Can the free-market really handle the problem of poverty?

Published August 30, 2010 in Short Answers by Mary Ruwart

Question

"I understand that libertarians believe welfare should be handled by private charities. Which would be great, but... what if not enough private charities step up?"

Answer

Government regulations, which would not exist in a libertarian society, create most of today's poverty by destroying jobs and the wealth that they create. In Chapter 12 of my book Healing Our World, I estimate, from published studies, that the U.S. would have 3-15 times as much wealth as it does today.

Obviously, more wealth means that more money would be available to help the unfortunate few who still could not support themselves. Instead of government welfare, where about 75% of our tax dollar goes to those who administer the programs, private charities, on average, give about 75% of each dollar to the needy. Without the high cost of bureaucratic overhead and government-created poverty, the poor would have more in a libertarian society.

Would enough people contribute to the poor to make this happen? With fewer poor and more wealth, it's difficult to imagine otherwise. The poor in a wealthy society always have more, which is why it's better to be poor in the U.S. than in India.

Ironically, the most unfortunate people in the US -- the homeless -- are literally left out in the cold by our current system. To qualify for welfare in most states, a person has to provide a home address. Naturally, the homeless, by definition, can't meet that requirement.

Today, the homeless depend almost exclusively on the private sector-- when government permits it. Mother Teresa's order, the Missionaries of Charity, bought two abandoned New York City buildings in 1988. Even though the sisters' plans for a homeless shelter had been approved, the city inspectors belatedly decided that an elevator had to be installed. The cost was so great that the nuns had to abandon the project. The homeless, who would have enjoyed having a roof over their head, with or without an elevator, were once again literally left out in the cold. Needless to say, this would not happen in a libertarian society.

See how libertarianism has the best answers for helping the poor in Dr. Mary Ruwart's book, Healing Our World.