Feb 23, 2019

A Libertarian Model of the Social Safety Net

The paternalistic welfare state has failed to create a reliable social safety net. Decentralized, voluntary institutions can do the job better.

Libertarians should, by rights, be foremost among the theoreticians of voluntary, cooperative mutual aid. Nothing sends us into fits of pique quite like the idea that everything worth doing must be done by the coercive machinery of the state—that society, acting on its own and without orders from on high, is powerless to adequately provide for the poor, the sick, or the elderly. Progressives and welfare-state liberals, generally posit that free people acting of their own accord cannot or will not make adequate provisions for these groups; in the face of such “market failure,” the state must fill the gap. Libertarians tend to see this as too easy: if the state is uniquely endowed with certain powers (e.g., the power to force one to take or abstain from certain actions against her will), then it is also hobbled by serious knowledge and incentive problems, problems that are actually aggravated by its monopoly on the use of physical force. In any case, the theory and history of libertarian alternatives to state welfarism have gone largely unsung, lost in the margins, overshadowed by public policy efforts in this space. Today, genuine concern for the poor, the sick, and the elderly is treated as the exclusive province of those who want a larger, more powerful state; that is, it has become practically axiomatic in American politics that to properly demonstrate her concern, one must support the politicians and policies associated with a larger, more powerful state. Given that framework, libertarians who purport to care about the poor simply must not be sincere.

Social Solidarity Can Foster a Social Safety Net

But if libertarianism’s critics have smeared it as a philosophy of cold, compassionless individualism and greed, libertarians themselves have tended to emphasize the power and potential of social solidarity, convinced not of humanity’s unconquerable selfishness, but of its generosity and altruism.1 Arguably, welfare-statists hold the far bleaker and more cynical view that among human beings, mutualistic compassion and fellow feeling are extractable only through the overwhelming force of the state. Both aid for her community and appropriate planning for her retirement and old age must be threatened out of the citizen, who is naturally too callous and imprudent to take these on in the absence of credible threats from her social betters. Attacks on libertarianism as a political philosophy frequently betray the author’s deep misunderstandings of their sources rather than reveal the supposed deficiencies of libertarianism. Consider, for example, the following attempt at a takedown of libertarianism, authored by Peter Corning in Psychology Today:

One problem with this (utopian) model is we now have overwhelming evidence that the individualistic, acquisitive, selfish-gene model of human nature is seriously deficient; it is simplistic, one-sided and in reality resembles the pathological extremes among the personality traits that we find in our society. The evidence about human evolution indicates that our species evolved in small, close-knit social groups in which cooperation and sharing overrode our individual, competitive self-interests for the sake of the common good.

Like so many of libertarianism’s progressive critics, Corning is unaware that it is not the libertarian model of human nature that is seriously deficient, but his uninformed model of what libertarians think. Again, real-life libertarians have repeatedly stressed that cooperation and sharing come naturally to human beings; we need not, therefore, be intimidated and terrorized into cooperative endeavors by the state. Indeed, if Corning is so confident in the uncompelled benevolence of human beings, he should join libertarians in the call for a society without cynically legitimized, systematic coercion. Compelled cooperation is a contradiction in terms: it is only in the absence of such systematic coercion that a notion of cooperating citizens working together for the sake of the common good could have any real meaning. Corning’s story of human evolution and the social patterns to which it led is compatible with and reinforces libertarian philosophy. Peter Kropotkin famously emphasized the human tendency toward cooperative mutual aid as a central factor in natural selection and evolution. Human beings are quite naturally a social and communitarian animal, drawn to one another to create a “human aggregate.” “Sociability,” writes Kropotkin, “is as much a law of nature as mutual struggle.” Kirkpatrick Sale similarly suggests “that the instinct for community is as old and as vital and as powerful” as any human instinct, including those that drive procreation, as community has been absolutely “necessary for survival.”2

A libertarian society, even one without the state, does not do away with the idea of citizenship or the social advantages related thereto—only with counterfeit citizenship, citizenship cynically defined as a list of arbitrary impositions, announced by one holding a gun. There is all the difference in the world between the duty to which one binds herself voluntarily, possessed of adequate information and some bargaining power or ability to reject the terms, and the duty imposed through the besetting compulsion of an irresistible government. We might even say that it is an error to attach the name duty to both. This is one of the reasons that we should not forget an important piece of the story Corning sets forth: cooperation and mutual aid of the kind we are discussing take place in small, close-knit social groups. Progressives and welfare-state liberals seem always to forget this element. As an empirical matter, the level of social trust necessary for a welfare system (whether state-operated or not) that functions even somewhat effectively seems to require smallness. “The groups must be small,” writes Paul Goodman, “because mutual aid is our common human nature mainly with respect to those with whom we deal face to face.”

Decentralized Local Groups Can Create Social Benefits

If small groups are indeed the practical ideal for achieving functional, consent-based mutual aid, we might reasonably wonder how we arrived at today’s paternalistic, centralized federal bureaucracy. The modern welfare state, particularly in the American context, was born in large part as a project of social control, social engineering, and social sanitization, predicated on fundamentally nativist, racist, and eugenicist ideas about what it means to have a strong, coherent nation-state.3 No less than so-called “right” libertarians, “left” libertarians have stressed the hostile displacement of voluntary self-help through friendly societies by the steamrolling totalism of the modern nation-state. Confronting the argument that anarchism’s anti-statism is obsolete given the modern state’s role in providing social welfare, Colin Ward points out that social welfare “did not originate from government.” Social welfare, it would seem, furnishes another example of the state uprooting and crowding out the spontaneously emerging innovations of cooperative society—only to turn around and congratulate itself for rescuing the poor with its own programs. As David T. Beito observes in his book From Mutual Aid to the Welfare State, advocates of the existing fraternal societies saw the paternalism of the emerging expert class for what it was, noting, “The application of their doctrines usually has led to oppression and bloodshed.” Bottom-up, decentralized mutual aid societies, directed by the users who draw their benefits, were (and remain), of course, a rival to the totalizing power of the modern state. Early progressives were, in fact, quite explicit about their desire to snuff out any social organization seen as challenging total “loyalty to the state.”4 Today’s progressives, though they maintain the same ideological fundamentals, have had to repackage the bureaucratic welfare state in the language of care, compassion, and charity.

Such language reflects a patronizing attitude at the heart of the modern bureaucratic welfare state, an attitude that prevents us from thinking more carefully and accurately about the role and purpose of a social safety net. As Samuel Hammond correctly notes, “the metaphor of social insurance as a public form of charity is a deeply misleading one,” as insurance is a mutually beneficial agreement, not a form of philanthropy. Hammond highlights the example of Social Security, but the point is no less applicable to food stamps, unemployment insurance, and other such programs. Staying with the example of Social Security, there is, in principle, no reason why the government should be better able to provide this kind of insurance service, unless, of course, government is in fact not simply acting as an ordinary insurer would, but is able, by the sheer exercise of arbitrary power, to continue a broken scheme long after it has revealed itself as insolvent. Put another way, even assuming we grant the premise that life annuities of the kind represented by Social Security are subject to a market failure, there’s no ready path out of this failure for governments. Thus, while it may be “more precise to think of it as a form of insurance,” Social Security is not insurance under any of the definitions we would ordinarily assign to that term, all of which exclude the government’s fraudulent system.5 If private actors (insurance companies and employers) face incentives insufficient to provide adequate market options for pensions and life annuities, then, ceteris paribus, governments are bound to behave similarly, being no less operated by human beings. Governments are only different in that they can violently compel people to do things we are told they would otherwise not do—things they supposedly don’t have the incentives to do.6 But, again, if people are people, and governments are without magic wands and silver bullets, then we have to grapple seriously with a seeming absurdity: people are not sufficiently rational (perhaps because they’re too shortsighted or they’re naively optimistic, etc.) to provide themselves, on a voluntary basis, with pensions and life annuities, but government actors, a comparatively small group of people possessed of a unique power to compel obedience and lacking in any similarly situated competition, will have all the incentives they need to provide a superior, workable system for the entire citizenry. Faced with questions about a social safety net, libertarians are frequently accused of hand-waving, lazily falling back on the ideological insistence that markets will somehow simply take of the subject problem. But is there any position more reliant on insubstantial hand-waving than holding state actors above or outside of all the assumptions economists and social scientists make about human behavior? Forget, for a moment, terms like “market,” “market failure,” and “government”; here, the phenomena we are actually discussing are human beings and the myriad ways in which we can behave toward one another and provide for our needs. We should take care, at this juncture, to emphasize that the problem with the modern welfare state from a libertarian perspective is not the mere fact of wealth redistribution; insurance, by definition, entails the redistribution of wealth according to the terms of its policies, agreements between insurers and insureds. Rather, the problem is the paradoxical idea that the introduction of arbitrary compulsion is able, apparently alchemically, to augment the rationality of the people who use it, agents of the state, and their plans for us, enabling them to provide a more efficient system than people could provide for themselves if left to their own devices. Everyone, regardless of her politics, should greet this idea with a level of skepticism, for it is quite a strange and ambitious claim.

Social Welfare Should Not Be Tied to Centralized Bureaucracy

Perhaps, though, we libertarians should submit that there may not be a perfect solution to every social and economic problem. That is, even granting the claim that there is a market failure in the annuities market—controversial indeed given current levels of government intervention in the U.S. economy—we’re nonetheless left with the question of whether Social Security is the correct policy answer. Consider that just as Social Security is funded by regressive payroll taxes, so is it regressive in its effects, actually transferring wealth from the lifetime poor to the lifetime rich. If Social Security is not welfare-enhancing, and many economists have concluded that it is not, then we should at least consider alternatives; and even if it can be determined that Social Security is welfare-enhancing, the question remains as to whether it is superior to available alternatives. Defenders of the status quo, the present Social Security system, also tend to omit the important fact that their preferred system does not entitle anyone to anything. In Flemming v. Nestor, the Supreme Court held that no one has any legally enforceable right to any benefits whatever, quite regardless of how much she has invested in the system.7 As many observers have pointed out, myself included, the federal government has constructively repudiated all promises associated with Social Security, so far as and as long as the finances of that system lie in such abject disrepair; no reasonable investor could trust such a system. All Americans are well within their rights (their moral rights at least, for prudence counsels obedience to this disastrous law) to simply discontinue their contributions, being without any real assurance that the program is viable.

Libertarians are not out to destroy the idea of a robust social safety net. Centralized, bureaucratic control of the social safety net seems to have done that. And as Colin Ward argues, “the identification of social welfare with bureaucratic managerialism is one of the factors that has delayed the exploration of other approaches for half a century.” In a human-scale polity, one that serves its citizens instead of dominating and parasitically extracting from them, citizenship is akin to membership in a club; one pays dues and receives the benefits of membership in exchange. Citizens both desire to sacrifice for and serve their community, and are close enough to its machinery to perceive that they also benefit from it and the social trust it represents. Libertarian ideas stress the ingenuity and resourcefulness of free people and communities, understanding that paternalistic compulsion is the problem, not the solution.

  1. The word altruism may be controversial in libertarian circles, owing to the influence of Ayn Rand, but Objectivist Rand devotees like the Atlas Society’s David Kelley have advanced an “unrugged individualism” at the center of which is a celebration of the virtue of benevolence.
  2. Kirkpatrick Sale, Human Scale Revisited: A New Look at the Classic Case for a Decentralist Future (Chelsea Green Publishing 2017), page 120.
  3. See, for example, “‘More Merciful and Not Less Effective’: Eugenics and American Economics in the Progressive Era,” in which Thomas C. Leonard notes, “Historians increasingly regard the Progressive Era as a vital precursor—in thought and policy—to the American welfare state. The expansion of state power meant that it was now possible to have not only eugenic thought, but also eugenic practice.”
  4. David T. Beito, From Mutual Aid to the Welfare State: Fraternal Societies and Social Services, 1890-1967 (The University of North Carolina Press 2000), page 147.
  5. See Milton Friedman on the government’s “bogus” system: “The only way that the Treasury can redeem its debt to the Social Security Administration is to borrow the money from the public, run a surplus in its other activities, or have the Federal Reserve print the money—the same alternatives that would be open to it to pay Social Security benefits if there were no trust fund. But the accounting sleight of hand of a bogus trust fund is counted on to conceal this fact from a gullible public.”
  6. Libertarians, of course, argue that free people would in fact provide for themselves, that they have done so as a matter of historical fact.
  7. Michael D. Tanner, The Poverty of Welfare: Helping Others in the Civil Society (Cato Institute 2003), page 154.