Montréal, 10 juin 2000  /  No 63
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Dr. Younkins is a Professor of Accountancy and Business Administration at Wheeling Jesuit University in West Virginia.
by Edward W. Younkins
           Whereas the state, or political society, is based on coercion, civil society is based on voluntary participation. The state is the institutionalization of force with respect to its financing (e.g., taxation), the allowable activities of its citizens (e.g., regulation), or the forced participation of individuals (e.g., compulsory military service). In political society, someone else makes decisions about your life. In civil society, you make those decisions. Civil society is the sphere of cooperation, competition, and true charity.
Civil Society 
          David Boaz in Libertarianism: A Primer, observes that civil society is made up of all the natural and voluntary associations in society including families, churches, clubs, fraternal societies, neighborhood groups, charities, self-help groups, trade associations, unions, sole-proprietorship, partnerships, corporations, etc. Each association within civil society is created to achieve a specific purpose, but civil society as a whole has no intended purpose – it is the undesigned, spontaneously emerging result of all of the voluntary, purposive associations. Order in civil society results as the unintended byproduct of the voluntary and mutually beneficial associations among the individuals in that society. 
          Communities emerge as individuals voluntarily relate to one another in an indefinite number of ways. A man needs to associate with others in order to flourish and fulfill his needs and desires. It follows that civil society is comprised of associations without being collectivist and is individualistic without being atomistic. 
          Civil society, the realm of freedom, is based on giving the widest possible discretion to the individual so that he has sovereignty over his own life in the pursuit of his happiness, as long as he respects the equal rights of others. It follows that political society should exist only to prevent force, fraud, and misrepresentation. As the state grows, civil society wanes. It is in civil society that men flourish, and from civil society that prosperity, progress, and virtue flow. 
          The corporation has a primary position in the construction of the major alternative to the state – civil society. The corporation depends on investors for its financing. Its purpose is to provide goods and services in order to earn income for its investors, with fiduciary care for its invested capital. Sources of private capital and private wealth are crucial to the survival of freedom – the alternative is dependence on the state. 
          According to Michael Novak in The Fire of Invention: Civil Society and the Future of the Corporation, from the point of view of civil society, the corporation is an important social good for the following reasons: 1) It creates jobs; 2) It provides goods and services; 3) Through its profits it creates wealth that did not exist before; and 4) It is a private social instrument, independent of the state, for the moral and material support of other activities of civil society. 
          The corporation is a major supporter of many works of civil society including charities, the arts, research, universities, etc. Of course, expenditures for such purposes are legitimate only when they have been authorized by the stockholders or when managers reasonably believe they will increase the firm's long run profits. 
          In addition, corporations underpin the financial hopes of many citizens. Over half of the adult population in North America owns corporations through mutual funds, pensions plans, etc. 
Cooperation and Competition 
          Capitalism involves the voluntary exchange of goods and services between free and self-responsible individuals to their mutual benefit. With the advent of specialization of labor, people found it necessary to develop an exchange mechanism through which a producer of one item could exchange it for something he would produce less efficiently than another. Voluntarism ensures that both parties to an economic transaction will gain from it. Each person enters a free market transaction because, in his own judgment, the result will be beneficial to him. Each party acquires something he values more in exchange for something he values less. 
     « When people are financially squeezed by the welfare state, they find their ability for private philanthropy to be greatly reduced. Only people who are allowed to keep what they have earned have the financial means to be benevolent and compassionate. » 
          The free market, a key component of civil society, developed as men realized that they could accomplish more through cooperation than they could individually. Cooperation can actually enhance a person's individuality by increasing his chances of attaining his goals and flourishing as a human being.           
          In a world of scarce resources and self-interested individuals, each possessing the right to self-determination, it is essential for people to voluntarily cooperate with one another in order to attain their instrumental goals and pursue their needs for human inter-connectedness. This implies the need for a minimal state, the rule of law, the division of labor, and a secure system of property rights.  
          Persons engaged in economic activity may be guilty of coercion, fraud, or theft in which one party will benefit at the other's expense. The proper role of the government under capitalism is to restrain and punish those who obstruct the practice of free exchange. In a free market economy people are rewarded for serving others and are punished only for injuring others. 
          Capitalism is based on cooperation. Workers cooperate with their employers. Farmers cooperate with distributors and food processors. Manufacturers cooperate with distributors, both of whom are attempting to cooperate with consumers. Banks cooperate with individuals, firms, and families. Unions cooperate with corporations, etc. 
          Capitalism is inherently relational – it fosters human interdependence and a mutualistic outlook. Voluntary exchange is a form of cooperation between buyers and sellers in which individuals can only promote their own interests by furthering the interests of others. Limited by the rule of law, individuals and groups prosper only to the degree that they offer products or services for which people are willing to trade. The consumer is sovereign under capitalism. The only way for an individual or corporation to grow and remain economically successful is to continually satisfy consumers. This calls for an increasing regard for the interests, desires, tastes, and opinions of consumers. Failure to adjust one's actions to the consumers' wishes will result in losses and the shifting of resources to those who serve consumers better. 
          Under capitalism, successful competitors are those who cooperate with or satisfy others in society. Firms and individuals compete with one another in order to cooperate more effectively with the buying public. As a result, competition encourages invention, innovation, research, cost reductions, greater efficiency, and the development of new and better products and services. 
          The variety of enterprise associations that exist are attempts to find better ways of attaining mutual purposes. Licensing agreements, joint ventures, outsourcing and other forms of strategic partnering are common today. Even apparent competitors sometimes find it advantageous to cooperate with one another in their efforts to acquire needed resources or access to markets! 
          The profit-and-loss system in a voluntaristic society is just and moral. A person's wealth under capitalism depends upon his productive achievements and the choice of others to recognize them. Profits indicate that a businessman has served his fellow men by using resources to produce a product or render a service at costs below the value people place upon the product or service. The firm making profits is using resources in a manner that satisfies what people want and need. Losses indicate that a businessman has failed to serve his fellow men efficiently.  
          Justice does not imply that everyone deserves some predetermined share of wealth, but that what people deserve varies according to their accomplishments, and that it is proper to observe those differences. As people recognize that rewards depend upon their efforts and outputs, their incentives to produce increase. Not only does profit provide risk-takers with incentives, it also serves as a guide for allocating resources, provides a reward for efficiently serving other people, and serves as a measure of efficiency in the use of resources to satisfy customers. 
True Charity 
          The goal should be to have no welfare state at all. Welfare is not only demeaning to its beneficiaries, government programs also diminish self-reliance, breed dependency, and reinforce social pathologies by creating unintended rewards for people to do the things they are trying to remedy (e.g., pay people to have children they can't support and encourage unemployment). Also, a system that tries to force acts of love, such as charity, violates the true nature of love and, as a result, creates injustice. The only way the state can « help » people is to give them wealth taken through taxation from someone else. Forcing people to be « charitable » makes them self-centered and resentful. When people are financially squeezed by the welfare state, they find their ability for private philanthropy to be greatly reduced. Only people who are allowed to keep what they have earned have the financial means to be benevolent and compassionate. The existence of government welfare brings red tape, diminishes the spirit of self-sacrifice, and fosters the unfortunate view that assistance to the poor is the State's job rather than private citizens' freely chosen obligations for charity. 
          Much of the need for the welfare state is caused by the government itself. For example, minimum wage laws create poverty by increasing unemployment, tariffs and quotas make consumer goods more expensive, and rent control promotes homelessness by supplying a disincentive to provide low-rental housing. In addition, regulations such as building codes, zoning requirements and licensing laws have obstructed the development of small businesses that are crucial for raising people out of poverty through employment. 
          Even in the absence of government poverty-causing programs, there would still be unfortunate people such as the disabled, the illiterate, the sick, the unemployed, the mentally incompetent, the elderly, and single mothers of infant children. The welfare state is a poor substitute for personal local acts of charity that emphasize self-reliance and self-respect – qualities that tend to be missing when government welfare is viewed as positive « rights » to be asserted. Given that some type of charity is needed, private sector solutions are vastly preferable to governmental ones. Civil society allows for a variety of voluntary initiatives by family, friends, neighbors, churches, charitable organizations, unions, fraternal and friendly societies, etc., to help those in need. Voluntarism means doing away with coercion and relying on individual action, education, persuasion, and voluntary organizations based on generosity and neighborliness. 
     « Our most serious challenge today is to recreate a vibrant civil society to solve the social problems that welfare statists have tried to solve with governmental action. Political society cannot mandate virtue, morality, and responsibility – it can only provide a framework for their possibility. » 
          Individuals who give through private charities are aware of both the amount of their sacrifice and to a great extent, the actual use of their contributions. Private charity allows people to undertake ventures that the state either will not or cannot take on. People tend to give to private charities because they believe in the goals of the organization. Such sacrifices are made because individuals perceive value in their contributions. When a person donates his own resources he wants to receive value for his sacrifice. Charity may therefore be viewed as an exchange transaction in which both parties receive benefits. Recipients of charity must act in a manner that makes charitable acts desirable to the givers. They become happier when they choose to be committed to the happiness of others. Benevolence is a rational and self-interested virtue that enables men to gain pleasure by interrelating with others and helping them in the pursuit of their own happiness. 
          Self-respect and self-reliance are contributory to happiness. It follows that true charity encourages self-esteem in the recipients and emphasizes practical measures that help people to help themselves. When recipients of charity fight against adversity, take steps to help themselves, and gain self-esteem, the donor receives satisfaction and pleasure from the virtues of individuals he respects. It follows that charity, at the same time, can be both generous and self-interested. Also, because people do live in communities, are necessarily related to others, and consider the well-being of others to be important to them, it is self-interested (in an enlightened sense) to consider the needs of others. 
Reinvigorating Civil Society 
          In the past, families, neighborhoods, charities, churches, and other friendly societies taught and reinforced in their members the habits of self-responsibility, discipline, mutual support, and regard for the future. They fostered a sense of community and voluntarism, separate from, and independent of, state action. Our most serious challenge today is to recreate a vibrant civil society to solve the social problems that welfare statists have tried to solve with governmental action. A person who understands that he is a member of a free society, tends to realize that its material and spiritual health needs his participation in its voluntary associations of good works and mutual help. In order to have a society of responsible and virtuous individuals, responsibility for virtue must be taken back from the state and returned to the individuals and associations that comprise civil society. Political society cannot mandate virtue, morality, and responsibility – it can only provide a framework for their possibility. 
          Government programs permit men to shift responsibility for the consequences of their actions to unwilling parties by disrupting the connection between cause and effect, and crowd out private initiatives by enervating private citizens and breaking the bond between those in need and people who want to help. State programs teach that the roles of giving and organizing giving belong to the government, rather than to individuals. 
          Social security has made people dependent on the state for their retirement income – citizens' forced payments are spent currently by politicians who pretend that it is in a trust fund. In civil society, people provide for their own retirement by investing in securities, savings accounts, etc. that furnish the resources that create jobs and stimulate productivity and economic growth. The welfare state's transfer programs have made the poor dependent on the state – we need to eliminate programs that discourage self-responsibility and independence, destroy families and communities, and stand in the way of people who want to respond to problems around them. By forcing firms to act in prescribed ways, regulation limits the alternatives from which firms can choose and discover the best option available. Such intervention has prompted companies to make large investments in lobbying and influence-seeking activities – activities that result in the redistribution, rather than the creation, of wealth. A business performs its most vital functions when it is allowed to do what is was founded to do – hire people, provide goods and services, and generate wealth. Government regulation keeps firms from doing what they do best. 
          Recently (and ironically), government projects and programs have been started to restore civil society through state subsidization or coercive mandates. Such coercion cannot create true voluntary associations. Statists who support such projects believe only in the power of political society – they don't realize that the subsidized or mandated activity can be performed voluntarily through the private interaction of individuals and associations. They also don't understand that to propose that an activity not be performed coercively, is not to oppose the activity, but simply its coercion. 
          If civil society is to be revived, we must substitute voluntary cooperation for coercion and replace mandates with the rule of law. According to the Cato Handbook for Congress, Congress should: 
  • before trying to institute a government program to solve a problem, investigate whether there is some other government program that is causing the problem ... and, if such a program is identified, begin to reform or eliminate it;
  • ask by what legal authority in the Constitution Congress undertakes an action ...;
  • recognize that when government undertakes a program, it displaces the voluntary efforts of others and makes voluntary association in civil society appear redundant, with significant negative effects; and
  • begin systematically to abolish or phase out those government programs that do what could be accomplished by voluntary associations in civil society ... recognizing that accomplishment through free association is morally superior to coercive mandates, and almost always generates more efficient outcomes.
          Every time taxes are raised, another regulation is passed, or another government program is adopted, we are acknowledging the inability of individuals to govern themselves. It follows that there is a moral imperative for us to reclaim our right to live in a civil society, rather than to have bureaucrats and politicians « solve » our problems and run our lives. 
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