Freeing the Poor from Dependency
Conservatives say they want to cut the safety net to free people from dependency, but where has that ever worked?
On April 26 the Republican controlled House of Representatives voted to raise the debt ceiling to avert financial disaster for the country, but a major part of the bill includes large cuts to domestic spending. Most of these cuts focus on programs to assist the needy, including work requirements for Medicaid and increased age limits for food assistance.
Conservative arguments today are nearly the same as those made in the mid-1800s, as England debated whether the government should provide assistance for the growing number of urban poor. Opponents said that if you help these people, they won’t help themselves. If you give them food once, they’ll know that the government will always be there to help them out, and they’ll become lazy and won’t work.
Liberals then and now see these arguments as cruel and punitive, but conservatives see it very differently. They believe that they are helping these people, helping them develop independence, giving them the tools to live and succeed on their own, and allowing them to break free from dependency.
One of the better explanations of this argument comes from Friedrich Hayek, one of the fathers of modern economic conservatism. Hayek’s most famous work, still widely quoted by conservatives today, is The Road to Serfdom. According to Hayek, even small types of “socialism,” like welfare, will put a nation on the eponymous “road to serfdom.” Specifically addressing welfare, Hayek said that government assistance will strip people of their initiative and lead to a generation dependent on the government. He said that the “most important change” from these programs “is a psychological change, an alteration in the character of the people.” Welfare programs lead to the loss of “independence, self-reliance, and the willingness to bear risks.” (Hayek, Road to Serfdom, pg 325.)
It’s an interesting theory, and on the surface sounds plausible. But is it true? Is there any way to test the theory?
I think there are at least three ways to do this. The first is to look at human nature: Does giving people assistance make them dependent, does it alter, as Hayek suggests, their very nature? The second is to analyze economic statistics: Are countries with welfare programs full of unproductive workers? The third is to review history: What does history tell us about countries that adopt welfare systems versus countries that reject it?
Human Nature
History is often ironic. Hayek wrote Road to Serfdom in 1944, based on his study of the rise of communism in Russia in the 20s and 30s, and as a warning to the U.S. and U.K., which had adopted welfare programs in the 30s to deal with the Depression.
Think about the date of the book: 1944.
What were millions of British and American men — men who’d relied upon government support in the 1930s — doing in the early 40’s? Well, in late 1942 some of those men who (per Hayek) lack independence, landed in North Africa and pushed Rommel and the Afrika Korps off the continent. In 1943 a bunch of these men, who (according to Hayek) lacked self-reliance, landed at Anzio and pushed the Nazi’s out of Italy. And in the summer of 1944, some of the men who (again Hayek) had been sapped of their “willingness to bear risk,” landed on the beaches of Normandy. Oh, and a bunch of other weak-willed slobs who purportedly lacked independence, self-reliance, and a willingness to bear risk were fighting Imperial Japan from Burma to the Philippines. I’m no military historian, but I think the Allies success had a lot to do with the independence, self-reliance, and willingness to bear risk of millions of young British and American men.
Hayek wrote his lament based on his observation of the collectivization in Russia. So, what were the generation of young Russians who’d grown up in this collectivized system doing in the early 40’s? Millions were in the Red Army, which was grinding down the Wehrmacht inch by blood inch, from Moscow to Berlin, in one of the bloodiest and most brutal land wars in human history. These Russian soldiers may have lacked political independence, but it’s repulsive in the extreme to suggest that they lacked self-reliance or a willingness to bear risk.
The reality of the Second World War makes hash out of Hayek’s prediction that welfare would breed a generation of weak-willed people lacking in independence, self-reliance, and a willingness to bear risk. Of course, the laughable inaccuracy of Hayek’s idea doesn’t alter his place in the Pantheon of conservative gods.
A more recent example of the fallacy of Hayek’s theory involves the collapse of communism in the early 1990s. After the Berlin Wall fell, most former Eastern Block countries threw off communism and adopted capitalism. (I should note that in most cases these countries didn’t adopt the laissez-faire capitalism American conservatives claim to favor, but rather a more western European version.) What happened in these nations when they abandoned cradle-to-grave welfare? Had the populace become so infantilized by generations of assistance under communism (meager as it was) that they were unable to become productive citizens? Had they lost self-reliance and their willingness to bear risk? Nope. Most of these nations easily adopted capitalism, with a few prospering, particularly Hungary, the Czech Republic (from the split of Czechoslovakia) Poland, and the Baltic countries. While results varied, the people of these nations had little problem transitioning from hard socialism to market-based capitalism, and to a life where they were their own masters, to succeed or fail on their own. See Pew Research Report on the Fall of Communism.
Perhaps the best example to disprove Hayek’s theory is China. From 1949 to 1979, China was fully communist, and the state completely controlled the lives of its people. These were truly the serfs Hayek spoke of. The communist took over in 1949 with the promise to keep people from starving. As we know now, the Communists completely screwed up the economy, and in an attempt to modernize agriculture and the industrial economy (the Great Leap Forward 1958–62) created a massive famine that starved as many as 50 million people, and then the Cultural Revolution (1966–72) which killed millions more. This confirms many of Hayek’s theories about the problems of socialism and communism.
Moa Zedong died in 1972, and the new leaders knew they had to change course. In 1978 the Communist Party opened the economy and allowed people to own land and businesses. There was a rapid and massive shift to capitalism — at least economically, the country is still controlled by the Communist Party. Far from being hobbled by communism and government support, far from being stripped of “independence, self-reliance, and a willingness to bear risk,” the people exhibited independence and bore great risk in embracing economic freedoms and opening businesses.
Conservatives love to cite examples of “welfare queens” and generational poverty, and that certainly does happen. There are genuinely lazy people, just as there are people who exploit any system from welfare to the tax code. Conservatives suggest that these individual examples are the norm, but the reality is that they’re the exception not the rule. The fact is that there are no large scale, nation-wide examples, of welfare stripping people of initiative. In fact, every large-scale example disproves this theory.
Economic Statistics
If welfare causes people to be lazy and leach-off society, this should show up in economic statistics. Wouldn’t a country with a strong social safety net, where people know that if they don’t work, they’ll be saved from starvation, be a nation where people do as little as possible to get by? If government support makes people lazy, then the converse should be true: a lack of government assistance should spur people to work hard. The very real threat of starvation should cause people to be extremely productive or incentivize them to create new businesses and new products as a way to make money. As a result, there should be distinct differences in the economies of countries with welfare systems, and those that without. There is. But it’s the exact opposite of what Hayek and conservatives suggest.
According to data from the OECD (the Organization for Cooperation and Development, the organization of the richest countries in the world), the countries with the highest level of welfare support for their citizens are the nations of Europe, Japan, Canada, the United States, and Australia. And what do these countries have in common, other than relatively generous welfare? They have the strongest economies in the world. According to the World Economic Forum report on Global Competitiveness, the top ten most competitive nations in 2019 are Denmark, Switzerland, Singapore, Sweden, Hong Kong, the Netherlands, Taiwan, Finland, Norway, and the US. Other leading countries include Germany, Japan, and the UK. So, with the exception of Singapore and Hong Kong, the most economically competitive nations have generous welfare systems. These countries are also the most productive per worker. Again, according to the OECD, the nations with the most productive workers, are Norway, Luxembourg, Ireland, U.S., the Netherlands, Belgium, France, Germany, and Denmark. Again, all have welfare programs, and with the exception of the U.S., they are among the most generous in the world.
These same countries are also the nexus of worldwide innovation and development, when measured by patents, scientific papers, and new products creation. According to the World Intellectual Property Organization (WIPO) the top ten nations for patent applications are, China, Japan, the US., Korea, Germany, France, the UK, Switzerland, Russia, and the Netherlands. The entire rest of the world files barely ten percent of the patents. Patents equate to new products, which are the foundation of new industries and growing economies.
So, it doesn’t appear that the lack of welfare is a spur toward productivity or innovation. For the most part, the nations with generous welfare benefits have the hardest workers so are the most productive, and have the most innovative people so are the most innovative nations on earth.
The reality is that Western countries have generous welfare programs, and also have highly productive workers, strong and innovative economies, and a rich populace. Poor countries lack effective welfare programs, have unproductive workers and weak economies. One theory is that welfare — a minimal safety net — keeps workers out of wage slavery, which allows them to choose jobs that correspond to their desires and abilities, and this helps the economy. Apparently desperation doesn’t force people to become hard working strives, rather it incentivizes them to do just enough to survive.
The Lessons of History
Post- World War Two history provides a wonderful comparison between countries that adopted welfare systems and other forms of socialism and countries that didn’t. After World War Two, Europe was in ruins, industrial cities blown to smithereens, and the economies of most nations in shambles. South America, in contrast, had not only avoided the war, but prospered from it. By 1950 a number South American nations had standards of living that far surpassed those of Europe. Argentina was one of the wealthiest nations in the world, and other countries, particularly Chile, Colombia, and Venezuela, were doing very well.
As Europe rebuilt from the devastation of war, many countries embraced varying levels of socialism. Some nationalized industries, others imposed a high degree of government control over the economy, many established “cradle to grave” welfare systems, and most imposed onerous and confiscatory taxes to pay for these programs. Virtually all of the nations of Western Europe did precisely what Hayek warned against. The wealthy nations of South America, in contrast, rejected most of these socialist programs and welfare systems. They seemed to embrace Hayek’s ideas or at least his anti-socialist attitudes — whether purposefully or not).
Throughout the 50s and 60s Europe rebuilt, and eventually rejoined the world economy. During this same period, and partially as a consequence of Europe’s re-emergence, the economies of the nations of South America began to slow, and there was a corresponding rise in poverty. As poverty spread, many South America regimes became fiercely anti-communist, and some violently suppressed those working for economic reform. In the 1970s Chile and Argentina were taken over by anti-communist dictators who ruled with an iron fist. It was a warped mirror-image of Hayek’s Road, with anti-communism, not socialism, leading to totalitarianism.
There are obviously significant historical and cultural differences between the nations of Europe and South America. The countries of both regions had large and educated middle class populations in the ’50s, but Europe had a longer history of industrialization. In contrast, most South American nations have natural resources that dwarfed those of most European nations.
After World War Two, Europe was in ruins: it embraced welfare and socialism, rebuilt, then prospered, and finally scaled back socialist measures. After World War Two, South America was booming: it rejected welfare and socialism, languished, and suffered social turmoil and unstable governments. Now the nations of Europe are modern, developed, and rich, and most of the nations of South America struggle.
While there are many different factors at play, it is difficult to suggest that the two regions’ vastly different approaches to welfare and economic regulation didn’t play a significant role in the ultimate outcomes. This historical comparison is pretty strong evidence that Hayek’s theory that government assistance saps workers of initiative and leads to a downward economic and governance spiral is simply wrong. But when has a theory being wrong ever stopped conservatives from believing it?
