A very common view today is that the government needs to provide welfare programs for the poor. This is the view that “redistribution of wealth to the needy” is a noble project, and such “government assistance” is necessary to keep people from starving in the streets.

This essay will challenge and refute this view. In Ayn Rand’s ideal society, under laissez-faire capitalism, there would be no welfare programs, and this would be a good thing.

The people who didn’t vote for welfare programs, yet are taxed to support them, did not consent to the taking of their money. They signed no “social contract,” and simply living near other people does not give those other people a right to take their money. If you doubt this, watching this short video should be helpful:

Welfare programs are immoral for the same reason that three people using guns to force a fourth to pay for all their dinners is immoral: It’s an injustice that violates the rights of the victims. It has the same moral status as a robbery.

Yet people still attempt to justify using government to “redistribute” (steal) money by force, by appealing to alleged good consequences that result from the practice. The main line of argument is that welfare benefits are needed to prevent the poor from starving, while wealthier people can “afford” to have a corresponding amount of money taken out of their incomes. Thus, the argument goes, there is a net “social benefit” to welfare redistribution.

This argument is wrong on four counts:

1. Welfare is not needed to keep good people from starving.
2. The effect of redistribution on the wealthy should not be thought of in terms of whether they can “afford” it.
3. There is no such thing as a “social benefit,” in the way this argument assumes.
4. Even if we dismiss the idea of “social benefit,” the argument falsely assumes that the “beneficiaries” of welfare really benefit, overall, from redistribution.

“Welfare is Needed to Prevent the Poor from Starving”

Starting with the first point, we can look to a time in US history before there were significant welfare and social programs such as TANF, Medicaid, food stamps, Medicare, Social Security, etc. Do we see people starving in the streets? No, actually, we don’t.

In his book, Rooseveltcare: How Social Security is Sabotaging the Land of Self-Reliance, Don Watkins describes the situation before welfare and Social Security:

Self-reliant Americans knew that sickness, injury, or adverse economic conditions could throw them out of work, and so they prepared for that possibility. “Most families made provisions for the future,” notes one researcher. This took a variety of forms. For one thing, they saved, and according to one scholar, “the growth of real incomes in the late nineteenth and early twentieth centuries coincided with a rapid growth of savings….Households tended to save one-eighth to one-ninth of their incomes.” For another, they purchased various forms of commercial insurance, especially life and funeral benefits, which not only protected their families in the event of their death, but which could also be converted into cash in case of an emergency. One study found that prior to the Great Depression, “Almost 75 per cent [of the participants] carried insurance–many had several policies–and more than 30 per cent had savings accounts. Only 15 per cent had neither.”

Americans in this era also invested in property, be it a house, farm land, or farm animals…Home ownership “was a particularly valuable source of security, since a family could always obtain extra income by taking in boarders and lodgers,” [according to historians Steven Mintz and Susan Kellogg.]

Another common strategy was to join one of the many mutual aid societies that existed at the time. These were private associations of individuals that offered an array of affordable member benefits, including various forms of insurance: life, permanent disability, sickness and accident, old-age, and funeral. Between twenty and thirty-five million Americans belonged to mutual aid societies by 1930, more than any other kind of organization besides churches….

Self-reliant Americans had created their own private safety net. For a small membership fee, they were able to protect themselves from life’s risks–and millions of them did….

[S]upport from family, friends, and neighbors was the most common method of coping with economic challenges, whether through gifts, loans, housing, child care, or some other form of assistance.

If all else failed, an unprecedented amount of private charity was available for those who needed it. “In fact,” writes historian Walter Trattner, “so rapidly did private agencies multiply that before long America’s larger cities had what to many people was an embarrassing number of them. Charity directories took as many as 100 pages to list and describe the numerous voluntary agencies that sought to alleviate misery, and combat every imaginable emergency.”

In 1910, in New York State, for instance, 151 private benevolent groups provided care for children, and 216 provided care for adults or adults and children. If you were homeless in Chicago in 1933, you could have found shelter at one of the city’s 614 YMCAs, or one of the 89 Salvation Army barracks, or one of the seventy-five Goodwill Industries dormitories, among others. During the 1920s, total private philanthropic giving climbed from $21 billion in 1921 to $31.3 billion in 1928 (2009 dollars). To put that in perspective, this was roughly 2.5 percent of GDP. Half a century later, philanthropic spending was about 1.8 percent of GDP.

Watkins goes on to describe how a relatively small percentage of the elderly were considered very poor, and how private charity was a major source of help for them. And all this was at a time when the US economy was less developed and people thus had a much lower standard of living than today.

If government welfare was unnecessary to keep people from starving in the streets, then, it should be even more unnecessary now, when there’s so much more wealth available to donate. Food is now so cheap and easy to obtain that today’s “poor” have a much greater problem with obesity than with starvation.

“The Wealthy Can Afford Redistribution”

On the second point, we should not think in terms of the wealthy being able to “afford” being stolen from. Can you “afford” to have one of your kidneys removed, if someone else pays for the surgery? Yes, you’ll survive it and you won’t go broke. But that doesn’t give anyone else the right to force you into a transplant against your will. The same principle applies to taking money from the wealthy by force for the alleged benefit of others. So long as the money was earned, or acquired through voluntary (unforced) transactions with others, it is theirs in the same way a kidney is. The money is the product of their time and thought, and the more money you earn, the more time you save for doing the things you love most in life. When you take money from someone by force, you are effectively taking the most enjoyable time out of their life. (1)

Also, stealing from the productive wealthy is indirectly harmful to everyone else in the economy. Wealthy people generally spend a small percentage of their wealth on themselves at any given time. Most of it is saved in banks or invested. And since banks use saved money to make loans and invest in businesses, this means that vast majority of the money that the wealthy don’t immediately spend on consumption goes back into the economy as investments and loans. Investments and loans help new businesses to start and old ones to expand. This creates new jobs for workers and new income sources for investors of all sizes.

Thus, the accumulated money of the wealthy helps create jobs and increase production in the economy. This is especially true of entrepreneurs like J.D. Rockefeller, Henry Ford and Bill Gates. They tend to put their personal wealth back into their business ventures, in the form of expansions and new side-projects. It’s especially beneficial when the wealthy entrepreneur does it, because he has a proven track record of highly productive innovation and success. It’s best for everyone when the money is under his control.

The productive wealthy do more to drive the increase in a society’s general standard of living than anyone else. Their ideas, their visions, and their innovations make the labor of their workers more and more productive as time goes on. By inventing or investing in machines and equipment, creating new types of business organization, inventing new distribution methods, the owner or CEO of a business adds tremendous value to the labor of his employees. As the employees produce more wealth, they can be paid more, and their wages rise:

When the productive wealthy are inspired by values outside their profession, or when they retire, they often become great philanthropists. They establish non-profit foundations, schools and funds that reflect their values and provide benefits to others. The Nobel Prizes, Vanderbilt University, and The Huntington Library in Southern California are all the products of philanthropy by wealthy industrialists.

“Welfare Provides a Social Benefit”

On the third point, there is no such thing as a “social benefit,” apart from benefits to the various individuals that make up a society. What would it mean for there to be a “social benefit,” or a benefit to “the common good”? Does it mean a lack of conflict within the society? Well, the institution of slavery lasted in the Roman Empire for hundreds of years (70 BC to late 400s AD) with very little conflict about it. Did that make slavery “good for everyone”? Nazi Germany was quite unified and had little internal conflict after Hitler came to power. Did that make Hitler “good for everyone” in Germany? A lack of overt conflict in a society can coexist with brutal, destructive oppression and economic stagnation. It can exist while the society is heading for disaster. So we should not say that “societal harmony” is inherently a good thing. It is very bad for those who are oppressed, or who will be launched into an unnecessary war with foreign nations.

It is not “social harmony” that is ultimately good, but the health and well-being of the people of a society. And this health and well-being is ultimately individual. Drug abuse by one man affects his own health, not the health of a stranger 2,000 miles away. A gambling addiction affects the happiness of the addict, not that of a corporate CEO in another state. Even things that are often called “public goods,” such as education and transportation, can’t benefit people as one great mass, because human beings don’t combine to form one great organism. Individual people benefit to varying degrees from a given person’s education: The educated person benefits greatly and directly, while others may benefit slightly and indirectly, if and when they deal with that person. Different people benefit to varying degrees from a given road project: Those who actually use the road for the transportation of goods benefit greatly and directly, while others may benefit slightly and indirectly, when they buy goods like those at the store.

Even the benefits of a seemingly universal value like freedom vary depending on the choices of a given individual. Those who use their freedom to do productive work–to think, produce, invent, build businesses–benefit greatly from freedom. Those who are mentally lazy, stagnant, and irresponsible benefit little or none from freedom. They would be just as (un)happy in an oppressive dictatorship.

While we may talk in generalities about things being generally beneficial to everyone, strictly speaking, all benefits are ultimately individual, and depend on individual choices. (2)

“Welfare Benefits the Poor”

On the fourth point, many people seem to think it’s obvious that welfare is a net benefit to the poor. They seem to follow the simple formula of “more money = good.” But I would ask them to question this: Is it really true that just having more money given to you is always the best thing for you? Doesn’t this strike you as both simplistic and materialistic? What if someone is addicted to harmful drugs, and will use the money to buy more? Is giving money to them really the best thing to help them?

If the fundamental problem in someone’s life is not merely that they’re temporarily poor because an unpredictable disaster hit them, but that they routinely make bad choices, then fixing their lives is not merely a matter of material donations. What they need is to be prompted to make better choices. They need to be confronted with the full reality of the consequences of their choices, then decide to change their behavior based on these consequences. Material donations will not help them do that, but will instead help to insulate them from the full consequences of their actions. They will tend to develop the attitude that whenever they make self-destructive choices, others will always be there to bail them out. They will tend not to see the need for fundamental change, but continue in their self-destructive ways, while being a drain on those around them.

Since welfare is forced redistribution, it is based on the idea that everyone has a “right” to material help when they “need” it. It doesn’t make any distinction between those who are in trouble due to a random disaster, and those who are in trouble due to their own bad choices. As we saw in the section on the first point, people in a free society are generally very willing to provide voluntary financial help to those who are in trouble through no fault of their own. Those needy people won’t suffer when welfare is abolished.

But those individuals who are in trouble through their own bad choices deserve to suffer, and suffering is good for them. Suffering from their bad choices is what will help them to see that they need to change their behavior, if anything will.

So welfare gives people what they don’t deserve (other people’s money) and what is bad for their long-term well-being. (That is, it encourages them to be mentally lazy and irresponsible, rather than ambitious and responsible, with a plan for a productive life for themselves.)

Welfare programs go against justice, and are against human well-being on every level. They violate the rights of the taxpayers who didn’t vote for them, they reduce business investment and thus growth in people’s standard of living, and they promote stagnation and irresponsibility among the poor. (3)

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(1) For example, a young professional couple who have spent much of their time on cleaning their house, finally earn enough money to hire a housekeeper who enjoys cleaning more and makes it her profession. They now have more time to focus on the things they love in life. Another example: an entrepreneur who has spent a lot of time on managing his small business’s finances–a job he dislikes. As he earns higher profits, he can hire a professional bookkeeper, so that he can focus more of his time on the parts of the business that he really enjoys: research & development, and talking to customers.

(2) Note that the title of this essay includes one such generality. It’s not true, strictly speaking, that welfare programs “hurt everyone.” They don’t hurt those who are utterly lazy, irresponsible and completely unambitious people. They hurt everyone to the extent that they are ambitious, responsible and productive people, (or would be without welfare.) Welfare hurts each individual to the extent that he’s a good person. If an individual is fundamentally not a good person, then welfare will make little difference to his self-destructiveness.

(3) The promotion of stagnation and irresponsibility is especially pronounced when the benefits are openly provided as a “right,” with no strings attached. This can be seen in the effects of welfare reform in the US in the mid-1990s. Unemployment dropped and poverty decreased after the welfare system was altered to be more like “temporary help” in 1993 and 1996. (See here.)

This article from CATO talks about the potential monetary value of welfare benefits vs. work, even today, after welfare reform: When Welfare Pays Better than Work. The article says, “To be clear: There is no evidence that people on welfare are lazy. Indeed, surveys of them consistently show their desire for a job. But they’re also not stupid. If you pay them more not to work than they can earn by working, many will choose not to work.” This is using “lazy” in a different way than I do in this essay. I refer to welfare as encouraging mental laziness, which is perfectly compatible with wanting a minimum-wage job, or working full time at one. Mental laziness is not striving to better your situation by planning, thought and improvement of your skills. Plenty of people who work full time are mentally lazy. Having a full-time job doesn’t mean one isn’t stagnating. Also, unless one’s spouse died or suddenly turned criminal after becoming a father, having two children and being a single mother on minimum wage (with no child support) counts as irresponsibility.

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Related Posts:

On Fairness and Justice: Their Meanings, Scopes, and How They Are Not the Same

Wealth is Created by Action Based on Rational Thought

How Business Executives and Investors Create Wealth and Earn Large Incomes

Socialism and Welfare vs. Justice: Why Inalienable Private Property Rights are Required for Justice

19th-Century Capitalism Didn’t Create Poverty, But Reduced It

What is Individualism? What is Collectivism?