The Cure for Poverty; H. Hazlitt

minded. Where there are so many causes there can be no all-embrac ing cure. It is fashionable to say today that "society" must solve the prob lem of poverty. But basically each individual - or at least each fam ily - must solve its own problem of poverty. The overwhelming ma jority of families must produce more than enough for their own support if there is to be any sur plus available for the remaining families that cannot or do not pro vide enough for their own support. Where the majority of families do not provide enough for their own support - where society as a whole does not provide enough for its own support - no "adequate relief system" is even temporarily pos sible. Hence "society" cannot solve the problem of poverty until the overwhelming majority of families~ have already solved (and in fact slightly more than solved) the problem of their own poverty. All this is merely stating in an other form the Paradox of Relief: The richer the com,munity, the less the need for relief, but the more it is able to provide,. the poorer the 356 THE FREEMAN June community, the greater the need for relief, but the less it is able to provide.

And this in turn is merely an other way of pointing out that re lief, or redistribution of income, voluntary or coerced, is never the true solution of poverty, but at best a makeshift, which may mask the disease and mitigate the pain, but provides no basic cure. Moreover, government relief tends to prolong and intensify the very disease it seeks to cure. Such relief tends constantly to get out of hand. And even when it is kept within reasonable bounds it tends to reduce the incentives to work and to save, both of those who re ceive it and of those who are forced to pay it. It may be said, in fact, that practically every meas ure that governments take with the ostensible obj ect of "helping the poor" has the long-run effect of doing the opposite. Economists have again and again been forced to point out that nearly every pop ular remedy for poverty merely aggravates the problem. I have an;.

alyzed in this study such false remedies as "land reform," the guaranteed income, the negative income tax, minimum-wage laws, laws to increase the power of the labor unions, opposition to labor saving machinery, promotion of "spread-the-work" schemes, spe cial subsidies, increased government spending, increased taxation, steeply graduated income taxes, punitive taxes on capital-gains, in heritances, and corporations,and outri.ght socialism. But the possible number of false remedies for poverty is infinite. Two central fallacies are common to practically all of them. One is that of looking only at the imme diate effect of any proposed re form on a selected group of in tended beneficiaries and of .over looking the longer and secondary effect of the reform not only on the intended beneficiaries but on everybody. The other fallacy, akin to this, is to assume that produc tion consists of a fixed amount of goods and services, produced by a fixed amount and quality of capi tal providing a fixed number of "jobs." This fixed production, it is assumed, goes on more or less au tomatically, influenced negligibly if at all by the incentives or lack of incentives of specific producers, workers, or consumers. "The prob lem of production has been solved,"

we keep hearing, and all that is needed is a fairer "distribution." What is disheartening about all this is that the popular ideology on all these matters shows no ad vance -. and if anything even a retrogression - compared with what it was more than a hundred years ago. In the middle of the nineteenth century the English 1972 THE CURE FOR POVERTY 357 economist Nassau Senior was writ ing in his journal: It requires a long train of reason ing to show that the capital on which the miracles of civilization depend is the slow and painful creation of the economy and enterprise of the few, and of the industry of the many, and is destroyed,or driven away, or pre vented from arising, by any causes which diminish or render insecure the profits of the capitalist, or deaden the activity of the laborer; and that the State, by relieving idleness, improvi dence, or misconduct from the punish ment, and depriving abstinence and foresight of the reward, which have been provided for them by nature, may indeed destroy wealth, but most certainly will aggravate poverty.!

Man throughout history has been searching for the cure for poverty, and all that time the cure has been before his eyes. Fortu nately, as far at least as it applied to their actions as individuals, the majority of men instinctively rec ognized it - which was why they survived. That individual cure was Work and Saving. In terms of so cial organization, there evolved spontaneously from this, as a re suIt of no one's conscious plan ning, a system of division of labor, freedom of exchange, and eco nomic cooperation, the outlines of 1 Nassau Senior, Journal Kept in France and Italy from 1848-52 (London: Henry S. King, 2nd ed. 1871), Vol. I, pp. 4-5. which hardly became apparent to our forebears until two centuries ago. That system is now known either as .Free Enterprise or as Capitalism, according as men wish to honor or disparage it. It is this system that has lifted mankind out of mass poverty. It is this system that in the last century, in the last generation, even in the last decade, has ac celeratively been changing the face of the world, and has provided the masses of mankind with amenities that even kings did not possess or even imagine a few generations ago.

Because of individual misfor tune and individual weaknesses, there will always be some indi vidual poverty and even "pockets" of poverty. But in the more pros perous Western countries today, capitalism has already reduced· these to a merely residual problem, which will hecome increasingly easy to manage, and of constantly diminishing importance, if soci ety continues. to abide in the main by capitalist principles. Capital ism in the advanced countries has already, it bears repeating, con quered mass poverty, as that was known throughout human history and almost everywhere, until a change began to be noticeable sometime about the middle of the eighteenth century. Capitalism will continue to eliminate mass 358 THE FREEMAN June poverty in more and more places and to an increasingly marked ex tent if it is merely permitted to do so. In a previous article ("False Remedies for Poverty," The Free main, February, 1971), I explained by contrast how Capitalism per forms its miracles. It turns out the tens of thousands of diverse commodities and services in the proportions in which they are socially most wanted, and it solves this incredibly complex problem through the institutions of private property, the free market, and the existence of money - through the interrelations of supply and demand, costs and prices, profits and losses. And, of course, through the force of competition. Compe tition will tend constantly to bring about the most economical and efficient method of production pos sible with existing technology and then it will start devising a still more efficient technology. It will reduce the cost of existing production, it will hnprove prod ucts, it will invent or discover wholly new products, as individual producers try to think what prod uct consumers would buy if it existed.

Those who are least successful in this competition will lose their original capital and be forced out of the field; those who are most successful will acquire through profits more capital to increase their production still further. So capitalist production tends con stantly to be drawn into the hands of those who have shown that they can best meet the wants of the consumers. Those who truly want to help the poor will not spend their days in organizing protest marches or relief riots, or even in repeated protestations of sympathy. Nor will their charity consist merely in giving money to the poor to be spent for immediate consumption needs. Rather will they themselves live modestly in relation to their income, save, and constantly in vest their savings in sound exist ing or new enterprises to create not only more jobs but better paying ones ("Private Wealth, Public Purpose," The Freeman, December, 1970).

The irony is that the very mir acles brought about in· our age by the capitalist system have given rise to expectations that keep run ning ahead even of the accelerating progress, and so have led to an incredibly shortsighted impatience that threatens to destroy the very system that has made the expec tations possible. If that destruction is to be pre vented, education in the true causes of economic improvement must be intensified beyond any thing yet attempted. * DONALD M. DOZER FORMAL systems and institutions of education always represent a gift from the present generation to the next generation. The school at all levels is a highly complicated social phenom enon. It depends, first of all, upon a controlling or governing body a body of taxpayers in the case of public schools, a body of parents and financial donors in the case of private schools. This supporting body forms the principal in the entire educational complex; it is the base upon which the system rests.