How the Government Has Caused Poverty, and How Libertarians Can Fix It


As Congressman Ron Paul (R-Texas) continues to grow in popularity with his recent success in Iowa and New Hampshire, much more attention has been focused on the libertarian ideas he represents. Liberals sympathize with his opposition to foreign wars and defense of civil liberties but question his support of free market economics and his criticisms of domestic welfare programs like Medicare, Medicaid, and Social Security. Without these government programs, liberals ask, how will the poor get taken care of?

It’s easy to see why progressives think that without a big, activist government providing essential social services, the world would likely look like a Dickensian nightmare. After all, for most of human history, poverty has coexisted next to a wealthy minority. Textbooks may tell us of noble governments protecting the public from the excesses of the market, but the poverty and exclusion evident throughout history, and unfortunately still very much a part of today’s world, can frequently be traced precisely to government intervention itself.

Licensing laws, zoning regulations, minimum wage laws, and many other restrictions raise the cost of being in poverty and make it much more difficult for the poor to enter the labor market and start their own business. The Federal Reserve destroys the value of the dollar, harming those with the least amount while subsidizing big banks and big corporations. Governments use “eminent domain” laws to force people out of their homes in favor of rich land developers and politically-connected industries. A look back in history reveals that more often than not, governments tend to centralize wealth, protect the interests of the rich, and pay lip service to looking out for the little guy. Food stamps are nothing compared to the welfare large corporations receive.

Larger programs like Medicare and Medicaid also show the harmful effects of government intervention on the poor. Despite being implemented with the best intentions, the costs of medical care have skyrocketed while the level of access has either remained stagnant or fallen. Sectors of the economy that have far less government intervention and regulation, like computers and electronics, have the exact opposite result as the market drives down prices and increases quality.

It seems that government often breaks your legs, especially of those with the least amount of power and control over policy, and then hands you the crutches while convincing you of its necessity.

Before America was saddled with the debt, dependency, and opportunity costs associated with the welfare state, mutual-aid societies did a far better job of taking care of the poor than government welfare. These fraternal organizations were not charities per se, but private associations of individuals. Those who chose to join would voluntarily pay membership dues in return for a defined schedule of benefits, which, depending on the society, could include life insurance, permanent disability, sickness and accident, old-age, or funeral benefits. And because they were private and thus more immune to bureaucracy, the annual fee was usually about a single day’s paycheck.

Libertarians oppose government welfare programs and government intervention into the economy not because we disagree with their intentions (helping the poor), but because the means (taxation) violates the non-aggression principle by initiation of force through taxation. It is a healthy sign that society cares about the poor and less fortunate; there is no virtue, however, in using force in order to achieve a certain set of desired goals or ends.

Progressives should think twice about supporting such a destructive and dangerous institution.

Photo Credit: Tony Crider