Welfare State for the Rich
Living as I do in Arkansas, I'm privileged to read the commentary of Bradley Gitz, a conservative columnist for the Arkansas Democrat-Gazette who occasionally makes libertarian noises. I wish there was a Thomas Sowell Award For By-the-Numbers Regurgitation Of Republican Talking Points, so I could nominate Mr. Gitz.
In his column of Aug. 1, Gitz notes the tendency of welfare states to push themselves to bankruptcy. He quotes the old saw, attributed in urban legend to 18th century Scottish historian Alexander Tytler, that democracies only survive until "voters discover that they can vote themselves generous gifts from the public treasury."
Politicians shower the general public with unearned benefits, rather than telling them to "find jobs, work hard, and save"; you get a lot more votes for having "compassion" than for being "cruel and heartless."
Reading Gitz, you'd get the impression that the main beneficiaries of the welfare state are working people and the poor. But genuine welfare for the poor, like TANF and food stamps, barely amounts to a CBO rounding error. Adding up the so-called "defense" budget, two unfunded wars, "national security" spending on DHS, CIA, DOE and NASA, and interest on debt from past wars, the bulk of the federal government's budget goes to welfare for the Military-Industrial Complex.
Indeed, the dominant feature of the American polity is welfare for big business and the rich. This welfare consists of a wide array of government interventions into the market to enforce artificial scarcities and artificial property rights.
These interventions include patents and copyrights. They include enforcement of absentee title to vacant and unimproved land, which has never been altered by human labor -- the only legitimate means of appropriating land in a free market (in fact, the government pays landowners tens of billions to hold land out of cultivation). They include enforcement of entry barriers to free competition in the supply of credit. And they include enforcement of regulatory cartels, mandated artificially high capital outlays, and all sorts of other entry barriers.
The cumulative effect is to make land and capital artificially scarce, impose overhead costs and other penalties on self-employment, and raise the price of the means of production and subsistence relative to the price of labor. As a result, government intervention shifts income from those who work to those who live off the rents of artificial property rights and artificial scarcity.
That's welfare for the rich. Every time a consumer pays $200 for a CD of MS Windows or Word, when the free market price absent copyright would be $10, she's taxed to pay welfare to Bill Gates. Every time she pays $200 for a prescription that would cost $10 without patents, the patent markup is a tax for welfare to Pfizer. Every time a tenant pays an extra $100 in rent because untold hundreds of millions of square miles of land are closed to development, the extra rent is welfare for the landlord.
The problem is that this welfare state for the rich shifts income from classes with a propensity to spend to classes with a propensity to save and invest. The rentier classes have far more investment capital on their hands than they can find productive outlets for, because there's insufficient demand to fully utilize existing productive capacity. So government resorts to things like the perpetual warfare state, the drug war and prison-industrial complex, and boondoggles like the Interstate Highway System, to use up surplus capital and productive capacity and stave off depression. The financial sector grows steadily, and becomes increasingly prone to speculative bubbles, as investors seek outlets for excess capital.
The welfare state for the poor was actually created to solve the problems created by the welfare state for the rich. New Deal programs like Social Security and AFDC were promoted by "socialists" like GE head Gerard Swope and the Business Advisory Council in order to put a floor under aggregate demand. Government-enforced monopoly and unequal exchange redistribute wealth upward with a backhoe, and then the welfare state for the poor gives back some of it with a teaspoon.
If it weren't for the welfare state for the rich, we wouldn't need welfare for the poor.
In his column of Aug. 1, Gitz notes the tendency of welfare states to push themselves to bankruptcy. He quotes the old saw, attributed in urban legend to 18th century Scottish historian Alexander Tytler, that democracies only survive until "voters discover that they can vote themselves generous gifts from the public treasury."
Politicians shower the general public with unearned benefits, rather than telling them to "find jobs, work hard, and save"; you get a lot more votes for having "compassion" than for being "cruel and heartless."
Reading Gitz, you'd get the impression that the main beneficiaries of the welfare state are working people and the poor. But genuine welfare for the poor, like TANF and food stamps, barely amounts to a CBO rounding error. Adding up the so-called "defense" budget, two unfunded wars, "national security" spending on DHS, CIA, DOE and NASA, and interest on debt from past wars, the bulk of the federal government's budget goes to welfare for the Military-Industrial Complex.
Indeed, the dominant feature of the American polity is welfare for big business and the rich. This welfare consists of a wide array of government interventions into the market to enforce artificial scarcities and artificial property rights.
These interventions include patents and copyrights. They include enforcement of absentee title to vacant and unimproved land, which has never been altered by human labor -- the only legitimate means of appropriating land in a free market (in fact, the government pays landowners tens of billions to hold land out of cultivation). They include enforcement of entry barriers to free competition in the supply of credit. And they include enforcement of regulatory cartels, mandated artificially high capital outlays, and all sorts of other entry barriers.
The cumulative effect is to make land and capital artificially scarce, impose overhead costs and other penalties on self-employment, and raise the price of the means of production and subsistence relative to the price of labor. As a result, government intervention shifts income from those who work to those who live off the rents of artificial property rights and artificial scarcity.
That's welfare for the rich. Every time a consumer pays $200 for a CD of MS Windows or Word, when the free market price absent copyright would be $10, she's taxed to pay welfare to Bill Gates. Every time she pays $200 for a prescription that would cost $10 without patents, the patent markup is a tax for welfare to Pfizer. Every time a tenant pays an extra $100 in rent because untold hundreds of millions of square miles of land are closed to development, the extra rent is welfare for the landlord.
The problem is that this welfare state for the rich shifts income from classes with a propensity to spend to classes with a propensity to save and invest. The rentier classes have far more investment capital on their hands than they can find productive outlets for, because there's insufficient demand to fully utilize existing productive capacity. So government resorts to things like the perpetual warfare state, the drug war and prison-industrial complex, and boondoggles like the Interstate Highway System, to use up surplus capital and productive capacity and stave off depression. The financial sector grows steadily, and becomes increasingly prone to speculative bubbles, as investors seek outlets for excess capital.
The welfare state for the poor was actually created to solve the problems created by the welfare state for the rich. New Deal programs like Social Security and AFDC were promoted by "socialists" like GE head Gerard Swope and the Business Advisory Council in order to put a floor under aggregate demand. Government-enforced monopoly and unequal exchange redistribute wealth upward with a backhoe, and then the welfare state for the poor gives back some of it with a teaspoon.
If it weren't for the welfare state for the rich, we wouldn't need welfare for the poor.
posted by Kevin Carson | 12:00 PM
6 Comments:
I completely agree; in fact, I recently got into an argument with a conservative, and I made this exact point to him; he had no response.
Not to mention, an anarcho-capitalist friend of mine has made the categorical statement that conservatives cannot be capitalists for this reason (I don't know that I agree with him or his definition of "capitalism", but oh well).
~Ian
Great article, Kevin. This is very similar to what I asked a right-libertarian about cutting state spending, and if the state was truly interested in cutting taxing and spending why it doesn't go after the biggest welfare-grubbers (corporations) and instead chooses to cut the services that the working and lower classes depend on because they have no alternative (which is also the state's fault in the first place, but that's another story) first.
Ian: that's another reason why I roll my eyes at the people who believe capitalism is compatible with statelessness. I would argue that the vast majority of hierarchical firms rely on some kind of statist activity, even if it's just the reenforcement of the bosses' illegitimate property holdings and/or patents and the like. If "anarcho-capitalism" did happen in some way, I would guess that it would either morph into de facto mutualism or the big bosses would just find a way to bring the state back for these reasons.
"because untold hundreds of millions of square miles of land are closed to development, the extra rent is welfare for the landlord."
Have to admit I'm not sure opening to "development" all public lands (and even private lands with restrictions) would result in a very happy place.
Otherwise, a very interesting and convincing argument.
Brian: One reason for the current extent of development of marginal/wilderness lands was that the state preempted ownership, and then doled them out preferentially to extractive industries. Another is leapfrog development resulting from holding vacant and unimproved land out of use, which pushes the poor onto marginal land.
Your argument makes no sense because of how globalized the labor market has become.
We are never going to get away from labor surplus in this country. There's no way back.
So since there are not enough jobs to go around, a percentage of the population wwill still need public assistance for the time they are unemployed. Which part of that is confusing?
Natasha: I think you're taking an extremely narrow and myopic view of the extent to which the overall structural conditions of the economy (including "how globalized the labor market has become," passive voice, as if there were no human agency behind it) are side-effects of the welfare state for the rich.
The extent of globalization in the labor market is not a fact of nature. It is not an inevitable result of technological imperatives. It is entirely a result of ongoing state intervention in the market on behalf of big business.
Further, the amount of labor entailed in a "job" and how much work-time is required to support one's existing standard of living is also a dependent variable. If subsidized waste, rents on artificial property rights, and assorted premiums like oligopoly markups were all eliminated by abolishing all forms of privilege and artificial scarcity, the present standard of living could probably be produced with a fifteen hour work week.
If labor received its full product as a result of the abolition of state-enforced monopoly rents, the cost of subsistence fell as a result of the abolition of artificially mandated costs, and the remaining work were equitably shared by a reduction in the average work week, there would be plenty of work to go around.
Which part of THAT is so confusing?
You seem to be starting from the assumption that one little thing would be changed -- although you're not so clear on what, exactly -- and everything else would remain constant. It reminds me of Ralph Kramden, discussing some get-rich-quick scheme: "Norton, when I'm a rich man, I'll have a phone installed out here on the fire escape so I can handle all my big business deals when I sleep out here in the summer."
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