Capitalism, Not Welfare, Has Destroyed Faith in Freedom

At Future of Freedom Foundation, Jacob Hornberger writes: “America’s welfare state way of life is based on the notion that the federal government is needed to force people to be good and caring to others.” 

Um, no. America’s welfare state way of life is based on the notion that, since the capitalist state redistributes massive amounts of income and wealth upwards from producers to rentiers as profit, rent, and interest, compensatory state action — namely, returning a tiny fraction of that income to the neediest — is necessary to preventing capitalism from collapsing from social disorder or insufficient aggregate demand.

The welfare state did not come about as the result of any idealistic “notion” on the part of do-gooders and bleeding-hearts. Such people may have helped sell it politically, but the architects of the welfare state were hard-headed capitalists who rightly understood its necessity for keeping capitalism to sustainable levels of extraction. Of course the capitalist state was motivated in part by the grass-roots activism of the destitute and unemployed, but the specific form the welfare state took was determined by policy elites understanding of the system’s survivability needs.

Ironically, no one understands the need for a powerful interventionist regulatory and welfare state better than capitalists. And nothing would destroy capitalism faster than right-libertarians who, if given free rein, would balance the federal budget, pay off the debt, and eliminate the welfare state.

Way back in the 1860s, Karl Marx characterized the Ten-Hour Day legislation passed by the British Parliament as employers acting through their state to limit the exploitation of labor to sustainable levels. The length of the working day in 19th century Britain presented capitalists with a problem akin to the prisoner’s dilemma. 

It was in the interest of the capitalist class as a whole that the exploitation of labor be kept to sustainable levels, but in the interest of capitalists severally to gain an immediate advantage over the competition by working their own laborers to the breaking point. The capitalist state solved the problem by limiting the working day on behalf of employers collectively, so that individual employers could not defect from the agreement. In the chapter on the Ten-Hour Day in Capital, he wrote:

These acts curb the passion of capital for a limitless draining of labour power, by forcibly limiting the working day by state regulations, made by a state that is ruled by capitalist and landlord. Apart from the working-class movement that daily grew more threatening, the limiting of factory labour was dictated by the same necessity which spread guano over the English fields.

Marx referred, later in the same chapter, to a group of 26 Staffordshire pottery firms, including Josiah Wedgwood, petitioning Parliament in 1863 for “some legislative enactment”; the reason was that competition prevented individual capitalists from voluntarily limiting the work time of children, etc., as beneficial as it would be to them collectively: “Much as we deplore the evils before mentioned, it would not be possible to prevent them by any scheme of agreement between the manufacturers…. Taking all these points into consideration, we have come to the conviction that some legislative enactment is wanted.”  

The smarter capitalists, similarly, support a welfare state for two main reasons. First, the capitalist state’s upward distribution of income in the form of economic rents creates a maldistribution of purchasing power, which in turn results in chronic tendencies toward underconsumption and idle production capacity — tendencies which periodically almost destroyed capitalism (most notably in the Great Depression of the 1930s). Redistributing a small portion of this income to at least the poorest part of the population, and otherwise bolstering aggregate demand, is necessary in order to prevent depression. 

Second, if the worst forms of destitution are not addressed, starvation and homelessness will reach levels that threaten political radicalization, disorder, and violence.

At every step of the way, the primary architects of the 20th century mixed economy were hard-headed capitalists. There is enough historiography on this theme by James Weinstein, Gabriel Kolko, G. William Domhoff, and Frances Piven to keep Hornberger busy for many months.

If anything destroys the average person’s faith in freedom, it is the pretense of people like Hornberger that the capitalist system they defend is the product of freedom rather than of massive state violence, and the association in the popular mind of the language of “freedom” with the system they experience daily as a boot on their neck.

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