Anarchy Without Bombs

Cooperation Without Coercion

Poverty and Government – Blog Action Day

This being Blog Action Day, I want to do my part in the voluntary collective request that bloggers post on the subject of Poverty today.    I want to briefly address 5 important ways in which legitimized aggression (i.e. government) prevents people in poverty from escaping it:

  1. Licensing — In anarchist Mary Ruwart’s wonderful Healing Our World in an Age of Aggression, one of the recurring themes is the role of government licensing in keeping people down.  There is no way to sugarcoat licensing laws: they originated as racist and xenophobic attempts of people in certain professions to exclude competition from minorities and immigrants, while their ostensible purpose of protecting the public earned the support of well-meaning people (I say ostensible because the benefits are highly questionable: electrocutions actually go up whenever a state passes or strengthens licensing for electricians, because it makes the professionals so costly that more try to do the work themselves).  After the abolition of slavery, free blacks were the first victims of licensing (you can find a discussion in an older version of Ruwart’s book that is available online at no charge at, although I strongly encourage the purchase of her 2003 edition).  Although modern day proponents of licensing are far less likely to share the anti-black attitudes of the original propoents of licensing in America (sadly, they probably still do share the anti-immigrant attitudes), they continue to exclude competition, hurting the poor twice: (a) raising the price of services from those industries and (b) preventing them from entering those professions themselves as providers.
  2. Import controls – Tariffs and trade barriers are used by domestic businesses to exclude foreign competition, increasing the costs of the products they provide.  Once again, there is no way to sugarcoat these: politically powerful firms lobby government officials for these barriers to benefit themselves at the expense of the general population of consumers (and businesses that export).  The passage of the Smoot-Hawley Tariff in June 1930 was a key factor in causing the Great Depression.  Trade is not only good for both sides, but is also one of the most important keys to peace.  As economist Frederic Bastiat stated, “When goods don’t cross borders, soldiers will.”
  3. Minimum wage laws – The minimum wage is, has always been, and always will be, ZERO.  That is what someone makes when they’ve lost their job.  Black unemployment was actually the same or even slightly LOWER than white unemployment until 1930, when the Federal government, during the administration of Herbert Hoover, made it a key policy to keep wages high.  Indeed, the massive unemployment of the Great Depression was a direct result of Hoover’s policies, which began with a November 1929 meeting with big business leaders where he implored them not to cut wage rates after the stock market crash: the leaders complied, but when faced with business difficulties were only left with the choice of reducing their labor force or going out of business (and both results occurred with regularity).  It was made worse by a Federal Reserve System-engineered deflation of the currency, which effectively raised real wages even more, and the Davis-Bacon Act of 1931, which was the first Federal minimum wage law, in the construction industry, supported widely by Southern whites who were objecting to cheap black and immigrant labor (sound familiar?).  In 1938, FDR made the minimum wage a permanent part of the American landscape.  By 1940, black unemployment was far above white employment, and hasn’t recovered to this day.  Unemployment rises virtually every time the minimum wage does: the primary supporters are big businesses that pay MORE than minimum wage, wanting to eliminate small business competitors, and well-meaning people who don’t personally suffer from the loss of their own job (since 97% of the working public makes more than the minimum wage) and don’t realize the harm they are causing.
  4. Inflation – If inflation were good for the economy, counterfeiters would be heroes.  When the Federal Reserve System creates new money, they don’t hand it to poor people, but the increase in the number of dollars buying the same goods and services causes prices to be higher than they otherwise would be for the poor.  Actually, in prosperous societies with honest money, prices have a tendency to slowly drop, as more goods and services compete for the same quantity of money.  Inflation is a complicated phenomenon: because it counteracts the harm caused by minimum wage laws, it can actually be beneficial to workers who would otherwise have lost their jobs, but the primary beneficiaries are banks (who are the first to get the new money) and those that provide goods and services directly to the Federal government.  To the mass of working poor, it simply makes it harder to make ends meet.
  5. Taxes – In some ways, this is the LEAST important of the factors on this list: once the government is spending, they will tax, borrow, or inflate to get the money, and all of these choices are damaging.  Moreover, many politicians who are among the most irresponsible big spenders in history will pretend to favor free markets by supporting tax cuts: the current administration is a primary example.  That said, there is one tax that is especially damaging to the poorest workers, and that is the payroll tax, which raises the cost of hiring a worker by 15% and has the effect of making minimum wage laws even more destructive.  Also, while Federal payroll taxes theoretically are going to provide Social Security and Medicare benefits, the tax money is actually being spent as collected, much of it for general government activities such as war, with no “lockbox” or any other form of savings and investment of the money.  In any event, the poor don’t live as long as the rich, so they collect the benefits for a much shorter period of time: Social Security and Medicare are both programs that involve transfers of wealth from poor black men (who have the shortest life span) to rich white women (who have the longest).

WIth friends like the government, the poor don’t need enemies.

UPDATE: I owe so much to so many other writers that I’ve long despaired of being able to give them all the proper h/t for their ideas, but after racking my brain (wracking it didn’t help), I was able to remember that I organized my thoughts on this subject thanks to a piece that Sheldon Richman wrote a couple of years ago, and with a little searching I just located it online (or at least one version of it), on the Future of Freedom Foundation website at . My apologies to Sheldon (whose blog, Free Association, is one of my “must” reads), for not crediting him in the first version of my post.


Written by Less

October 15, 2008 at 6:47 pm

Posted in Economic freedom

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5 Responses

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  1. Less, thanks for this. Can I use it as a handout flyer – with proper attribution, of course – at our local libertarian lit tables?


    October 21, 2008 at 9:48 am

  2. Absolutely, and that applies to everything I write on this site.


    October 21, 2008 at 3:56 pm

  3. […] want to especially call attention to the section on Credential Inflation.  In my post on Poverty and Government, I cited licensing laws as one of the most harmful to the poor.  In field after field, the costs […]

  4. Cool article, was curious if you would permit me to link to it in a article im currently writing for my own site?


    March 10, 2010 at 8:55 am

  5. No permission is needed: I’m delighted to have anyone link to my writing, even if it is to criticize it.


    March 10, 2010 at 3:13 pm

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