Tuesday, May 3, 2011

Murray Rothbard on Welfare

Murray Rothbard is a distinguished economist who for many years wrote about anarcho-capitalism and the economic problems our nation faces. He published many great books, and this is an excerpt from one of his books called For a New Liberty. This section is about poverty and welfare and what exactly the problem is.

Almost everyone, regardless of ideology, agrees that there is something terribly wrong with the accelerating, runaway welfare system in the United States, a system in which an ever-increasing proportion of the population lives as idle, compulsory claimants on the production of the rest of society. A few figures and comparisons will sketch in some of the dimensions of this galloping problem. In 1934, in the middle of the greatest depression in American history, at a nadir of our economic life, total government social welfare expenditures were $5.8 billion, of which direct welfare payments ("public aid") amounted to $2.5 billion. In 1976, after four decades of the greatest boom in American history, at a time when we had reached the status of having the highest standard of living in the history of the world with a relatively low level of unemployment, government social welfare expenditures totalled $331.4 billion, of which direct welfare amounted to $48.9 billion. In short, total social welfare spending rose by the enormous sum of 5614% in these four decades, and direct welfare aid increased by 1856%. Or, put another way, social welfare spending increased by an average of 133.7% per year during this 1934-1976 period, while direct welfare aid increased by 44.2% per annum.

If we concentrate further on direct welfare, we find that spending [p. 143] stayed about the same from 1934 to 1950, and then took off into the stratosphere along with the post-World War II boom. In the years from 1950 to 1976, in fact, welfare aid increased by the huge sum of 84.4% per year.

Now some of these enormous increases can be accounted for by inflation, which diluted the value and purchasing power of the dollar. If we correct all the figures for inflation by putting them in terms of "constant 1958 dollars" (i.e., where each dollar has roughly the same purchasing power that the dollar could command in 1958), then the relevant figures become as follows: 1934 — total social welfare spending, $13.7 billion; direct welfare aid, $5.9 billion. In 1976 — total social welfare spending, $247.7 billion; direct welfare aid, $36.5 billion.

Even if we correct the figures for inflation, then, social welfare spending by the government rose by the vast amount of 1798%, or 42.8% per year over these forty-two years, while direct welfare aid rose 519%, or 12.4% per annum. Furthermore, if we look at the figures for 1950 and for 1976 for direct welfare aid, corrected for inflation, we find that welfare spending went up, during the intervening boom years, by 1077%, or 41.4% per annum.

If we adjust the figures still further to correct for population growth (total American population was 126 million in 1934, 215 million in 1976), then we still get an almost tenfold increase in total social welfare expenditures (from $108 to $1152 per capita in constant 1958 dollars), and a more than tripling of direct public aid (from $47 in 1934 to $170 per capita in 1976).

A few more comparisons: from 1955 to 1976 — years of great prosperity — the total number of people on welfare quintupled, from 2.2 to 11.2 million. From 1952 to 1970, the population of children eighteen years old and younger increased by 42%; the number on welfare, however, increased by 400%. The total population remained static, yet the number of welfare recipients in New York City jumped from 330,000 in 1960 to 1.2 million in 1971. Clearly, a welfare crisis is upon us.1

The crisis is shown to be far greater if we include in "welfare payments" all social welfare aids to the poor. Thus, federal "aid to the poor" nearly tripled from 1960 to 1969, leaping from $9.5 billion to $27.7 billion. State and local social welfare expenditures zoomed from $3.3 billion in 1935 to $46 billion, a 1300% increase! Total social welfare expenditures [p. 144] for 1969, federal, state, and local, amounted to a staggering $73.7 billion.

Most people think of being on welfare as a process external to the welfare clients themselves, as almost a natural disaster (like a tidal wave or volcanic eruption) that occurs beyond and despite the will of the people on welfare. The usual dictum is that "poverty" is the cause of individuals or families being on welfare. But on whatever criterion one wants to define poverty, on the basis of any chosen income level, it is undeniable that the number of people or families below that "poverty line" has been steadily decreasing since the 1930s, not vice versa. Thus, the extent of poverty can scarcely account for the spectacular growth in the welfare clientele

If anyone ever tries to argue with you that we need more welfare spending, that people are starving and dying, merely point out this excerpt. Welfare rolls have expanded exponentially while prosperity has increased. It is an amazing farce that the welfare situation grows worse while we grow richer. It is impossible, and the only explanation is the corruption of our government that is trying to buy votes.


  1. Professor Rothbard was a brilliant teacher. His writing on the erosion of the dollar and fractional banking is well argued but broken down so even non-scholars like me can understand it.

    Our welfare programs have created societal dysfunction. Shield people from the consequences of their bad behavior and you will get more bad behavior.

    This is what I love about the Austrian School. It always takes history and human nature into the equation.

  2. Our welfare programs have contributed to the disintegration of the family and increased crime and laziness, not to mention the horrible effect it has had on our morality. A program that most people think is so good has done nothing but terrible evil.