The History of Entitlements

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For most people, the word “entitlements” means “something that is owed to someone.”  In some senses, that is absolutely correct.  Some examples:

  • When you purchase an auto insurance policy, you are entitled to the specified coverage and benefits, such as repair or replacement due to accident, theft, etc.
  • When you contribute to a private pension fund, or government-sponsored retiree programs such as Social Security and Medicare, you are entitled to all the specified benefits.
  • When you serve in the U.S. military, you become entitled to certain veteran’s benefits – such as educational, job-training and mortgage assistance, health care services, shopping discounts, etc.

These are examples of “paid-in entitlements” – meaning, you are entitled to the benefits specified only because you have purchased them, or have earned them through service.

The only form of “entitlements” that our federal government was involved in until the early 20th century were of the paid-in variety, and related only to military service – both for veterans, and their survivors and dependents.

 

Mutual-aid societies as a provider of needed products and services

Most people today have never heard of a “mutual-aid society.”  Until the in 1930s, however, they were the primary means by which needed products and services were provided to those who fell on hard times, or who could not afford them.

Essentially, a mutual-aid society is a group of individuals who come together to provide products or services for those who are enduring momentary or ongoing difficulties, such as money for medical assistance, funeral expenses, unemployment, education and housing.  Some were organized around religious beliefs or race; others were purely secular.  Many mutual-aid societies also bought or constructed modest facilities where members could meet, hold educational classes, and enjoy enriching recreational activities.

It is interesting to note that the first black woman bank president in America got her job as a result of a black mutual-aid society first creating that bank, as a means to help economically empower and train young blacks.

(At right: A marker indicating the location of the Free African Society of Philadelphia, a mutual-aid society begun in 1787)

 Hispanic Americans and other cultural, racial, ethnic and religious groups also formed their own mutual-aid societies.

(At left: The La Liga Protectora Latina, or “Latin Protective League,” a mutual-aid society instituted among people of Mexican heritage around Arizona in the early 1900s)

In a sense, mutual-aid societies operated on a partially paid-in entitlement system, but in reverse: instead of paying in advance for the products and services one needs, he agrees to receive them in advance, but only in exchange for him providing a negotiated value in return, as part of a long-term repayment plan.  So for example, if a poor farmer’s child suffered a broken leg, the mutual-aid society would either pay a member doctor, or the farmer and the doctor might strike a deal in which he would deliver three dozen eggs to the doctor’s home each month, for a specified period of time, in exchange for his services.

Most mutual-aid societies also had robust programs to teach members and aid recipients how to develop their skills and advance their careers, to wean them off of the society’s aid, and become independent, self-sustaining individuals.

Note that mutual-aid societies existed at zero cost to society as a whole; all membership was voluntary, and all agreements were entered into through voluntary, mutual consent.

But in the first few decades of the 20th century, thanks in part to the trans-Atlantic influence of European welfare states – more and more U.S. state governments began going to into direct competition with mutual-aid societies, taxing all residents in order to provide welfare entitlements to those who qualified.  By 1915, the trajectory was clear, as indicated in this editorial in the magazine of the Fraternal Order of Eagles of that year:

“The State is doing or planning to do for the wage-earner what our Order was a pioneer in doing eighteen years ago. All this is lessening the popular appeal of our beneficial features. With that appeal weakened or gone, we shall have lost a strong argument for joining the Order; for no fraternity can depend entirely on its recreational features to attract members.”

And according to the Heritage Foundation:

“The first three decades of the 20th century brought a rapid and unprecedented expansion in the government’s social welfare role. The two leading sources of growth were mothers’ pensions and workers’ compensation. In 1910, no state had either program; by 1931, both were nearly universal.”

In the wake of the Great Depression, however, activist groups began advocating for the federal government to provide welfare entitlements.

 

The 1930s: The federal government begins constructing the modern welfare state – via both paid-in and welfare entitlements

The election of Franklin Delano Roosevelt in 1932 ushered in a new view of the necessary and legitimate function of the federal government arose: that it should provide certain benefits to select groups that meet specified criteria – benefits that are paid for through general taxation.  And these taxpayer-funded gifts were not limited only to individuals.  Certain large and small businesses also could qualify, if the perceived benefits to society as a whole were judged to be significant.

The first of these entitlement programs, Social Security, was of the paid-in variety. The scheme was fairly simple: all employees and employers would be taxed, with the money deposited into a separate fund, and distributed to beneficiaries upon reaching a certain qualifying age, to help support their retirement years.  This “educational” film made the sales pitch:

At the same time, activist groups began advocating for the federal government to provide welfare entitlements.  In essence, the federal government would:

  • Take money from all members of society – under force of law –  then give it to certain individuals, groups, businesses and other nations, based on arbitrary criteria.
  • Force – under penalty of law – businesses and local governments to provide services and benefits such as health care, housing, food, etc. to certain individuals and groups.

[To be continued]

Bibliography:

The Heritage Foundation: “From Mutual Aid to Welfare State: How Fraternal Societies Fought Poverty and Taught Character,” by David Beito, July 27, 2000.

Foundation for Economic Education: “Mutual Aid Societies” (audio lecture): The Freeman editor Sheldon Richman discusses the importance of Mutual Aid societies with the students attending Freedom University 3 on July 23, 2009 in Irvington, NY.

“African American Mutual Aid Societies: Blacks giving in L.A. is a historic practice,” by Cynthia E. Griffin, Our Weekly, February 3, 2011.

“Faces and Places in Black History: The Free African Society,” by Jackie Jones, BlackAmericaWeb.com, January 28, 2009.

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