All Commentary
Tuesday, August 1, 1995

Individual Responsibility and Economic Well-Being

Handouts Are Not a Right or Entitlement

Dr. Cleveland is an associate professor of finance at Birmingham-Southern College, Birmingham, Alabama. Mr. Stephenson is a student there.

Despite being motivated by apparent concern for the poor, government efforts to redistribute income have failed. Decades of U.S. welfare programs have failed to rescue both the urban and the rural poor. The only way to maximize economic well-being for all is to rely upon individual choice and responsibility, not income redistribution.

In order to transfer income to some citizens, government must first take income from others. The more government attempts to redistribute wealth, the less wealth it finds to redistribute. Ultimately, such action consumes capital, depletes wealth, and ends in widespread hardship and increasing despair.

The Soviet and British experiences with redistributionist philosophy serve as excellent examples in demonstrating that redistribution only produces a greater need for redistribution. For example, the English welfare state has led to an unemployment rate of over 10 percent.[1] It is interesting to note that both the rate and the amount of transfer payments have quadrupled since World War II. Thus, as more money is diverted to support more unemployed citizens, more must be taken from the remaining producers in the economy. At the margin, the incentive to work continues to fall and the economy spirals downward.

Some people immediately challenge this proposition. They suggest that eliminating popular social assistance programs would lead to the demise of all concern for the poor. Proponents of government-subsidized housing, welfare, and health care point out the economic value of our poor, and are quick to remind us that America’s great prosperity sprang from the depths of our slums. They argue that it was the poor, the uneducated, and the unskilled that came together and transformed this country into an industrial giant.

Making a comparison of today’s poor with earlier immigrants is frivolous because our forebears were different from today’s poor. The people who came to America in decades past made sacrifices to build a life for themselves in a free country. They abandoned their possessions and embraced the hope of a new land, a new life, and a better home. On the other hand, today’s poor are often discouraged and unwilling to seek opportunities. Most early Americans embraced opportunity with hope, but today’s poor possess no such general zeal. If we wish to redevelop a spirit of hope among today’s poor, we must reject the plea for government-induced equality, and instead replicate the circumstances faced by those who carved out a living for themselves and their families in earlier generations. That earlier reality offered little public assistance. It was market-driven, and those who failed relied largely on the compassion and private charity of their neighbors to help them in times of need.

Our forefathers possessed a sense of responsibility far greater than that generally displayed today because they knew no one would subsidize their complacency, They carefully considered the choices they made, and lived with the knowledge that they had ultimate responsibility for the consequences of their actions. Too many people today have no such understanding. They live with the assurance that regardless of their actions, government will force society to look after them. This mentality separates them from early Americans. Perhaps a modern example can clarify the issues.

Eric’s Story

Eric is a young black acquaintance struggling to improve his life. He is determined to better his situation in spite of his disadvantaged environment and childhood. Eric worked to pay his way through an expensive Catholic prep school, and is currently putting himself through college. His path has not been unscathed and there have been times when it would have been easier for him to quit. For example, last summer Eric was in an automobile accident that almost took his eyesight and his life. During his stay in the hospital, he accumulated medical bills of nearly $10,000. Regrettably, he had no medical insurance.

It would have been easy for a person of lesser character to give up and seek relief through government programs, but Eric did not choose that route. Instead, he chose to focus on his goals, left college for a semester to pay off his medical bills, and then returned to school debt-free and ready to make a better life for himself. Eric’s story is significant in that it shows his determination to endure hardship in order to reach his goals. In the process of endurance, Eric’s character is being developed and his prospects for future success are being enhanced.

Eric personifies how individual responsibility is a far better foundation for the promotion of economic well-being for two reasons. First, Eric had to recognize that no one made or influenced him to drive, fall asleep at the wheel of his car, and run into a telephone pole, nor did anyone force him to go without medical insurance. These were decisions that Eric made freely, privately, and with the knowledge of their potential consequences. Secondly, had Eric accepted government assistance to remain in school, he would not have learned from his mistakes. People learn the most from their errors when they persevere through the hardship of the consequences that result from them.

In addition to these issues, there is the question of equity. The government does not “own” $10,000 to pay for Eric’s medical bills. To obtain that money it must take it from someone else. Given the nature of government as collective force, this action is tantamount to theft. No one wins from a long-term system of public theft.

History has demonstrated that government cannot successfully alleviate poverty. In fact, government redistribution actually leads to impoverishment because it promotes the disregard for property rights.

There is nothing wrong with empathizing with the pain and suffering that people endure, or with showing mercy to those who are suffering. Private charity must be responsible so that it does not promote irresponsible behavior. However a problem arises when handouts are presumed to be a right or entitlement. When government force is used to fund charitable activities, the result is a system of public theft which exacerbates profligacy in society. If we truly wish to help the poor and unfortunate we must recognize the importance of individual responsibility, not government redistribution, as the foundation for stimulating economic well-being and character development. []

1.   Robert J. Gordon, Macroeconomics (New York: Harper Collins College Publishers, 1993).