The Pope’s visit to the United States has raised, among other things, issues relating to poverty, socialism, and capitalism.
I grew up a liberal. By the time I returned to my hometown of Laredo, Texas, to practice law in 1975, I had no doubts that one of the basic functions of government was to help the poor. I became the ACLU representative in Laredo. I served on the board of trustees of the local Legal Aid Society, which provided free legal assistance to the poor. I campaigned for Democratic Party candidates, both at the local and state levels.
I couldn’t understand why anyone would object to government’s helping the poor. After all, I felt, it was the government’s money. Why shouldn’t it be free to use its money in any way it deemed fit? What better way, I felt, to combat poverty than by having the government provide food, housing, and welfare to the poor?
One day I was waiting to talk to a client who was incarcerated in the federal detention center that was located outside Laredo. My client was a Mexican immigrant who had been arrested for illegal entry into the United States. Like all the other inmates in that detention center, all that my client had wanted to do was better his life by working for an American employer who was willing to hire him.
Suddenly a profound question hit me. How could liberals, who always used a supposed love of the poor, needy, and disadvantaged to justify America’s welfare state, treat illegal immigrants in this way? After all, they were the poorest of the poor. Why were liberals (and conservatives) putting them into jail when all they wanted to do was break the chains of poverty by working?
I posed that question to some of my liberal friends. The only answer they had was, “The law is the law.” But that wasn’t satisfactory to me because at one time segregation was the law too. That didn’t make it right.
That caused me to do some serious soul-searching and intellectual exploration. That was when I discovered libertarianism. My life has never been the same since.
The first thing that I realized was that welfare state way of life was opposite to a genuinely free society. That was a big revelation for me because all my life, my schoolteachers had taught me that America was a free country, one that had a free-enterprise or capitalist economic system.
As I began studying libertarianism, I learned that there have been two opposing economic systems in American history.
One system — the one we live under — has such programs as Social Security, Medicare, Medicaid, income taxation, fiat (paper) money, education grants, Federal Reserve, drug laws, immigration controls, public (i.e., government) schooling, occupational licensure, minimum wage laws, foreign aid, and welfare for the poor.
The other system — the one our American ancestors lived under — had none of those programs.
Opposite economic systems cannot both constitute freedom and free enterprise. One does and the other doesn’t. That’s when I learned about the welfare-state revolution in American during the 1930s, when everything changed but with everyone continuing to operate as if nothing had changed. People convinced themselves that the welfare-state revolution was nothing more than capitalist “reforms” that “saved free enterprise.” That’s why so many Americans today, libertarians excepted, continue to describe America’s welfare-state way of life as “capitalism,” “free market,” and “free enterprise.”
Among the most important things I learned was the causes of wealth. This is something liberals just don’t get. They have a blind spot on this issue. In their minds, wealth in a society is a given. Given such wealth, they want government to confiscate part of it from the rich and give it to the poor.
That’s when it hit me: Government doesn’t have money of its own. It’s different from businesses in the private sector, which get wealthy by providing goods and services to people who are willing to pay for them. The government, by contrast, forcibly confiscates or taxes a portion of people’s wealth. That’s the way government gets its money — through coercive seizure of wealth of people in the private sector.
But notice something important here: For government to seize, there must be something to seize. If everyone in society has nothing, the government can’t confiscate any wealth to give it to the poor. That’s what liberals just don’t get. They assume wealth exists and discuss how to seize it and who to give it to.
So, the question arises: How does a nation get wealthy? That’s what was so unique — exceptional, if you will — about 18th- and 19th-century America. Our American ancestors discovered that a nation gets wealthy by having a society in which there is no welfare state (and warfare state), including income taxation.
When there is no income tax, people are free to keep everything they earn. They save some of that income. The savings goes into banks, where it is borrowed by businesses, which use it to purchase tools and equipment, which makes workers more productive. More productivity leads to higher profits and higher wages.
That raises the standard of living of everyone, especially the poor, many of whom are getting wealthy. It’s not a coincidence that tens of thousands of penniless immigrants were flooding American shores in the 19th century. They were doing so because they had a good chance to get rich or at least significantly better their lives.
It is impossible to overstate the tremendous increase in the overall standard of living in the United States, especially in the latter part of the 19th century. Real wages were doubling and doubling again in a 20-year period.
That’s not all. The tremendous amount of wealth that this type of economic system was generating engendered the greatest outburst of charitable activity that mankind had ever seen. That’s how the opera houses, museums, churches, and soup kitchens got established — by the willingness of people with money to voluntarily donate a part of it to worthy causes.
As I was discovering this, I experienced another revelation: that voluntary charity is totally opposite to government-mandated charity. One is voluntary — it comes out of the willing heart of the individual. The other is based on coercion and is really nothing more than legalized stealing. That’s when I realized that a genuinely free society is based on the moral principle of freedom of choice while the welfare state is based on the immoral principle of forcing people to care for others.
It boggles the mind to think what America would look like if 20th-century Americans had not abandoned their unique and exceptional economic system in favor of a welfare-warfare state way of life. Imagine if the income tax had not been adopted in 1913 and afterward and that everyone had been able to continue keeping everything he earned. Imagine the enormous amount of savings and capital that would have come into existence, which would have not only caused the standard of living to continue soaring but also tremendously increased the amount of voluntary charity.
Instead, America went the road of the welfare-warfare state, even while Americans convinced themselves (and remain convinced) that nothing changed and that America still has a “free enterprise” or “capitalist” economic system. The results have included booms and busts, economic and financial crises, less prosperity, less voluntary giving, more poverty, an overburdened middle class, minimal savings, and a federal government whose ever-growing spending and borrowing spree to pay for the welfare-warfare state threatens to send America into national bankruptcy.
Who was right — our American ancestors or the American statists of the 20th and 21st centuries — and which road should we now take: the road toward a genuinely free-market society or the road to the welfare-warfare state way of life?
Isn’t the answer obvious? If Americans want a peaceful, prosperous, harmonious, and free way of life, there is but one way to achieve that — by restoring and building on the principles of free markets, private property, free enterprise, and limited government on which our nation was founded. That necessarily means a dismantling, not a reform, of the welfare-warfare state apparatuses that liberals and conservatives grafted onto our federal governmental system.