In any discussion those known as partisans of the anarchist market economy will soon be confronted with the despised exclamation: "And what about the poor?" Although grammatically a question, it is meant to be a moral condemnation. The secret behind this moral condemnation is a complicated system of ideology shaping the standard political wisdom.
With this section, my intention is to outline the libertarian approach to the social question. To settle the question of poverty the libertarian way, in my opinion, it is needed that we turn to the concept of criticism of ideology.
"Criticism of ideology" admittedly is a concept developed by social scientists ascribing themselves to some brand of Marxism. But on the one hand "criticism of ideology" is a method not necessarily connected with Marxism, and on the other hand the deep insights of such great thinkers as Herbert Marcuse or Gabriel Kolko are too important to any theory of revolutionary change to be dropped only on account of our rejection of Marxism. Let me explain the reason right off.
The libertarian approach to misery is to show that the social question is wrongly posed by established political factions and that they draw upon a misconceived definition of poverty. These fallacies, however, are not accidental errors. Quite to the contrary, the fallacies concerning the social question are an inevitable function of the ruling system. Without the belief in these fallacies the system could not work. That is what "ideology" means.
Destroying the ideology, or belief, is, of course, the task of libertarians. But unfortunately this task cannot be accomplished merely by spelling out the truth because the ideology is backed by powerful interests. This does not mean the role of the science of economics should be underestimated. The criticism of ideology rests upon the findings of libertarian economics. If we cannot prove our hypothesis of the disastrous consequences of state interventions in the life of society, the criticism of ideology would loose its very basis. On the other hand, however, if we try to do without criticism of ideology, we would have to consider being wrong. Why? Simply because the libertarian theory is accepted neither by scientists nor by the more general public. This may be an indication that the theory is not convincing or the fact of non-acceptance must be explained as part of the ruling system.
The explanation of how the system defends itself by manipulating the public opinion and even the opinion of scientists is the meaning of the term "criticism of ideology." To give an impression of how the libertarian can use the concept of criticism of ideology, I will present an example from the public choice theory.
To be explained is the fact that politics is concerned more with spending than with reducing the budget. This asks for an explanation because libertarian economics sees increasing budgets as neither in the real interest of any individual nor of the public. The explanation is: tax resources come from the whole community whereas tax benefits are concentrated on special interest groups. Cost-benefit-analysis on the level of interest groups participating in politics indicates that competing for tax money indeed is preferable. The political competition of pressure groups includes public statements. Therefore, these groups must look, and pay, for intellectual support. As most money for intellectual services is distributed by organized groups or by the state, making a living as an intellectual tends to mean defending big spending by the state as being a public good. The next step is that an ideology emerges out of this individual material interest.
What follows is that the adherents to the statist ideology will based on self-interest not listen to our simple plain truth. &endash; I do not know how the criticism of ideology enables us to overcome the strength of the system, but I do know that after the breakdown of Marxism, libertarian criticism of ideology is the only scientifically based revolutionary perspective. Thus, on us libertarians rests the hope for a more humane future.
The so-called social question is embedded in an ideological dynamic creating the firm belief that misery calls for state intervention. The dynamic is dialectically nourished by the interaction of three groups.
First group: Conservative or neoliberal free marketers insist that capitalism as it is today is the most effective way to run an economy. They show little to no interest in social issues. If the problem of poverty is called to their attention, they tend to devaluate the poor as dumb lazy trash who are unwilling to work.
Second group: State-socialism, authoritarian communism, and fascism advocat an economy fully run by government. They pose the social question. To fight poverty, they find it necessary to abolish the free market and organize production as well as consumption by public authorities in an alleged just way.
Third group: Liberals, moderates or social-democrats think of themselves as a synthesis of these two pretended extremes. Economically the moderate synthesis is named "interventionism." The free market is in general accepted as the most effective organization of production and consumption, but with certain distinct exceptions. These exceptions are called public or social goods. Public and social goods are, according to the moderates, the domain of state intervention.
The just described dialectic of conservative thesis, socialist antithesis and moderate synthesis is ideological because it exists to smokescreen the truth.
The truth is, firstly, that conservatives are not proponents of the free market but for a distinct kind of interventionism. The conservatives favor state interventions to perform three tasks:
n to stimulate or defend non-market generated wealth,
n to force certain values upon society, and
n to protect this unjust social order against resistance.
The truth is, secondly, that not the market mechanism but the conservative interventionism is the origin of poverty and other social problems. Consequently, giving the state absolute power to intervene in the economy and society cannot diminish the problems but results in a total problem: It is not equalized wealth which is generated but equalized poverty. Not equality in freedom is guaranteed but equality in slavery.
The truth is, thirdly, that moderate interventionism is also the wrong answer. Conservatism and authoritarian socialism are not extreme opposites but two degrees of the same. Thus, moderate interventionism cannot be seen as a synthesis, because the thesis of market economy is already negated by its supposed adherents, namely the conservatives. The moderate "solution" is just the emperor's new clothes.
Thus, the dialectic of conservative, socialist, and moderate rule is a system because it is only in their interaction that these groups find political stability: The failure of conservatism to answer the social issues raises socialist, or fascist, opposition. The failure of socialism leads to the moderate interventionism. And if people sometimes get tired of the problems of interventionism, they get some doses of either conservatism or socialism as cures; e.g. Labour ruling Great Britain in the seventies or Reagan ruling the US in the eighties.
At this stage of reflection I can give the simple libertarian answer to the question "What about the poor?" The answer is: Do not produce the poor.
The phrase "production of poverty" will shock conservatives and moderates but not Marxists. Most Marxists differ from us in their exposition of what are the mechanisms leading to the production of poverty. Again, I want to stress the fact that this does not relate to all Marxists. Gabriel Kolko, Michael Katz and even Herbert Marcuse, as self-termed Marxists, often come to conclusions very close to libertarianism.
I must confess that a full-grown libertarian theory of how the poor are produced does not exist, yet. What exists are many detailed studies, analyses, and hints in the writings of our classical authors like Von Mises, Goodman, and Rothbard. In the following I try to draw a framework for a libertarian theory of poverty based on the economics of Von Mises and the sociology of Paul Goodman. Needless to say, the framework is sketchy and preliminary, open to discussion, improvement, and elaboration.
To begin with I differentiate three categories of interventions leading to poverty.
First category: Interventions disabling one to feed oneself. These interventions hit certain normally healthy people by making them poor.
Second category: Interventions draining compassion for the disabled. These interventions harm people disabled by birth, accident or previous interventions in such a way that they are not supported as well as they could be.
Third category: Interventions harassing certain ways of life. These interventions are concerned with people who do not consider themselves as needy but are selected by the authorities as needing help.
Next, I will fill these categories with some contents. Without claiming to be complete I will mention items which seem to me most important.
These interventions hit certain normally healthy people and make them needy. I want to discuss the impact of two interventions, central to any concept of state, namely taxation and inflation.
Taxation: It is a well-established libertarian thesis that taxation harms the whole economy. But it definitely does not affect all people of the community in the same way. Taxation divides society in a class of tax-payers and a class of tax-consumers. Later I will say something about the tax-consumers, a term often misunderstood in many libertarian writings.
But for now let us take a closer look at the tax-payers. They can easily be sub-divided by the concrete form which the levying of taxes takes. As we know from the price theory of Austrian economics, on the marketplace no tax can be shifted forward. Rothbard named this the "first law of incidence." By preparing a balance account of what a person, or group of persons, is paying in taxes and what is received in subsidies it is possible to discover which people are harmed most by the intervention. Thus, the levying system itself generates income classes.
There is another aspect to this. The law of incidence applies only to the market situation. By selling services to government agencies it is, without any doubt, possible to shift a tax forward. This inevitably leads to higher taxes, higher prices for goods sold to government and then to higher taxes again. Those who are able to do business with the government, most prominent among them being the military industry, are to be called "tax-consumers." On the other side of the coin, in the highly developed interventionist economy the majority of employers and employees alike are either directly or indirectly connected with the so-called public sector. People with no such connection become the lower classes. Paul Goodman spoke disgustedly of what he called "soft money," earned in the government's grace, and of the hardships to earn "hard money" with real work.
Let me dwell on this point for a moment. The labor market is relatively free. That is, labor has a competitive market price. To be sure, the market is robbed of all those resources which are allocated or wasted by the government. Thus, the relative market prices of labor tend to fall. On the one hand, employers selling their services to government agencies at an above-market price and buying labor at the left-over market price, earn a steady rent. On the other hand, workers whosemarginal wages fall below reproduction costs will drop out of the labour market, forming the group of long-term unemployed welfare recipients.
To my knowledge, all economic studies on the redistributing effect of taxation and subsidies indicate that welfare is for the well-to-do, regardless of the political options involved. I know of no study elaborating on the thesis that taxation by its levying system generates income classes. This is yet to come.
Inflation. Whereas taxation is the official instrument to collect government revenues, inflation is the hidden one. Inflation is the legal method to counterfeit money, and has the same effects. Those who first spend the fake money benefit at the cost of later owners. Only the government and its certified money agencies, namely banks, can inflate money legally. And it should be quite evident that inflation is used as a mechanism to re-allocate resources from the free market to the public sector, often on an international level. The distortion of the market by this re-allocation is, according to Austrian economics, the cause of the so-called "business cycles."
As with taxes, inflation reduces the relative market prices of all labor, goods and services not sold to the government. Consequently this leads to unemployment for those people whose work has a marginal utility below the reproduction level. This is a well-studied effect of inflation.
But there is another aspect which is, as far as I know, only hinted at in the writings of the Austrians. If inflation harms the early owners of false money less than later ones, it follows that the lower stages of production are harmed most. This could explain, for instance, why peasants and farmers are so bad off in modern society although they produce the very basis of our existence. It could explain the rural exodus. And it could probably be an explanation of the confusing fact that countries with heavy interventionism, like India or the late USSR, have problems to produce enough food while at the same time providing high tech like atomic bombs or satellites.
Like taxation, inflation does not only harm the poor more than the wealthy but it also generates classes of poor people.
These interventions harm people disabled by birth, accident or previous interventions in such a way that they are not supported as well as they could be.
There is no informed person, I think, unaware of the deplorable state of affairs in hospitals, medical care systems, old-age pensions, asylums, jails, all of which are more or less either state-monopolized or state-controlled.
The French philosopher Michel Foucault gave me the idea that these institutions are not failing to help the poor but that they are intended to harm them. These institutions are monopolized to make sure that those people selected to be poor stay poor. That they keep quiet. That the normal citizens get the message: "Look what happens if you dare to resist."
Libertarian studies of the adverse effects of such welfare measures like poor relief, rent control, affirmative action, free tuition, minimum wage laws and others can be re-interpreted in the light of Foucault's idea: These measures are meant to harm precisely those who they indeed harm &endash; the poor.
Within the production of poverty, social welfare programs fulfil three tasks:
n keeping the poor needy,
n preventing free market solutions like insurance, self-help, and charity, and
n fostering hatred against the "tax-consuming" poor.
Let me emphasize the last point because some libertarians sound just like conservatives to me. The poor, objectively, are not tax-consumers. First they are stripped of their livelihoods by interventions and then they are victimized by the coercive welfare system. Calling them tax-consumers is an ideological trick to divide the oppressed people. The term "tax-consumers" should be reserved only for those who really benefit from the system of interventions. These are, and no one else, the ruling class.
These interventions are concerned with people who do not consider themselves as needy but are selected to be cared for by the authorities.
Why is someone selected to be poor? Sometimes it is probably the case that those harmed by interventions are unintentionally selected. But in many cases, it is done with intention. For hundred of years peasants have been the object of exploitation by the ruling class &endash; military brutality, confiscation, taxation and inflation being the instruments. Additionally: ethnic, cultural, religious, sexual, political, and generally non-conformist minorities are preferred groups to be selected.
But how is someone selected? Some instruments of exploitation are self-selecting, for instance, as we have seen that inflation inevitably select the peasantry, among other groups, to be poor. Yet the selection process is too precious to the state to be let alone. There exists at least one specialized instrument for that selection process, namely the public school system, which is not only state monopolized but also compulsory.
I limit my discussion of schooling to one aspect, the credential system. The schools and their diplomas define the future chances for every single individual. Not surprisingly, the golden rule of the credential system is that no one should get any chance if not successful in school. That, as Goodman time and again pointed out, denies those people a chance who by inheritance, cultural tradition, or personal decision don't fit in the school routine. To be sure, the competition in school is quite different from the competition in the marketplace. The school competition is, other than the market one, a closed zero-sum game with the winners balanced by the losers. The rules are not set by the players but by outside authorities. Success is not defined internally by the interaction of individual aims and voluntary co-operation but by external criteria.
Given that the public school system is monopolized and compulsory, the ruling class is able to exactly select groups making losers out of them by exclusion.
Schooling is one of the most far-reaching selective instrument but not the only one. I only touch upon some other instruments although their very brutality often leads to human tragedies.
n Sometimes the government decides to care for alleged "poor" people by coercively re-locating them. Prominent examples are Nicaraguan Indians under Sandinista rule. A variant considered more "civilized" and "decent" is public housing.
n Regularly government agencies decide to care for the alleged "neglected" children of the poor by taking them away from their parents against the will of both, parents and children. This takes place daily in most so-called western democracies.
n Within every country one or another victimless behavior or lifestyle are criminalized, for instance truancy, adultery, prostitution, homosexuality, gambling, certain cults, and drug-taking. And jailing is meant, as I said before, not to assimilate and rehabilitate but to form outcasts.
It's time to draw some conclusions. The social question is not a problem for libertarians. Libertarianism is the solution of the problem. Reviewing libertarian literature, I judge that it is possible to formulate a coherent, well-documented theory of poverty. The theory being that poverty is produced either intentionally by interventions or by their unintended consequences. In addition, and especially, all interventions express the will of the ruling class to dominate some other groups thereby making them poorer or weaker than they could be. If no power interest is involved in an action, there would be no need to express it as coercion which intervenes in social life, but voluntary co-operation would suffice.
The libertarian theory of poverty, is also able to explain how, counter to the truth, the ideology of the welfare state can evolve. Organized pressure groups and the government itself, buying up most of the intellectuals, decide rationally that it is more cost-effective to compete for tax revenues than to promote decreasing the state &endash; its institutions and interventions.
After the failure of state-communism, libertarianism is the only revolutionary approach to stop the production of poor, unfree people. But, just like Marxism, we have the problem of how to fight the strength of the ideology being expressed by the ruling class.
Empirical studies are seldom better than the theoretical framework they come from. Domhoff's study "Who Rules America Now?" (1983) is not among them. The introductory chapter called "Class and Power in America," only 15 pages long, contains everything needed to reduce the usefulness of all the empirical evidence of the remaining two hundred pages to zero, at least for libertarians.
Let's start with the examination of Domhoff's attempt to define the term "power," the central concept of his study. He follows Dennis Wrong's notion, "Power is the capacity of persons to produce intended and foreseen effects on others" (p. 9). He does so by explicitly stating that he sees flaws in Max Weber's definition, in which "the ability to use force or coercion" is central to the concept of power. Whatever the merits of using a concept of power broader than Weber's might be, we, then, should introduce a distinction between power in the sense of influence (non-coercive power, so to speak) and power in the sense of employing force (aggression). Even if Domhoff does not see, like libertarians, a moral difference between these two sub-concepts of power within his broad definition, he should have seen the analytical difference.
The result which the mentioned flaw in Domhoff's definition of power has on his analysis is disastrous. This is apparent in the "indicators" he uses to reveal the power structure. These are
"1. who benefits? 2. who governs? and 3. who wins?" (p. 11 ).
Who benefits? "Those," writes Domhoff, "who have the most of what people want are, by inference, the powerful" (p. 11). This sentence is not absurd, but even necessiates a third sub-concept of power. If you look at two families living in autarchy with no relation to each other, and see that they have a different level of standard of living, it can make sense to say that the family with the higher standard of living has more "power." But in this sense "power" does not mean power over someone, but power to accomplish something.
Wealth can be used as an indicator to measure influence or oppressive power only if you assume that without such power the values would be equally distributed. Put another way, this indicator indicates the notion that wealth inevitably is built on the misery of others. Needless to say, libertarians believe this notion to be wrong. On the market, wealth is accumulated by the very service to other people. The market is not a zero-sum game. Wealth, on the market, is an indicator of making other people happy, not making losers out of them.
But wealth can also be accumulated by force (power). Therefore wealth is not an indicator, but something to be explained. If wealth and power are, as Domhoff concedes, not "strictly correlated" (p. 204), this fact can be attributed to the fact that there are two means to accumulate wealth, not differentiated by Domhoff.
Who governs? The second indicator: "Power also can be inferred from studies of who occupies important institutional positions and takes part in important decision-making groups" (p. 12). The concentration on "positions" leaves out the question of how powerful the positions in fact are. Just two examples:
1. The people who manned the political positions after the American revolution undoubtedly were more restricted in respect to social class, race, sex, and religion than nowadays. But clearly such great men as George Washington, Thomas Jefferson, and James Madison were, whatever their statist crimes might have been, a thousand times less powerful than inferior minds like John F. Kennedy, Ronald Reagan, and George Bush.
2. Ethnology has for a long time hypnotically stared at the "leadership positions" of so-called "primitive" societies and who occupied them. But libertarian researchers, e.g. the late Pierre Clastres, can demonstrate that the "leaders" in such societies are nearly powerless in imposing their wishes on the people. For instance, great American Indian military leaders are known to have been unable to find soldiers to wage a war which people thought of as unnecessary, because the leaders lacked the power of conscription.
Again, Domhoff's second "indicator," whatever it indicates, does not indicate "power" in the sense he himself defined it.
Who wins? The last indicator: "Power can be inferred from [Š] issue conflicts by determining who successfully initiates, modifies, or vetoes policy alternatives" (p. 12). Although this indicator, at first glance, seems to be reasonable, the way in which Domhoff uses it, is not convincing.
Look at these two statements: "Ultra-conservatives have continued to insist that taxes should be cut to the very minimum" (p. 91). And: "Many corporations attempt to sell the free-enterprise system through [Š] advertising" (p. 105).
Leaving aside that both mentioned groups today are not principled in their commitment to either low taxes or free enterprise, the fact remains that Domhoff seemingly would regard a political victory of "ultra-conservatives" to keep taxes low or of "corporations" to preserve the free-enterprise system as a sign of their being powerful. On the contrary, such a victory would limit or even diminish the chances of the upper class to execute power in the sense of oppression.
What Domhoff does not realize is that the dynamics of power spring from the political structure of the state, i.e. the legal monopoly of force, and the interactions between the social groups who have access to or want to get access to this monopolized force. Everyone participating in this structure of monopolized force is a Ruler, or more precisely: an oppressor. Besides these Rulers there might be wealthy people, probably forming an "upper class," but with no logical relations to the oppressors. The difference is obviously that the wealthy are beneficial to other people, according to their very own judgement, whereas the powerful are exploitative. No analysis which leaves out this decisive difference can satisfy the libertarian sociologist.