The Perennial Problem of Philanthropy

Handouts trap and oppress the poor.

The Wall Street Journal reports that billionaire Carlos Slim has fired yet another salvo in the ongoing charity wars:

The Mexican billionaire, who Forbes still lists as the world’s richest man, said in 2007 that he could do more to help fight poverty by building businesses than by “being a Santa Claus."

Mr. Slim’s signature also has been noticeably absent from the Gates-Buffett Giving Pledge. At a conference in Sydney last month, Mr. Slim said that charity accomplishes little.

"The only way to fight poverty is with employment,” he said. “Trillions of dollars have been given to charity in the last 50 years, and they don’t solve anything.

Mr. Slim made a good point: the trillions of dollars lavished on charity worldwide have accomplished little in terms of turning poor people into productive citizens.

Americans who are classified as poor live better than the average European and most certainly can't be called poor by international standards.  The charity doled out by our welfare system has eliminated American poverty by any reasonable definition but it traps people into lives of idleness and dependency.

Despite the absence of American poverty, poverty and what's done about it remains a contentious issue, particularly in these times of exploding government spending.  If we're going to get government costs under control, nearly every program will have to be cut, even those which supposedly help the poor.

Given that upcoming necessity, it would be a good idea to look back at some of the historical arguments about government welfare so we needn't repeat past mistakes.

The Contentious Debate

It's generally agreed that nobody should be left to starve, but the devil is in the details.

When America was founded, carving a living out of the wilderness required so much work and attention that nobody was over-concerned with mass charity, particularly for people who wouldn't work.  There was so little money available anywhere that it simply wasn't practical for the government to provide charity.

Such charity as existed came from individuals, but givers were cautioned to be aware that charity could lead to recipients becoming unwilling to work.  When Ben Franklin visited London in 1776, he pointed out the bad effects of the then-recent British Welfare Act:

There is no country in the world in which the poor are more idle, dissolute, drunken, and insolent.  The day you passed that act you took away from before their eyes the greatest of all inducements to industry, frugality, and sobriety, by giving them a dependence on somewhat else than a careful accumulation during youth and health of support in age and sickness.  ...  Repeal that law and you will soon see a change in their manners, St. Monday and St. Tuesday will cease to be holidays.

Franklin would not have been surprised to read the Economist's recent report of British college students rioting when the government proposed cutting their tuition support.  They'd become so used to receiving free tuition that they thought of it as an inalienable right.

Please, Uncle Sam, I want some more!

The question whether some minimum support is an inalienable right or a privilege that can be withdrawn by the giver if the recipient doesn't shape up has been asked many times.  Josiah Quincy, who chaired the Massachusetts committee which addressed the state's Pauper Laws, wrote in 1821:

The poor are of two classes: 1. The impotent poor; in which denomination are included all who are totally incapable of work, through old age, infancy, sickness, or corporeal debility.  2. The able poor, in which denomination are included all who are capable of work of some nature or other.

Rep. Quincy favored government help to those who truly couldn't work - primarily the handicapped or aged - but he realized that there were subtle shades of difference between those who could do absolutely nothing and those who could do a little.  Making the rules too tight would exclude some who really needed help but making them too loose would tempt some who could work to be idle at public expense.  Rep. Quincy did not believe that government officials were capable of making such judgments and that charity should therefore be left to private organizations.

The Nature of Man

Some number of disadvantaged people will move heaven and earth to lift themselves out of poverty; all that's really needed is opportunity for them to succeed.  Other people who might seem to have every advantage would just as soon lay about doing nothing if there's a way for them to do so without starving.  The question is, what proportion of the population is which sort, and can those percentages be altered by public policy?

Where you stand on this question depends on your basic ideas about the nature of mankind.  There are essentially two views:

  1. Men and women are by nature sinful, selfish, and idle.  Children won't learn enough to support themselves unless pushed in school and won't work hard enough as adults unless forced to do so.  They must be reformed to become useful citizens, which can only be done one person at a time.  Charity must be given out very carefully in order not to create a class of permanent idlers because hunger is the best motivation of all.
  2. Children are by nature good and are corrupted only by corrupt societal institutions.  Reform the society and children will automatically grow up to be hardworking and responsible.  Allowances of food, clothing, shelter, and medical care are a basic human right which must be met by the government and should be open to all regardless of any other factors.

Reforming people one at a time is a lot of work and involves a great deal of personal heartache when individuals refuse to reform.  It's tempting to assume that people will be good if we spend money cleaning up society as well as a good deal easier.  It's also highly satisfying to pass laws against undesirable behavior although coercing people by passing laws doesn't generally work out very well.

Bad Charity Driving Out Good Charity

Horace Greely, who founded the New York Herald, and Henry Raymond, who founded the New York Times, debated this question in 1846.  Greely was a universalist who believed that people were naturally good and that every person had a right to material prosperity.  He argued that government had to redistribute tax revenue to bring equal prosperity.  Raymond argued that work was an unfortunately necessity and that the driving force of civilization was the need each person felt to work in order to survive - he certainly wouldn't recognize the newspaper he founded today.

The key question, Raymond insisted, dealt with the nature of man.  Did evil come from within men or was it generated by social institutions?

Before a cure can be devised or applied, the cause of the evil must be ascertained.

Although there were government-supported anti-poverty programs as early as the late 18th century, most American charity came from private associations.  These groups were careful not to help people who were able to work.  This historical record shows that many of the people who were helped managed to lift themselves out of poverty, but often only after years of volunteer help, mentoring, and encouragement with the threat of being cut off if progress wasn't forthcoming.

It took more than 100 years, but Greely's ideas triumphed with the advent of the Great Society in the 1960's.  Laws were passed which gave people an unconditional right to food, clothing, and shelter at public expense.  Medical care was added to the list of unconditional entitlements, starting with Medicare and Medicaid, leading ultimately to the recent passage of Obamacare.

Once people were able to get public money without meeting any conditions at all, they were no longer interested in the earlier programs which attached conditions to receiving benefits.  Over time, bad charity drove out good charity.

So few people wanted to collect welfare at first, however, that it took a great deal of public argument by "welfare rights" organizations to persuade the population that everyone had a right to collect before people were willing to sign up in large numbers.  For many decades, there was a shame and a stigma attached to receiving public assistance such that only the truly desperate would seek it out.  Today, that stigma is long gone and so thoroughly forgotten that welfare recipients seek out news reporters to demand additional benefits that they think they deserve.

More than 50 years later, the results of this great social experiment are clear - if there is no need to work, increasing numbers of people choose not to work.  In Europe and in America, we're seeing our second and third generation of hard-core welfare recipients.  Those of us who've gotten to know a number of welfare recipients realize that most of them have no intention of ever seeking work of any kind and are shocked at the very thought!

A Hand Up, or a Hand Out?

The question of the basic nature of mankind also applies to the motives of people who promote government charity.  Are they seeking to help the poor lift themselves out of poverty to independent self-provision?  Or do they desire to boost welfare agency budgets by urging as many recipients as possible into the system?  It is in the best interests of government bureaucrats to grow their agencies, and from the days of "bread and circuses" in Rome to the crooked ways of Tammany Hall, politicians have sought to buy votes by showering benefits on voters at taxpayer expense.

It's clear that nobody wants anybody to starve.  As Henry Raymond put it during his debates with Horace Greely,

The existence of misery, and the necessity of relieving it, are not in controversy, for we have never doubted either.  It is only in the means to be applied, that the Tribune and ourselves are at variance.

The question is, if we don't want people to starve, what should we do about it?  The conflict begun by Greeley and Raymond rages to this day.  This Boston Globe op-ed reminds us of the vehement opposition when President Clinton reformed welfare to encourage recipients to work:

... it is clear that welfare reform has been a shining success. The Republican Congress that passed it and the Democratic president who signed it turned out to be truer champions of the poor than those who inveighed against it so hysterically. [emphasis added]

When a welfare mother was forced to go to work, it wasn't long before she earned more money than welfare paid.  Her children were lifted out of poverty by welfare reform, not by welfare.  Having people support themselves improves their sense of self-worth and benefits society as a whole by reducing the deficit.

Mr. Slim's statement that charity is useless is an understatement when applied to the American welfare system.  By urging generation after generation of people to waste their lives in inactivity, the welfare system is not only a useless waste of money, it's an evil waste of lives.

Mr. Slim's views aren't quite as simple as they might seem:

Now Mr. Slim isn’t un-charitable. He has contributed hundreds of millions of dollars to his foundation and has funded millions of dollars in joint-venture projects with the Bill and Melinda Gates Foundation.

So he clearly isn’t against charity entirely. His point seems to be that society would benefit more if the wealthy channeled their creative energies and talents toward building job-creating businesses rather than doling out cash. It is the 21st century billionaire version of the old adage, “give a man a fish and he eats for a day, teach him to fish and he eats for a lifetime.”

Instead of just giving handouts which condemn people to lives of dependence on society, Mr. Slim wants to give people jobs so they can earn their own way.  He believes in a hand up, not a hand out.  So do we.

The difficulty is that giving a hand up requires a great deal more personal involvement than giving a hand out.  Hand outs require only that the giver have enough money to write a check or fund a soup kitchen which provides meals.  An effective hand up requires getting to know the person well enough to separate the really needy from the fakers.  Once a truly needy person is identified, someone has to work with him or her over a period of years to help the person grow up enough to take responsibility instead of relying on the government.

The Clinton welfare reforms forced idlers to grow up enough to find jobs.  They were better off for having done so, but getting people out of the system represented a threat to the bureaucratic empires which have taken over charity and turned it from a helping ministry into a business.

Carlos Slim is correct in pointing out that most charity is wasted.  Most givers would rather just write checks than get involved in the lives of other people.  Unfortunately, writing checks, whether through private philanthropy or by paying taxes, merely compounds the problem instead of solving it.

If the Tea Party activists cut government spending, there will be less money spent on ineffective government handouts.  It remains to be seen whether private individuals will step into the gap and take on the far more difficult, but more rewarding and vastly more effective, ministry of offering "A hand up, not a hand out."

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Economics.
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