The Cliché of Socialism Number 8, written by Leonard E. Read is “The free market ignores the poor.” This cliché has far from vanished. In fact, with the recent rise in the popularity of libertarianism many have used it as the jumping point for attacking the free market approach. It is their means for making the liberty libertarians desire sound repugnant; as if the free market system would make a few extremely rich and leave the rest with no shoes, sick, and graveling in the streets. This seems to be the point of Stephen Metcalf’s recent Slate Magazine article attacking the libertarian position (see a nice summary of the libertarian responses here).
These opponents of the free market see liberty in a different light, almost wholly separate from personal responsibility, because they view responsibility as a job for society as a whole. Material needs become a human right and society, through its agent the state, is responsible for providing such needs. In such a system, equality is material and justice distributive. Metcalf and others have attacked libertarian thought by showing so-called flaws in Robert Nozick’s entitlement theory (with his famous example of Wilt Chamberlain). But as Steven Horwitz points out, this completely misses the point Nozick was making.
Nozick wasn’t attempting to justify, morally or otherwise, the free market but instead used the example to show how you cannot have a theory of distributive justice and allow individuals to use their private property as they see fit. The point then is that if you believe in a distributive theory of justice you must also advocate the restraint of liberty to dispose of individuals’ income. A consequence of liberty is an inequality of material well-being. So we must choose what type of equality we want. Do we want equality of outcomes? If so we must treat people unequally. Or do we want to be treated equally? If so, then we must put up with some level of unequal outcomes.
What is interesting, though, is that, countries that attempt to create equality of outcomes end up with much less of both equality of outcomes and equality under the law. Freedom in these countries is greatly curtailed and major wealth gaps exist with the majority in relative poverty. Countries, on the other hand, that put the responsibility in the hands of the individuals, find more freedom and equality under the law and more equality of outcomes. True it is not perfect, no system can achieve that (at least not without creating equality in poverty) but those societies tend to be wealthier overall, even for those in the lowest economic positions. As Leonard Read points out in the article, it is the countries that attempt to provide free shoes for the poor that have many more individuals without shoes.
Why is that? In a way it could seem counter-intuitive but the reason is that, yes people are working for their own self-interest but in order to make oneself better off they must make others better off. And the more people you make better off, the more you can achieve for yourself. Through the market process competition lowers prices so more individuals can have more material things at lower costs. In this sense, the market far from ignores the poor, it helps lift them up out of poverty.
Take away the incentives embedded in the free market system and efficiency will go with it. As Read noted, “Agreement with the idea of state absolutism follows socialization, appallingly.” Once this happens it becomes hard to remember how well the market works because in stomping out real entrepreneurship we have also crushed our imaginations. And despite what the critics think, with their wholly inaccurate caricature of libertarianism and the free market, I believe that is not just sad, it is abhorrent.