Coalition and Beyond: Liberal Reforms for the Decade Ahead
- A Whole New Kind of Choice in Public Services
- Liberal Education: Academies Revisited
- Social Policy
- Collapsing Under the Weight of Our Own Contradictions
- Four Changes for the NHS of the Future
- A Liberal Solution to the UK’s Housing Crisis
- Family Law: A Liberal Agenda for the Future
- The Dignity of Work
- Evidence-Based Education Policy. Why the Lib Dems Have it (nearly) Right
- A New Mandate for Development Aid: Beyond 0.7%
- Where Nick Clegg MEP Left Off
- Bleeding Heart Libertarianism
- Is Drug Prohibition Liberal?
- Grassroots Economics
- A New Deal for Poor Workers
- Future Generations Want the State to Go on a Progressive Diet
- Higher Education: Britain has a Social Mobility Problem
- Enshrining Individual Rights to Remove the Planning System
- Wellbeing Economics
Suppose you wanted the state to do everything in its power to improve the welfare and opportunities of the poor, but were extremely sceptical about its ability to do so effectively. This mixture of traditionally ‘left-wing’ ends with traditionally ‘right-wing’ means to achieving them is a growing cocktail among many classical liberals and libertarians, variously described as ‘liberaltarians’, ‘Rawlsekians’ (followers of both John Rawls and FA Hayek) and, most popularly, as ‘Bleeding Heart Libertarians’.
Bleeding Heart Libertarians combine concern for the poor with scepticism of the state. It is a new term for an old idea, one that has been at the core of classical liberal thought since Adam Smith.
Bleeding Heart Libertarians, or BHLs for short, combine concern for the poor with scepticism of the state. The question they ask is this: knowing what we do about markets and the problems with state action – that state failure is just as (indeed, sometimes more) real and dangerous as market failure, that knowledge is limited so well-meant state actions often have very harmful unintended consequences, and that the state can become captured by special interest groups and act in ways that are not in the best interests of society as a whole – how can we design our institutions so that they best improve the welfare of the poor?
Bleeding Heart Libertarianism is a new term for an old idea, one that has been at the core of classical liberal thought since Adam Smith. Indeed, the most common perception of what defines libertarians – a belief that the protection of private property rights is all that matters – only really describes followers of Murray Rothbard and Ayn Rand (the latter of whom explicitly rejected the label ‘libertarian’). Many of the most well known libertarian thinkers — FA Hayek, Ludwig von Mises, James Buchanan and Milton Friedman — believed in property rights protections as tools to improve people’s welfare, not as ends in themselves. In particular, Hayek and Friedman were both willing to concede numerous areas of policy where property rights violations were justified.
What would a ‘political economy’ of Bleeding Heart Libertarianism look like if BHLs focused their efforts on a few policies that would deliver the best results for the poor? Pursuing reform in areas like immigration policy and welfare for the rich, and focusing on the state’s regulatory activities in general, is far more important than opposing the sort of redistribution of wealth carried out in most modern social democratic states. The upshot of a new focus on these ‘BHL’ topics would be that traditional alliances between libertarians and conservatives would become defunct, as BHLs would have as much common ground with the political left as with the political right.
The BHLs’ preoccupation with the welfare of the poor suggests that traditional free market areas of interest like tax and redistribution become less important or even lose their importance altogether. Virtually nobody would dispute that very high redistributive taxes can be harmful to the poor by discouraging capital accumulation and thus long-term growth which, compounded over time, can lead to much less extra wealth creation at all levels of society than would otherwise have taken place. However, this does not imply that the optimal rate of redistribution is zero. Just as too much redistribution has costs, too little wealth redistribution might as well.
But there is no shortage of people who can tell us either of these things. There are several ‘low-hanging fruit’ policies that would do the most good for the poor without requiring a major change in governance in general and which are underemphasised by libertarians and the political left alike.
Although these policies should be achievable on their own – that is, without dismantling the entire apparatus of the state (however appealing that may be) – they should also not be heavily determined by what currently seems politically achievable. Taking the ‘extreme’ position in a debate can help move the window of debate in the direction we want, giving cover to allow others to take more ‘moderate’ positions closer to us. Political change requires ideas first.
I suggest that three areas of policy where liberalisation would have a profoundly positive impact for the poor are:
- Drugs legalisation
- Modern mercantilism (aka corporate welfare)
Some degree of libertarian reforms in each of these areas would mean a massive improvement in people’s lives. The founder of the BHL blog1, Matt Zwolinski, has also suggested these areas, as well as militarism (which may be less relevant in the British context).
Immigration is probably the most important policy issue in the world today. A study by Michael Clemens2 of existing economic literature that tries to estimate global GDP benefits from freer trade compared to freer migration dramatically illustrates the importance of immigration reform to the poor. Removing all barriers to trade, it is estimated, could increase global GDP by between 0.3% and 4.1%. Removing all barriers to migration could increase global GDP by between 67% and 147.3%.
That staggering extra wealth would in large part accrue to the poorest people in the world. As Clemens has pointed out, a taxi driver working in New York City can create an order of magnitude more wealth than if she was doing the same job in Addis Ababa. Matthew Yglesias points out that low-skilled immigrants are actually particularly good for the poor, because they typically provide goods and services that are directly consumed by other poor people, reducing prices for them.3 The idea that immigrants ‘steal’ native jobs is untrue – they may displace native workers but the extra demand they generate creates other jobs. There are other objections to immigration but none for which tight immigration controls are the best solution. The welfare benefits are so enormous, and accrue to such poor people, that arguments for controls should face an extremely high burden of proof.
Our drug laws can reasonably be described as the most anti-poor domestic legislation that we have, and are part of a global network of laws that indirectly cause tens of thousands of people to be killed every year.
Drugs legalisation is often dismissed as a middle class hobby-horse. In fact, our drug laws can reasonably be described as the most anti-poor domestic legislation that we have, and are part of a global network of laws that indirectly cause tens of thousands of people to be killed every year. In the UK as in the US, drug laws disproportionately affect black people: according to the Transform Drug Policy Foundation, “there are a higher proportion of black inmates on drug offence charges (28%) compared to white (13%). This is despite the black community having a per-capita level of drug use lower than whites.”4 Crime, which affects poor areas most badly, is in large part driven by drug addicts’ compulsion to fund their habit – over half of property crimes are driven by drug use, according to the Number 10 Strategy Unit, including 80% of domestic burglaries.5
Outside Britain, the impact of drug prohibition is much worse. Drug wars in Mexico have killed 60,000 people since 2006, according to the BBC6, and extremely poor countries like Guinea-Bissau have been brutalised by international drug cartels. These cartels owe their existence to drugs prohibition in the Western world. The tide seems to be changing in the United States towards some legalisation, but we cannot expect widespread liberalisation until a large country takes the first step. That country could be Britain.
Many free marketeers and economic leftists already share much common ground over corporate welfare. Obviously, bank bailouts are a transfer of wealth from the poor to the rich and a dangerous distortion of market incentives – in the words of former chief executive of Eastern Airlines, Frank Borman, capitalism without bankruptcy is like religion without hell. Sweden’s experience in the early 1990s points to a ‘bail-in’ strategy for letting banks fail that avoids taxpayers picking up the bill.7 And there are many other more subtle forms of corporate welfare. The modern-day equivalents of medieval guilds are the professional lobby groups that restrict the supply of, say, lawyers or taxi drivers through professional licensure, protecting their own incomes; or that lobby for government subsidies, as farmers’ groups do.
But just as bad are the middle classes who use their voting power to support policies that protect their wealth at the expense of the poor. Although planning laws are typically justified in terms of ‘protecting the countryside’ and other forms of conservation, they owe their popularity to the effect they have on the value of existing properties. By raising the costs of construction, fewer houses are built and the price of existing stock is protected. For people who own their homes, this is very attractive. For people who rent – which includes many, if not most, of the country’s poorest – this means that the price of housing has risen far beyond what they can manage.
Other middle class subsidies include universal healthcare and education, but I do not expect people who are not already sympathetic to free market ideas to change their mind about these issues. If a cross-ideological consensus could be forged over issues like planning and bailouts for private businesses, the absurdity of poor people shouldering the burden of welfare for the rich could be ended. The ‘modern mercantilism’ of corporate welfare and middle class subsidies is as much of a threat to today’s poor as its predecessor was in Adam Smith’s day.
Lots of other things matter too, of course. School choice and monetary reform are both critically important to the poor. In particular, the Bank of England adopting a nominal GDP targeting regime – as advocated by my Adam Smith Institute colleague Scott Sumner8 – would help to end the current economic stagnation and avoid more demand-led recessions in the future.
Most of the policies I have outlined are uncontroversial positions in orthodox libertarian dogma, but what may be new is the suggestion that these issues matter far more than do things like tax and overall government spending. What is remarkable is how many of these issues are more typically associated with left-wing political stances than right-wing ones. Could it be that some of the most important issues for libertarians are the ones about which we agree with the hitherto hated left?
Such an overlap should not be as surprising as it might initially seem. Nor is it to be feared. Murray Rothbard’s fears about losing ‘the tight-assed majority’ by associating with ‘free spirits’ on the left were misplaced – libertarianism never has and never will command a majority of the political tight-asses. Its best hope is to shape other ideologies in ways that bring out the best in them: giving conservatives a taste for free enterprise. Or, we may hope, giving leftists a taste for getting the government off poor people’s backs.
But for this to work, libertarians must change their rhetoric and, to some extent, their minds. They should be humble about the policies they propose, and disaggregate the bundle of policies they want from one another. You need not believe in abolishing the NHS to accept libertarian arguments about school choice. I am sceptical about claims that (for example) employment deregulation will impoverish the poor, but I cannot dismiss them out of hand. Similarly, people on the left cannot dismiss the market liberal critique of social democracy out of hand. Regulations do indeed impose costs and often hurt the people they are designed to help.
So I suggest that libertarians concerned with the plight of the poor should abandon their opposition to wealth redistribution in practice and focus instead on the regulatory state, where we have a much greater degree of certainty about the harm caused. For libertarians who wonder if they are BHLs, the question might be: If libertarian institutions existed and serious, significant poverty persisted, would state action be justified in acting to relieve at least some of that suffering, if we had a pretty good reason for thinking that that action would work?
I think that it would, and if you have a serious commitment to welfare so should you. The only problem should be an empirical one, which I cannot say is strong enough to reject all wealth redistribution. While I am extremely confident about the benefits of liberalising planning to allow new homes to be constructed in the UK, I feel less confident about saying that all redistribution is harmful.
So I propose a compromise: a ‘libertarian welfarism’. This might see us reform tax credits and the welfare system into a combination of universal basic income and a ’negative income tax’ that acts as a top-up to people’s wages, adjusted to give a little more to people in low-income jobs and the unemployed. The details of this approach to income redistribution are not important for now: what matters is the idea of a simple, cash-based redistributive mechanism. I find myself very comfortable with this kind of redistribution; other libertarians will be less so. But perhaps they could accept it as the cost they have to pay to persuade others about the other, much more important, things they have to say.
We should not forget that political reform is like a game of Jenga: removing the redistributive supports for the poor before we remove the legislative contributors to their poverty will simply cause harm (and make it harder to dismantle what we really do want to get rid of).
Political reform is like a game of Jenga: removing the redistributive supports for the poor before we remove the legislative contributors to their poverty will simply cause harm (and make it harder to dismantle what we really do want to get rid of).
Politically, these ideas are mostly non-starters. But all political movements have to start somewhere. Those of us who agree that political institutions – whatever they are – should be designed so as best to improve the lives of the poor should put aside suspicion and stop assuming our ideological rivals do not share the same ends that we do. Where there is common ground over means, as in the areas I have outlined, we can work together to achieve a more just world.
Sam Bowman is Research Director at the Adam Smith Institute. He was voted 'Liberal Voice of the Year 2013' by readers of Liberal Democrat Voice.
Matt Zwolinski, 'What’s Important vs. What’s Interesting' (15 March, 2001) <http://bleedingheartlibertarians.com/2011/03/whats-important-vs-whats-interesting/> [Accessed 9th August, 2013]
Michael A. Clemens, 'Economics and Emigration: Trillion-Dollar Bills on the Sidewalk?' (Journal of Economic Perspectives, v.25, no.3, Summer 2011) <http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.3.83> [Accessed 9th August 2013]
Transform Drug Policy Foundation, 'Drugs offenders, drugs related offending and the prison population' <http://www.tdpf.org.uk/MediaNews_FactResearchGuide_prisons.htm> [Accessed 27 July, 2013]
'Q&A: Mexico's drug-related violence' (16 July 2013) <http://www.bbc.co.uk/news/world-latin-america-10681249> [Accessed 9th August 2013]
'Stopping a Financial Crisis, the Swedish Way' (22 September 2008) <http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=0> [Accessed 9 August 2013]
Scott Sumner, 'The Case for NGDP Targeting: Lessons from the Great Recession' (Adam Smith Research Trust, 2011) <http://www.adamsmith.org/sites/default/files/resources/ASI_NGDP_WEB.pdf> [Accessed 9 August 2013]