John Maynard Keynes — not exactly history’s greatest opponent of government spending — is reported to have said he would be worried if government outlays ever surpassed 25 percent of GDP. Well, in recent years both American and British government expenditures have hovered around 40 percent of GDP. The bulk of that spending, perhaps as much as 70 percent in Britain, goes to feed the ravenous welfare state.
Clearly it’s time to question the welfare state. But such questions are too often viewed as taboo. Anyone who challenges it is viewed as seeking a return to the “dog-eat-dog” world of unfettered capitalism — a world where sellers supposedly exploited buyers, employers exploited workers, the rich exploited the poor.
But capitalism, to say nothing of poor old Fido, has gotten a bad rap.
Capitalism — real capitalism, not the mixed economies that have existed for the past century — is the system based on private property, free production, and voluntary trade. It’s not a zero-sum game where people battle over a fixed pie. Each person is free to create wealth and to trade it with others, such that they all benefit.
That’s the beauty of capitalism. Because all economic relationships are voluntary, people only enter into them when each party thinks it’s to his advantage. When you accept a job, for instance, it’s not because the employer forced you to work at the point of a gun. It’s because you valued the paycheck more than other possible uses of your time. It’s a gain for you and a gain for your employer. In some cases you may not be thrilled with the work or the pay, but the fact that a win may be smaller than you would have preferred doesn’t change the fact that it’s a win. And if what first seemed like a win turns out badly, you’re free to make a new bargain.
Capitalism isn’t dog-eat-dog: It’s win-win.
We don’t have capitalism anymore — not in Britain, not in the rest of Europe, not in the United States. What we have instead are massive welfare states. And if the false charge against capitalism is that it allows “the strong” to exploit “the weak,” then the true nature of the welfare state is that it allows “the weak” — i.e., the unproductive — to exploit “the strong” — i.e., the productive.
And exploiting they are. The Davey family, for instance, made headlines in 2010 for receiving £42,000 in state-provided benefits while driving a Mercedes, enjoying cutting-edge electronics, and continuing to have children (at the time of the story they had seven with another on the way). Mrs. Davey had never worked, and Mr. Davey had quit his job after he figured out he could do better by living on the dole. “I don’t feel bad about being subsidized by people who are working,” Mrs. Davey told The Daily Mail.
This sort of story does not represent some bizarre failure of the system — it captures the system’s spirit.
The truth is that the goal of the welfare state is to make the productive sacrifice for the unproductive. It establishes the principle that a person is entitled to state support simply by virtue of his need. But the state doesn’t have any money. In order to provide support, it has to take money from the people who earned it. Translation? A person’s need entitles him to your money. The less value he creates, the more rewards you owe him — and the more value you create, the greater your duty to serve him, and all the Daveys of the world. As Ayn Rand put it in her novel Atlas Shrugged, “If you succeed, any man who fails is your master; if you fail, any man who succeeds is your serf.”
How is that fair?
In place of capitalism’s philosophy of win-win, the welfare state puts everyone’s wealth up for grabs, ensuring that one person’s gain comes at his neighbor’s expense. Talk about dog-eat-dog.