Milton Friedman - What's wrong with welfare? / Universal Basic Income & Equity Debunked

could you please join me in welcoming dr milton friedman thank you ladies and gentlemen i'm glad to be here tonight i must say i am strongly tempted after that the title what's wrong with the welfare state with a question mark to say nothing and turn around and walk off the stage that would make it easier on all of us but i learned long ago that it was good policy to be honest what i want to talk about tonight are first of all the origins of the welfare state and second of all why it is that the noble objectives which have animated the growth of the welfare state have produced results that disappoint almost everybody regardless of whether they were initially in favor or initially opposed to the various measures and finally ask ourselves what if anything is the alternative to it and what can we do about it as to the origins of the welfare state they go a long way back there was a book which was published quite a long time ago by a man by the name of cecil driver called tory radicals and it referred to a group of people in great britain in the early part of the 19th century 150 and more years ago william osler lord shaftesbury these were a group of people from the upper classes of the british aristocracy who were very much concerned about the welfare of the ordinary people of the lower classes and who were the became the driving force behind a whole series of legislation the so-called factory act the first 12-hour day and then 10-hour day act and so on which they promoted from a point of view of no bless oblige their whole attitude was after all some people know better than other people what's good for people we are among the elite we know what's good for the ordinary man we don't want to force it down his throat but we believe that in a properly structured society he would recognize that we do know better and would assign to us the task of structuring things for his benefit that was a notion which the tory radicals had at that time and it is in many ways the basic motivating force on a moral and ethical level behind the movement for the welfare state the closest modern descendant of that movement is john kenneth galbraith who is also a tory radical today he and those who share his views again believe themselves to be an elite who know what is good for the ordinary man who again do not wish to impose their views on the ordinary man but who believe that the ordinary men too ought to recognize the superiority of the elite and assigned to them the task of choosing what goods they consume what products are available and so on the fundamental driving force is paternalism it's an attempt to do good for other people now interestingly enough the other source of the modern welfare state comes from a very different different yet not holy unrelated tradition it comes from bismarck's germany bismarck's germany as it was established in in the late 19th century was a centralized bureaucratic state and it was the first modern state which introduced on a fairly large scale the kind of welfare measures that have become common in most societies in the modern day the movement toward a welfare state in its modern form dates in great britain back to the early decades of the 20th century it was already before world war one that in small measures britain started down the path of introducing governmental provision for one contingency after another what ultimately came to be known as cradle to the grave had its start in the early 1900s in the main with measures for governmental provision for the old and for the mentally deficient it was followed in by sweden in the nineteen twenties and thirties many of you will have remembered a very famous book called the middle way which told about how sweden was establishing a new different means the welfare state came to the united states relatively late it came to the united states really in any significant form only in the 1930s after the newt after the great depression and the beginning of the new deal now the interesting thing is that in every case the welfare states are in trouble the united kingdom has obviously been having great difficulties social economic political for a while everybody was saying ah but there's sweden but now sweden is in trouble it is having great difficulties it's uh government has changed form which is a minor matter because the substance hasn't changed but it has having a good deal of discontent and a great deal of economic difficulty denmark is in trouble the united states as we have moved farther and farther down the road we have had more and more dissatisfaction with what has occurred in the case of the united kingdom it is tempting to attribute the problems of the united kingdom and many british have done so to the consequences of world war one and world war ii to say that world war one decimated a whole of a young generation that would have provided the leadership for britain in world war ii destroyed its economic capacity and yet in a great book that was first published in 1899 and of which a revised edition was published in 1913 av dicey a famous constitutional lawyer outlined what was going to happen in britain in coming decades in the 1913 edition of his the relation between law and public opinion in the 19th century dicey already saw the the what was going to happen from the developments that were going on he dated the turn in britain back in the 1880s and 1890s it turned from individualism to collectivism and he discussed what were going to be the far-reaching consequences of the changed role that was being assigned to the state vis-a-vis the individual and if you read that preface that 1913 preface there is nothing that has happened from that data this that was not pretty clearly foreshadowed so that it wasn't the war in any event sweden is decisive evidence because if it was a war that caused the problems in the uk sweden stayed out of both wars and indeed profited enormously on an economic level from them and you certainly cannot blame the problems that have been arising in sweden on the war the thing that about the welfare state is that when you start on this route everything goes fine to begin with you are imposing taxes on ninety percent of the people small taxes and are able to give considerable benefits to 10 of the people but the problem is that as time goes on more and more people come in and either express a desire or given a chance at a part of the proceeds so you gradually get to the position where 50 of the people are providing benefits to other fifty percent of the people and then you ultimately get to the position where a hundred percent of the people are paying taxes in order to provide benefits to a hundred percent of the people and you are then in that situation which uh frederick bastiat described so well 150 years ago when he said that government is at fiction whereby everybody believes he can live at the expense of everybody else the question remains however what goes wrong why is it that such noble objectives lead to such disappointing results after all the objective of promoting the welfare of the ordinary man of eliminating poverty and disease providing security for old age and against mishaps a fortune those are noble objectives i do not believe that there is anybody who can regard them as undesirable why is it that the attempt to effectuate such noble objectives by using the machinery of government tends to produce results which are so disappointing in my opinion the fundamental answer is very simple using government to achieve these objectives means trying to do good with someone else's money and when you try to do good with someone else's money there are two basic flaws in the process the first of those is that nobody spends somebody else's money as carefully as he spends his own and therefore you're going to have waste and ultimately fiscal catastrophe but the second is that you cannot do good with someone else's money unless you first take it away from them and therefore force coercion sending a policeman around to pick somebody else's pocket is at the very heart of the welfare state and the situation becomes one in which bad means corrupt the good intentions it's when you try to use bad means to achieve good objectives the end result is likely to be that the badness of means will triumph over the goodness of the objectives new york city provides a perfect illustration of this point there is no city in the country which that is more welfare state oriented there is no city in the country and few in the world that have so long a list of programs allegedly designed to benefit those in a state of difficulty some five or ten years ago john kenneth galbraith whom i mentioned before wrote an article about the problems in new york in the course of which he said that there was no problem new york had which could not be solved by the having the government spend more money on it since he wrote the budget of new york has roughly quadrupled and the problems of which he spoke have gotten worse rather than better why well in the first place if the government spends money on it somebody else has less money to spend the government has been spending more money on these problems but more money has not been spent on these problems because a government can get money to spend only by taking it away from somebody else and since no one spends somebody else's money as carefully as he spends his own it's not surprising that money spent by governmental officials has produced less satisfactory less efficient results than money spent than if people have been spending their own money it so happens of course that new york has been from this point of view fortunate in not having one of those printing presses on which you can turn out green pieces of paper so that unlike great britain unlike sweden and unlike the united states as a whole the fiscal problems of new york could not be concealed by inflation by printing money and trying to acquire resources for a time with inflation in the case of the united kingdom that has proved a very fruitful resource and it has enabled britain to postpone the evil day but new york fortunately had no such recourse which is why the results showed up more clearly and more sharply in lieu of a printing press all new york had were some senators and congressmen to go down to washington but given the great burst of sympathy for new york from the rest of the country those missions to washington were not uniformly successful and the result is that on a fiscal level new york is bankrupt whether it calls itself bankrupt or not is largely irrelevant the fact remains that it is it is bankrupt not in spite of but because of the attempt to do good with other people's money that's the one cons one of the consequences a necessary consequence of the welfare state approach but a second consequence is a loss of freedom if you use force to effectuate objects good or bad there is going to be a loss of freedom and new york has lost freedom and new yorkers have lost freedom in a double sense the city of new york has lost freedom the citizens of new york have lost freedom they may elect a mayor but he's a figurehead the actual power in running new york is now in the hands of a commission appointed by the state of new york to supervise the the bankrupt city of new york and the mayor has and the elected officials have very little power to do anything so you have lost freedom in that sense but the individuals have lost freedom in a more important sense that the citizens of new york over that considerable part of their income which is being spent for them by governmental officials no longer have freedom to dispose of as individuals they do not have freedom in the housing area to enter into contracts with their neighbors here again av dicey in his that in that preface i referred to before was enormously prescient and farsighted and i want to quote from you for you from his preface he was talking about a measure to provide for mentally deficient people state insomnia saint asylums if you want to call them that or the equivalent and he wrote the mental deficiency act is the first step along a path on which no sane man can decline to enter but which if too far pursued will bring statesmen across difficulties hard to meet without considerable interference with individual liberty if too far pursued will bring statesmen across difficulties hard to meet without considerable interference with individual liberty you are all aware of how depressingly true those words have become in the case of russian he talked about mental deficiency acts and russia has now been using insane asylums are their equivalent as a way of disciplining dissidents anybody who is a dissident is obviously suffering from a disease of being antisocial and he must be cured by being placed in a hospital where he can get appropriate shock and other treatment from so-called psychiatrists and what's true in the case of the mental deficiency act applies equally in respect of other measures if we assign to others the task of taking care of us we cannot retain our freedom to pursue our own lives as we would now let me turn from this general analysis to a more detailed analysis of why it is that the welfare state measures have so almost invariably disappointed their well-meaning sponsors if you ask anybody people who call themselves liberals although that is a term i do not myself wish to apply to them i am a liberal i believe in freedom liberalism means of and belonging to freedom pertaining to freedom those people who now call themselves liberals have misappropriated the term because for them it simply means that they are liberal with other people's money but suppose you ask one of those people who styles himself a modern liberal what do you think about public housing do you think that was a good program oh he'll say you know that program had some bad features you know we had those wonderful houses in st louis the pruitt i go houses we had to blow them up we have in the course of public housing torn down more dwelling units than we have put up in every sit city and state of the country public housing units have become a source of crime and indigence they have done harm i remember very very well a personal episode along these lines when many years some quite some years ago i was in los angeles not long after the watts riots and i went down to uh i had a guided tour through the watts area of los angeles and the man who was guiding me was a wonderful fella who was in charge of a project sponsored by a trade union for self-help for the people in was and i said to him well there are some houses over there they look pretty good those dwelling unison's apartments and he said to me that that's the worst thing that ever happened to watts he said those are public housing and then he went on and he said do you suppose it really helps the youngsters in watts to segregate all those who are poor in one place to take all the divided families because after all a large fraction of the poor come from those in which the family is broken up so you have all the children without with only one parent and their parents all put together in the one building and they have only one another as to work with that's terrible we need to have a very different kind of a setup well what he said is right wherever it's been used public housing has been a disaster but if you ask the proponents of it people who have been proponents of it in the past they will agree but then they will say but that's because we didn't do it right we ought to spend more money on it we ought to have scattered public housing instead of concentrated or we ought to have this that or the other thing and over and over again you will find that the reaction is what we've done in the past has not worked but that's because we haven't done it right we ought to spend more money i can understand that attitude in the 1930s the 1940s when we were starting in this country on the road and when we had not sufficiently absorbed the experience of other countries but it is much harder to understand in the 1970s when we now have 40 years of experience behind us and we have seen exactly the same thing happen in area after area after area doesn't the time come when we have to say it's not the particular program it's the system that's wrong well why is the system wrong fundamentally it's because the laws of the market work as well in the political arena as they work in the economic arena we have all of us had a tendency to look at economic organization and political organization in very different ways when we come to the economy as economists political scientists and whatnot we say well it has laws of its own we ask if you change this what will happen and we say of course we will treat people in the market as pursuing their own interest the worker will try to get the highest wage the consumer will try to get the lowest price the employer will try to get the best deal the producer will try to make the most profit but then when we come to the political arena we tend to look at it a little differently we tend to say well now let's figure out what would be the right thing to do from the social point of view let's persuade our fellows to vote for it and once we voted for it we'll have we'll have the results we want but surely we have to look at it from a different point of view we have to say that people who are in the political arena are also people they are also trying to do what's best for themselves the politicians are in business they are trying to maximize the number of votes they get or maybe not the number of votes but they're trying to act in such a way as to get enough votes to get elected the bureaucrats the i don't mean that in any invidious way uh i'll come and become more invidious about them later but at the moment i don't want to start that way you or i as a bureaucrat if we're in that position we're going to pursue our own interests now in saying that we pursue our own interests they don't have to be narrow interests the the uh the great martyrs in the world have pursued their own interests as they have seen that but everybody is going to pursue his own interest as as a great friend of mine an economist at ucla army alchin always says there's one thing you can depend on everybody else to do you can absolutely depend on him you can always depend on him to put his interest ahead of yours so if we're going to analyze the political arena we have to look at that as a different kind of a market in which there is also competition if the government is going to distribute a million dollars for whatever program no matter how it will pay people to spend up to a hundred million dollars to get it to go to them instead of somebody else if goodies are going to be distributed well then you better go out and try to get your share of the goodies if you have a perfectly operating market if you have what we economists call equilibrium you will end up just as equilibrium in the economic market leads to zero profits so equilibrium in the political market leads to no net gain to anybody because you're going to distribute a million people spend a million to get it you're back where you started from this is not offensible fanciful view let me give you a couple of very simple examples which aren't strictly in the welfare state area but in which the same principle applies consider the issuance of tv and radio licenses if you can manage to get the fcc to grant you a license for a tv station under the law you will pay nothing for it directly to the t to the fcc that license will immediately be worth a considerable number of millions of dollars we could name some fortunes in this country that have derived from that and some of the names would even be known to you now given that that's the process it pays you if you're interested in getting it to one of these free grants so-called free grant it pays you to devote a lot of effort and energy and money to making sure you get it instead of somebody else and so you will go in for a big publicity campaign you will wine and dine the appropriate legislate tours you will see if there is some way in which you can indirectly get influence on the commissioners you may put on a a big program of getting public opinion polls of developing a fancy package and so on you can see what happens you spend money and not only you spend money there's only one of these going to be delayed distributed but it'll pay 10 100 people to spend some money in order to try to get it and on the average it will pay the whole level to spend as much money in total as the value of the tv license once distributed nobody has any net benefit no benefit from that program you take the case of urban renewal legislation if you have urban renewal first of all it will pay you to try to influence and spend money on influencing the legislature to have the particular area where you've got some property you'd like to get rid of included in the urban renewal area and i may say in this game there are universities some of which i have been associated with which have not been innocent of playing this game once the urban renewal legislation is passed it will pay you to bid among one another to get the property which is going to be taken over so that the first proposition is that if you are going to spend somebody else's money somebody else's money is going to be spent there will be many claimants for it and not only those to whom the well-meaning people initially intended it to go in the second place in this competitive game who are the most efficient competitors is it the poor suckers at the bottom who haven't got any money there may be no in direct and close relationship between ability to compete in the political arena and ability to compete in the economic arena but they're not wholly unrelated those people who have not had the qualities which enable them to succeed in economic arena are not likely to have the qualities that will enable them to succeed in the political arena there has been the great fear over the centuries of democracy on the ground that the have-nots would get together against the haves that the bottom 51 percent would get together in a majority rule and to spoil the top 49 percent that fear has proved unjustified and for very good reason it's not a sensible coalition if you're organizing an electoral coalition that's a silly way to organize it what you want to do is you want to leave out the top five percent because the money you can take from them is more important than the votes they can provide you want to leave out the bottom 44 because first of all they're likely to be more easily duped with respect to providing them with your votes but they aren't likely to be very efficient good competitors and then you form a coalition of the 51 percent in between and benefit that 51 at the expense of the people at the very top and the people at the very bottom colleague of mine george stigler in writing an article on this subject called this proposition director's law after a another associate or relative of mine my brother-in-law aaron director who first developed this idea that this was what you would expect to happen now that's an oversimplified picture because of course the 51 percent doesn't become a single coalition in the middle it's made up of lots of little minorities we talk about being guided by majority rule but we're not we're and yet we are we are controlled we are run in a political system you are run by a majority which is composed of a coalition of minorities you get five percent who feel very strongly on one issue and are willing to give up their vote on that issue forget about everything else you get another five percent another five percent and if you want to get elected to office if any of you in this room have political ambitions the way to get elected to office is to figure out how you can construct a coalition of enough five percent so you get 51 that's why special interests are so powerful and get their way of course over and beyond the concentrated minorities who will get their way in the political process you have another group that has that develops as the welfare state grows that becomes increasingly important and these are the government officials elected and unelected this applies to the welfare measures but of course it applies to many other issues you now have for example a newly established department of energy which has nineteen thousand employees which has contracts with contractors who employ another hundred and thousand hundred thousand people so you now have a hundred and nineteen thousand people who are being paid to devote a large part of their energy to getting government more more and more deeply involved in the problem of production distribution and consumption of energy but the same thing is true in the welfare area some years back when patrick moynihan was not a senator of the state of new york but was an adviser to president nixon he was responsible for trying to get through congress a welfare reform program called the family assistance plan form of the negative income tax a program not very dissimilar to the one which president carter has now said he's going to try to get through moynihan failed he wrote a book about that failure and it's a fascinating book why did he fail well there are a number of reasons but one of the most important to which he refers was a welfare establishment enacting that law would have put out a business a lot of people who had nice jobs exerting real influence in administering one or another welfare program because this would have been a substitute for afdc for food stamps for a half a dozen other programs now again don't misunderstand me none of these these i'm not saying these members of the welfare establishment opposed it out of out of a deliberate malice or with the belief that they were doing harm not at all but everybody is perfectly capable of persuading himself that what's in his interest is in the nation's interest and the bureaucrats here i am i'm running a bureau we're doing good work we're doing important things you mean to say you're going to put me out of business that's not the way to improve the national welfare and so you get a a concentrated group of governmental bureaucrats who make it more and more difficult to follow policies which are in the general interest if they tend to conflict with their own bureaucratic interest let me go from this general level of analysis and get down to specific cases let me first give you some numbers to show you that i'm not making up the problem i'm talking about we have had an enormous number of welfare measures passed over the past 50 years in the name of helping the poor the total expenditures on all these programs the total expenditures by the federal the state and the local governments excluding private expenditures excluding private charity in the rest total governmental expenditures amount today to one-seventh of the national income the government to put this in terms that are more meaningful the government publishes figures on the number of people who are regarded as being in poverty now i warn you that's a wholly arbitrary number these levels that divide people between the not poor and the poor are arbitrary but take them for what they are the government estimates something like uh 12 or percent of the people are in what they call low-income status or poverty suppose i divide the total amount of money spent on these programs by the number of people labeled poor the answer comes out to nine thousand dollars per person or thirty six thousand dollars per family of four to take the mythical family of four so much beloved by statisticians compare this with the average per capita income of everybody the per capita income per person income of all the people in the united states after taking away taxes disposable income is sixty five hundred dollars if that nine thousand dollars per person were really going to the poor they'd be among the rich that income given to them would put them in the top 20 of the income distribution but of course it isn't going to the poor it's going to you and me it's going to the governmental officials it's going to the various programs that are enacted in the name of helping the poor but end up helping you and me let me get closer to home and go away from these numbers consider the one of the major programs which in a way is not really a social welfare program but yet it illustrates the general point so beautifully that i can't resist referring to it and moreover it applies to you and me i have in mind governmental expenditures in higher education now rochester being a private institution like the university of chicago is less guilty than most others the worst cases are the state universities but we all of us have our hands in the federal pot and if not in the federal pot in the state pot but consider the situation of higher education you have a great deal of tax money being spent on higher education who benefits primarily the people who go to the institutions of higher education the students where do they come from mo they come disproportionately from the upper income classes even those of them who come from the lower income classes as i myself did are going to be converted by their college education in large part and by their own qualities into people in the upper income class those individuals from low income families who have the ability and the energy and the drive to go to college are the richer ones of the low income class they are the ones who have personal wealth personal qualities in any event the facts are clear graduates of college are on the average of very much higher income class than people who don't go to college so what do you do we impose taxes on everybody including those who don't go to college in order to subsidize the people who do go to college as i say when i want to be demagogic we impose taxes on the people in watts to send the children from beverly hills to college that's a literally exact statement there's no uh it's it's put demagogically but the facts are literal a study in the state of california some years back showed that 50 percent of the students at the state universities of higher education came from the top 25 percent of the income scale and five percent came from the bottom 25 what's true there is true everywhere there is no social program in this country in my opinion which is so clearly a case of imposing taxes on low-income groups to benefit high-income groups as government subsidies to higher education clearly a case of this middle coalition taxing the poor and the very rich to benefit themselves now that case is dramatic and shows these forces it works and it also shows how hard it is to do anything about it how many people in this room how many of my colleagues at the various universities i've been a year your fellow students are going to go out tomorrow and campaign for cutting down government expenditures in higher education how many are how often do you hear people in colleges universities or graduates of college and universities who will scream their head off about how we must have equality and down with regressive taxes and we have to tax the rich and help the poor how many of them have you heard denounce this utterly unconscionable program of imposing taxes on the poor to send the ch send people who are going to be well to do to college why not because we know that what's good for us is good for the country i think it's a good thing that everybody should have an opportunity to go to college if he has a will the capacity to do so provide it he's willing to pay for it himself if he can't do it in advance fine let's set up mechanisms whereby we can finance him through college in return for a commitment on his part to pay it back later and we can go into details about the form and so on i'm just trying to get at the principle of the thing let me give you some other examples a major one of these programs the most expensive is social security now social security is the case as you may know and it's one of the most extreme cases of misleading advertising that i know of it's not social and it's not security what it is is a combination of a bad tax and a bad relief program a bad distributive program it is sold as if individuals who pay social security taxes are paying for their own benefits that they're going to get later on that's the language in which the social security administration sells it that's extremely misleading what's happening is that people today are paying taxes on their wages people today are receiving payments from the government the relation between the taxes mr x pays and the benefits to which he's entitled is very very slight there is a tiny bit of a relationship to maintain this fiction but on the whole there's very little relationship two people who pay the same amount of money and through their lives may get very different benefits but let's leave that aside i want to go to the point i'm talking about about the tendency for us and for those of us in the middle class to impose programs that benefit us at the expense of people below us social security does involve a very large transfer from the young to the old that is today's young pay taxes which go to pay benefits to the old but over and above that it involves a very substantial transfer from low income groups to middle income groups how come well consider at what age does a young man or young woman from the lower income groups go to work 16 17 18. he or she will start to pay social security taxes at that time at what time do we go to work or do our children go to late work you and they stay protected in schools stay at college and they generally start to work at 24 or 25 maybe and then they start to pay taxes if you do a little actuarial calculation as nowadays you can all do on one of those handy hewlett packard calculators you will discover that the effect of this is to make the total payments of those who start early about a third higher in actuarial value than the payments of those who start later but that's only half the story have you ever looked at the statistics of average length of life who do you suppose has a longer expected length of life those in the lower income groups or those in the higher income groups those in the higher income groups as a consequence those of us in the middle and upper income groups pay less taxes because we start paying later and we get more benefits because we live longer with the end result that you have a program enacted in the name of helping the poor and keeping the poor off the out of the poor house which has the effect of benefiting middle income groups at the expense of relatively low income groups now over and above that there are lots of inequities there are lots of people in the middle income groups who don't benefit some in the low who do i'm not saying there isn't it's an enormously complicated program and there are many different considerations but taken as a whole it's a marvelous illustration of the tendency to for legislation enacted in the name of helping the poor to turn out to be a way in which middle-income people help themselves the only program i know of for which a good case can be made that the people who get the money have lower average incomes than the people who pay the taxes the only program i know of is direct welfare afdc and direct welfare and it's not an accident that's the program which draws the greatest opposition and to which there is a greatest discontent on the part of the population as a whole now it is a lousy program i agree so are all the others it's no worse than the others it is there is a welfare mess and i have as you may know long been in favor of major reforms of the welfare program of substituting a negative income tax for the whole collection of programs but my point is that that's the only one i know of and it's only a small fraction of the total expenditures on program labeled as being for poverty over and above the waste of resources through these welfare state measures they have further effects which i think are very serious from the point of view of the maintenance of a free society in the first place calling on the government to solve problems strains that social fabric of agreement on basic values that is necessary to maintain a stable society in order to have any kind of a stable society you have to have people agree with one another you have to have them have a certain minimum common set of values and beliefs and you want to avoid straining that set of beliefs now the great virtue of the market is that people who hate one another in other respects can cooperate with one another on the market without any difficulty as i often say when you buy bread at the grocery you don't know whether the wheat from which that came was grown by a black or a white an indian or a a christian a jew somebody you like somebody you dislike and it doesn't make a darn bit of difference and even though you and he disagree violently on every issue you can cooperate he can produce the wheat and you can buy the bread that's a great virtue of the market that it permits cooperation without conformity without people having to agree with one another political mechanisms have the opposite arrangement you have to enforce conformity on people you have to decide on the standards you have to decide on who is going to pay who is going to get and when 51 percent of the people say one thing and 49 percent say the other 100 percent do what the 51 percent say as a result the more you have to use political mechanisms the more you tend to strain the social fabric and this has shown up very drastically this is a reason why you can go much farther in this direction in homogeneous societies like sweden than you can in heterogeneous societies like our own but it's showing up in the form of divisiveness of the tendency of things like the tendency for quebec to try to get independence for scotland to try to become separate after all if the government's going to handle the oil the scots want to have their hands in the oil pot so that one of the effects of resort to welfare state measures is to promote div regionalism and divisions within our society in the united states this is shown up by the growth of ethnic particularism ethnic divisiveness we used to be proud of being a melting pot in which we got a common set of values while each of us was able to go our own way with respect to our local customs and our local backgrounds but now that there is a great deal to be gained by forming cohesive minority blocks political entrepreneurs are out forming blocks of people from particular ethnic backgrounds and they are now going to become more cohesive blocks which tends to divide the society the welfare state measures develop an acceptance on the part of the public at large of regimentation it develops it on the part of the poor who get their benefits by being told what to do i remember years ago a fellow who was doing a study of the welfare programs in new york city came to me and he said i've been reading your book capitalism and freedom he said and you talk about the conflict between growth of government and human freedom he says you don't know what you're talking about he says you don't have your fear freedom interfered with very much if you really want to see this conflict in action you go down to harlem and you look at the people who are on welfare they can't move from one place to another without getting the permission of their uh welfare supervisor they can't put in a telephone without getting it approved et cetera et cetera et cetera they are the people who are having their lives regimented well it's not only they those of us who are subject to medicare have to know about the forms we have to fill out those of you who are students who are getting federal aid or loans and whatnot know about the conditions to which you have to subscribe all of us who know that our future benefits are going to come from the government have to sink three times think three times before we engage in actions that might prejudice our future acceptability so the effect of the growth of the welfare state is also to develop an acceptance of regimentation furthermore undermines the ethical and moral standards of the people it undermines those standards by in instilling the notion that nobody is responsible for himself that if something is wrong somebody else is responsible for it now of course what happens to people is not wholly a co a result of their own behavior or their own actions society does have an effect outside forces doesn't do affect them but unless you adopt broadly the view that individuals are to be responsible for themselves you cannot get in my opinion a decent free society well what are we are fast in my op my view approaching the kind of poi kind of situation the dicey outline in which we must be fearful about the extent to which the growth of the welfare state is encroaching on our freedom encroaching on it indirectly by its fiscal effects by putting us in a situation where the fiscal crisis that it tends to produce as in britain as in new york city interferes with our freedom interfering with our freedom through the extent to which we become subject to bureaucratic control what can we do about it well obviously the right way to do it would be to get rid of these social welfare measures and promote our basic objectives by other means in getting rid of these welfare measures we cannot abandon them overnight we have induced millions of people to become dependent on them we have to dis we would have to get rid of them gradually that's why i have always been in favor of introducing a negative income tax as a substitute for a great many of them as providing a way in which you could gradually get out but i have to admit that that's a romantic approach and is inconsistent with everything i've been saying tonight because it goes back to the idea that the way you attack government is by trying to figure out the right answers persuading people and getting it legislated and we know that isn't the way government works what we need to do is to look at an objective analysis of the forces set in motion that may lead to a reversal and there are forces set in motion very strong forces because as the welfare state moves and grows you get bigger and bigger taxes with fewer and fewer benefits and people don't like to pay the taxes without getting the benefits and therefore the objective circumstances develop under which you can have a tax revolt have seen that and i think that great britain may be giving us a very favorable example from that point of view here you have a situation in great britain great britain went much farther than we did in the united states total government spending at all levels has gone to 40 percent of our income in great britain it went up to 60 of their income great britain had a much more severe financial crisis than we did its inflation reached something like 25 percent a year instead of hours just a mere 12 percent a year great britain has as a result had enormous pressure on its political system and the labor government of great britain in the past two years for example has behaved in a way to reduce the ratio of government spending to income and to reduce the welfare measures so i think that there is some chance and that chance i think derives from the impact of two things the inefficiency of government which causes discontent with government policies and the burden of taxes which cause a tax revolt in thinking ahead to alternatives i want to close on a different note the objectives of those well-meaning people who were behind the development of the welfare state are good objectives and we must not denigrate them or lose sight of them what is needed is a recognition that there are other ways of promoting those objectives than the use of force and the use of government there is a strong tendency to believe that you either must have the government do it or else at the other end you you have only narrowly defined market activities with everybody looking after himself that's wrong there is a great middle ground there is a there is a great area in which you can have voluntary activity by individuals who cooperate with one another for common purposes that is what we have always had the 19th century in the united states when government spending never reached more than 10 percent of the national income and federal government spending never reached more than 3 percent when we had essentially no welfare state measures on the federal level certainly and few on the state level was the period that 19th century was a period of the greatest outburst of elemonary charitable activity that the world has ever seen you had the great development of non-profit hospitals you had the you had the uh foreign missions and you had the establishment of great universities like this one the market is an effective means for voluntary contribution in promoting charitable activities as well as all other activities and in trying to reduce the role of government one of the worst things in my opinion that has happened as a result of the welfare state is the destruction of private mechanisms what we need to do is to strengthen those and use those instead of the compulsory mechanisms of the state thank you you

Channel: BasicEconomics

Views: 280,046

Keywords: liberty, Milton Friedman, Economy, Economic, Freedom, Economics (Field Of Study)

Id: m_q_Y0U1QcI

Length: 59min 35sec (3575 seconds)

Published: Thu Apr 26 2012