Philantropy and Medicine

Regulation and rationing will not save decaying welfare systems spawned by Marx and Bismarck. Will the market do better?

Karl, Otto & Benito are Dead

Medicine belongs to the free market. Neither rationing nor further regulation will save socialized health care systems inherited from Karl Marx, Otto von Bismarck or Benito Mussolini. Individuals ready to reclaim full responsibility for their health care will find many viable alternatives to state controlled and constricted medicine. Tax-deductible health savings accounts will help them parry the costs of predictable illnesses, in particular those that come with age. Differentiated insurance products - ranging from mutual assistance fund pooling to commercial and catastrophic insurance - will cover the risk of unexpected health accidents liable to hit humans at any time of life. Genetic screening will identify predispositions to particular diseases (diabetes, smoker's lung cancer, heart conditions), thus guiding individuals towards specific preventive action while allowing insurance institutions to optimize assessment and management of risk.

The costs of fighting disease and human suffering will no longer be perceived as collective losses but will once again become part of investments towards a better life. The end of inflationary tax-and-spend welfare profligacy, the disappearance of the hidden costs of regulation, the demise of health lobbies and monopolies together with a return to true competitive markets, will make medical care and health insurance far more affordable for most than it is today.

What will then happen to the poor?

Beggars, Muggers and Corporate Hard Players

Citizens who have lost the aptitude to confront risk and who have been groomed to expect everything from Government may indeed not easily adapt to an environment that places autonomy and personal responsibility in the foreground. There will also always be people who through a variety of misfortunes will neither be able to pay their doctor, borrow or save for medical care nor afford insurance. Who will take care of them after modern social security systems disappear?

The welfare state has not done away with poverty. Worse: not only has government social protection conditioned individuals to count on others rather than on their own resources, it has also stifled natural inclinations to assist one's neighbor in times of crisis. The cocktail of inertia and unlawfulness which dazed New Orleans immediately after Katrina, illustrates on a large scale, the societal disorders that the myth of government omnipotence can foster. The fable of cradle to grave welfare provided by a benevolent State has probably done more to harm the weak and the poor than the supposedly amoral and ruthless market.

The market is indeed to some extent morally neutral, insofar as it reflects the multiple and varying moral values of its actors. From primitive times, markets have always harboured thieves, crooks and charlatans. Market mechanisms have integrated this fact of business life by adding value to integrity and reputation. The greed of some may add harshness to competition; the generosity of others will temper it. Pathological violence reaps fewer dividends in commercial transactions than in political or military arenas and certainly does less collateral damage. No industrial predator will ever match the ferocity unleashed by states (even the more benevolent) in their natural functions of taxation and war. Just as they reward reputation and integrity, markets leave ample room for generosity.

Business tycoons are capable of formidable benevolence. George Soros the merciless speculator, who almost broke the Bank of England, and who is said to share Karl Popper's philosophy of a free and open society is also a wide ranging philanthropist. He ranks among of the top five American living philanthropists today. This very exclusive group accounts for approximately 20’000 million dollars funneled into philanthropic ventures between 2001 and 2005. Only when they penetrate the inner circles of state power, do ruthless industrial high flyers become truly fearsome. In his days of tough corporate wheeling and dealing, Dick Cheney may have wielded enough clout to ruin weaker competitors; he did not have the power to have them tortured.

Most interchange between individuals takes forms other than those, which economists can measure. The ties of family and kinship, friendship, professional companionship, religious creed play an important role, as may emotions such as pride anger and envy or feelings of love, gratitude and compassion. Altruism is as much part of human nature as egoism. The latter is linked to the survival of the individual whilst the former is essential to the survival of the family, of the tribe and ultimately of the species. Switzerland is better known for its bankers than for its philanthropists; yet, a recent Swiss poll indicated that a surprising 50% of people questioned would readily give alms to beggars. On another scale, more billions were raised from private pockets after the Tsunami than the recipients will ever be able spend in a lifetime, even after reconstruction of their devastated coastlines. The flow of global aid was such that it has even come to cause local inflationary problems of its own.

A Market for Virtue

The beggar is an archetypal figure of the market. Should there be no givers, there would be no beggars. Just as there is a market for charity, there is a matching one for mendicancy. Every beggar has something to offer in exchange for alms though not necessarily thankfulness. The gratitude of the beggar is as ephemeral as the sham love a prostitute enacts for her client. Beggars however, do not need to be grateful: the intangible good they offer is worth more than the coins that find their way to their hats. Beggars are basically in the business of virtue. In exchange for alms, their donor claims an instant sense of virtuousness no other commercial exchange can quite match. Giving to a beggar and receiving a small parcel of virtue in return is the quintessence of private charity. It is also an eye-to-eye transaction between fellow human beings with no intrusive third parties, no hidden costs, no strings attached. A society geared to turn its beggars into assisted and submissive wards of social bureaucracies, has as much to loose as one that puts an onus on wealth and replaces it by the redistributive power of the State.

With the decline of religious faith, the beggar ceased to be seen as a God-given opportunity to practice Christian virtues. Secular power has seldom shown much tolerance for beggars. The Statute of Labourers, one of the first recorded interventions of state authority in pre-modern England placed travel restrictions on impotent and unemployed persons and forbade the giving of charity to beggars in "valiant" health. Statutes passed by parliament in 1531 followed in 1536 by the Henrician Act for the Punishment of Sturdy Vagabonds and Beggars, called for public whipping of able-bodied beggars until their bodies "be blody by reason of suche whypping". The Elizabethan Poor Law enacted in 1601 and whose principles were to stand until the mid 19th Century severely restricted entry into mendicancy, sanctioning offenders with punishments that ranged from branding and stoning to the death penalty!

The stigmatizing and criminalizing of mendicancy was probably one of the first assaults made on the liberty of the poor by early modern secular authority. These archetypal forms of social control punished the most vulnerable elements of society. This would be a recurrent mark of future undertakings of the modern State in a task alien to its nature: that of providing care for its weaker serfs.
The modern state has not erased the stigma branded on beggars by post-medieval secular powers. Present welfare societies deny beggars their social value. They prefer to muffle their very poor under thick administrative rugs or to hide the truly destitute in ever expanding psychiatric gulags. The welfare state has also warped the moral value of giving; its munificence goes hand in hand with taxation, which is extortive by essence. Giving to a mugger, even if the money serves to feed his children, does not qualify as generosity, let alone as virtue. Neither will sharing part of his loot with the poor make the mugger benevolent. A good action can only be virtuous if it results from free choice and if it harms no one.

Tax-supported welfare creates dependence. So may private charity for that matter. Private charity however, hinges on the good will of its patrons and can not reach beyond their purse. Lasting philanthropic endeavours do not stop at the immediate needs of their beneficiaries. Their effectiveness is multiplied by "help the needy help themselves" measures such as apprenticeship and job placement programs, farming enterprises and work projects. The more successful private charities give rise to true and fruitful partnerships between helper and helped. The former reap full returns on their investment. The latter regain autonomy and self-esteem.

Public welfare dips into a seemingly inexhaustible treasure of wealth. Beneficiaries come to see their handouts as sums due that society can provide forever, rather than as the products of the toil of others. Altruism becomes rare as gratitude becomes obsolete . The industrious that the State fleeces in order to feed and medicate its social wards, develop contempt for beneficiaries of social aid, cast as parasites. They think twice before giving alms to beggars. The naive and softhearted delegate their compassion to public social assistance services.


Who Really Cares about the Poor

The destitute were not always dependent on tax-tainted welfare. For many centuries, patronage of the poor by the well to do was a voluntary action dictated exclusively by personal motivations. In some cases it was fostered by a quest for gratitude and recognition, in others, it became a symbol of prestige. Some wanted the name of their family to be remembered; others felt they were endowed with a sacred mission. For many, giving to the poor was an investment for paradise. Charitable enterprises created bonds between rich and poor and prevented disparities of wealth from creating strife between social classes. All the great religions have placed moral duties on their rich. For more than a millennium, clergies were major instrumental powers in the management and redistribution of voluntary charity. Hospitals as institutions were born from great charitable movements, which as from the 4th Century swept the Christian world. The bulk of their resources came from private bequests and voluntary endowments collected by churches and religious orders. With the opening of trade routes in the aftermath of the Crusades and the advent of merchant cities, guilds and philanthropic societies would progressively enter the field of assistance to the ill, the destitute and the disabled. The late Arthur Shenfield correctly observed that the treatment of man by man became conspicuously more humane with the rise of capitalism.

The time of the industrial revolution was also one of booming philanthropy. In 1837 Great Britain counted 28 840 charitable foundations. Throughout the 19th Century, British Hospitals were entirely financed and managed by private philanthropic associations . Doctors charged fees according to incomes and their services were generally available to all, irrespective of social condition. Voluntary hospitals and charitable dispensaries in most large towns provided free medical care to the poor. The story of American charity and philanthropy cannot be dissociated from the saga of the first settlers, for whom voluntary mutual assistance was a condition for survival. Before the American civil war, laws governing the distribution of assistance and relief to the needy were rare. Only in larger New England townships did the involvement of tax and authority in the provision of relief bring strict administrative limits to compassion, leading to restrictive requirements for residency and severe sanctions for trespassers. For the most part however, Churches, religious groups, ethnic communities, fraternal societies and innumerable other private organizations efficiently provided or financed medical care for the poor without discrimination. Friendly societies and fraternal organizations gave rise to mutual aid societies and to many insurance institutions, which would dominate the insurance market for working class people in America and beyond. The Power of Philanthropy Philanthropy and charity have not dissapeared with the advent of modern social security. They have developed in other directions and found new missions. They have even become big business today and claim a respectable segment of market economy. In the United States approximately 2% of GDP (i.e. 250 billion USD) enters philanthropic ventures every year.

The Germans and British each invest 2,5 billion Euros a year in charitable enterprises. In Switzerland twenty thousand private foundations control a global fortune of over 30 billion CHF and distribute more than a billion CHF a year. Major Swiss banks are developing their own philanthropic products. Some already offer investors a 100% guarantee on capital with yields of up to 5.5% per year after deduction of 1 to 1.5% towards funding of charitable foundations. In comparison: Swiss interest rates on government bonds meagerly stand at 1.48%. Much of the fundamental research in fields such as Mucoviscidosis, Alzheimer disease, Cancer or AIDS to name but a few, is already financed through private donations and bequests made to specific Foundations. Public hospitals and state universities now growingly rely on private grants for the funding of clinical research. Private charity and philanthropy not only have the power to help medical progress but they probably also have the potential to ensure decent health care for the poor with greater efficiency and compassion than any existing public welfare bureaucracy. Voluntary private charity organizations cannot be expected to solve all the hardships and misery human life can foster. However, compared to their extort-and-spend compulsory social security counterparts, they hold the moral high ground.

The Heart of Liberty

Virtue does not necessarily guarantee efficiency. Yet multiple decentralized philanthropic institutions are capable of fine-tuning assistance to the poor far better than monopolistic welfare services. Beneficiaries of charity cease to be social security numbers. Benevolence comes with a smile. Administrative costs of private charity do not burn up resources faster than they are gathered, while any indelicacy is sanctioned by donators far more drastically than logrolling, rent seeking, political pork or blatant corruption can ever be punished by the taxpayer. The death of the welfare state and of public social security may well be the best news the poor will receive in the upcoming years. Some of them will be able to rally enough resilience to overcome their dependence on inept or corrupt bureaucracies. Others will find helping hands no longer bound by indifference or contempt. Resources no longer tapped by tax cleptocracy will find their way to philanthropic ventures.

Compared to regulated systems, the free market is superior in terms of economic efficiency: this applies as much to health services as it does to food, housing or transportation. However, in the sensitive field of human suffering, economic efficiency is not sufficient if it fails to meet basic humanitarian values. Rationed, over-regulated, bureaucratic and decaying health care systems spawned by a now obsolete collectivist ideology do not respect such values. Pseudo reforms that prolong their agony are not morally acceptable. Generosity and altruism are inherent to human nature and are a condition for cooperation in human societies. They can only bloom in an environment that recognizes autonomy and personal responsibility as prime values. A fully free society generates philanthropic and charitable enterprises powerful enough to address the basic needs of the truly destitute. Only a rapid and complete return of health care to the free market will do justice to the weakest elements of human society: the poor, the sick, and the elderly.


This article was edited from:

"Charity and Philanthropy in Free Markets and their Place in Healthcare" (essay)by Alphonse Crespo

Alphonse Crespo

February 20, 2008