I came across an interesting article that described the “Cobra Effect.” As soon as I read the article I immediately thought of Socialism. The “‘Cobra Effect’ is used to describe the unintended consequences of well-meaning but poorly planned incentive plans or regulatory schemes, that end up exacerbating a problem.” As you read the following, think about government programs and how they grow over time and end up costing more than the original architects of the programs claimed:
In the days of the British Raj, India’s colonial rulers grew concerned by large numbers of venomous cobra snakes infesting the city of Delhi. So the authorities offered a bounty for every dead cobra, payable upon delivery of its skin to designated officials. The plan seemed to be working great, and before long, natives were thronging to the drop off points, whose store rooms were soon bulging with cobra skins.
However, the incentive scheme did not seem have a noticeable effect on the city’s cobra population. No matter how many cobra skins were delivered to the authorities, Delhi seemed to be just as infested with the deadly snakes. City officials eventually figured out why: many locals had turned to farming cobras. Since the bounty on the snake skin was greater than the cost of raising a cobra, the British had unintentionally created a new cash crop.
When the authorities finally realized what was going on, and how their incentive scheme was being gamed, they cancelled the plan, and stopped paying out bounties for cobra skins. That turned out to be their second mistake. Without the bounties, cobra skins and captive cobras were now worthless. So Delhi’s cobra farmers did the economically sensible thing, and released the snakes back into the wild – the “wild” in this case being the city of Delhi. (History Collection)
Foes of sophisticated and expensive government programs that are designed to help the poor and implemented by distant bureaucratic agencies that grow along with the growth of the programs are on target with their opposition. They have history on their side. Confiscating trillions of dollars in taxes from one segment of society and redistributing the collected revenue to another segment of society and calling it “social justice” does not mean that it is, in fact, the just thing to do.
Attempts to solve problems by declaring war on them by the national government has been an ongoing theme in politics since the mid-1960s. As you might expect, wars are expensive, and there are many casualties. “Overall, civilian social welfare costs increased by twenty times from 1950 to 1980, in constant dollars. During the same period, the United States population increased by half.”1
When the Food Stamp Program began in 1965, 424,000 people participated in the program (that’s less than 9,000 people per state, a manageable number for private welfare agencies to handle). Typically, social welfare programs begin small, but before too long, they expand well beyond their initial intended purpose. When a behavior is subsidized, you get more of it. At the end of Lyndon Johnson’s presidency in 1968, participation increased to 2.2 million. The number doubled during the first two years of Richard Nixon’s presidency (1969-1970). By the end of Nixon’s first term in 1972, the number of food stamp recipients had increased five-fold. “By 1980, more than twenty-one million people were receiving food stamps, fifty times more people than were covered during the Johnson presidency.”2
Today, nearly 43 million people are part of the Supplemental Nutrition Assistance Program (SNAP) costing around $71 billion.
There are other “Cobra Effect” programs:
AFDC was to take care of widows with small children…. Nothing in the New Deal [Social Security, Aid to Families with Dependent Children (AFDC), Workman=s Compensation, and Unemployment Insurance] provided help just because a person was poor or hampered by social disadvantages…. By the fifties it had become embarrassingly, outrageously clear that most of [the women receiving benefits] were not widows. Many of them had not even been married. Worst of all, they didn’t stop having babies after the first lapse. They kept having more. This had not been part of the plan.3
Using the State to satisfy a concept of “social justice” did more harm than good because it lured people into programs that made them dependent upon the State. Undoubtedly there were poor people in 1965 who needed food and shelter but creating a government program to satisfy the need was the wrong solution.
Keep in mind that the money spent on these programs is only a fraction of the money collected.
In 1982, the total U.S. welfare bill at all levels of government (Federal, state, and local) came to 403 billion dollars. If we take figures from the Bureau of the Census (August 1984) which state that the number of people living in poverty in the U.S. was 15.2 percent of the population or 35.3 million people, an amazing fact emerges. Had we simply divided the 403 billion dollars this nation spent on poverty at every level of government among the estimated number of poor people, each poor person could have received $11,133. For a family of four, this would have totaled $44,532. Since the official poverty level per family for that year was $9,287, it is clear that America’s fight against poverty involves enormous overhead costs. Most of the tax dollars collected to fight poverty end up, Thomas Sowell notes, “in the pockets of highly paid administrators, consultants, and staff as well as higher-income recipients of benefits from programs advertised as anti-poverty efforts.” Clearly, the bucket used to carry money from the pockets of the taxpayer to the poor is leaking badly. Many think the real beneficiaries of liberal social programs are not the poor and disadvantaged but the members of the governmental bureaucracy who administer the program.4
Those who administer these programs have a vested interest in their survival and expansion. Winning the war on poverty is not the goal, perpetuating the programs is. “Less than 25 percent of all the tax dollars allocated to fight poverty at every level of government reaches the poor. The other 75 percent goes to pay overhead.”5 It’s even higher today.
Advocates of “social justice” programs implemented by the State at the expense of productive members of society will claim that there are success stories. Few would dispute the claim. When so much money is being poured into these programs, someone is bound to benefit. But if that same money — including the revenue lost in overhead expenditures that never reach the poor — were saved, invested, and spent instead of taxed, many more people would benefit, and we would have fewer social-welfare slaves that vote to release more cobras into society.
While good intentions should be commended, good intentions have little to do with what is just and helpful for those in need. There is no question that many advocates of a “social justice” perspective care about the poor. “But their compassion is often wedded to a political and economic ideology that is long on heart and short on wisdom. The emotional side of Christian social concern — loving and caring — is only half the story. The best of intentions cannot actually aid the poor unless channeled into actions that are informed by sound economic theory and practice. When ‘aid’ is grounded on bad economics, it will usually make any bad situation worse.”6
Charles Murray, Losing Ground: American Social Policy, 1950–1980 (New York: Basic Books, 1984), 14. ↩
Ronald H. Nash, Poverty and Wealth: The Christian Debate Over Capitalism (Westchester, Illinois: Crossway Books, 1986), 176. ↩
Charles Murray, Losing Ground: American Social Policy, 1950-1980 (New York: Basic Books, 1984), 17-18. ↩
Nash, Poverty and Wealth, 177. ↩
Ronald H. Nash, Why the Left is Not Right: The Religious Left — Who They Are and What They Believe (Grand Rapids, Michigan: Zondervan, 1996), 183. ↩
Nash, Social Justice and the Christian Church, 3. ↩