Saturday, June 5, 2010

Why I am against the Welfare State

I will be making my case against socialism proper in a later post, but for the time being, I will rest content in concentrating on a single aspect of socialist economics: Redistribution, otherwise known as spreading the wealth around.
While it is still promoted by the politicians who wish to rack up as many votes as possible, the idea of the welfare state is no longer a tenable position in the eyes of rational economists. And for a good reason; slowly but inexorably, the economic and technological sciences have rendered the entire foundation of redistributive economics outdated and intrinsically flawed.
It is has long been known that the process of expropriating wealth from one group and giving it another is strikingly inefficient. It has been said that as high as 50 percent of the money being distributed falls into the hands of bureaucrats - and thus being sucked out of the private sector. What this has lead many to conclude, unfortunately, is not that welfare is a program with numerous structural flaws inherent in the system and thus should be abolished, but rather that its current form simply needs revising.
All revisions that improve the efficiency of the redistributive process should be lauded, but there is a limit to how efficient one can make it. And there is no evidence that welfare can be a viable and efficient program and plenty of evidence to the contrary.
With that being said, the fact that welfare programs allocate wealth from the private-capital-creating sector to the public-parasitical sector is not the only reason to doubt the efficacy of redistributionism. The core problem with it and the reason why economists find it to be so untenable is that it diverts wealth from the rich, who demonstrably know how to manage and invest their money, to the poor, who demonstrably do not. This is not an argument from unfairness, but rather it is simply an extrapolation inferred from an observation as well as an economic fact that it is savings and investment - which create capital - that are the hallmark of a strong economy. By diverting wealth from the people who know how to invest in capital wisely to those who don't is a severe hindrance to the economy.
It is one of the most profoundly ignorant myths that the poor are hurt by the rich. In fact, in a capitalist society where one has to appeal to the consumer's interest to be successful, it is precisely the opposite. It is because Bill Gates founded Microsoft that poor people can enjoy the software he created; it is because a large company is lucrative and isn't taxed to death that it is able to pay its workers better.
But the biggest crime of the Welfare State is that it completely redefines the scope and purpose of the government. Once the government is committed to ensure the financial well-being of every citizen it is no longer a small and limited entity, but a Nanny state.
Conclusion: Welfare is not viable from an economic perspective, its primary appeal, that it helps the poor, is based on a demonstrably false understanding of economics and is the result of ignoring the undeniable fact that the poor in this country are far better off than even the relatively well-do-to in other countries where capitalism not been tested. Capitalism and the work ethic that it fosters has done far more for the poor than any welfare program ever has, it always will.

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