America Before The Entitlement State

Mutual Aid Vs The Ponzi Gang

By Yaron Brook and Don Watkins,

Reacting to calls for cuts in entitlement programs, House Democrat Henry Waxman fumed: “The Republicans want us to repeal the twentieth century.” Sound bites don’t get much better than that. After all, the world before the twentieth century–before the New Deal, the New Frontier, the Great Society–was a dark, dangerous, heartless place where hordes of Americans starved in the streets.

Except it wasn’t and they didn’t. The actual history of America shows something else entirely: picking your neighbors’ pockets is not a necessity of survival. Before America’s entitlement state, free individuals planned for and coped with tough times, taking responsibility for their own lives.

In the 19th century, even though capitalism had only existed for a short time, and had just started putting a dent in pre-capitalism’s legacy of poverty, the vast, vast majority of Americans were already able to support their own lives through their own productive work. Only a tiny fraction of a sliver of a minority depended on assistance and aid–and there was no shortage of aid available to help that minority.

But in a culture that revered individual responsibility and regarded being “on the dole” as shameful, formal charity was almost always a last resort. Typically people who hit tough times would first dip into their savings. They might take out loans and get their hands on whatever commercial credit was available. If that wasn’t enough, they might insist that other family members enter the workforce. And that was just the start.

“Those in need,” historian Walter Trattner writes, “. . . looked first to family, kin, and neighbors for aid, including the landlord, who sometimes deferred the rent; the local butcher or grocer, who frequently carried them for a while by allowing bills to go unpaid; and the local saloonkeeper, who often came to their aid by providing loans and outright gifts, including free meals and, on occasion, temporary jobs. Next, the needy sought assistance from various agencies in the community–those of their own devising, such as churches or religious groups, social and fraternal associations, mutual aid societies, local ethnic groups, and trade unions.”

One of the most fascinating phenomena to arise during this time were mutual aid societies–organizations that let people insure against the very risks that entitlement programs would later claim to address. These societies were not charities, but private associations of individuals. Those who chose to join would voluntarily pay membership dues in return for a defined schedule of benefits, which, depending on the society, could include life insurance, permanent disability, sickness and accident, old-age, or funeral benefits.

Mutual aid societies weren’t private precursors to the entitlement state, with its one-size-fits-all schemes like Social Security and Medicare. Because the societies were private, they offered a wide range of options to fit a wide range of needs. And because they were voluntary, individuals joined only when the programs made financial sense to them. How many of us would throw dollar bills down the Social Security money pit if we had a choice?

Only when other options were exhausted would people turn to formal private charities. By the mid-nineteenth century, groups aiming to help widows, orphans, and other “worthy poor” were launched in every major city in America. There were some government welfare programs, but they were minuscule compared to private efforts.

In 1910, in New York State, for instance, 151 private benevolent groups provided care for children, and 216 provided care for adults or adults with children. If you were homeless in Chicago in 1933, for example, you could find shelter at one of the city’s 614 YMCAs, or one of its 89 Salvation Army barracks, or one of its 75 Goodwill Industries dormitories.

“In fact,” writes Trattner, “so rapidly did private agencies multiply that before long America’s larger cities had what to many people was an embarrassing number of them. Charity directories took as many as 100 pages to list and describe the numerous voluntary agencies that sought to alleviate misery, and combat every imaginable emergency.”

It all makes you wonder: If Americans could thrive without an entitlement state a century ago, how much easier would it be today, when Americans are so rich that 95 percent of our “poor” own color TVs? But we won’t get rid of the entitlement state until we get rid of today’s widespread entitlement mentality, and return to a society in which individual responsibility is the watchword.