Freeman

ARTICLE

Perspective: The Politics of Poverty

OCTOBER 01, 1990 by DWIGHT R. LEE, ROBERT L. SEXTON

Political competition depends on the skills and abilities of the competitors. How then can the poor, who lack the skills and abilities to compete successfully in the marketplace, compete in the political arena? They can’t, and therefore they haven’t. After all, if the poor had the skills and attributes that are necessary for effective political action, they would not be poor. Certainly billions of dollars have flowed through government programs supposedly established to redistribute income from the non-poor to the poor, but the poor did not structure these programs. The middle-class bureaucrats who run these programs, the consultants and academics who study them, and the doctors, farmers, and construction contractors whose services are demanded by them—they are the ones who share welfare programs and receive the most benefit from them. For example, in 1984 the federal government spent $344 billion on transfer payments of which only $80 billion went to the poor.

The benefits the poor do receive are provided in such ways as to make them more, rather than less, dependent on public support. As a result, they are made worse off in the long run. Current programs discourage the poor from entering the job market, and encourage poor husbands to abandon their families.

The welfare industry is perpetuating itself by undermining the economic incentives and the family structure that are so important if the poor are to develop the skills and attitudes needed to move up the economic ladder.

The deluge of government welfare spending has done nothing to redistribute income to the poor. It has, however, reduced economic productivity by requiring greater tax burdens on the private sector of the economy. The poor don’t have a bigger share of the pie, and because of welfare expenditures, the pie is smaller than it would have been.

—Dwight R. Lee And Robert L. Sexton,

writing in the October 29,1989,

Orange County Register.

The Black Hole

The government is seizing the thrifts, taking onto its own books the properties that served as collateral for defaulted loans. In theory, it will sell the properties and use proceeds to reduce its de-posit-insurance liabilities. In practice, history suggests government ownership is a black hole from which property never escapes. Office of Management and Budget attempts to sell assets are routinely defeated. The one notable success, the sale of Conrail, took years. The government still owns 85 percent of the land in Nevada and 87 percent of Alaska. Think of it this way: The last time the federal government ever sold anything was the Oklahoma land rush in 1889.

—from an editorial in the March 15,1990,

Wall Street Journal

Curbing the Impulse to Hire

In any community there are countless numbers of self-employed entrepreneurs who report that business is good—so good, they can’t keep up. In the dynamics of business development this is the point at which an entrepreneur would normally hire his first employee.

All too often this fails to happen, mostly because would-be employers are reluctant to assume the mountain of responsibilities that government heaps upon them should they hire someone.

What should be a simple, straightforward business transaction of mutual benefit is now on the order of an adoption—requiring, through a host of laws and regulations, that the employer assume growing responsibility for the life of another human being for an unknown period of time and with increasingly unpredictable consequences.

What is overlooked in society’s zeal to heap its problems onto the shoulders of employers is that economic reality demands that any employee, in any position, must produce enough product or service, which when sold at prevailing prices, will cover not only his wage (minimum or no0, but also thecosts associated in hiring him, including insurance, day care, health care, sick leave, vacation, and maternity leave—not to mention the additional legal, accounting, and filing-forms-in-triplicate costs in-cuffed by the seemingly innocuous decision to hire.

(This is not to say that such forms of compensation shouldn’t and wouldn’t be voluntarily negotiated in a free market without government mandates.)

But more than covering costs, would-be employers want to know, “Why should I assume this responsibility and risk?” Rational people will conclude, “I’d rather be fishing.”

This spells doom, not so much for the prospective job creators, who will likely find a niche for themselves, but for potential employees who are not cut out for self-employment or need the experience and training of employment, who need the job creators and who will be left with substantially fewer choices and opportunities.

—Evelyn Pyburn, Editor,

Big Sky Business Journal,

Billings, Montana.

Stealing from Children

American economic wealth is the product of the labors, savings, and entrepreneurial efforts of many generations of Americans. Our generation is the beneficiary of the apparatus of production left us by many generations that preceded us. We neither planned nor built it; with minimal efforts on our part we are enjoying the broad stream of goods it is providing. Yet, for most of us this is not enough; we make our political institutions run chronic deficits and leave the bills to our children. We would rather consume their heritage than to forgo our benefits. Unfortunately, we are sowing the seeds of our punishment which, to be just, will be both certain and proportionate to the offense.

—Hans F. Sennholz,

“Thou Shalt Not Steal, Coerce or Deceive”

(Libertarian Press, Spring Mills, Pennsylvania)

ASSOCIATED ISSUE

October 1990

ABOUT

DWIGHT R. LEE

Dwight R. Lee is the O’Neil Professor of Global Markets and Freedom in the Cox School of Business at Southern Methodist University.

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