The dominant political doctrines of the 20th century failed us economically, socially and morally. The beneficiaries of the welfare state have not been the poor and the disadvantaged; they have been those with influence who can capture and manipulate the system.
It is hard to imagine an ethic better suited to undermining the moral basis of a free society. [Yuval Levin]
The ethics of liberty on the other hand are based on the principle of private property and founded on natural rights theory. For this we are indebted to John Locke:
Every man has a property in his own person. This nobody has any right to but himself. The labour of his body and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided … he hath mixed his labour with, and joined to it something that is his own, thereby making it his property.
In Anarchy, State, and Utopia, Robert Nozick, takes up this theme when he discusses the respect for individual rights that flow from man’s inherent human dignity, his self-ownership.
Nozick posits that if we own ourselves then we have certain rights; in particular to life, liberty and the fruits of our labour. These rights constrain others, putting limits on their actions not to kill or maim us, and not to force us to work against our will.
This leads Nozick to the view that the redistributive programs of the modern state are morally illegitimate. They give others a right to certain benefits from the proceeds of our labour. Others become a part owner of the individual and this is inconsistent with the principle of self-ownership.
Distributive Justice
Our politicians say with pride that they believe in creating a fairer society. Not a good society mind you, but a fair one. But what is fair? It usually refers to the transfer of wealth from some segments of society to others. To get the balance right. To redress the inequities of the system, whatever that might be. So when they talk about fair, they are talking about distributive justice.
Underlying these views is the belief that fairness requires equality of outcomes; that all should share equally in the economic wealth of the society. It is a widely held view that a system based on liberty does not deliver fairness and that there is a role for government to redistribute income and wealth to compensate for the errors or vagaries of the marketplace.
To what extent are people entitled to their fair share of the wealth of the community as a function of their existence within a community, as distinct from their own efforts? Most people believe that taxation should be progressive and that the wealthier people are the more they should pay. In a minimal state where its major functions are to provide defence against foreign aggression, policing to provide physical protection for persons and property, and a judicial system to enable a functioning contract law, then it is reasonable that the wealthy should pay more. They benefit most from these activities.
Is it equally true, is it equally fair, when the major expenses of the state are for health, education and welfare? Is it fair that somebody else should fund my doctor’s bills, my children’s education, my elderly parent’s pension, my unemployed son’s benefit? Those who preach this fairness conjure up pictures of the extremely rich supporting the destitute. But once the benefits of the welfare state become extensive, then the reality is that most citizens are getting the benefits and most citizens are paying for it. In Australia, 80 per cent of households receive more in welfare benefits than they pay in income tax. In the process, public sector jobs are created to devise and administer these schemes that add nothing to the overall wealth of the society. This is economically inefficient.
There is a worse and more insidious effect. Who pays and who benefits are political decisions. They favour some segments of society over others. These decisions are not made on objective criteria, they are made for the mutual benefit of those with the power to influence. Corruption ensues. Once you allow the state to enrich some groups at the expense of others, you create the motive for political influence and the mechanism for the illegitimate use of the state for selfish economic interests.
This is most evident in the pork barreling funding of projects in individual electorates. The local member is seen as effective if he can secure public funds for his electorate. In practice, marginal electorates benefit most as parties spend public money to buy the approval and hence the votes of its citizens. Is this fair? Is it fair that someone in a remote part of the country should be paying for my upgraded sports ground, new surf lifesaving club, a research grant to study my favourite pastime, a walking track through my local park – things that they will never have the opportunity to use and enjoy? Or consider infrastructure. Is it fair that the citizens of Adelaide or Dubbo or Upotipotpon should pay for improved road and rail services and port facilities in Melbourne or Sydney?
It is also a feature of corporate life. Crony capitalism derives from the same flawed theory. We saw this clearly in the GFC, when the Detroit automobile CEOs flew to Washington in their corporate jets seeking handouts, and Hank Paulsen, Secretary of Treasury, convinced Congress to bail out his Wall Street mates – those casino operators masquerading as bankers.
Is some fair means of distribution possible? If so, on what basis should wealth be redistributed?
All attempts are fraught. Whatever patterns are chosen, they require that the government coerce some people to give to others. Moreover the patterns are forever thwarted by gifts, donations, inheritance etc. and so require ongoing forceful interference by government.
Gifts and Charity
Most economists believe that we acquire everything by exchange, that gifts are made simply with the expectation that the favour will be returned. This simplification masks the reality. What if we were to consider that our productive efforts were not just to provide for ourselves but also for those we love? This seems to me to more accurately describe real life. In fact, a large proportion of our time and productive efforts go to providing for our family and friends. Gifts are a normal and pervasive part of our life.
Consider family life. Children are looked after and supported by their parents and grandparents. When the grandparents become too frail to look after themselves, the rest of the family may step in to help. This is a strength of the family. Members can support each other in these different stages of life. They can also support each other in adversity, when someone is ill or loses a job.
We also give gifts to our friends. We may share a meal or buy an ice cream for our children’s friends who have come around to play. We may help out friends who fall on hard times. Sometimes we will provide charity to people we do not know, for instance the victims of a tsunami or in response to requests from World Vision to support impoverished children, or the Fred Hollows Foundation to support their work restoring people’s sight. We may also give our time for civic purposes by joining service clubs like Rotary or Lions, or assisting charities such as the Ardoch Youth Foundation or the Brotherhood of St Laurence, or working with community self-help groups such as the Country Fire Authority. These are acts of beneficence not exchange.
Charity allows the donor to make a moral choice. There is virtue in deciding to give away your money, but none in having the same amount taken from you by the tax system. … When you give to good causes, you are making a moral choice; when the government takes an equivalent sum from you in taxation and spends it on your behalf, you are not. [Daniel Hannan]
Everyone has the right to the rewards of their efforts and to distribute them as they see fit. Each of us develops a scale of preferences of persons with whom to share our economic resources. The resources are finite. There are limits to our generosity. We have a responsibility to look after ourselves and our family. After that, we may give to friends and neighbours, and even to strangers. Scarcity will limit how much we may give to others. We will never have unlimited resources. Neither does the state.
A good society will provide community support for unanticipated hardships. Prior to the growth of the welfare state, support was delivered by charities and friendly societies. In 1904, six million British people were members of friendly societies – fifty per cent of the adult male population. Such fellowships provided insurance against illness accident and death, and mutual support in times of hardship; they promoted good character and such virtues as charity, civility, sobriety and self-respect. The support was less rule-based, and locally delivered by people who knew and sympathised with the recipient. These beneficial institutions were crowded out by the welfare state.
The state is not the appropriate institution for delivering compassion. It provides inefficient, untargeted and impersonal delivery of services. It diminishes virtuous behaviour. Gratitude is replaced by a sense of entitlement and mutual respect vanishes. Charity is better delivered by small, local, caring, voluntary organisations than by large, remote, condescending, bureaucratic, government agencies.
In an ideal world the sources of help in dealing with unanticipated hardships would be ourselves, our family, our friends and neighbours, and our friendly society. Only when these had been exhausted would we need recourse to the charity of strangers and the welfare of the state.
Wealth and Power
We appreciate that a free market system, which encourages everyone to do their best to produce what their fellow citizens want, provides rewards for those who succeed. The market will produce differentials in wealth and income. Is this in itself a bad thing? Can we live with it? Does it have any deleterious effect other than envy? I think not.
The conventional view that the wealthy remain so forever, is not borne out by the facts. Family fortunes ebb and flow. Top companies of former eras have disappeared. Once, the IT industry was dominated by IBM and the Bunch – Burroughs, Univac, NCR, Control Data and Honeywell. Today’s leading companies – Microsoft, Apple and Google – did not exist. The entrepreneur is always taking risks and some ventures do not succeed. Companies lose their dominant edge and wither or are absorbed by others. This contention should not be confused with the fact that, in many countries, the wealthy exert political power and can maintain their wealth for generations through coercion and political favours.
What about generational transfers of wealth? Clearly James Packer and Gina Rinehart received a head start from their parents compared to their peers. Does this matter? Are others worse off because James Packer and Gina Rinehart are rich? Probably not, unless they can bribe politicians and public officials to get preferential treatment for their businesses. Clearly we need to put measures in place to limit crony capitalism. The most effective way to do that is to limit the scope of the state, and to disperse economic decision making so that more decisions are made by many different people.
Socialist and interventionist policies have not eliminated the discrepancies in wealth and power. In fact they have increased them as elites capture control of the political system for their own advantage.
Call to Action
Distributive justice is not only unfair, it’s immoral.
In its place we need to build a thriving free society with a market economy, strong families, a devotion to our fellow citizens, and a commitment to the value of every life. There is an ideological battle to be fought against the forces of evil.
It is up to you to fight this battle; to change people’s world view; to explain things patiently in private; to explain things vigorously in public. It is up to you to encourage others to understand and believe in the dignity of work, and the moral principles of self-ownership and private property. Go forth with passion and using a mix of persuasion and proof change the world.
[This is an edited version of a paper given to the Students for Liberty Conference at RMIT on Saturday 4th July, 2015]
For more, read my book The Fragility of Freedom: Why Subsidiarity Matters
