It is often thought that individualism as a philosophical position must go together with dislike of state involvement in economic life. Radical individualists must like a small state, or no state at all. I think it is an utterly wrong point of view: being a radical individualist does not predispose one to be in favor of a small or big state, to favor state-provided social transfers or to be against them.
Where does this erroneous view come from? We have at least three possible sources.
The first is associated with Ayn Rand and her identification of “rugged individualism” (of “creators”) with people who are basically wronged by the state that transfers whatever they have produced to the “moochers” and thus, of course, the creators must be against the state. Ayn Rand’s view is so extreme (never have people divided so neatly into two categories, and never has the state spoliated all the “creators”) and a caricature of any real society that her views need not detain us any longer.
More serious is Mises’ view (and that of many Austrian economists) who similarly associate individualism and preference for a small state. (Mises does it explicitly in “Human Action”) Individualists not only want to be left alone by the state, but (and this is a crucial addition) they also do not care about the state transferring money to others, or the state taking on an insurance role (through a pension system, unemployment benefits, or social assistance to the poor). Thus, individualism would seem to be compatible only with the “night-watchman” state: a state whose function is limited to the protection of property and life. Even the judiciary system run by the state and state’s monopoly over fiat money are disliked by many Austrians: private courts and private monies can do the job, they believe, even better.
Hayek’s position, particularly in “Law, legislation and liberty” is much more nuanced, realistic and worth of a consideration. (It is also different from his simplistic “Road to Serfdom”.) He allows for a number of state functions, including a guaranteed minimum income. So, Hayek, to a large extent, modifies the earlier view that by being individualistic one must necessarily (a) not only be against state interference into one’s affairs but also (b) indifferent to the fate of the others.
It is this crucial point (b) which is false. If one does not want anyone (and especially not the state) to meddle into her affairs does not imply that she does not care at all about the fate of people who live near, who may be compatriots, or, even more broadly, who are just people like her wherever they are. But if one does care, there are only two ways to help them. One is to rely on private charity, another to transfer that function to the state.
I will not discuss here which one is more efficient (I believe that, because of the economies of the scale, the latter is). But relying on private charity means, in reality, that a person wants to establish relations of hierarchy between herself and those whom she is helping. At the minimum, there is a paternalistic relation where help may be forthcoming or not, depending on whether the “givers” like the recipients, or approve of their actions. Such a relationship, whether of hierarchy or of paternalism, is profoundly demeaning for the recipients of aid. Thus, while on the one hand, a person is helping them, she is, on the other hand, reducing their human dignity. There is an unhealthy trade-off there: the more a person gives, the more he wants to exercise influence over their lives, and the more their dignity is impugned. Perhaps, on balance, giving may become counter-productive: one loses mores through trampling of one’s dignity than one gets through money.
The other option is to delegate this function to the state. Now, people who receive aid receive it not from another individual (who just happens to be luckier than them, or to have been born into a rich family) and to whom, personally, they ought to be grateful, but they receive it as full-fledged citizens of a country that guarantees that they do have the _right_ to such assistance. The situation of the poor totally changes: they are not at the mercy of an individual’s whim. They are receiving something which is their right, no less than a person who receives wages is getting something which is his/her right. Poor person’s human dignity is preserved.
But to see decisively which situation is preferable, change your perspective, and assume that you are a recipient of aid: would you prefer to get it from an individual whom you must constantly please in order that she continues with the aid, or from the state, as a free citizen? I think the answer is obvious.
So, in conclusion, if a radical individualist is (1) not indifferent to the fate of people with whom she lives, and (2) does care about their human dignity, there is absolutely no reason why she might not prefer to have the state play a strong income redistribution role. The equation individualism=small state is a wrong one, in a general case. There is no necessary association between the two.