Almost 50 years ago Lyndon Johnson declared a “war on poverty.” Ever since then, the federal government, through a wide array of welfare-state programs and regulatory programs, has waged its war, aiming to end poverty or at least to greatly alleviate it.
After a half-century of poverty warfare, has the war been won? Not according to Democrats. They say that poverty is still so deep and so extensive that it’s necessary that the war on poverty continue indefinitely into the future.
But given that the war on poverty hasn’t been won after 50 years of fierce warfare, isn’t that a sign that the wrong means have been employed?
The two primary methods of fighting poverty are welfare and regulation. With welfare, the state seizes the wealth and income of some and ostensibly gives it to the poor. (In actuality it also gives part of the money it seizes to the middle class and wealthy in the form of grants, subsidies, and bailouts, and also to foreign regimes, including dictatorships.) The state also regulates economic activity with the supposed aim of helping the poor, a good example being minimum-wage laws.
If welfare and regulation were the keys to ending or alleviating poverty, you would think that the entire world would now be without poverty. Just think: All that Haiti, for example, would have to do to end or drastically reduce its desperate poverty is enact welfare and minimum-wage laws. I wonder why no one has gotten the word to them. And the same holds true for other places around the world that are mired in poverty, such as North Korea and Cuba. You would think that they would have seen the light by now and enacted a welfare state and a regulated economy.
In fact, all poor nations, including Haiti, North Korea, and Cuba, adopted the welfare-state and regulated-economy way of life a long time ago.
In Cuba, for example, the state has long taken care of people, even to the point of providing public (i.e., government) employment for every person in society. People not only get a guaranteed job but also free retirement, free education, and free health care. The few private businesses that are permitted to function are tightly regulated and highly taxed.
Nonetheless, the people of Cuba remain desperately poor, many even verging on starvation. Sure, the U.S. government’s economic embargo (an economic regulation imposed on the American people) has contributed to the impoverishment of the Cuban people. Nonetheless, you would think that if welfare and regulation were the keys to ending poverty, the Cuban people would have a fairly wealthy and prospering society notwithstanding the embargo.
Moreover, there are plenty of nations mired in poverty that have embraced the welfare-state, regulated-economy way of life, including many in Latin America, that are not subject to a U.S. embargo. Why are they still so poor?
The time has come for the world to acknowledge the obvious. The war on poverty has failed. The welfare-state, regulated-economy way of life has not ended poverty or significantly reduced it. Instead, it has exacerbated it. Indeed, it’s even time to admit that a governmental war on poverty is, in fact, a root cause of poverty.
Does that mean that we should just give up on waging war on poverty? Of course not. It simply means that people, especially the poor, should reject the means that have been used to wage war on poverty, i.e., welfare and regulation. Instead, people should turn to libertarian economic principles as the way to end or alleviate poverty.
There are five libertarian keys to ending or greatly alleviating poverty. These keys apply not only to the United States but to every other nation in the world. If any nation wants to end poverty or at least to drastically reduce it, what follows is what it should do. Any nation that adopts the following five principles will, in both the short term and long term, achieve rising standards of living, especially for the poor.
1. End all income taxation and welfare. Leave people free to keep everything they earn. Prohibit the government from taking care of anyone, including seniors and the poor, with welfare of any kind, including old-age retirement benefits, education, and health care. Separate charity and state, just like religion and the state.
2. End all economic regulation, including permits to start businesses, licenses to engage in occupations and professions, minimum-wage laws, and price controls. Leave all economic enterprise totally free of any government control, management, or manipulation. Separate economy and state.
3. Totally open the nation’s borders (and internal borders) to the free movement of people, goods, and services. Leave individuals totally free to hire whomever they want, buy from whomever they want, and sell to whomever they want.
4. Do away with a giant military-intelligence establishment and limit the government to the defense of the country. No policing the world. No foreign aid. No foreign military bases. No war on terrorism or war on communism.
5. Separate money and state. Let the free market decide the type of money that is used. No more fiat money. No more central bank. A society based on sound money.
Those five principles are central elements of libertarianism. They are also the keys to a prospering society, one in which standards of living constantly rise, especially for those at the bottom of the economic ladder. They are the solution to ending or at least drastically reducing poverty.
Independence and responsibility
When people are free to keep everything they earn, they are able to save a portion of their income. Their savings go into banks and become available as capital to businesses. Businesses borrow the money and purchase tools and equipment that make their employees more productive. Higher productivity brings increased revenue and higher wages.
Thus workers benefit from an income-tax-free system because when they save a portion of their income, they not only earn interest on their savings, they also earn higher wages when businesses use those savings to make their workers more productive.
Do higher wages depend on the benevolence of the employer? Of course not. They depend on rising levels of productivity and an ever-growing number of businesses that are competing in the search for labor, thereby driving up wage rates. Productivity and competition, not regulatory laws, are the greatest allies of workers.
Moreover, at the risk of belaboring the obvious, when people, especially the poor, are free to keep everything they earn, it’s easier for them to become wealthy. They’re able to save more, which enables them to earn more on their money. Over a lifetime of working, even the poorest people in society are able to save up a nice retirement nest egg when no taxes are imposed on their incomes.
With no license or permit requirements, people are free to engage in occupations and professions and start businesses without governmental permission. That especially benefits the poor, who lack the money to meet the prerequisites that the state establishes to secure licenses and permits.
Immediately, there would be an enormous flood of new businesses into the marketplace, providing consumers with new choices that would be competing against the well-established firms and also providing new employment opportunities for workers.
Consumers would be king. Through their purchasing decisions, they would decide which people would stay in business and which would not.
Consumers would immediately know that they could no longer base their consumer decisions on whether the state had given a license or a permit to someone. They would have to do their own research, relying on friends, professionals, and reputable private certifying agencies, such as Good Housekeeping, Consumer Reports, or professional associations. The result would be a higher level of independence and responsibility among the citizenry.
No one would be forced to be caring or compassionate toward anyone because there would no longer be any coercive welfare programs. All charitable decisions would be voluntary. That’s what genuine freedom and free will are all about — the right of people to decide for themselves whether to be charitable toward others or not.
Moreover, a free people can be trusted to use their money in the right way. It all boils down to the extent to which one has confidence in himself, in others, and in freedom. One thing is sure: When people are wealthier, they are likely to be more charitable than when they are poorer.
Soaking the poor
The people at the bottom of the economic ladder who are locked out of the labor market because their labor is not valued at the legally established minimum would be free to work at lower wages. That would enable them to enter the workplace, acquire work skills, educate themselves, and learn a work ethic, thereby making themselves more marketable.
The poor would also be free to open new businesses and hire friends and people in the neighborhood at minimal wages, enabling them to compete against well-established firms. Moreover, no longer would there be extremely costly regulations that often prevent poor people from establishing new businesses.
Free trade increases people’s standard of living. That’s because in every trade, both sides benefit. They both give up something they value less for something they value more. Through the simple act of trade, people raise their standard of living. Thus the more opportunities to trade, the better off people are.
Immigrants have always been a key factor in raising a society’s standard of living. They infuse a society with vitality, energy, commitment, and hard work. They are a gift to a society. There is good reason that businessmen love to hire them. Immigrants work hard. They are productive. They add to the level of savings, and they open up new businesses, thereby bringing more opportunities to people in the form of jobs and by providing goods and services to consumers.
Sound money is key to a prosperous society. When government controls the monetary system, it inevitably plunders and loots the citizenry by inflating the money supply to pay for its ever-increasing expenses. The people who pay the highest price for inflation are the poor, and most of the time they don’t even realize what the government is doing to them.
Sound money enables people to save a portion of their income without fear that the government is going to surreptitiously confiscate it with inflation. It also enables businesses to make solid plans for the future.
A large military-intelligence establishment operates as an enormous drain on a society, much as the welfare state does. For one thing, the expenditures associated with a permanent warfare state necessarily mean income taxation, thereby destroying or damaging one of the keys to ending or alleviating poverty. There is no need for a government to have an overseas empire of military bases or even to have a large permanent military-intelligence establishment, especially when the danger of a foreign invasion is virtually nonexistent.
Moreover, a free and economically prosperous and wealthy society is the greatest deterrent to a foreign attack because of its ability to convert its wealth and productive capacity to wartime uses. An impoverished society is going to have a very difficult time furnishing the armaments and weaponry to wage war against a wealthy society that has lots of money and productive capability.
Would it be easy for a society to adopt the five libertarian principles? Of course not. When people are born and raised under a certain system, the hardest thing in the world is for them to change to a new system. But reality has a way of mugging people with the need for change. The reality that the U.S. welfare-state, regulated-economy way of life has not ended poverty or significantly reduced it is now starting to dawn on people, especially those at the bottom of the economic ladder.
At least there is an alternative for any nation who dares to lead the world out of this statist morass. That alternative is libertarianism.
This article was originally published in the March 2015 edition of Future of Freedom.