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Monday, October 4, 2010

What Our Welfare State Really Is

Freeman contributor Kevin Carson has an excellent, and remarkably brief, analysis of America’s welfare state: “Giving Back With a Spoon, Taking With a Shovel.”

Choice quote:

In most avowedly “free market” discourse on the right, the main direction of government activity is framed as a war on the “productive” rich in favor of politically organized, idle mobs….

But I would argue that most regulations of what employers can do to employees are just secondary restraints on the abuse of their unequal bargaining power — an inequality which results from primary background conditions created by government intervention in the market.

The main effect of most government policies is to increase entry barriers, minimum capital outlays, and overhead cost of small-scale production, and to reduce the amount of idle land and cheap capital, so as to minimize the number of self-employment opportunities that wage employers are forced to compete with for your labor. And by putting a floor under the cost of subsistence, the regulatory framework increases the size of the minimum revenue stream the average household needs just to break even, hence increasing workers’ demand for hours of employment relative to the supply….

I believe the overwhelming trend of income transfer is upward (but more indirect and less visible), and that the direct and visible downward transfers involve just the least possible fraction of this enormous sum required to reduce outright homelessness and starvation below politically destabilizing levels.

I recommend the full article.

  • Sheldon Richman is the former editor of The Freeman and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families and thousands of articles.