Power and Market: Government and the Economy

A common complaint is that the free market would not insure the elimination of poverty, that it would “leave people free to starve,” and that it is far better to be “kindhearted” and give “charity” free rein by taxing the rest of the populace in order to subsidize the poor and the substandard.

In the first place, the “freedom-to-starve” argument confuses the “war against nature,” which we all conduct, with the problem of freedom from interference by other persons. We are always “free to starve” unless we pursue our conquest of nature, for that is our natural condition. But “freedom” refers to absence of molestation by other persons; it is purely an interpersonal problem.

Secondly, it should also be clear that it is precisely voluntary exchange and free capitalism that have led to an enormous improvement in living standards. Capitalist production is the only method by which poverty can be wiped out. As we stressed above, production must come first, and only freedom allows people to produce in the best and most efficient way possible. Force and violence may “distribute,” but it cannot produce. Intervention hampers production, and socialism cannot calculate. Since production of consumer satisfactions is maximized on the free market, the free market is the only way to abolish poverty. Dictates and legislation cannot do so; in fact, they can only make matters worse.

The appeal to “charity” is a truly ironic one. First, it is hardly “charity” to take wealth by force and hand it over to someone else. Indeed, this is the direct opposite of charity, which can only be an unbought, voluntary act of grace. Compulsory confiscation can only deaden charitable desires completely, as the wealthier grumble that there is no point in giving to charity when the State has already taken on the task. This is another illustration of the truth that men can become more moral only through rational persuasion, not through violence, which will, in fact, have the opposite effect.

Furthermore, since the State is always inefficient, the amount and direction of the giving will be much different from what it would be if people were left free to act on their own. If the State decides from whom to take and to whom to give, the power residing in the State’s hands is enormous. It is obvious that political unfortunates will be the ones whose property is confiscated, and political favorites the ones subsidized. And in the meantime the State erects a bureaucracy whose living is acquired by feeding off the confiscation of one group and the encouraged mendicancy of another.

Other consequences follow from a regime of compulsory “charity.” For one thing, “the poor”—or the “deserving” poor—have been exalted as a privileged caste, with an enforceable claim to the production of the more able. This is a far cry from a request for charity. Instead, the able are penalized and enslaved by the State, and the unable are placed on a moral pedestal. Certainly, this is a peculiar sort of moral program. The further consequence will be to discourage the able, to reduce production and saving in all of society, and beyond this, to subsidize the creation of a caste of poor. Not only will the poor be subsidized by right, but their ranks will be encouraged to multiply, both through reproduction and through their moral exaltation and subsidization. The able will be correspondingly hampered and repressed.15

Whereas the opportunity for voluntary charity acts as a spur to production by the able, coerced charity acts as a drain and a burden upon production. In fact, in the long run, the greatest “charity” is precisely not what we know by that name, but rather simple, “selfish” capital investment and the search for technological innovations. Poverty has been tamed by the enterprise and the capital investment of our ancestors, most of which was undoubtedly done for “selfish” motives. This is a fundamental illustration of the truth enunciated by Adam Smith that we generally help others most in those very activities in which we help ourselves.

Statists, in fact, are really opposed to charity. They often argue that charity is demeaning and degrading to the recipient, and that he should therefore be taught that the money is rightly his, to be given to him by the government as his due. But this oft-felt degradation stems, as Isabel Paterson pointed out, from the fact that the recipient of charity is not self-supporting on the market and that he is out of the production circuit and no longer providing a service in exchange for one received. However, granting him the moral and legal right to mulct his fellows increases his moral degradation instead of ending it, for the beneficiary is now further removed from the production line than ever. An act of charity, when given voluntarily, is generally considered temporary and offered with the object of helping a man to help himself. But when the dole is ladled out by the State, it becomes permanent and perpetually degrading, keeping the recipients in a state of subservience. We are not attempting to argue at this point that to be subservient in this way is degrading; we simply say that anyone who considers private charity degrading must logically conclude that State charity is far more so.16 Mises, furthermore, points out that free-market exchange—always condemned by statists for being impersonal and “unfeeling”—is precisely the relation that avoids all degradation and subservience.17

• 15See the readings referred to in footnote 3 of the preceding chapter.
• 16The devotion of government to charity may be gauged by its universal repression of mendicancy. A direct gift to a beggar helps the recipient directly and leaves no opportunity for large bureaucratic organizations to live full-time off the transaction. Harassment of direct aid, then, functions as a grant of monopolistic privilege to the “official” charity organizations. Isabel Paterson points out that the American government imposed a requirement of minimum cash assets for immigrants as an alleged way of helping the poorer immigrants! The actual effect, of course, was to keep the poorest immigrants, who could not meet the requirement, from American shores and economic opportunity.
• 17On various aspects of the problem of charity and poverty, see Paterson, “The Humanitarian with the Guillotine” in God of the Machine, pp. 233–50; Spencer, Social Statics, pp. 317–29; Mises, Human Action, pp. 831–36; F.A. Harper, “The Greatest Economic Charity” in Sennholz, ed., On Freedom and Free Enterprise, pp. 94 ff.; and Leonard E. Read, “Unearned Riches,” ibid., pp. 188–95.