Bryan Caplan  

Libertarians and the Welfare State: Is It Time to Drop the Hard Line?

PRINT
Comments Worth Reading... What's the Cheapest Way to Red...

Libertarians are widely seen as welfare-state abolitionists - people who want to eliminate government's "safety-net" role, not make it more efficient. Will Wilkinson rightly points out that many well-known intellectuals in the libertarian camp - including Friedman, Hayek, and Buchanan - didn't share the abolitionist position, and suggests that it might be time for libertarians to drop their extremism and get real:

The death of socialism as a viable competitor to the liberal-capitalist welfare state makes continued slippery-slope-to-socialism thinking look densely anachronistic. Other liberal welfare states, like the UK, Sweden, Denmark, Australia, New Zealand, etc., have moved in a rather more market-liberal direction, becoming rather less of a soft-socialist middle-ground between the American model and full-on economic socialism... In this context, the negative income tax looks much less like a dangerous concession to the world-historical forces of evil.
Will's right about Friedman, Hayek, and Buchanan, and right about the slippery-slope argument. But I still think that welfare-state abolitionism has the force of argument on its side.

First, though I'm not going to win Will over to "Ayn Rand and Murray Rothbard’s peculiar views of rights and coercion," the welfare state is an area where it's particularly apt. Almost no one thinks you should be legally required to financially assist your relatives - even your indigent parents who raised you. The welfare-state abolitionist can fairly ask all of these people a tough question: If your parents shouldn't have a legal right to your help when they really need it, why should complete strangers?

Second, and probably even more compellingly, the existence of welfare state is one of the main rationalizations for undercutting the greatest anti-poverty campaign the world has ever known: immigration. (Friedman said it most clearly: "You cannot simultaneously have free immigration and a welfare state." But Krugman's in full agreement). And unlike the welfare state, immigration has and continues to help absolutely poor people, not relatively poor Americans who are already at the 90th percentile of the world income distribution. There's no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America's real humanitarian era.

Now I'm the first person to say that there are better ways to save the welfare state than curtailing immigration. If that's your worry, let immigrants come as guest workers - entitled to work but not collect welfare. At the same time, though, the presence of guest workers does reveal the hollowness of the standard rationales for the welfare state. It's hard to keep prating about how much you love "the poor" while insisting that the elderly Haitian who shines your shoes shouldn't get a dime.


Comments and Sharing





COMMENTS (30 to date)
Javier writes:

Bryan, can you please point to some economics research that shows that the rise of the welfare state is responsible for the end of relatively open borders? I've been curious about this topic and I have heard many libertarians advance your point, but I haven't seen much in the way of empirical confirmation.

8 writes:

Colonization was a larger anti-poverty force than immigration.

Eli writes:

Third, the welfare state is very expensive. Sure, the payments themselves are transfers, but their level is so high that the taxes used to fund them are highly distortionary. You don't have to be a die-hard "supply sider" to note the cumulative effect on growth and innovation. Even if you accept that "helping the poor" is a good, using government to do it may not pass a cost-benefit test.

liberty writes:

"the greatest anti-poverty campaign the world has ever known" is the free market, not immigration. The only reason immigration saves the poor now is that they migrate to places with a free market.

Obvious, but worth noting.

Blackadder writes:

"Bryan, can you please point to some economics research that shows that the rise of the welfare state is responsible for the end of relatively open borders?"

According to Fatal Misconception, the original restrictions on Asian immigration were aided by the combined efforts of the eugenics movement (for obvious reasons) and organized labor (who had the familiar worry that immigrants were driving down native wages). Arguing that restrictive immigration was the result of the welfare state would be tricky, as the U.S.'s main restrictive immigration law was passed in the 1920s before the welfare state really got going. More plausible is the idea that the welfare state was the result (or, at least, was made possible by) the restrictive immigration law).

Miracle Max writes:

If you want to talk turkey, the political trade to explore is less market regulation for more social insurance. Granted taxes are a market intervention, but if you think they can be designed and enacted with less damage than existing regulations, that's the way to go.

hutch writes:

Javier,
I've never thought of the rise of the welfare state being responsible for the end of open borders being an economic issue as much as a legislative issue. In 1965, LBJ signed into law Medicare and Medicaid. Also, coincidental or not, we also passed the "Immigration and Nationality Act of 1965" which was signed into law in 1968. Granted, we'd already passed some immigration laws that began to close the borders to immigrants in 1952, but from what I understand, a lot of what we have now came from the 1965 act. My guess is that they decided that if they're going to give all this stuff away for free, they needed to prevent just anyone from coming in and getting it. To me, this explains the H1-B visa's, because they assumed that if the immigrants were highly-skilled, they'd be less likely to need welfare.

Ethnic Austrian writes:
Second, and probably even more compellingly, the existence of welfare state is one of the main rationalizations for undercutting the greatest anti-poverty campaign the world has ever known: immigration.
Could you justify that? Seems implausible to me. World population growth is about 75 million per year. If the EU+USA would take in a million each per year, it wouldn't make a difference. South east asia is not interested in mass immigration anyway.

Poverty reduction in China and India don't seem to be a function of migration, but rather of free trade and globalization.

Almost no one thinks you should be legally required to financially assist your relatives - even your indigent parents who raised you. The welfare-state abolitionist can fairly ask all of these people a tough question: If your parents shouldn't have a legal right to your help when they really need it, why should complete strangers?
This argument can be easily extended to attack your position. If your compatriots shouldn't have a legal right to your help, why should foreigners from other continents be of any concern to policy decisions?
There's no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America's real humanitarian era.
Well, it is easy to be a "humanitarian", if it isn't your job security and income that is at stake. ;-)

Which social democrats do you accuse of hypocrisy? The european socialist left doesn't apply, since they have always been pro immigration for ideological and humanitarian reasons. The only austrian party that shares the libertarian point of view on immigration, is the communist party. They regard the very notion of citizenship to be racist and nationalist.

The mainstream social democrats argued for immigration from an utilitarian economic point of view. The populist right wing disagreed on the utility of immigration, but also make no bones about clearly favoring compatriots anyway. So they aren't hypocritical or contradictory either.

The question is a two-dimensional one:
1. Should citizens be privileged over non-citizens?
(This is based on a gut feeling. It is a value judgement.)
2. Does immigration have benefits? (what kind?, to whom?, how much?)
Now that is much more a matter of rational debate.

Blackadder writes:

"If the EU+USA would take in a million each per year, it wouldn't make a difference."

Presumably it would make a difference to those millions of people.

Grant writes:

Great post Bryan, I often wonder why more libertarians don't argue this point. The degree of which the morals of even our philosophers and economists is shaped by nationalism is a bit frightening, IMO.

Why don't Americans pay taxes to put Africans on welfare? Africans are much poorer than a homeless man in America. IMO its simple, they don't like poor Africans nearly as much as they like poor Americans, and Africans cannot vote in America elections. Funding Africans would not be politically popular. Americans aren't going to want Africans immigrating here en mass if they are able to collect welfare, either.

Like it or hate it, discrimination isn't going anywhere. Most people aren't very fond of others outside their own society and culture, and aren't very inclined to "dirty foreigners" or their immediate offspring. In order for immigration to really be open, IMO you need to get rid of the welfare state and laws which prevent voluntary discrimination (which admittedly isn't going to happen any time soon).

Obtsu writes:

I would recommend Lant Pritchett's book Let Their People Come to anyone doubting what immigration can do for the world's poor (ethnic austrian). It's a very short read, but worth it. The book argues that extreme poverty in the third world can't be helped anymore by loosening trade restrictions. We've already got fairly open trade policies with many of these nations. The only thing left to do is increase labor mobility (immigration).

dearieme writes:

One problem with the Socialist Era was that actual-existing-capitalism was subjected to too little criticism. "Destroy it!" isn't useful criticism. Perhaps now the Welfare State gets too little. If a better, smaller welfare state is to be sought, it won't be found just by yelling "dismantle it!".

8 writes:

Letting a few million people in helps a few million people. Colonizing a country helps tens of millions of people, and it doesn't necessarily require military invasion.

Ethnic Austrian writes:
I would recommend Lant Pritchett's book Let Their People Come to anyone doubting what immigration can do for the world's poor (ethnic austrian). It's a very short read, but worth it. The book argues that extreme poverty in the third world can't be helped anymore by loosening trade restrictions. We've already got fairly open trade policies with many of these nations.
A lot of these countries don't even have functioning domestic markets yet. It seems a bit early to proclaim the potentials of trade to be maxed out.
The only thing left to do is increase labor mobility (immigration).
75 million per year would double the population of the USA within four years and the population of the EU within six years.

And why exactly should the shifting of populations across borders be necessary? Because of resources? Well they are finite over here too.
Or because of people, institutions and culture? In this case it would make much more sense for migration going the other way, meaning first worlders moving to poor countries.

TGGP writes:

There were no 17th century open borders.

I would endorse a Gulf State style guest worker system where they were truly guests sending money home to their families rather than having families here, but until that happens or we eliminate the welfare state and a political system in which immigrants inevitably become its client-voters I am a restrictionist.

The socialist writes:

"If your parents shouldn't have a legal right to your help when they really need it, why should complete strangers?"

Because such a system yields a higher standard of living for everyone -- not in economic models, but in reality? Egoism can be ineffective, you know, because your well-being could depend on the worst-off being well off.

Perry writes:

Ive struggled a lot with this very question and the main difference, I've come to think, is that when you deal with family, the repetition (or at least the threat ) of repeated interactions keeps the kind of order between you that prevent things like a robbery, or assault because of the help you choose to or not to provide.

When dealing with strangers, there is no such repeated social interaction, and therefore much less of a barrier to prevent a more violent form of redistribution of wealth. So the welfare payment is almost like a personal insurance payment that you make in order to increase your own level of personal safety.

or maybe thats all just BS too.. who am I to know?

irony writes:

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

Grant writes:

Ethnic Austrian, no one is talking about letting all of the world's newborn poor emigrate to the US and EU (even if there was a way to get that to happen in the first place). There are many shades of poverty, and many places people can, and do, emigrate to that are less poor than where they started.

Jim writes:

Libertarian defenders of immigration are the real humanitarians in the world

It's no great trick to claim sainthood for yourself by supporting a policy you know has no chance of being enacted. But when it comes to feasible policies we know will help the poorest people in the world right now, such as much more aid to fund mass distribution of insecticide-treated bed-nets to combat malaria across Africa, suddenly it's more important to whine about a mythical ban on DDT.

Jim Glass writes:

If you want to be politically effective at getting rid of the "welfare state", start by finally turning the huge ship of public opinion against it, for the first time since FDR's day.

Do that by showing the cost it is about to drop on everyone for real.

Do that by forgeting penny-ante issues like welfare programs for the poor, and starting to look at the cost of Bastiat's "everybody striving to live at everybody else's expense."

To do that in dollar cost terms look at the letter CBO issued two weeks ago saying we are on course for income taxes to go up 54% by 2030 -- not 75 years from now, 2030 -- only 22 years away. Two thirds of a home-mortgage term.

This tax increase is in GDP terms bigger than the ones enacted after Pearl Harbor to fight WWII. And it's is only the start, of course.

I've digested the basics of this projection and put a link to the full CBO document here.

Argue against the welfare state this way: "Do you want your fixed retirement income from your IRA, pension, even your Social Security benefits, to get hit with a 50%-and-rising-forever more income tax increase??

"You're just starting a family. When your kids are going to college do you want to be running into income tax increases of 50%, 60%, 70%???"

At first people won't believe you. "Those numbers are ridiculous. If they are true, why aren't Obama and Hillary and McCain and everyone talking about it???"

But when you show them the Treasury's own numbers, and they begin to sink in, people start to revise their opinion about the welfare state.

And that's how you start in politics.

It works. This is the only thing I've ever seen that has.

Lord writes:

I fully support the right of anyone to emigrate to help the poor elsewhere. When are you leaving?

piglet writes:

[Comment removed for supplying false email address. Email the webmaster@econlib.org to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

Peter St. Onge writes:

How about allowing the sale of passports? Indian doctors would pay poor Americans $500k (raised on the collateral of his US earning power) for a family-worth of US citizenship, and those poor Americans could retire in style in India on that 500k. Presto, assortive immigration and welfare in one go.

Billy writes:

Grant writes: "Great post Bryan, I often wonder why more libertarians don't argue this point."

Sadly, many libertarians are just as opposed to open borders as Pat Buchanan and Lou Dobbs. You will find many of them at the Ludwig von Mises Institute. A few months ago, I attended a talk by Tom Woods where he was discussing the candidacy of Ron Paul. I asked Dr. Woods why he thought Ron Paul was opposed to open borders and, after an hour of essentially telling us that "government is the problem, not the solution" he said to me "because these people [Americans living in border states] can't continue to live like this," whatever that means. His answer then was for government to "solve our problem" and close down the border.

knapp writes:

Some Libertarians, but not all, are very selective in their moral indignation against the special privileges granted by the State, critiquing the social welfare state without proper context: the existence of the banking-welfare state.

The banking system with its lender of last resort functions, deposit insurance and "prime dealerships" along with a multitude of other laws and regulations create an unlimited opportunity for policy arbitrage that turn very smart people (who otherwise would be curing cancer or something) into billionaire hedge fund managers.

It would be a much easier task to dismantle the social welfare state AFTER dismantling the banking-welfare state. This would be in accordance with both freedom and fairness- making libertarians and egalitarians rejoice in tandem.

Until that day, Libertarians should view the welfare state as a just system, i.e,, as merely reciprocity for opportunities denied to those not smart enough to get in on the banking schemes which dominate our economy.

Grant writes:

Billy,

Ron Paul's stance against illegal immigration was based on its incompatibility with welfare, and the fact that getting rid of welfare was a lot less politically likely than slowing immigration. I don't agree with him that immigrant use of free welfare and education is a problem for most of America (I can see it being a problem for some states and counties of course), but his position was somewhat defensible.

I remember this because I recall hearing him say in a GOP debate that he'd prefer open borders if we had a free market with no welfare state. I remember being surprised none of the questioners grilled him on this very un-GOP stance.

Kevin writes:

I agree with Perry. It's a pacification payment to entitlement recipients to make it marginally not worth their while to attempt to confiscate others' wealth directly. I would point out that this system of "insurance" is not voluntary and that this risk could conceivably be managed more efficiently in some other way.

I think knapp has a point as well, but once you go beyond the issue at hand (personal entitlement) into "banking welfare" I don't know why you'd stop at that... the list of incentive-distorting and value-destroying policies is way longer than 2.

The deep trouble for those who advocate Welfare is that they believe money earnt by others is theirs to redistribute it to those who do not deserve it.

Welfare by voluntary means has always worked best and those that wish to lay their greedy hands on other peoples property by force do it because they want control over others because they have no self control.

Chris A writes:

Wilkinson fails to account for the "rights vs. consequences" controversy in libertarian circles.

In a consequentialist libertarian model, a welfare state could bu justified. but in a rights-libertarian system, welfare is simply incompatible with individual sovereignty and thus violates the non-aggression principle.

Wilkinson should really study positions more thoroughly before he attempts to criticise them.

Comments for this entry have been closed
Return to top