was a libertarian philosopher, economist, and journalist for The Wall Street Journal, The New York Times, Newsweek, and The American Mercury, among other publications. He is best known for Economics in One Lesson, available in both trade paperback and MP3 CD. See his bibliography. Comment on the blog.
This essay was extracted from The Conquest of Poverty (Mises Institute Student Edition, 2007), newly available in print and as a free download (PDF).
NOT the state’s job.
The “War on Poverty” is lost. We must cut off funding NOW!
The only really decent benefit is unemployment insurance, which means the difference between someone on the streets between jobs and someone that can handle it, in most cases.
Otherwise, no way.
It all stems from covetry, the most deadly force in human history.
Coveting because the socialist knows he must take from someone who has assets in order to fund his scheme.
It is lies because he must tell people lies that the scheme will work, that the person who has the assets “doesn’t need them”, or they were acquired in an immoral way.
It is theft because invariably government is used to secure the funds, in a way that is really under the color of law.
Amen! It is the job of that State to establish justice, insure domestic tranquility, provide for the common defense, and promote -- not "provide" -- the general welfare.
Besides, who determines just what is "poverty"? The poor in America today lives better than any emperor of Imperial Rome could imagine.
Good essay. Thanks for posting.
It’s the same argument thats been debated for many years,what’s best government\socialist control of society or individual\free market control.For those of us who believe in the merits of the Constitutional government the Founding Fathers left us it’s obvious however there are many people in this society who have much to gain by seeing the country continue down the road of socialism !!!
At the begining of Johnsons Great Society the percentage of people classified as in ‘poverty’ was at 13%. Today, it is 13%.
Seems like the $4,000,000,000,000 dollars wasn’t enough.
My numbers are by memory, which sometimes fails, if you have different stats, please correct.
Last point, any thinking person knows that the Great Society was simply a code name for “Let’s Destroy The Balck Family” That part was VERY successful. Still, $4,000,000,000,000 seems like a lot of money to do that.
Nike Shoes for the males, Cell Phones for all the teens,
top-end Cable service...while living in HUD homes
{section 8 or “projects”},and using their Food Stamps for Twinkies & T-Bones.
Now, re-sell the Twinkies and T-Bones [at a discount],then buy Pasta and Wieners.
I know, I know; Uncle Sam would punish them for “Saving”. But He doesn’t watch for their Scamming!
Nope! The state causes poverty!
Improving the lot of the poor, in a real sense, takes several steps.
1) Segregating the poor by the temporary poor vs. the long term poor. The temporary poor are usually both responsive to assistance, and may be poor only during economic downturns and layoffs. The long term poor are both unwilling and unable to lift themselves out of poverty.
2) Traditional methods of helping the temporary poor work. But they are ineffective with the long term poor, for several reasons. This latter group needs new paradigms for both them and society.
3) The first of these is for society to recognize that there is nothing inherently wrong with being poor. Many of the poor do not want to lead middle class lives, and utterly reject what they see as the measures used to re-integrate them into society:
a) Alcoholics and addicts that do not seriously want to end their addictions are being served on an experimental basis by NOT trying to force them to quit, but just by putting them up in hotel rooms. They are far less expensive to society when they are not forced to sleep in the gutter, frequently use emergency rooms, etc.
This is very aggravating to a large segment of society that wants to FORCE them to stop being addicts and to live like “normal” people. But they cannot be forced to change, so it is better to just minimize the price we pay to leave them alone.
b) Voluntary homeless, travelers, Rainbow Family hippies and the like also reject many of the requirements of society. They do not want to have ID cards, licenses, pay taxes, be forced to attend meetings, etc., ad nauseum. I, for one, cannot really condemn them for not wanting to be part of “the system”, which in truth can be both arcane and oppressive at times.
For these people, it is not unreasonable to set up alternative communities in rural areas, more comfortable to their lifestyles. Governments and again, much of the public reject this idea as anarchic and uncontrolled, which sort of goes to the heart of the problem. If they would just allow it, then it wouldn’t be much of a problem.
And it would cost a lot less money than trying to force them to take regular jobs and be part of the system.
c) The long term homeless that really do need help. For example the mentally ill and addicts who want to quit. These people should not be allowed to remain on the street, and should be public charges. Thanks to lawsuits by the ACLU, thousands of them wander around, helpless and in pain.
This needs to change, with the recognition that for some of the long term homeless, institutionalization is a societal duty, just as important as putting criminals in prison.
Which is why it must destroy religion; lest anyone call it for what it is. Of course, I suspect you already knew that.
The reason is simple: governments respond primarily to political incentives. Economics only come into the calculus when it has political implications. Government is a political, not an economic animal. Further, government finds that economic signals, which is the primary role of prices in a free economy, often thwart political considerations. So, government has every incentive to thwart pricing information when it can. One way it does so is to subsidize or overtax an activity.
But returning to the original claim of economic efficiency: in the ‘business model’ of the socialist, since citizens only consume the resources of the State. Since citizens only make demands the State must struggle to satisfy (and never very well at that), citizens on balance cost the state. The more citizens, the more the net cost. The State, on balance, gets very little of value for the money it spends. It is far less than 100% efficient with respect to money.
In capitalism, citizens on balance generate wealth, for in the free market citizens only trade and exchange goods and services when they can do so to gain value (as each perceives it). Citizens, again on balance, spend money with greater than 100% efficiency.
Tellingly, socialist economies consume the capital that they seize from their citizens. When they have run through all of it, the economy can no longer function. It took the USSR several generations but it eventually consumed all the wealth that it started out with. China changed to a form of mercantilist capitalism before it was too late. North Korea is now in the last moments of its economic life, now resorting to extortion and counterfeiting to generate income.
But socialists are ever hopeful. The Soviet Union was lamented on the day it fell with claims that it could have been a success if only it had had more time. Tell that to the tens of millions who lived through the misery of that economic and moral failure.
All that the state can accomplish is to make everyone equally poor.
Ever try your hand at starting your own business? The government red tape will strangle you. You will blow through your savings trying to comply with all their regulations, and the purchase of the proper permits. Try and go about it through the backdoor, so to speak. All it takes is one quisling and boy are you in trouble.
Kind of sucks that can do attitude right out of you :(
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.