David R. Henderson  

Don't Confuse Government Support with Charity

Don't solve problems, stop cau... Vote Buying and Political Busi...
Both Prime Minister Justin Trudeau and Alberta Premier Rachel Notley have announced that they will match Red Cross donations for Fort McMurray dollar-for-dollar. So people who consider giving money to the Red Cross for Fort McMurray know that their dollar will leverage two more dollars. On the surface, this may appear to many as a charitable action--cleverly leveraging private charity.

But let's look below the surface.

When government steps in and uses taxpayer money to help victims, that's not real charity. Those are government subsidies and those who pay the subsidy have no choice. The people choosing are Trudeau and Notley. They are not being charitable. The only way these two officials could be charitable in this circumstance is by spending their own money.

This is from my most-recent blog post with the Fraser Institute, "Fort McMurray--don't confuse support from Trudeau and Notley with charity," Fraser Forum, May 11.

Since my post came out, I learned about this heartening story about oil-sands oil producers stepping in to help out with the horrible fires.

HT2 Steve Horwitz and Janet Neilson.

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CATEGORIES: moral reasoning

COMMENTS (11 to date)
Greg G writes:

I wasn't aware that anyone was insisting on calling the government portion of this assistance "charity." If you can identify such people I will be happy to join you in urging them not to use that word for the government portion.

Of course, the fact that it's not charity doesn't necessarily mean it's not a good idea.

Jon Murphy writes:

I've a client who lost a factory and any employees' homes in the fire. They're spending tons to pay for the families to live in hotels AND making sure no one misses a paycheck

ThaomasH writes:

I agree that the matching is not charity, but it might still be a good idea. [I see Greg G said it first] I do hope that charitable giving in Canada is a partial tax credit rather than a tax deduction as this rewards giving equally rather than rewarding high marginal tax rate payers more.

Tom West writes:

David, I think you might be missing the point of the matching.

Presumably the gov't is prepared to devote $x to disaster relief.

By structuring this as "we're matching donations" (and then later giving roughly $x - matched donations to disaster relief), they provide an incentive for donators to increase their donation.

Perhaps I'm projecting (I'll often increase my donation if there's matching), but matching donations seems a pretty effective way to increase the initial donation, even ignoring the matching.

R Richard Schweitzer writes:

"Government," of course, does nothing. People do things through the mechanism of governments.

Human actions are motivated.

So, perhaps one would be hasty, even wrong, to say the this "support" is not charitable.

What is the motivation for the action. That, not the source of the funds, should be the criterion.

If the motivations of the immediate actors are "political," they are sustained by a general public Caritas and the use of taxes or other revenues from that motivation.

michael pettengill writes:

Don't capitalists want neither charity nor government spending?

The spending that charity and government spending will go to is reducing the scarcity of productive capital assets which will destroy the wealth created by destruction of capital assets.

Even if the fires in Alberta have raised oil prices by only $2 a barrel, that represents hundreds of billions in capital wealth created. Rebuilding Alberta will destroy more wealth than charity and government spending will create.

David R. Henderson writes:

@Tom West,
David, I think you might be missing the point of the matching.
I think you didn’t read my Fraser post.

Peter Gerdes writes:

As a matter of linguistic usage I think this is charity. The government voluntarily chooses to provide assistance to those in need so money is a charitable donation from the government.

Sure, the government may have obtained those resources by threat of violence but that's not how we usually use the word. A crime boss whose fortune was built on extortion and theft is still making a charitable donation when he donates money to the local food bank. And yes we are perfectly comfortable talking about charitable gifts from companies and governments so the word can't be inapt just because the giver wasn't an individual. I think it is totally correct to say welfare is a form of charity by the government.

I sympathize with your point but formulating it as a point about the applicability of certain words takes away from the message. Presumably you mean something like: people who use other people's money to provide assistance (while sometimes a net benefit) shouldn't be given the same laurels we offer people who donate their own resources and we should be vigilant for possible abuses of compulsory charitable giving.

Hans writes:

This is also the use of funding (non)profits
by governmental units, to advance ideology and
their agenda by, in the main, Socshevik forces.

Tom West writes:

David, you are correct, I should have read the whole post. Having done so, however, I think the "matching" idea is intended to prevent crowding out.

Now perhaps there are those who contribute less because their donation is being matched, but at least among those I talk to, the matching is an incentive to contribute more.

As for the long-term, I agree there is less private giving because of gov't intervention, but then the entire part is less private giving is necessary.

Or more to the point, the giving is involuntary. However, for someone who believes in a certain level of giving and who doesn't want to do the work of determining which causes to donate to, the gov't has two advantages:

One, it does all the work, and it doesn't just focus on the crisis du jour. It's sort of like an index fund of charities/causes. Second, it's the ultimate matching - it makes every single person match (to some extent) your contribution. Talk about getting power for your dollar.

Together, it's not surprising that a fair number of people find gov't involvment in charity matters fairly attractive.

Charlie writes:

"(Russ Roberts) points out that in the first few years of the Great Depression, private relief expenditures grew from $10.3 million in 1929 to $71.6 million in 1932. These were substantial numbers in an economy whose dollar value of gross domestic product was less than one per cent of today's. But by 1935, government relief expenditures were more than triple their 1932 level and private expenditures had fallen to one-fifth their 1932 level."

That's pretty weak evidence to rest your case on. Lots of things changed between 1932 and 1935, including real GDP growing 20% from 1933-1935, while it had fallen 27% from 1929-1932. A plausible alternative is just that in the depths of the depression many people felt a strong duty to give that subsided as the economy improved. Might I suggest this is a case where a quasi-experiment that tries to tease out causation would be very useful.

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