If poverty and inequality have formed the basic arsenal of free-market capitalism's critics, what did this system's most prominent advocates offer as the solution to these problems in the mid-twentieth century, and how did they differ? In answering these questions, this article explores the division between free-market economists on the benefits of a guaranteed income during the 1960s and 1970s in the United States. In 1962, Milton Friedman published his own iteration of a guaranteed income in the form of a negative income tax, intended as a wholesale replacement for social programs that had defined the American welfare state since the New Deal.Footnote 1 By this time, Friedman was emerging as the recognized face of what Phil Mirowski and Dieter Plehwe have called the “neoliberal thought collective,” the most prominent pro-market intellectual community in the world, organized since the 1940s in a transnational network of university economics departments and think tanks, connected by the central hub of the Mont Pelerin Society (MPS).Footnote 2 Friedman was not alone in his support for a guaranteed income within this network, joined by the likes of George Stigler, Aaron Director, George Shultz, Arthur Kemp, Paul McCracken, Karl Popper, Ralph Harris, and Arthur Seldon, but neither was he unchallenged, with Ludwig von Mises, Martin Anderson, Henry Hazlitt, Peter Bauer, and Arthur Burns amongst those most vehemently opposed to such plans. The implications of these disagreements have received scant analysis even in works which have taken neoliberal welfare ideology as their focus. Close study reveals that its protagonists sought to destroy the welfare state by two means that were fundamentally irreconcilable.
When Richard Nixon became president of the United States in 1969, two developments brought heightened significance to this debate. First, the consideration of a guaranteed income became a priority in tackling a perceived crisis in welfare provision. Second, this debate occurred with MPS members holding many of the most influential positions concerning its enactment. Milton Friedman, Martin Anderson, Paul McCracken, George Shultz, and Arthur Burns were on Nixon's economic advisory group in his campaign for the presidency. Friedman met with Nixon several times in the Oval Office, and his negative income tax formed the basis of the administration's Family Assistance Plan (FAP). Shultz was Nixon's Secretary of Labor. Burns, alongside Anderson as his aide, was the president's first choice for chair of the Federal Reserve, and McCracken headed his Council of Economic Advisers.
Every one of these economists was, or would become, a member of the MPS, and for the first time they were in positions of genuine political power in the United States. With Nixon making welfare reform his flagship domestic policy once in office, a guaranteed income became one of the first political battlegrounds for the neoliberals to confront. It is thus a remarkable historical irony that these thinkers found themselves on opposite sides of this debate. This article charts the theoretical groundwork laid within the neoliberal network in the decades preceding Nixon's plan to contextualize these debates when they occurred.
Brian Steensland has theorized that four basic paradigms framed political discourse on welfare reform by the late 1960s. Three were mobilized in support of a guaranteed income. First was the “economic-citizenship” approach of Robert Theobald, John Kenneth Galbraith, and the National Welfare Rights Organization. This paradigm cultivated the notion that minimum standards of comfort be assured as a legal right, supposedly operating in concert with preexisting social programs to end poverty in the US with relative speed. Second, Steensland maps the “family stability” concern of theorists like Daniel Patrick Moynihan, who sought to revive and strengthen the nuclear family in structurally disadvantaged minority communities. Marisa Chappell and Melinda Cooper reframe this motivation as extending the Fordist family wage to those excluded from sectors dominated by white, unionized labor since the New Deal.Footnote 3 Steensland labels the proposals of Friedman and George Stigler as the third, “laissez-faire conservative” paradigm, concerned primarily with eliminating bureaucracy, cutting costs, and replacing supervision with incentives. Finally, the fourth conception is placed in opposition to all three of these approaches as the “rehabilitationist” paradigm. Advocates of this conception, including Anderson, Burns, Henry Hazlitt, and Ronald Reagan during his time as governor of California, attacked guaranteed-income proposals’ dissolution of the boundaries between categories of the poor that varied in their worthiness for state support.Footnote 4
The neoliberal epistemic community was cut through the middle by those who supported the “rehabilitationist” (which I will henceforth call “paternalist” to fit the context of the neoliberal intellectual network) and those supporting the “laissez-faire conservative” (which I will henceforth call “libertarian”) paradigms. Absorbing Steensland's mapping onto a fresh analysis of neoliberal welfare ideology provides an insight into its heterogeneity. Previous analysts have suggested that neoliberal welfare regimes have been premised on the disciplining of troublesome populations, workfare, surveillance, and the moralized categorization of recipients into restrictive standards of eligibility. Sanford F. Schram, for example, has argued that neoliberal policy is defined by a system in which “those in poverty are cast aside as disposable populations who are to be monitored, surveilled, disciplined, and punished.”Footnote 5 John Krinsky similarly frames neoliberal welfare reform as synonymous with workfare and categorization, while Loïc Wacquant believes it to operate in harmony with the penal state, sanctioning disciplinary intervention into the lives of minorities and the poor.Footnote 6 Melinda Cooper and Jessica Whyte in part trace these policy architectures back to the intellectuals of the MPS, arguing that they sought to reinvigorate invasive Poor Law means-testing and the stigmatizing social exclusion of an “intrusive paternalism.”Footnote 7 But, as will be shown, those neoliberals who advocated a guaranteed income attacked the very aspects of the welfare state which these analysts have condemned as neoliberal innovations. The “paternalist” paradigm has been privileged in the literature as the neoliberal approach to welfare reform for the simple reason that it won political success in the United States.
Revisiting the disagreements that neoliberals held over a guaranteed income provides a window into the well-established historiographical debate on whether these thinkers sought to “roll back” the state or to “reprogram” it towards alternative goals.Footnote 8 Julilly Kohler-Hausmann, Elizabeth Hinton, Heather Ann Thompson, and Loïc Wacquant, amongst others, have carefully reconstructed how the contraction of social-policy goals was combined with an expansion of the penal state since the 1970s.Footnote 9 In welfare policy, a blurring of boundaries occurred between provision and policing through heightened surveillance, drug testing, restrictions on consumer choice, integrated criminal databases and strict categorization of recipients at the state level.Footnote 10 Many neoliberals of the “paternalist” paradigm actively supported this emphasis on policing and the stigmatization of claimants. They employed the language of criminality to describe large sections of this population, overlapping with racialized narratives that emphasized fraud, cheating, “chiselling,” and the assumption that freely available cash would be used for alcoholism, gambling, drug use, and other illegal activities.
Milton Friedman, the archetypal “libertarian” within this debate, instead saw one of the central advantages of a minimum income to be its eradication of these policing activities.Footnote 11 Friedman instead sought to remove government presence entirely from those on the economic margins, extending the libertarian justifications of choice to welfare recipients: consumer choice through cash payments, political choice through equal voting rights, and personal choice through the removal of restrictions on their activities. For Anderson, Hazlitt, Burns, and indeed Ronald Reagan, these privileges were to be more strictly reserved for those who maintained economic self-sufficiency, and thus deserved the full status of citizenship. “Choice” was the last thing those on welfare either needed or deserved, and a wholly different face of the state was to be employed in dealing with them. Hazlitt, for example, argued that recipients should be required to work by law; that redistribution should occur in kind to remove their opportunity to spend taxpayer money on frivolities and vices; that recipients should be disenfranchized until they had repaid their assistance; and that there should be a strict, enforced separation between the “deserving” and “undeserving” poor on normative behavioural principles.
Thus even amongst members of the MPS, disagreement over a guaranteed income was more than a disagreement over the policy incarnation of a shared ideology. It represented fundamental disagreements on the meanings and obligations of citizenship; on whether the libertarian principles of consumer choice, privacy, and political freedom were to be extended to economic dependents; and on whether the state should treat citizens differently to ensure behavioural compliance. The importance of this division is reinforced by the fact that guaranteed-income plans became the most prominent reform strategy by the late 1960s, inciting fierce disagreements across the political spectrum.Footnote 12 While Michael Harrington described a guaranteed income as “the most radical idea since the New Deal,” Moynihan went further in arguing that a minimum floor would embody “one of the half-dozen or dozen most important pieces of social legislation in American history.”Footnote 13 What debates over a guaranteed income reveal is a reformulated spectrum of neoliberal thinkers along ethical and political as well as economic lines.
Naturally, any grouping of theorists does not fully incorporate the idiosyncrasies of their thought as individuals. It is fruitful therefore to consider these paradigms of “paternalist” and “libertarian” as correlations along a continuum rather than impenetrable binary categories. A number of factors determined positions on a guaranteed income, including differences in methodological training, readings of classical liberalism and libertarianism, views on practicability, and whether redistribution in itself was desirable. The negative income tax (NIT) was unprecedented and often obscure in its implications. Some onlookers straightforwardly failed to comprehend the program, some changed their minds on the issue, and some were conflicted over its contradictions. The MPS member W. Allen Wallis, for example, equivocated in his debate with the NIT advocate James Tobin in 1967, “While I am sympathetic and favourably disposed toward it, I am not really convinced. I am disappointed that Tobin has not helped me to clarify my mind on the issue and come to a firmer position.”Footnote 14 While favouring freedom of choice and the preferability of redistribution in cash, guaranteeing an income without work requirements often struck neoliberal thinkers as an unusual if not wholly unethical proposition. Given that both these paradigms were employed towards the ideal of shrinking the welfare state, some were content to overlook their different implications entirely to back whichever mechanism best achieved this task. As we shall see, even Henry Hazlitt, who became the fiercest opponent of Friedman's NIT by the 1960s, had briefly been warm to a comparable proposal in the 1930s before changing his mind. The tensions and ambiguities of libertarian thought thus existed within as well as between the minds of its philosophical advocates.
Though a guaranteed income had receded from the political agenda by the end of the Carter administration, the debates it aroused within the neoliberal network marked just one episode of a longer historical narrative. Whilst Friedman conceded in 1980 that the enactment of an NIT had become unrealistic by that time, he reminded his readers that “what is not politically feasible today may become politically feasible tomorrow.”Footnote 15 In the past quarter-century, neoliberal support for a guaranteed income has been reignited. James Buchanan reiterated his support for a universal basic income in 2005 following previous references.Footnote 16 Charles Murray, who became an MPS member in the new millennium, similarly committed himself to a guaranteed income as the most beneficial realistic alternative to the welfare state.Footnote 17 The inheritors of Hayek and Mises's Austrian brand of neoliberalism in the US remain divided on a guaranteed income, while Sam Bowman, the former head of the Adam Smith Institute in the UK, has consistently supported Friedman's NIT.Footnote 18 The divorce of work from income during the COVID-19 pandemic, and its potential to evolve the so-called “neoliberal era,” has only heightened the significance of this lineage.Footnote 19 The debate outlined here is thus representative of a wider arc in the intellectual history of neoliberalism, rather than the flashpoint of a single, historically contingent event.
Neoliberal Social Policy
Social policy concerned the neoliberal network from its foundation. Much of what inaugurated “neoliberalism” as an innovation of the laissez-faire principles of the nineteenth century was the recognized need to consider reformed solutions to poverty, unemployment, and the mass disaffection with market capitalism that had arisen in the 1930s. Fascism, communist expansion, New Deal liberalism, and Keynesian social democracy were varying shades of collectivism that had resulted from these ills, and a spectrum of opinion existed within the MPS on how much concession should be granted to state mechanisms for redistribution.
As exemplary thinkers within this network, Milton Friedman and Friedrich Hayek did not argue that those earning higher incomes and wealth were necessarily morally deserving of their position. Nor did they argue that the poor were at fault for theirs. For Hayek, the market operated as a morally neutral information processor, allocating resources through the price mechanism by signaling relative scarcities. No single person, group, or government could map these scarcities as efficiently as the price mechanism, and the market was therefore defined by risk.Footnote 20 Even the most conscientious labourers, entrepreneurs, or producers could find themselves immiserated by unforeseen structural shifts, the shortage of a vital resource, or changes in the preferences of consumers. Hayek therefore conceded that the market's determination of rewards would yield “strokes of misfortune which those hit have not deserved.”Footnote 21 By the 1970s, he lamented that “especially in the USA, popular writers like Samuel Smiles and Horatio Alger, and later the sociologist W. G. Sumner, have defended free enterprise on the ground that it regularly rewards the deserving.” Such justifications could not be guaranteed, and thus “bode ill for the future of the market order.”Footnote 22
The market was justified by its economic efficiency, its protection of individual freedom, and the more serious defects of its alternatives, rather than by its rewarding of the good. Friedman used a “lottery” as his analogy for distribution patterns in his 1962 work Capitalism and Freedom, accepting that unearned inequalities abounded as a result of birth, education, inherited capacities, and luck. “Most differences of status or position or wealth can be regarded as the product of chance at a far enough remove,” Friedman argued, and “the goddess of chance, as of justice, is blind.”Footnote 23 This indiscriminate neutrality of the market extended also to its satisfaction of consumer demands. As a British president of the MPS, Ralph Harris, argued, “the market will supply what consumers want, from prayer books and communion wine to pornography and hard liquor.”Footnote 24 The correlation between material well-being and moral action was not assured. Neoliberals thus regularly conceded that market exchange, despite its vast preferability to other systems, could yield undesirable consequences.
On the question of short-run poverty and unemployment as examples of these side effects, neoliberals were united in opposing the policy solutions of full employment, minimum-wage laws, and collective bargaining, as these measures seized up the productive change driven by competitive markets.Footnote 25 A dynamic economy was instead one in which structural shifts happened regularly in response to changing technology, resource endowments, and consumer demands, provided inflation remained low and the state did not intervene in private agreements. The neoliberals theorized that minimum-wage laws increased unemployment by pricing submarginal workers out of the labour market, while full-employment drives caused rigidities that boosted uncompetitive economic practice.Footnote 26 The abandonment of these interventionist solutions obligated alternative methods for the alleviation of poverty to be explored.
The axiomatic assumption of the neoliberal network in this context was that free-market policies would eliminate poverty in a comprehensive and systematic manner in the long term. This approach rested on a reading of history that posited the market as the greatest liberator of human beings from material want. As Friedman argued, market capitalism “has freed the masses from backbreaking toil and has made available to them products and services that were formerly the monopoly of the upper classes.”Footnote 27 A system built on the principles of private property, competitive markets, individualism, and the rule of law created abundance where it was permitted to grow. One of the most important principles in this regard was that the income one gained through the market could be used howsoever its earner desired.
The conundrum came in how to provide for those who were not self-sufficient. Michel Foucault argued that part of the neoliberal attraction to a guaranteed income was its promise to prevent dependents from exiting the “game” of competition and consumption.Footnote 28 For a number of neoliberals, therefore, some form of minimum provision by the state formed a necessary exception to the market's general rules of operation. Proposals of this kind were crafted in the earliest neoliberal texts by Henry Simons, Walter Lippmann, W. H. Hutt, Friedrich Hayek, George Stigler, and Lionel Robbins.Footnote 29 The most innovative, and subsequently most influential, however, was Milton Friedman's negative income tax. The division it inspired at the first meeting of the Mont Pelerin Society set the terms of debate in neoliberal circles for the following decades, reflected in one of its six founding aims as “the possibility of establishing minimum standards by means not inimical to initiative and the functioning of the free market.”Footnote 30
Friedman's Proposal at Mont Pèlerin
Friedman's NIT was inspired by his interest in tax fluctuations for earners of an irregular income in the 1930s.Footnote 31 Individuals earning a consistent wage over tax cycles were advantaged over those earning in consecutive periods of higher income and no earnings at all. The individual on a fluctuating income would pay high tax sums for their earning period, but would receive no rebate when they earned nothing, thus often owing higher tax dues overall than the consistent earner despite receiving the same pre-tax income. The NIT's origin in this sense was an attempt to combat a technical problem largely shorn of broader ideological claims.
Friedman repackaged this problem for welfare purposes in conversation with economists at the US Treasury during the early 1940s, where he helped to reform the federal fiscal system through the creation of a withholding tax.Footnote 32 Friedman had already spent time researching household consumer spending during the 1930s, and had formulated a calculation of minimum subsistence by 1939.Footnote 33 The consideration of these problems was broader than Friedman's own theorization, and he later argued that the British politician Juliet Rhys-Williams's “social-contract” version of a guaranteed income, outlined in 1943, was largely identical to his own in emphasizing work incentives and the fusion of tax and social policy.Footnote 34 He was similarly aware of proposals like Abba Lerner's “social dividend” as another variant of a guaranteed income during the war.Footnote 35
Friedman presented a prototype of his NIT at the first meeting of the Mont Pelerin Society in 1947 as a system of “negative taxation,” granting cash payments to all who fell below a “national minimum” income determined by the electorate. Work incentives would be maintained by recipients keeping a portion of their benefits in work, taxed at a specified rate until income surpassed an exemption point. There would be no means test apart from income, and no supervised work requirements. “If a man earned nothing, he would be given something by the state.”Footnote 36 Friedman clarified that his proposal was consistent with liberal principles, as “even in a completely competitive order, we would still have the problem of poverty.”Footnote 37 To overcome the market-crippling inefficiencies of price fixing, protectionism, social security, and collective bargaining, a system of negative taxation was the best alternative. While an NIT attacked poverty directly by giving cash to the very poorest, these programs were not fulfilling their purpose precisely because they did not do this. Friedman's ideal was that they would be replaced by his scheme, supplemented by charitable aid for special cases of hardship.
Friedman framed his proposal as an alternative to the Poor Law tradition, which implied case-by-case inspection of claimants to filter out the undeserving on nonfinancial criteria, as well as supervised work requirements. Not only was this system inefficient and invasive, but also it bore unnecessary costs of administration and was not fit for the circumstances of the modern world.Footnote 38 Friedman here set down the distinction that would emerge into the libertarian and paternalist paradigms of neoliberal debates for the following decades.
Friedman's “libertarian” approach was shared by the contingent associated with the University of Chicago at the conference, including George Stigler and Aaron Director. Though Friedman was its originator in the format presented, Stigler was the first to propose a negative tax in his critique of minimum wage laws in 1946.Footnote 39 Like Friedman, Stigler argued that relief should be granted on the “objective” grounds of declared income alone, and not on the subjective “merits” of particular cases.Footnote 40 At the MPS conference, Director contended, parallel to Friedman and Stigler, that “desperate poverty and excessive inequality of income” could not be left entirely to the market, and a system of “subsidy payments to those with low incomes” should be provided while “leaving a margin for incentive to work. A guaranteed minimum income along these lines will meet our humanitarian objectives far more effectively than the proliferation of ad hoc interventions on behalf of special groups.”Footnote 41
The Chicago contingent here were largely operating on axioms set down by the economist Henry Simons, who had died the previous year. Friedman credited Simons as the intellectual source of “neo-liberalism” in the United States, with Stigler, Director, and Hayek paying similar tributes.Footnote 42 In contrast to more radical views at the MPS meeting, Simons had supported government measures to temper inequality within a market system. Acknowledging the need for careful consideration of work incentives, he nonetheless embraced a conception of “distributive justice” that was divorced from market earnings, favouring tax mechanisms to discrete government projects in combating income poverty.Footnote 43 Price fixing, subsidies, tariffs, licensing, or sector-specific supports distorted the price signals of the market and, like Hayek and Friedman, Simons therefore argued that any minimum countenanced should be universal.Footnote 44 Simons's death provided a powerful sense of purpose amongst the Chicago contingent, and Friedman's justifications for his guaranteed income were heavily influenced by the principles he set down.
Most of the reaction to Friedman's proposal at Mont Pèlerin was hostile, however, and objections came primarily from those operating on alternative assumptions to the Chicago group. Stanley Dennison and John Jewkes pointed out that Friedman's plan had no fixed principle to determine payment levels, and thus could be bid up into a dangerous level of expansion.Footnote 45 Administrative difficulties in accurately determining incomes were raised by Bertrand de Jouvenel and Karl Brandt, and the latter stressed that a universal minimum was a flawed solution for agricultural poverty, where even a basic guarantee would dissuade labourers from taking more productive work in industry.Footnote 46
Ludwig von Mises and William Rappard went further in rejecting Friedman's proposal as unethical. Rappard called it “anti-social” for its tendency to increase dependency. “Professor Friedman's scheme has the worst possible psychological effects,” Rappard is reported to have contributed, in that “the good citizen, who pays his taxes, has to pay for the poor.”Footnote 47 Mises, whom Simons had called “fanatically extreme” for his robust opposition to redistribution, was hostile to the implied separation between earnings and income, questioning why an industrially advanced nation should provide any minimum at all.Footnote 48 Unlike most MPS members, Mises had dismissed the possibility of a middle way between laissez-faire capitalism and centralized planning in his work. Not only against Friedman's NIT, Mises was opposed to government redistribution of any kind, reportedly condemning conferees at the meeting as “a bunch of socialists.”Footnote 49
Friedrich Hayek, though more open to mechanisms for redistribution, criticized Friedman's plan on similar grounds. Hayek was particularly skeptical that provision should be made in cash and on the criteria of income alone, fearing that these features promoted a “freedom not to work.”Footnote 50 Friedman agreed that payment levels were crucial in maintaining incentives. But Hayek more fundamentally argued that the Poor Law tradition Friedman had sidelined was the preferable model, recommending a labour force “under semi-military conditions” to ensure it. “You can refuse to enter this service,” Hayek is reported as arguing, “if you prefer to live on a pittance.”Footnote 51 With a certain measure of ambivalence, Hayek thus assented to the tradition of the workhouse in opposition to cash minimums. Karl Popper followed by arguing that Friedman's plan was an “attractive alternative to socialism,” while the miserly paternalism involved in Hayek's was not.Footnote 52
In one sense, Hayek's opposition to Friedman was surprising. He had argued in his Road to Serfdom that government could provide “the certainty of a given minimum of sustenance for all.”Footnote 53 Reiterating this point in Chicago the following year, Hayek would repeat this commitment for decades, citing John Rawls by the 1970s that “a social minimum is simply a form of rational insurance and prudence.”Footnote 54 The division of Hayek's followers on his advocacy for a minimum income is a reflection of the fact that he offered these solutions ambiguously, primarily justified on pragmatic grounds rather than as serious policy commitments. At the MPS conference, Hayek was hesitant to justify any minimum conditional on economic need alone and which relied purely on incentives to induce work. Unlike Friedman, this led him to justify the alternative model of work requirements, stricter conditionality of payments, and the use of the disciplinary arm of the state. In doing so, Hayek had outlined the basic core of the paternalist paradigm of neoliberal welfare ideology.
Friedman's Proposal in Maturity: The Poor are Free to Choose
The idea of a guaranteed income remained isolated from policy discussions following the conference. Friedman referred to his proposal in passing over the next decade, while the likes of Director continued to emphasize cash guarantees as a preferable form of redistribution.Footnote 55 Friedman again referred to his negative tax at Wabash College in 1956.Footnote 56 Here Friedman made a broader case for government's role by defining the alleviation of poverty as bearing the non-excludability characteristic of a classic public good. Eradicating the most dire poverty held positive “neighbourhood effects” in reducing visible misery and could therefore invite government intervention on principle. As Friedman argued, “I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; thus the benefits of other people's charity partly accrue to me.”Footnote 57 Gordon Tullock later argued that Friedman had here “produced the first really intellectually respectable argument for government charity.”Footnote 58 But in doing so, Friedman's stance was much closer to the neoclassical tradition of Alfred Marshall and A. C. Pigou on government correction of externalities than it was to the stricter methodological individualism of Mises or the Austrians within the MPS, accepting that redistribution could produce measurable social benefits, even if Friedman himself concluded that this could only be done to a lean minimum.
Friedman finally published an exposition of his NIT in Capitalism and Freedom in 1962. Up to this point, he had considered the proposal as a sound but peripheral policy to his broader program, and it was not until the circumstances of the 1960s popularized the idea of a guaranteed income that it rocketed up the political agenda in the United States.Footnote 59 It was for reasons wholly unrelated to Friedman and the neoliberal network that this occurred.
Growing perceptions had by this time emerged in the United States of structural unemployment immune to the general remedy of economic growth. The commentators and social scientists Michael Harrington, John Kenneth Galbraith, Dwight MacDonald, Frances Fox Piven, and Richard Cloward brought invigorated attention from policy makers to the parallel lives Americans were leading, as riots in the nation's inner cities by the mid-1960s focused particular attention on the interdependencies of urban decline, poverty, and race.Footnote 60 President Johnson's initially color-blind, service-based strategy of legal aid, civil rights, job training, and education in his War on Poverty had fallen out of favour by the second half of the 1960s, as liberals, student radicals, and civil rights organizations sought more lasting social victories.Footnote 61 The rapid expansion of welfare rolls, female-headed households, and illegitimate births provided the primary social corollaries critiqued by the right.Footnote 62 In response to these trends, policy makers redirected the focus of poverty programs from employment, education, and job training towards direct income transfers.Footnote 63
Meanwhile, the rise of a new strain of “commercial Keynesianism” emphasizing protection of the price mechanism and encouraging private investment through tax cuts rather than government expenditure and work programs brought auspicious circumstances for Friedman's NIT. Key advisers to Democratic administrations in Walter Heller and James Tobin, who were amongst its gurus, were supportive of an NIT scheme in its utilization of tax mechanisms for social-policy goals within this framework. A new focus on financial incentives gained ground in welfare reform debates, and Friedman's proposal was taken up by figures from across the political spectrum, alongside more generous iterations of a guaranteed income exemplified by the Ad Hoc Committee on the Triple Revolution in 1964.Footnote 64 Reflecting on the newfound popularity of his NIT, Friedman admitted as early as 1966 that he was “astounded at the amount of interest which it has generated.”Footnote 65
Friedman had soft-pedaled some of his arguments for the NIT by this time, including his egalitarian justifications and, reflecting his move away from Keynesian assumptions, a side argument that the NIT held positive “anti-cyclical effects.”Footnote 66 In its maturity, Friedman presented his plan as a system of payments to all below an established threshold of income, with a marginal tax rate of up to 50 per cent on earnings until an exemption point. If the rate was 50 per cent, the exemption would be double the minimum income.Footnote 67 This would provide greater financial incentives to work than Aid to Families With Dependent Children (AFDC) or alternative guarantees which “topped up” income to a defined level with no marginal tax rate.Footnote 68 Friedman's guaranteed income was specifically neoliberal in its low minimum at approximately half the federal poverty line, and its justification as a market-conforming measure, rather than as a solution to technologically driven unemployment, the affirmation of a right to communal resources, or a need to supplement the welfare state.Footnote 69
Friedman remained committed to the principle of no eligibility rules other than income. No distinctions would be made on behaviour, work, age, disability, or gender. Nor would they be made on the sexual, marriage, or dating preferences of recipients, unlike “man-in-the-house” laws.Footnote 70 As well as disincentivizing family breakup, Friedman saw this feature as extending the liberal principle of neutral government. It was not for government officers to implement moralized eligibility guidelines open to interpretation and abuse, and Friedman’s distaste for these powers was magnified as he fused left critiques with his own perspective that they undermined the rule of law.Footnote 71
The NIT would abolish this welfare bureaucracy, operating instead through the Internal Revenue Service via W-2 tax forms.Footnote 72 Checks would be mailed to the poor by the same institution that received the taxes of the rich, and the abolition of welfare bureaucracies would free up experts for the voluntary sector where they could aid those unable to supplement their guarantee.Footnote 73 This feature attracted Nixon and Moynihan within the federal government in wiping out a social-work profession seen to be expensive, inefficient, and counterproductive.Footnote 74
Without this supervision, recipients would be free to spend their own money, rather than having it allocated in kind through food stamps, public housing, or rent payments. Arthur Kemp praised the NIT in this regard as being “not conducive to more paternalism but rather less” at the Tokyo MPS meeting in 1966.Footnote 75 Recipients would be treated as responsible adult consumers.Footnote 76 Community action programs in the War on Poverty had attempted to include the poor themselves within the decision making of poverty programs. As this approach lost confidence, advocates of guaranteed income sought the same goal by alternative means in funneling cash to them directly. Friedman's centering of recipient choice thus provided an auspicious neoliberal strain of the wider policy zeitgeist.Footnote 77
Since Mont Pèlerin, Friedman had favoured a centralized NIT to combat geographical concentrations of poverty.Footnote 78 His advocacy for federal centralization nonetheless stands out from his wider political thought. Dispersing government power was consistently supported by neoliberal thinkers, including Friedman. This commitment cultivated competition between governments themselves, allowing consumers to elude state monopolies and coercive legislation as well as corporations to escape debilitating tax regimes. As Friedman wrote in Capitalism and Freedom, “If I do not like what my state does, I can move to another. If I do not like what Washington imposes, I have few alternatives in this world of jealous nations.”Footnote 79
For the NIT, however, Friedman pitched this argument on its head. While consumers and corporations should be empowered to choose between regulatory regimes, welfare recipients should not be encouraged to do the same. This approach complemented the “migration thesis” in contemporary debates that generous provisions attracted claimants across state lines. Joseph Mitchell, for example, infamously attacked newcomers to the city of Newburgh, New York, in the early 1960s as the “never-ending pilgrimage from North Carolina.”Footnote 80 But this theory was taken up by progressives too, including the Leadership Conference on Civil Rights.Footnote 81 Proponents across the political spectrum saw the vast inequality of payments between states as unjust in itself. The NIT would supposedly create an equitable system that dissuaded migration and eradicated AFDC, which relied on states determining rules for eligibility and remuneration.Footnote 82 The elimination of complex administration allowed Friedman to reconcile his advocacy for centralization with a belief that the role of the federal government would nonetheless be diminished.Footnote 83 Centralizing welfare permitted the taming of one bureaucracy, rather than fifty.
Newer members of the neoliberal network who supported Friedman's program by the late 1960s included Paul McCracken, Arthur Kemp, Arthur Seldon, and George Shultz. By this time, Hayek had left the United States and remained isolated from these policy debates, and Mises was in his late eighties. The primary critique of Friedman's plan came instead from the economic journalist Henry Hazlitt. Hazlitt had been in Friedman's audience at Mont Pèlerin, and it was he more than any other MPS member who mustered and complemented the criticisms heard there for a public audience in the 1960s, making it his personal mission to sink the idea on the American right. By 1974, the MPS economist Alan Reynolds could dub Hazlitt as “the most persuasive of critics of the negative income tax,” while Murray Rothbard praised his arguments as “the best available refutation of the potentially disastrous Milton Friedman proposal.”Footnote 84
Henry Hazlitt's Challenge: Beggars Can't be Choosers
In 1966, Friedman accepted an offer from Newsweek to replace Hazlitt as the economic columnist for the right-wing point of view—a position Hazlitt had held for twenty years before moving to the LA Times. In the same year, both figures were invited to a Symposium organized by the Chamber of Commerce to debate a guaranteed income, alongside the left-leaning futurist Robert Theobald, the liberal economist James Tobin, and the Republican representative Thomas Curtis. Hazlitt was uncompromising at this event in his criticism both of Theobald's more generous universal grants and of Tobin and Friedman's support for an NIT. Any variety of guaranteed income, he argued, was “morally indefensible.”Footnote 85
Hazlitt publicized his reservations on Friedman's plan for several years following this debate. In the year Nixon announced his introduction of an NIT in August 1969, Hazlitt consolidated his attacks in Man versus the Welfare State, and subsequently in The Conquest of Poverty, published after Nixon's plan was dropped by the Senate Finance Committee.Footnote 86 Friedman himself recognized Hazlitt as his most persistent opponent on the NIT, writing to the MPS economist Ralph Harris in 1967, “Hazlitt has been after me hard and heavy for my advocacy of the negative income tax. He has all the arguments on the other side pretty well marshalled.”Footnote 87 When Friedman and Hazlitt again came face to face at a meeting of the Philadelphia Society three years later, Hazlitt’s wife Frances joked that there should be “no physical violence.”Footnote 88
Hazlitt's most significant influence in economic thought was Ludwig von Mises, and, like Mises, Hazlitt was unwilling to concede an income guarantee divorced from market earnings. Both these figures were distant from Friedman's qualified theoretical justification of redistribution for “neighbourhood effects,” as well as his broader use of statistics in economic reasoning. At the Symposium debate, Hazlitt argued that the NIT embraced a wider fallacy of interventionism that money could be easily separated from production and thus redistributed as purchasing power.Footnote 89 The technocratic engineering of tax incentives by Friedman had merely created a mathematical “gadget” which drained the poverty problem of its more fundamental moral and economic contexts.Footnote 90 While Hazlitt accepted that those genuinely unable to earn required support, a significant proportion of claimants did not fall into this category. The best means of shrinking the welfare state was therefore to scythe current programs through stricter categorization, rather than to introduce a program of universal cash guarantees that could be justified neither in pragmatism nor in principle.
Hazlitt fielded a number of objections that were merely practical. First, he suggested that federal payments would squeeze markets into a single Procrustean box.Footnote 91 “The practical effect of this would be to reduce the present high level of relief payments in the big cities hardly at all, but to increase enormously the relief paid in the poorer States and in the country districts.”Footnote 92 Particularly in the latter, unpleasant jobs would be abandoned by those who preferred a subsistence income from the state.Footnote 93 Second, Hazlitt believed that setting the NIT at a low minimum, and ideally as a replacement for all social programs, was naively ignorant of the political process. Jewkes and Dennison had offered the same critique at Mont Pèlerin.Footnote 94 In the first place, the NIT encountered a mathematical dilemma: one either had to guarantee an amount below the federal poverty line, as Friedman prescribed, or provide higher guarantees which, when added to the tapering of income for incentives, would berth a costly scheme paying well-off units in the higher brackets.Footnote 95 It was the latter iteration that the policy would inevitably become in a democratic system.Footnote 96 Hazlitt argued that its bidding up would likely lead to universal payments for every family, “including the Hazlitts, the Friedmans, the Gettys and the Rockefellers,” thus enabling the European model of universal provision, so long resisted, to complete its domination of American political economy.Footnote 97
Though recognizing these as valid concerns, Friedman fired back. First, even if the NIT only replaced AFDC, this would still be desirable if labourers kept at least half their earned income. Second, the NIT was a federal minimum upon which states with the highest wage markets—especially Illinois, California, and New York—could supplement their own NITs if needed. Finally, Friedman argued that “bidding up” was a much smaller risk than with contemporary programs, as direct payments made costs explicit to the taxpayer.Footnote 98
But Friedman mistakenly took these practical reservations to be Hazlitt's only real objections. In March 1967, he responded to an editorial in National Review:
Mr. Hazlitt does not in any way whatsoever “demolish,” as you put it, my arguments for the negative income tax … He rejects the negative income tax on very different grounds: that it is not politically feasible [because] it will be converted to a wholly different proposal that I oppose as fully as he does … It is most uncharacteristic of both Mr. Hazlitt and National Review to give up a fight on grounds of political feasibility.Footnote 99
Not for the last time, Friedman here overlooked that Hazlitt's opposition was grounded as much in a sense of ethical repulsion as in a skepticism of the measure's practicability.
At the Philadelphia Society debate, Hazlitt emphasized that an NIT should be “rejected in principle,” as it rested on “a false idea of liberty.”Footnote 100 Consumer sovereignty of choice defined neoliberal thought throughout the twentieth century—even for thinkers as different as Henry Simons and Ludwig von Mises—but whether this principle extended to those supported by the state was debatable. While Friedman argued that consumer choice should be made universal, Hazlitt more strictly defined this principle as freedom to spend one's own earnings from the market. Extending choice over money to welfare recipients only meant sacrificing the choice of its earners to see that it was spent to their tastes. Friedman and Stigler were thus foolish to have adopted the “spurious libertarian argument” that recipients should be free to spend money that did not belong to them. Far from treating claimants alike, Hazlitt sought to accentuate
the old Victorian distinction between the “deserving” and the “undeserving” poor. People today are justifiably reluctant to state the distinction in moral terms. Nevertheless, the distinction between those who are trying to cure their poverty by their own efforts, and those who are not, is vital … The central vice of all guaranteed-income and “negative income tax” schemes is that they ignore this distinction.Footnote 101
Guaranteeing an income to undeserving “bums” and “parasites” meant forcing taxpayers to work for more income than they desired purely to support the agency of these unworthy recipients. “It makes no sense,” Hazlitt clarified, “to preserve the ‘liberty’ of the irresponsible at the expense of the liberty of the responsible.”Footnote 102 James Buchanan similarly critiqued Friedman for overlooking that it was not poverty itself but the poor's behaviour, lifestyles, and their side effects that concerned the American public.Footnote 103
The argument for consumer choice was further undermined, Hazlitt argued, as “it is precisely because so many of the poor have shown an incapacity for knowing how to spend as well as how to earn money that they suffer as many of the pangs of poverty as they do,” and “cash is the very last thing to be given to a compulsive gambler, a drunkard, or a drug addict.”Footnote 104 Contradicting Friedman, he argued that administrators should provide rent, food, and clothing rather than money for this reason.Footnote 105 William F. Buckley Jr, a friend of both of these men, posited to Friedman on Firing Line in 1968 that providing shredded wheat instead of cash could prevent claimants from purchasing pot, but Friedman countered that recipients would find ways to trade their shredded wheat for pot in any case.Footnote 106 Arthur Kemp addressed this point in starker terms at the MPS meeting in Tokyo:
Of course, some might buy LSD or gin or race track tickets instead of bread and housing. But then the problem is not poverty but something else … who shall decide which choices are “wrong”? Given freedom to choose for themselves, some people are certain to make choices of which others will disapprove. Indeed, that is freedom in the most fundamental sense.Footnote 107
Stigler had differentiated the policy aims of recipient choice and in-kind paternalism in his original 1946 article by warning more dramatically of “the two societies to which they lead.”Footnote 108 These figures accepted that paternalism was necessary for certain categories of people, including children and the mentally ill, but they saw no purpose in extending this social exclusion to welfare claimants.
Hazlitt's attack on recipient choice extended beyond consumer purchases, however. At the Symposium debate, Hazlitt argued that claimants should be disenfranchized until they had repaid their assistance in full, incurring interest if indebted beyond a year.Footnote 109 He reiterated this position in 1969, citing A. V. Dicey and John Stuart Mill in both cases as his justification.Footnote 110 As Mill had argued a century before, “He who cannot by his labour suffice for his own support has no claim to the privilege of helping himself to the money of others. By becoming dependent on the remaining members of the community for actual subsistence, he abdicates his claim to equal rights with them in other respects.”Footnote 111 Claimants’ voting power further risked bankrupting the nation by tempting politicians to expand payments in seeking their votes.Footnote 112 Hazlitt thus inherited wholesale the nineteenth-century vision that those relying on the community should lose their right to choose in the political as well as the economic sphere.
Hayek, who had shown sympathy to the paternalist position at Mont Pèlerin, had similarly floated the idea of recipients being stripped of certain freedoms in his Road to Serfdom. Footnote 113 But Hazlitt's Symposium audience found his disenfranchisement principle extreme, and Friedman stressed that though Hazlitt was right that this argument could be made logically on liberal grounds, it was both inconsistent and anachronistic. Dicey and Mill had made these arguments well before the foundation of the welfare state. While Friedman took profound inspiration from these figures, their prescriptions required wholly new applications in the twentieth century. Government subsidies were now received by many more people than welfare recipients, and at a much higher cost to the taxpayer. Of all those “feeding at the public trough,” it was unjustifiable even on Hazlitt's terms to single out for punishment “those who are feeding poorly.”Footnote 114
Theobald and Tobin were less forgiving than Friedman, highlighting their astonishment at the moral and racial implications of disenfranchisement, with Tobin calling it “unconscionable and so unconstitutional,” and Theobald attacking Hazlitt's callousness in excluding “primarily the Negro.”Footnote 115 Indeed, the wider racial context of bolstering a strict binary between the deserving and undeserving poor was amplified by the late 1960s, as poverty programs became increasingly associated in political discussion and disproportionate media coverage with African Americans. The very category of “undeserving” in these discourses was strongly correlated with the stereotype of an inadequate work ethic in black communities.Footnote 116 It was likely no coincidence that the likes of Hazlitt sought, in this context, to push claimants beyond the realms of citizenship entirely.
A central argument of the paternalists more widely was that a guaranteed income was unpopular with the American people, and in one sense this argument remains compelling to modern historians. But even when making it, many conceded that the figures were the reverse amongst racial minorities.Footnote 117 Many liberal and left proponents of a guaranteed income embraced this support in their arguments. Tobin believed that a primary compulsion for an NIT was “the new sense of human equality that the Negro civil rights movement has brought to America.”Footnote 118 The welfare rights activist Johnnie Tillmon similarly argued that a guaranteed income was a birthright for black women who had forever had their labour as workers and mothers exploited and degraded.Footnote 119 While black feminist activists in the National Welfare Rights Organization (NWRO) came to oppose Nixon's NIT, this was due to its low payment level and not to the principle of a guaranteed income itself.Footnote 120
Federal payments to black residents had formed a visceral fear of racially oriented politicians since the Reconstruction era. One of the most important tools for maintaining racial hierarchy in the South had been state control over eligibility rules for poverty programs, and this “southern cage” had permitted the reconciliation of a racial caste system with the founding moment of the American welfare state.Footnote 121 A federally guaranteed income threatened to destroy this architecture completely. Vee and Vincent Burke argued that Nixon's iteration would have “transformed the lives of poor black families in the South, giving them undreamed of economic security and its corollary, political power.”Footnote 122 Even Friedman's comparably meagre federal minimum would have more than doubled the average benefit of a family with no earnings in a state like Mississippi, as well as removing eligibility restrictions and the power of administrators to employ them. Christopher Green estimated in correspondence with Friedman that his scheme would increase payments immediately in nine states, the vast majority of which were in the South.Footnote 123
At the Symposium in 1966, Friedman attempted to stress the racial benefits of a libertarian NIT, reflecting on his conversation with the welfare specialist Herbert Krosney:
In effect, he said to me, “You classical liberals are always talking about how big government interferes with personal freedom. The examples you give are always about things that matter to people like you and me … The people whose freedom is really being interfered with are the poor in Harlem, who are on relief. A government official tells them how much they may spend for food, rent, and clothing … Mothers receiving aid for dependent children may have their male visitors checked on by government investigators at any hour of the day or night. They are the people who are deprived of personal liberty, freedom, and dignity.”
“And surely, he is right,” Friedman continued:
No doubt, the taxpayer who pays the bill to support people on relief may feel that he has the moral as well as legal right to see to it that the money is spent for designated purposes. But whether he has the right is irrelevant. Even if he has, it seems to me neither prudent nor noble for him to exercise it. The major effect of doing so is to weaken the self-reliance of the recipients [and] diminish their humanity.Footnote 124
Here was a no-man's-land of neoliberal thought in which Friedman and Hazlitt came to polar opposite conclusions. Both saw the payment of taxes as fundamental to citizenship. But whereas Hazlitt prescribed that those who relied on taxpayer money should be denied its privileges, Friedman sought to extend citizenship status through the tax system. Writing to George H. W. Bush in July 1968, Friedman highlighted that a “great virtue of a coherent positive–negative income tax structure is that it treats all citizens alike and does not divide them into two classes to whom different means tests are applied.”Footnote 125 He repeated this notion to the House Ways and Means Committee the following autumn, arguing that the NIT would end “the present demeaning division of our population into two classes—people on welfare and the rest of us.”Footnote 126 Many liberal commentators supported an NIT for the same reason: all would fill out the same tax forms as equal citizens through the same fiscal infrastructure.
In Hazlitt and Friedman we thus find figures representative of the division between a variety of neoliberal welfare policy that sought to reprogram the bureaucracies of the state to exclude, surveil, and categorize, and a variety that instead advocated complete withdrawal beyond minimum payments. Friedman sought the abolition of welfare inspectors’ role as “policemen and detectives,” while Hazlitt advocated a return to the “severity and niggardliness” of the nineteenth century.Footnote 127 Criminality, idleness, and fraudulent behaviour were rife in welfare, according to Hazlitt. “By neglecting the careful applicant-by-applicant investigation of needs and resources made by the ordinary relief system,” a guaranteed income “would open the government to massive fraud, chiseling, and swindling.”Footnote 128 It was time to intensify scrutiny of recipients rather than abandon it.
Hazlitt was nonetheless aware of the attraction of Friedman's NIT in its promise to streamline the welfare state. He emphasized his most surprising warning for its rejection at the Philadelphia Society meeting in 1970.Footnote 129 Having reeled off the NIT's insuperable flaws, he changed gear to surprise his audience. “Now at this point, I have a personal confession to make,” Hazlitt announced. “I am the author of the negative income tax.” More than thirty-one years previous in an article for the New York Times’ Annalist in 1939, Hazlitt had floated the idea of a “tapering subsidy” for claimants, both in and out of work, set uncannily at a tax rate of fifty cents on the dollar up to a minimum income. When a fifth of the American workforce remained unemployed, Hazlitt had briefly argued for a system he had come full-circle to oppose as a route out of the constellation of New Deal programs.Footnote 130 “Fortunately,” Hazlitt reflected to an amused audience, “this had no impact whatever and I myself abandoned the idea a few weeks later.”Footnote 131 As Hazlitt considered the scheme in detail, he concluded that its implications were unavoidably perverse. While there is no evidence that Friedman read Hazlitt's article, he replied with glee that he should claim alternative authorship of the NIT. “It just demonstrates that all reasonable, intelligent, rational people who look at the same problem come out with the same answers. I am sorry to see that his powers of rationality have declined with time.”Footnote 132
Neoliberals at The Wheel
These divisions on the right prompted confusion amongst Republicans. Alongside Nixon, Bush and many other members of Congress, Barry Goldwater, whom Friedman had advised in his presidential campaign in 1964, wrote to him in bewilderment in 1969 asking for papers on the issue.Footnote 133 Within Nixon's new administration, neoliberals debated NIT proposals along the same lines as Hazlitt and Friedman. George Shultz and Paul McCracken complemented Friedman's arguments in discussions with the president, while Hazlitt's reasoning was mirrored by Martin Anderson and Arthur Burns. When Anderson published his account of these discussions in 1978, Hazlitt wrote a beaming review for The Freeman.Footnote 134 In response, Anderson crowned Hazlitt as “the only reviewer that has fully comprehended the main theme of the book, namely, that the concept of a guaranteed income is fatally flawed, ethically and practically.”Footnote 135 Murray Rothbard called Anderson's work “an empirical counterpart to Henry Hazlitt's brilliant philosophical demolition of the GAI and NIT in his Man vs. The Welfare State, which should be read in conjunction with the present book.”Footnote 136 Anderson, alongside Burns, was an opponent of the idea from the very beginning of its political life. The arguments they utilized had all been made before.
Having served on Eisenhower's Council of Economic Advisers, Burns acted as an adviser to Nixon before becoming chair of the Federal Reserve in 1970. Friedman had a deep relationship with Burns, reflecting in his memoirs that “save for my parents and my wife, no one has influenced my life more than Arthur.”Footnote 137 He had taught Friedman as an undergraduate and they remained close friends until Burns died in 1987, when Friedman authored his obituary. The pair had significant disagreements on monetary policy, but were otherwise largely ideologically kin.Footnote 138 Anderson had joined the MPS in 1965 and lobbied to end the Vietnam draft with Friedman while Nixon's FAP was traveling through Congress.Footnote 139 Anderson and Burns, like Hazlitt, thus represented familiar faces to Friedman. When it came to the NIT, they were the best of enemies.
The pair blamed Friedman exclusively for making a guaranteed income palatable on the right.Footnote 140 McCracken described his approach as “Friedmanesque,” and it was in large part thanks to Friedman's recommendation that Shultz came to Washington in the first place.Footnote 141 McCracken mimicked Friedman's choice principle for recipients, and in a meeting on the topic of claimants receiving cash directly, he asked, as Kemp had in Tokyo, “As to the question, will they use it wrong, I say, wrong to whom?”Footnote 142 Secretary of Labor Shultz similarly argued that earmarking payments as food stamps was merely infantilizing recipients by providing them with “funny money.” Friedman wrote to Shultz to inform him, “I have stolen your ‘funny money’ phrase for food stamps. Wish you luck in getting this straightened out inside.”Footnote 143 Shultz further embraced Friedman's prioritization of incentives. In a memo to the president in May 1969, he privileged the “principle of free choice with respect to labor force participation in order to avoid the dual evils of crushing work incentives and removing effective wage competition.”Footnote 144 Building on Friedman's plan, Shultz advocated for an earnings disregard for recipients’ initial wages to reinforce incentives.
As Friedman intended, making work pay became the central focus of the program. In his testimony to the House Ways and Means Committee in November, he welcomed Shultz's earnings disregard, stressing that “the most important need in welfare reform is to provide a strong incentive for persons receiving governmental assistance to become self-supporting.”Footnote 145 In his own testimony, Shultz denied that their proposal permitted citizens to coast in comfort. “Work,” Shultz clarified, “is a major feature of the program.”Footnote 146 To assure this, payments would be kept low and the working poor would be included in a welfare program for the first time in federal social policy.
Pat Moynihan, who was one of Burns's adversaries within Nixon's circle, argued that his opposition reflected a “strong ideological distaste.”Footnote 147 Burns was opposed to any innovation that did not reduce costs and enrolment numbers, warning that the working poor would “find it increasingly acceptable to stay on welfare rolls” in any NIT scheme.Footnote 148 This was a reincarnation of Hayek's critique that Friedman's plan promoted a freedom not to work. Like Anderson, Burns denied there was any real problem of poverty left in the United States, and welfare should therefore serve only those unavoidably out of work, insisting on enforced work requirements to filter the lazy from the needy.Footnote 149 Abandoning this approach meant risking “what may happen to the moral fibre of America when millions of people, many of whom do not consider themselves poor, are suddenly thrust by law onto the welfare rolls.”Footnote 150
Burns and Anderson contended that an unconditional right to resources was inherent to an NIT.Footnote 151 Reflecting on these years, Anderson cited Hazlitt's contribution to the Symposium debate with Friedman as reflecting his own perspective at the time:
If you claim a “right” to an income sufficient to live in dignity whether you are willing to work or not, what you are really claiming is a right to part of somebody else's earned income. What you are asserting is that this other person has a duty to earn more than he needs or wants to live on. This is an absolutely immoral proposition.Footnote 152
The MPS economist Peter Bauer later similarly rejected Friedman's NIT for its principle of “support without stigma [and] the right to an income regardless of performance, simply by being alive and poor.”Footnote 153
Neoliberals universally rejected any definition of rights which obligated the redistribution of resources.Footnote 154 Such constructions conflicted with the principles of private property and the freedom to earn, save, and contract without undue state interference. Friedman, Stigler, and Kemp wholeheartedly agreed with this. But many advocates of a guaranteed income to Friedman's left did seek to enshrine a material standard of living as a legal right. While Friedman could distance himself from advocates like Theobald by distinguishing the NIT from larger payments bearing no marginal tax rate, liberal participants like Tobin, who also supported this argument, still framed their own iterations of an NIT as “a matter of right, not of charity.”Footnote 155 Friedman and his supporters thus trod a fine line in reconciling their opposition to a legal right with an advocacy of a guaranteed income, whether or not they saw it as a potential platform for a market utopia devoid of a welfare state entirely. “I favour the negative income tax,” Friedman clarified in 1972, “not because I believe anyone has a ‘right’ to be fed, clothed, and housed at someone else's expense, but because I want to join my fellow taxpayers in relieving distress and feel a special compulsion to do so.”Footnote 156
Anderson and Burns, like Hazlitt, argued that there was no practical distinction between these positions. Claiming rights was inseparable from a guaranteed income, and once inaugurated it could facilitate mass idleness and bankrupt government coffers. Anderson used the analogy of the Speenhamland Law to make this point, which de jure guaranteed subsistence to agricultural labourers in England from 1795 until the New Poor Law of 1834, suggesting in a memo to Nixon that the outcome was “the pauperization of the masses, who almost loss their human shape in the process,” leading with the words of George Santayana: “those who cannot remember the past are condemned to repeat it.”Footnote 157 The source of this example was Karl Polanyi's Great Transformation, and it was included in the first major study of the NIT in 1967 by Christopher Green, who corresponded with Friedman for his research.Footnote 158 Hazlitt referred to the Speenhamland example two months prior to Anderson's note, and he even paired it with the same Santayana quotation in Human Events the following year, concluding that there “could be no faster way to impoverish the nation.”Footnote 159 The MPS economist Arthur Seldon felt the need by 1971 to forestall the objection of “Speenhamland demoralisation” in his own writings to strengthen his case for an NIT in the United Kingdom.Footnote 160
Even without a Speenhamland-like dystopia, however, Anderson warned of an expansion in fraudulent behaviour under a guaranteed income, speculating by the 1970s that fraud nationally cost the taxpayer “hundreds of millions, probably billions, of dollars,” and the solution to this could never be the abdication of recipient scrutiny. Anderson urged a shift away from an “automatic, check-mailing type of welfare operation to a more personalized, people-oriented kind of welfare administration that emphasizes both the authority and the responsibility of local government.”Footnote 161 The libertarian approach was a non sequitur. “There is no reason,” Anderson argued, why “people should be given financial incentives to do what they rightfully should be doing anyway.”Footnote 162
He found his preferred model in Governor Reagan's reforms in California.Footnote 163 Reagan had consistently opposed any form of guaranteed income, including Friedman's and Nixon's. He telegrammed the chair of the Senate Finance Committee in May 1970 to demonstrate his opposition. He met with Nixon in July to voice his concerns, and withheld his support at the Republican Governors conference in December. Following his own Welfare Reform Act in California in 1971, Reagan devised an alternative road map intended for emulation at the national level.Footnote 164 Just as Nixon's plan was being jettisoned in Congress, Reagan proclaimed in June 1972 that his measures had enabled Sacramento, unlike Washington, “to slay the monster welfare was becoming in California.”Footnote 165
What Anderson praised in this program were features wholly opposite to Friedman's NIT: non-financial categorization of those undeserving of aid, decentralization to the states, maintenance of local bureaucracies to assess work capabilities and detect fraud, redistribution in kind to preclude consumer choice, and heightened prosecution for those who abused the system. This approach of distinguishing “scroungers” from the “truly needy” allowed Reagan to boast by 1974 that the California model had removed 350,000 applicants from the rolls while “basic welfare grants to destitute families have gone up 41 percent.”Footnote 166 Anderson highlighted this advantage in praising Reagan's model, privileging what Hazlitt had called the attention “case by case to the particular needs of each family.”Footnote 167 Hazlitt, Anderson, and Reagan sought, contra Friedman, to employ strict conditionality of payments, the expansion of policing, and a fundamental rejection of the entitlement philosophy that they saw as inherent to a guaranteed income.
Conclusion
Melinda Cooper has framed neoliberals as united in their desire to reinstate the principles of the Poor Law tradition, and specifically its emphasis on the family as the bearer of financial risk.Footnote 168 Cooper's profound scholarship has changed the way we think about neoliberal approaches to poverty, sexual politics, and the family. Even Cooper, however, inherits a broader oversight in the literature on neoliberal policy making of the contradiction between programs which defined recipients worthy of aid purely on the basis of income, and a Poor Law tradition that anchored itself as its polar opposite: an enforced normative distinction between the “deserving” and “undeserving” poor. If Clinton's reforms in the 1990s exemplify the triumph of neoliberal welfare ideology, its four main characteristics of nonfinancial means tests, work requirements, time limitation, and decentralization to the states were features wholly opposite to the libertarian framework of a guaranteed income. The neglect of this distinction has consistently led to narratives which universalize the paternalist paradigm, misaligning theorists like Friedman, Stigler, Kemp, and Seldon, who justified a guaranteed income as overturning, rather than reinforcing, this central core of the Poor Law tradition.
The libertarians recognized that they were striking at the heart of this inheritance. Friedman framed his NIT as a distinct alternative to the Poor Law tradition at Mont Pèlerin in 1947.Footnote 169 The welfare subcommittee of Nixon's Urban Affairs Council, on which Shultz played a significant role, similarly cast their approach as “the most significant departure yet made from the Poor Laws of Elizabethan England from which our present practices descended with all too little change.”Footnote 170 The NIT was so revolutionary, Michel Foucault argued, because it specifically disavowed this tradition: “the famous distinction that Western governmentality has tried for so long to establish between the good and bad poor, between the voluntary and the involuntary unemployed, is not important … whether he is a drug addict or voluntarily unemployed is not important. Whatever the reasons, the only problem is whether he is above or below the threshold.”Footnote 171 In Moynihan's words, the NIT “would put money in the hands of persons who all could agree needed money, whether or not they deserved it.”Footnote 172
Within the neoliberal network, to be sure, both libertarian and paternalist means were employed towards the ideal of bringing recipients into reconciliation with the competitive market. Critics of free-market capitalism thus have good reason to oppose both these paradigms on the terms they were given. But they cannot be made equivalent. If neoliberals could agree that their utopia was a free-market system devoid of a welfare state, their disagreements on the means of achieving it were persistent precisely because they were irreconcilable. As they themselves were so fond of emphasizing in their critiques of interventionism, political means are as fundamental as political ends.
When Reagan addressed the Conservative Political Action Conference in his maiden year in the White House in 1981, he credited intellectual “leaders like Russell Kirk, Friedrich Hayek, Henry Hazlitt, Milton Friedman, James Burnham [and] Ludwig von Mises.”Footnote 173 Reagan's election represented a triumph for the Mont Pelerin Society and the American conservative movement. But on the specific issue of an income guarantee, and with the president's position clear, Friedman conceded that Anderson's reenforced hostility to an NIT-like program as his domestic adviser was “likely to be very influential in the White House.”Footnote 174 While Friedman's influence on Reagan was significant, exemplified by his winning the Presidential Medal of Freedom under his administration, Reagan's election banished Friedman's libertarian approach to welfare. If Hazlitt thought himself irrelevant by this time, this sense was punctured when Reagan wrote to him following his landslide reelection in 1984. “No one in this century has written more lucidly or with greater common sense on the major issues of public policy, and few individuals have enjoyed an influence as far-ranging as yours … [Your] insights have guided my own thinking, and I am proud to count myself as one of your students.”Footnote 175 Overjoyed, Hazlitt congratulated the president by highlighting his now “precious opportunity, free from any election fears, to propose slashes in our immense welfare spending.”Footnote 176
With the accentuation of the Poor Law distinction between the deserving and undeserving poor, the paternalists within this debate sought to chisel away the welfare state with something known. With the negative income tax, the libertarians sought to destroy it completely with something new. As Arthur Kemp argued at the Tokyo meeting of the Mont Pelerin Society, if neoliberals could not assent to innovative new policies like the NIT, “the remark made that the liberals were dragged, screaming, into the twentieth century may prove to be more than a snide comment.”Footnote 177 Beyond the turn to free-market policies in the 1980s, historical narratives have tended to document the triumph of neoliberal welfare ideology. With a fresh analysis of the decades preceding this turn, one sees instead the more nuanced picture of one paradigm of thought, that operated both within and beyond the neoliberal intellectual network, gaining the upper hand over the other.
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