The Poor Would Have More in a Libertarian Society (Part II)

In a Libertarian society, what will keep the poor from starving in the streets? What about the homeless and the people who are handicapped? What proof is there that private charity will be sufficient?

In the last month's Libertarian Solutions, we learned how a libertarian society would provide more help to the needy than they have today. Private charities would weed out the large number of people who choose welfare as a way of life. Overhead would be cut in half. Finally, the high cost of collecting taxes (two-thirds of a dollar for every dollar collected) would be avoided. With these savings, contributions could be a tenth of current welfare funding-and the poor would still come out ahead!

Providing help more efficiently to those who can't help themselves is only the beginning, however. Studies show that free markets, on average, create about ten times as much wealth as unfree ones. Not surprisingly, the needy in a wealthy society (e.g., the United States) are always better off than the needy in a poor country (e.g., India). Thus, deregulation, which stimulates wealth creation, helps the poor even more! A libertarian society would minimize the regulations which strangle the economy, thereby raising the standard of living for those on the bottom rungs of the ladder.

Ironically, free societies have a more even distribution of wealth than those which try to redistribute wealth forcibly! The reason is simple: free societies provide the best opportunities for the poor to work and grow rich. Conversely, a highly-regulated society creates poverty by destroying jobs, especially those of the disadvantaged.

During the 1980s, I gained first-hand experience of how government destroys opportunities for the poor to earn while they learn. For example, while rehabilitating a dilapidated apartment building, a young man who wanted to better himself came by hoping for employment. He had some disabilities that made him less than an ideal worker, but suggested that I hire him for about half of the current minimum wage. With experience, he hoped that I would pay him more or recommend him to others.

Fearful that our arrangement would come to the attention of the ever-present building inspectors, I declined. I only lost a potentially good worker, but the young man lost a chance to earn while he learned--thanks to the aggression of minimum wage laws.

The very laws that were supposed to protect this young man from exploitation actually impaired his ability to get ahead. While well-to-do youths simply pay educators to train them, the disadvantaged are shut out of the work force, sometimes permanently.

Some of my low-income tenants made their living by providing child care in their apartments or taking in mending. One ambitious woman was able to get work sewing curtains for stores and offices. The city regulators started calling me to complain that these women hadn't paid expensive fees to register their business. The regulators threatened to serve me with zoning violations if I didn't evict these unfortunates and destroy their livelihood. This time I refused to be intimidated and assured my tenants that they had my support. Unfortunately, most of them buckled under the pressure. They couldn't afford the hassle and the registration fees, so most went on welfare instead.

Licensing laws destroy jobs-especially jobs for the disadvantaged and the minorities. Recently, Afro-American women in several states have started boutiques that braid hair exclusively. Cosmetology licensing boards have forced many out of work by demanding that these ladies attend a year-long program, costing an average of $5000, that doesn't even teach braiding! In many cities, would-be taxi and van drivers can't conduct business without paying exorbitant fees (over $200,000 in New York City) for the medallions (licenses). In some cases, the city or county won't grant new licenses at any price.

Such government intervention creates a great deal of poverty by putting people out of work! Thankfully, the Institute of Justice, a libertarian law foundation, is fighting City Hall-and winning--on behalf of the braid brigade and the would-be drivers. The Institute's pro bono service helps the poor help themselves. While big government caters to the special interests who benefit from high hurdles to self-employment, libertarians are defending the rights of the working poor. Such cases demonstrate that liberty, not government, is the true friend of the disadvantaged.

Government regulations not only put the poor out of work; they create homelessness as well!

William Tucker, using statistical analysis, found that 42% of homelessness could be explained by the high median price of homes in the 50 cities studied. The median housing price, the best single predictor of homelessness, increased as zoning regulations and stringent building or housing codes did. As a result, rents skyrocketed, pricing the poor out of the market.

When cities tried to protect the poor with rent control, the plight of the poor worsened. Rent controls drive landlords out of business. The few remaining landlords can pick and choose among applicants, so naturally they rent to people who are middle-class and most likely to pay. As a result, the poor have no place to go and often end up on the streets.

Government regulations, meant to help the disadvantaged, create poverty for them instead. On the other hand, liberty promotes prosperity, especially for the needy. Liberty empowers the poor with the opportunity to work and grow rich, just as penniless immigrants did in the early days of our nation.

Of course, a few people will still be unable to create enough wealth to support themselves. A libertarian nation, with its prosperity and better employment opportunities, will be much better equipped than today's society to care for such individuals.

Government licencing, minimum wages, and welfare harm, not help, the disadvantaged. If we truly want to help the unfortunate, we must give them the gift of liberty. Nothing else will do.



Economic Freedom of the World 1997 Annual Report, James D. Gwartney. Vancouver: The Fraser Institute, 1997.

The State Against Blacks, Walter William. New York: McGraw-Hill, 1982.

The Excluded Americans: Homelessness and Housing Policies, William Tucker. Washington, D.C.: Regnery Gateway, 1990.