Libertarian Anarchy

Whenever I am arguing with someone over the merits and morality of anarchism versus the horrible tragedy of statism, I am almost always confronted with the inevitable question: “What about the poor?” These ignorant statists (I’ve yet to find one aware of economics) are operating under the assumption that the government helps the poor, and so a stateless society would therefore leave the poor worse off. This assumption is false.

First off, let’s be generous and assume that the government actually has the intention to help the poor. That is, the government is genuinely working to reduce poverty and not just padding the bank accounts of state-allied business (note that most politicians are also businessmen). However, we all know a certain road that is paved with good intentions. They key is to look at the effects of government programs, not just the intentions. Do they really help the poor?

Minimum wage

Let’s start with the minimum wage. It is widely praised as the savior of unskilled and minority workers. But what are the actual effects? The minimum wage forces employers to pay workers no less than $X/hour. So, the employer must now pay a higher price for labor. At the higher wage, more employees seek work. But employers, whose incomes are now reduced, desire less workers because they cost more. As a result, there is a reduced supply of jobs and at the same time an increased demand. Thus, there is a shortage of jobs, or, in other words, more unemployment than there would have been without the minimum wage.

Skilled, unionized workers who remain employed do benefit, but only because they have less competition in a smaller labor market. They benefit at the expense of the marginal workers; this is why unions support the minimum wage. By increasing the competition for jobs, the minimum wage hurts marginal workers the most.  In a free market, they could actually work for lower wages; with a minimum wage they cannot work at all. Truly, the minimum wage is compulsory unemployment.

Moreover, employers, knowing they will never have trouble finding workers, can afford to engage in discrimination. They can hire only friends or people they know, or discriminate against minorities and women. The workers must put up with anything, because they can’t afford to lose their job.

Rent control

Rent control is another program supposedly aimed at helping the poor. Look more closely: by forcing landlords to charge lower rents, the cost of providing housing rises, thus lowering the income of landlords. Now that providing housing is less profitable, less people will become landlords. The primary effect of rent control is to reduce the supply of housing. Secondary effects include reducing the quality of housing: landlords, trying to maintain their income, cut back on service. Thus, rent control is the main cause of slums. What good is it having cheap rents if it is impossible to find housing, or if the only option is very low quality housing? Like the minimum wage causing a shortage of jobs, rent control causes a shortage of housing. One creates unemployment and the other homelessness. Both directly injure the poor.

Inflation

One of the most pernicious causes of poverty is inflation. When the government creates new money, whether by printing press, purchasing bonds, or manipulating the interest rate, those who use the new money first benefit at the expense of the last users. Consider: they get to spend it before prices are bid up by the increased money supply. The first-users have an increased purchasing power. Who are the first-users? Usually state-allied big business: Lockheed Martin, Halliburton, Wall Street; definitely not the poor.

The new money works its way around the economy, raising the price level (this is price inflation). When the new money reaches the poor, the prices have already risen, and so the poor gain nothing in purchasing power. In fact, they lose: wages are often the last price to respond to inflation. This means the poor and people on fixed incomes must pay higher prices at the same wages, and when their wages do catch up, they must contend with new inflation and yet higher prices, as the cycle begins again. The primary result of inflation is destroying 5-10% of the value of money. This means 5-10% less real income, every year, than it otherwise would have been. Thus, inflation inexorably whittles away the income of the poor, while the government and state-allied big business benefit from the increased purchasing power of the new money.

Higher education

Another great example of a wealth transfer from poor to rich is higher education. Universities and colleges receive massive funding from the government, via taxpayers. But who actually goes to university to benefit from this money? Among the rich, attending university is customary, part of the culture. Among the poor, it is a rare occurrence. Yet both rich and poor pay taxes for higher education. This is a classic wealth transfer. Both rich and poor pay for it, but only the rich use it. Does the government really have the poor in its best interest?

Barriers to entry

But wait, there’s more! If the poor are soaked by the minimum wage, rent control, inflation, and higher education, at least the government doesn’t stop them from earning a living, right? Wrong. The government imposes myriad barriers to entry preventing the poor from entering the workforce: permits, zoning laws, licenses, regulations, endless bureaucracy, red tape, etc. Someone rich like Bill Gates has no problem with such matters. He can just hire a team of lawyers to take care of it. But for the poor, first time entrepreneur, these barriers, coupled with indecipherable legal mumbo-jumbo, present an intimidating obstacle to earning an honest income. Thus, by stamping out potential competition from small businesses, government protects and enriches Big Business. Just another way the government keeps the poor unemployed and mired in poverty.

Bargaining power

I could go on all day, but I will end with bargaining power. Consider: In a free society, if someone wants to accomplish a million dollar task, they must spend a million dollars. But if there’s a government, they can bribe a politician, say, $10,000 and have the project funded with taxpayer money. Thus, the government grants privileges to and passes legislation for its business allies. What is the result? Businesses not already enjoying a monopoly will take on oligopoly status. Industries will become entrenched, bloated, and insulated against competition. Capital accumulation is heavily distorted in favor of those in cahoots with the state. The end result is that the employer has much, much more bargaining power than the employee. Bossism becomes rampant, and poor workers living paycheck to paycheck must bend over for whatever carpet-baggery their obnoxious boss comes up with. Truly, at the bargaining table it is the government and businesses against the workers.

Government against everyone

These are the ways in which government benefits some groups at the expense of the poor. But there are also the government programs which hurt everyone. Taxes – income, payroll, property, sales, gasoline – obviously reduce wealth. The death toll on government roads numbers 40,000 each year, and road congestion wastes tremendous amounts of time and money. Government schools miseducate or don’t educate children. Government health care causes either obscene prices or literally deadly inefficiency. Drug prohibition causes crime and gang wars. Finally, government monopolization of courts and police means that security is haphazard and justice is corrupted.

Solution: Anarchy

Now that we’ve established that the government is the worst enemy of the poor, how does a stateless society help the poor? First of all, there is no directly harmful action against them. The minimum wage and rent control would be recognized as unnecessary evils, and abolished. With no central bank or government monopoly on money, the free market would voluntarily provide sound money subject to the least inflation possible. And with no government to subsidize higher education, the poor would not be mulcted to benefit the rich. Government imposed barriers to entry would be eliminated, allowing the poor to start their own business, be their own boss, and vigorously outcompete overstuffed, top-heavy, corporatist Big Business. Lastly, bargaining power would side squarely with workers. A higher demand for workers would allow them to bargain with employers, and not just be a disposable tool.

Private charity

At this point I usually get one last objection: What about welfare? Won’t it be abolished?

First, I should point out that government welfare is problematic. You tend to get more of what you subsidize, and subsidizing poverty will beget more poverty. Government welfare creates incentives for people to become poor, and fosters a culture of dependency. After all, if you can get a check for doing nothing, what incentive do you have to find employment? Second, government welfare has perverse incentives. All of the workers in the vast welfare bureaucracy have an incentive to sustain poverty: if poverty were eliminated, they would be out of a job. Third, welfare would not be abolished, it would be privatized. This private voluntary welfare, like all things free market, would be much more efficient than the coercive state variety.

To begin with, private charities would have much more incentive to actually help the poor get jobs and become productive members of society. Because they would receive funding directly from voluntary donations and not indirectly from violent taxation, charities would have to satisfy donors in order to continue future donations. With government welfare, people cannot stop donating if they are unsatisfied with the results. A voluntary welfare system means that charities actually have to achieve something to receive funding. Bogus charities would soon be bankrupt. Furthermore, donors would want to see the poor climbing out of poverty, not just being “welfare bums”. Thus, the focus would not be just on handing out money, but on rehabilitation and actual job training.

One might object that private welfare has the same perverse incentives as government welfare. Perhaps, but they would be significantly weaker, if they existed at all. This is because private charities must constantly respond to the desires of their customers, the donors. A voluntary welfare system means that charities must compete with each other to see who can reduce poverty the most. This competitive aspect would weed out inefficient and fraudulent charities. Government, monopoly welfare, on the other hand, is checked only periodically by the voters. As long as the government welfare bureaucracy isn’t so wasteful as to incite a voter revolution, it will not be in danger. Coupled with the lack of competition, government welfare has very weak incentives to reduce poverty. After all, they can always rationalize their failures by pleading that “poverty has always existed, why do you expect it to be eliminated now?” Private charities have no such luxuries; they have to earn their money.

There are three more reasons why voluntary charities are better than violent ones. First, because voluntary charities must compete to satisfy donors, their operations would be more efficient; a higher percentage of donations would reach the intended recipients. Charities would not be bogged down with government bureaucracy and red tape, and would have to compete with other charities to see who can best help the poor. Second, donors would have more money to give. A free society will create a freer, richer economy. With higher employment, negligible inflation (or deflation) and no taxation, personal incomes will soar. Lastly, for the same reasons, there will be fewer poor to need charity.

“What about the poor?”

Thus, it is unfounded for statists to ask anarchists “What about the poor?” Truly, the government is the greatest enemy of the poor and downtrodden. They will be significantly better off in a free society, one without a government. In fact, our only hope in eliminating poverty lies in a free society. So when someone advocates government involvement in our lives, it is us anarchists who should rightly ask: “But what about the poor?”