Why do we have welfare? (part 2)
One possible reason why welfare only extends to state boarders is that welfare is better constrained by democratic institutions. Foreign welfare is not accountable to any voters and so it is inefficient. Money going to foreign governments that are hostile may be used against the donor country - look at how money going to "nation build" in Afghanistan has instead been channeled to lining the pockets of warlords. Even in more benign situations, foreign aid acts as a resource curse, incentivizing governments to be more brutal in controlling power to ensure they have access to a steady stream of easy money. Maybe leaving other countries alone is the best we can do.
People respond to incentives. If you pay someone to do something, they will do it more. It's a simple idea that has profound consequences. When applied to welfare, you get the conclusion that paying people not to work encourages them not to work. The incentives can be so strong that they encourage people to take actions that are detrimental to their own self interest in the long run. Suppose someone can get more money from welfare than they can from working a low wage job. They will likely take the welfare even if the job will eventually become higher wage, such as a manager or skilled worker position. Being unemployed for long periods of time lowers your perceived value to employers. Being employed allows you to gain skills and learn how to interact with others in the workforce. It allows you to build social connections with other high(er) achieving individuals who might provide support in gaining future skills or education. Welfare, especially combined with minimum wage (which limits access to low paying jobs and job training programs) has the effect of limiting social mobility. Welfare also discourages actions, such as marriage, which are beneficial to the individual in the long run and society as a whole. Having children outside of marriage is one of the most financially damaging things a woman can do. Children of single mothers are more likely to life a risky lifestyle, including having children outside of wedlock themselves. In 1964, LBJ launched a massive increase in welfare for single mothers. Guess what happened 9 months later?
It wasn't until the Clinton welfare reforms that out of wedlock births started to decline. It's amazing that a seemingly small incentive can have such huge effects on a country. Surely there were other factors as well, but it's hard to see how welfare did not contribute to this trend (especially give the movements are so coincidental with the law changes).
Welfare is not designed to help the poor in very efficient ways. It is mostly channeled to specific goods like food, housing and health care rather than allowing the poor to use it for what they want. Welfare is an extremely paternalistic policy. It treats the poor as not simply having less money than other people (in which case the solution would be simple - just give them more), but stupider and and more immoral than other people as well. They allegedly need health care in the form of an extremely regulated bureaucratic insurance system so they they take care of themselves. Welfare distributes (extremely low quality) houses, because, supposedly, if you gave the poor money, they wouldn't be smart enough to buy their own shelter. Do people think that the poor need food stamps, because if they were just given money, they would probably forget to buy food and starve? There is a clear condescending attitude taken toward the poor.
There are other reasons why welfare takes the form it does. Health care is nurturing signal. Giving someone medicine is culturally seen as more compassionate than simply giving them money to buy medicine. Money is dirty, mixing is with charity dilutes "goodness" so would be do-gooders must seek other methods of charity. It's not as powerful in the United States, where we have a more capitalistic culture, but in other countries, especially in Europe, finance is seen as a immoral activity - why else delegate it to the Jewish underclass? Finally, welfare is structured in a bizarre way to mask transfers to rich. The rich may not benefit from scholarships aimed at the poor, but they can run colleges. They may not get Medicaid, but they can be doctors, bureaucrats, pharmacists and hospital owners who benefit from it. The federal government spends around $30,000 per person below the poverty line on welfare (including Medicare, which is a large part of it). If that money went to the poor, they wouldn't be poor anymore! The Department of Housing and Urban Development has actually torn down more houses than they have built! Why? Maybe to reduce competition and increase profits for politically powerful slumlords, but certainly not to help the poor. Welfare, as it is practiced is an destructive, not creative process.
What is to be done?
Possibility 1: Charity left to private - leave it to churches and other privately run charities.
Possibility 2: Fixed money transfers to those in need, wage subsidies to encourage hiring the poor.
Possibility 3: Institute a Red Terror
People respond to incentives. If you pay someone to do something, they will do it more. It's a simple idea that has profound consequences. When applied to welfare, you get the conclusion that paying people not to work encourages them not to work. The incentives can be so strong that they encourage people to take actions that are detrimental to their own self interest in the long run. Suppose someone can get more money from welfare than they can from working a low wage job. They will likely take the welfare even if the job will eventually become higher wage, such as a manager or skilled worker position. Being unemployed for long periods of time lowers your perceived value to employers. Being employed allows you to gain skills and learn how to interact with others in the workforce. It allows you to build social connections with other high(er) achieving individuals who might provide support in gaining future skills or education. Welfare, especially combined with minimum wage (which limits access to low paying jobs and job training programs) has the effect of limiting social mobility. Welfare also discourages actions, such as marriage, which are beneficial to the individual in the long run and society as a whole. Having children outside of marriage is one of the most financially damaging things a woman can do. Children of single mothers are more likely to life a risky lifestyle, including having children outside of wedlock themselves. In 1964, LBJ launched a massive increase in welfare for single mothers. Guess what happened 9 months later?
It wasn't until the Clinton welfare reforms that out of wedlock births started to decline. It's amazing that a seemingly small incentive can have such huge effects on a country. Surely there were other factors as well, but it's hard to see how welfare did not contribute to this trend (especially give the movements are so coincidental with the law changes).
Welfare is not designed to help the poor in very efficient ways. It is mostly channeled to specific goods like food, housing and health care rather than allowing the poor to use it for what they want. Welfare is an extremely paternalistic policy. It treats the poor as not simply having less money than other people (in which case the solution would be simple - just give them more), but stupider and and more immoral than other people as well. They allegedly need health care in the form of an extremely regulated bureaucratic insurance system so they they take care of themselves. Welfare distributes (extremely low quality) houses, because, supposedly, if you gave the poor money, they wouldn't be smart enough to buy their own shelter. Do people think that the poor need food stamps, because if they were just given money, they would probably forget to buy food and starve? There is a clear condescending attitude taken toward the poor.
There are other reasons why welfare takes the form it does. Health care is nurturing signal. Giving someone medicine is culturally seen as more compassionate than simply giving them money to buy medicine. Money is dirty, mixing is with charity dilutes "goodness" so would be do-gooders must seek other methods of charity. It's not as powerful in the United States, where we have a more capitalistic culture, but in other countries, especially in Europe, finance is seen as a immoral activity - why else delegate it to the Jewish underclass? Finally, welfare is structured in a bizarre way to mask transfers to rich. The rich may not benefit from scholarships aimed at the poor, but they can run colleges. They may not get Medicaid, but they can be doctors, bureaucrats, pharmacists and hospital owners who benefit from it. The federal government spends around $30,000 per person below the poverty line on welfare (including Medicare, which is a large part of it). If that money went to the poor, they wouldn't be poor anymore! The Department of Housing and Urban Development has actually torn down more houses than they have built! Why? Maybe to reduce competition and increase profits for politically powerful slumlords, but certainly not to help the poor. Welfare, as it is practiced is an destructive, not creative process.
What is to be done?
Possibility 1: Charity left to private - leave it to churches and other privately run charities.
Possibility 2: Fixed money transfers to those in need, wage subsidies to encourage hiring the poor.
Possibility 3: Institute a Red Terror