Tag Archives: Economics

Jay Richards: How to end poverty in 10 tough steps

Jay Richards: How to end poverty in 10 tough steps
Jay Richards: How to end poverty in 10 tough steps

Why are some nations more prosperous than others? Is it because the wealthier nations exploit the poorer ones, keeping them poor? Or are there certain policies, laws, and cultural beliefs that lead to prosperity? Dr. Jay Richards delivers a lecture for Impact 360, in which he identifies 10 different factors that lift nations out of poverty, and explains why they work.

Summary:

  1. Establish and maintain the rule of law.
  2. Focus the jurisdiction of government on maintaining the rule of law, and limit its jurisdiction over the economy and the institutions of civil society.
  3. Implement a formal property system with consistent and accessible means for securing a clear title to property one owns.
  4. Encourage economic freedom: Allow people to trade goods and services unencumbered by tariffs, subsidies, price controls, undue regulation, and restrictive immigration policies.
  5. Encourage stable families and other important private institutions that mediate between the individual and the state.
  6. Encourage belief in the truth that the universe is purposeful and makes sense.
  7. Encourage the right cultural mores—orientation to the future and the belief that progress but not utopia is possible in this life; willingness to save and delay gratification; willingness to risk, to respect the rights and property of others, to be diligent, to be thrifty.
  8. Instill a proper understanding of the nature of wealth and poverty—that wealth is created, that free trade is win-win, that risk is essential to enterprise, that trade-offs are unavoidable, that the success of others need not come at your expense, and that you can pursue legitimate self-interest and the common good at the same time.
  9. Focus on your comparative advantage rather than protecting what used to be your competitive advantage.
  10. Work hard.

Solving economic problems is just like solving any other problem. First, we read to learn what has been proven to work. Then, we do what works. I want to encourage Christians to move beyond good intentions to good results when voting for economic policies. Often, people on the left want to “fix” inequalities by doing what feels good to them, or what sounds good to them. Economics is about choosing policies that we know have worked in other times and places.

Let’s talk more about #4 from Richards’ list.

Economic freedom linked to prosperity

Consider the book “The Poverty of Nations: A Sustainable Solution” by famous conservative theologian Wayne Grudem.

You can even read an article about it from the left-wing Christian Post here:

In a presentation of his new book at the Family Research Council, biblical theologian Wayne Grudem argued that poor countries can become rich only by producing their own prosperity, and that the free market is not only the economic answer, but in tune with the Bible’s moral teachings.

“Every nation that has escaped poverty has done so by producing its own prosperity,” said Grudem, professor of theology and biblical studies at Phoenix Seminary in Arizona. Perhaps best known for his book Systematic Theology: An Introduction to Biblical Doctrine, Grudem presented the key themes in his new book The Poverty of Nations: A Sustainable Solution. The very first of his 79 factors to help nations escape poverty in “a free market economy.”

[…]Grudem argued that the wealth of a country is determined by its per-capita income – the average amount of money each citizen makes. The only way to increase this is to increase the production of goods and services, creating more wealth for everyone, he said.

[…]The professor pointed to 79 factors to help a country produce more goods and services, in three different key areas: the economic system, government, and cultural beliefs and values.

For the economic system, Grudem mentioned the Index of Economic Freedom, a report put out by the Heritage Foundation to judge each country’s openness to trade and wealth creation.

You can find the Heritage Foundation Index of Economic Freedom right here. Take a look at the countries at the top… these countries also have a very high per capita income. Their citizens are earning a lot of money by selling what they produce to willing customers. The ones at the bottom are run by socialist governments. You wouldn’t want to try to make a living in Venezuela or Cuba or North Korea. But these are the places that American socialists admire and support. Does that tell you something about what they would do to you, if they got hold of the reins of government?

The Fraser Institute in Canada did a similar ranking of economic freedom (economic freedom = low taxes, low regulation, free trade), and they concluded:

Countries in the top quartile (25 per cent) of economic freedom (such as the U.K., Japan and Ireland) had an average per-capita income of US$40,376 in 2016 compared to US$5,649 for the bottom quartile countries (such as Venezuela, Iran and Zimbabwe). And life expectancy is 79.5 years in the top quartile of countries compared to 64.4 years in the bottom quartile.

Economic freedom works best.

Wage gap: are women paid less than men because of discrimination?

Google pays men less than women
Far-left social media giant Google pays men less than women

Liberal feminist Hanna Rosin takes a look at this question in the far-left Slate, of all places.

Excerpt:

The official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. But that is very different than “77 cents on the dollar for doing the same work as men.” The latter gives the impression that a man and a woman standing next to each other doing the same job for the same number of hours get paid different salaries. That’s not at all the case. “Full time” officially means 35 hours, but men work more hours than women. That’s the first problem: We could be comparing men working 40 hours to women working 35.

How to get a more accurate measure? First, instead of comparing annual wages, start by comparing average weekly wages. This is considered a slightly more accurate measure because it eliminates variables like time off during the year or annual bonuses (and yes, men get higher bonuses, but let’s shelve that for a moment in our quest for a pure wage gap number). By this measure, women earn 81 percent of what men earn, although it varies widely by race. African-American women, for example, earn 94 percent of what African-American men earn in a typical week. Then, when you restrict the comparison to men and women working 40 hours a week, the gap narrows to 87 percent.

But we’re still not close to measuring women “doing the same work as men.” For that, we’d have to adjust for many other factors that go into determining salary. Economists Francine Blau and Lawrence Kahn did that in a recent paper, “The Gender Pay Gap.”.”They first accounted for education and experience. That didn’t shift the gap very much, because women generally have at least as much and usually more education than men, and since the 1980s they have been gaining the experience. The fact that men are more likely to be in unions and have their salaries protected accounts for about 4 percent of the gap. The big differences are in occupation and industry. Women congregate in different professions than men do, and the largely male professions tend to be higher-paying. If you account for those differences, and then compare a woman and a man doing the same job, the pay gap narrows to 91 percent. So, you could accurately say in that Obama ad that, “women get paid 91 cents on the dollar for doing the same work as men.”

I believe that the remainder of the gap can be accounted for by looking at other voluntary factors that differentiate men and women.

The Heritage Foundation says that a recent study puts the number at 95 cents per dollar.

Excerpt:

Women are more likely than men to work in industries with more flexible schedules. Women are also more likely to spend time outside the labor force to care for children. These choices have benefits, but they also reduce pay—for both men and women. When economists control for such factors, they find the gender gap largely disappears.

A 2009 study commissioned by the Department of Labor found that after controlling for occupation, experience, and other choices, women earn 95 percent as much as men do. In 2005, June O’Neil, the former director of the Congressional Budget Office, found that “There is no gender gap in wages among men and women with similar family roles.” Different choices—not discrimination—account for different employment and wage outcomes.

A popular article by Carrie Lukas in the Wall Street Journal agrees.

Excerpt:

The Department of Labor’s Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

[…]Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women’s earnings are going up compared to men’s.

When women make different choices about education and labor that are more like what men choose, they earn just as much or more than men.

Wayne Grudem debates Richard Glover on the Bible, poverty and foreign aid

Two horses fight it out, may the best horse win!
Two horses fight it out, may the best horse win!

A great episode of the Unbelievable podcast. This is a great debate. I really enjoyed it. All three speakers were excellent putting forward their points. It’s nice to hear an American voice, a British voice and an Australian voice debating an important issue. HIGHLY RECOMMENDED.

Details:

Wayne Grudem is a theologian known for his conservative approach to both doctrine and economics. His new book “The Poverty of Nations: A Sustainable Solution” (co-authored with economist Barry Asmus) makes the case that pouring aid into developing countries is a failed strategy. Grudem debates whether the Bible supports free market, capitalist economics with Australian economist and theologian Richard Glover who wrote a critique of the book for the Australian Bible Society.

 The MP3 file is here.

Summary:

Grudem:

  • The Bible speaks to all of life, including economics, stewardship, government
  • The study of economics helps us to understand how to take care of the poor
  • My job is to apply the teachings of the Bible to all of life

Brierley:

  • What’s your thesis in the book?

Grudem:

  • A good system is one where the poor have the opportunity to earn and save from their labor
  • Book is a response to a Kenyan couple Grudem met at a London conference on business and Christianity
  • Book is not concerned with how individuals and groups can do charity to help the poor
  • Our church already does that and we support individuals and groups doing charity
  • The book is concerned with how should nations be transformed in order to grow economically
  • What should the laws, policies and cultural beliefs of a nation be in order for it to not be poor?
  • The book lists factors that have moved nations from poverty to prosperity in different times and places
  • The thesis of the book is this: government should set their people free to be able to produce more
  • We advocate freedom in economics: freedom to work, freedom to save, freedom to start businesses
  • We believe that this free enterprise view is consistent with the Bible in a number of places
  • E.g. – private property is good for prosperity (thou shall not steal) but forbidden by communism

Brierley:

  • What about the church sharing in communities in Acts 2 and Acts 4?

Grudem:

  • That is not redistribution of wealth among individuals and businesses by a secular government
  • Those passages showed that there was voluntary sharing among Christians, which is not communism

Brierley:

  • What’s wrong with Grudem’s book?

Glover:

  • The book emphasizes the Bible and the goal is to help the poor in poor countries
  • Criticism 1: the book doesn’t engage with non-free-market perspectives on economics
  • Criticism 2: the book doesn’t survey all that the Bible says about economics

Brierly:

  • For 1) what is one of the views that is not considered?

Glover:

  • Jeffrey Sachs says that nations need a leg up before they can grow economically
  • Ha-Joon Chang says that free enterprise was not how the wealthy nations became wealthy

Grudem:

  • We do engage with other points of view, especially Jeffrey Sachs in the book
  • The trouble with leftist views on economic development is that it does not work in practice
  • NO COUNTRY has even been lifted out of poverty by foreign aid
  • He says we don’t cite enough from the wisdom literature: we have 64 citations in the index
  • He says we don’t cite enough from the gospels: we have 42 citations in the index
  • He says we don’t cite enough from the epistles: we cite 22 of 27 epistles in the index
  • Some economists won’t criticize cultural and moral values that hurt prosperity
  • As Christians, we think that moral and cultural values are part of the problem that needs solving

Brierley:

  • What about foreign aid?

Grudem:

  • Foreign aid doesn’t help: a lot of the money goes into government and rulers can be corrupt
  • Instead of encouraging people to start businesses, it tells people to go into government to get aid money
  • Economists (lists 3) are saying that foreign aid entrenches corrupt government in power, does no good

Brierley:

  • If it’s not working, should we keep doing it?

Glover:

  • When there is an immediate need, we should do it, even if it is not a long-term solution: we need both

Brierley:

  • Should we stop foreign aid completely?

Grudem:

  • Voluntary charitable giving from individuals and churches to help poor countries is good
  • Me and my co-author are both active on our church board that helps poor countries with urgent needs
  • Food and doctors are urgent needs, and we should help, but it doesn’t lift countries out of poverty
  • We need a long-term solution that helps poor countries produce their own food and doctors
  • We are criticizing 1) government to government aid and 2) IMF/World bank to government aid
  • We have had pushback because 500,000 people make a living from this foreign aid industry
  • No country has ever been lifted out of poverty into sustainable prosperity
  • That’s the definition of insanity: continuing to do the same thing that has never worked

Brierley:

  • Does the Bible support free enterprise as a way of creating sustainable prosperity?

Glover:

  • When I said the Bible was absent from his book, absent was a bad choice of words
  • But the hundreds of references he listed were not dealth with *in depth*
  • In the Scriptures, God is the one who provides (e.g. – in Ephesians, Sermon on the Mount)
  • The Bible is less focused on his people making money, and more focus on sharing basics, like food
  • Secular governments should just take it from people who have food and give it to hungry people
  • In 2 Cor 8-9, Paul talks about voluntary sharing so everyone will be equal

Brierley:

  • Does 2 Cor 8-9 undermine the free enterprise system you champion in the book?

Grudem:

  • The sharing in the Bible solves cases of urgent need, it does not lift countries from poverty to sustainable prosperity
  • Some older translations say “equality” in 2 Cor 8:13-14, but newer translations (e.g. – ESV) say “fairness”
  • The Greek word is translated as “fairly” the only other place it appears in the NT (Col 4:1), in every translation
  • God uses the means of human work and productivity to provide (daily bread is baked, doesn’t just fall from Heaven)
  • In general, there’s no provision in Scripture for a person to be dependent on donations for their entire lives
  • God promises Israel fields and mountains to tend and mine, but prosperity is from work, not depending on others

Brierley:

  • Does the Bible support this focus on work?

Grudem:

  • Working is highly praised in Scripture, (lists Bible passages that favor work over dependency)
  • Countries that were exposed to this notion of work and productivity have been more prosperous

Glover:

  • Jeffrey Sachs and other development economists don’t say you can be prosperous through dependence
  • They say that it is a necessary part of leading to nations out of poverty into poverty

Grudem:

  • It’s never worked. What nation has become prosperous through foreign aid?

Glover:

  • There are lots of nations, especially in Africa, where foreign aid has helped lift them out of poverty

Grudem:

  • Name one country in Africa where foreign aud has lifted them out of poverty into sustainable prosperity

Glover:

  • I can’t think of one right now.

Grudem:

  • Our book contains a map of Africa and we looked at every nation’s per capita income
  • No nation has been able to rise out of poverty through dependence on foreign aid
  • The only close one is Botswana, but they have abundant freedoms, Christian morals, less corrupt government
  • So Botswana is the best case and they became prosperous through becoming productive, not foreign aid

Brierley:

  • Is he right to say that charity is a short-term solution, but that it’s not good long-term for prosperity?

Glover:

  • Yes, and work is a very important focus in the Scriptures as he says.
  • But since the Fall work has been much harder, and may not have the outcomes that we would like

Grudem:

  • I also believe in emergency aid for when catastrophies happen, like floods and famines
  • But dependence on foreign aid enriches corrupt rulers and does not create the productivity that leads to sustained prosperity

Brierley:

  • Can foreign aid be used to give poor nations a leg up on becoming prosperous?

Grudem:

  • Dambisa Moyo, Oxford-educated economist from Zambia, says stop the aid, it’s doing more harm than good
  • Jeffrey Sachs’ view is that foreign aid hasn’t worked yet, but just keep trying a bit more
  • What works: limited government, rule of law, fair courts, documented property rights, low taxes, stable currency
  • People are creative and want to work, we just have to get government out of the way and let people work, earn and save

Brierley:

  • Is this free enterprise system supported by the Bible?

Glover:

  • The wealthy nations of the world did not become wealthy through productive work and free enterprise policies
  • Ha-Joon Chang: free enterprise policies have never brought a country from poverty to wealth
  • E.g. – wealth is created through tariffs (not by innovating and by economic freedom?)

Grudem:

  • I’ve read Ha-Joon Chang’s book, and his examples are very selective and limited
  • Index of Economic Freedom: the freest countries are the most prosperous, the least free countries are the most poor
  • When you look at macro data, instead of very selective examples, the free enterprise system is best for prosperity

Glover:

  • The book doesn’t do enough to engage with leftist economists (he doesn’t say which ones)
  • Just because nations who are free are rich, doesn’t mean freedom causes productivity
  • There are parts of the Bible that doesn’t support the free enterprise system (he names none)

Grudem:

  • The Bible is focused on work not dependency, and charity not government redistribution
  • The best way to help the poor in other countries is by encouraging work and productivity

Two black economists explain how to end poverty in America

Economist Walter Williams
Economist Walter Williams

Walter Wiliams is one of my two favorite economists, the other being Thomas Sowell.

Here is his article on wealth and poverty on Creators written by Dr. Williams.

First, real poverty is not common in America:

There is no material poverty in the U.S. Here are a few facts about people whom the Census Bureau labels as poor. Dr. Robert Rector and Rachel Sheffield, in their study “Understanding Poverty in the United States: Surprising Facts About America’s Poor”, report that 80 percent of poor households have air conditioning; nearly three-quarters have a car or truck, and 31 percent have two or more. Two-thirds have cable or satellite TV. Half have one or more computers. Forty-two percent own their homes. Poor Americans have more living space than the typical non-poor person in Sweden, France or the U.K. What we have in our nation are dependency and poverty of the spirit, with people making unwise choices and leading pathological lives aided and abetted by the welfare state.

Second, the “poverty” is not caused by racism, but by poor choices:

The Census Bureau pegs the poverty rate among blacks at 35 percent and among whites at 13 percent. The illegitimacy rate among blacks is 72 percent, and among whites it’s 30 percent. A statistic that one doesn’t hear much about is that the poverty rate among black married families has been in the single digits for more than two decades, currently at 8 percent. For married white families, it’s 5 percent. Now the politically incorrect questions: Whose fault is it to have children without the benefit of marriage and risk a life of dependency? Do people have free will, or are they governed by instincts?

There may be some pinhead sociologists who blame the weak black family structure on racial discrimination. But why was the black illegitimacy rate only 14 percent in 1940, and why, as Dr. Thomas Sowell reports, do we find that census data “going back a hundred years, when blacks were just one generation out of slavery … showed that a slightly higher percentage of black adults had married than white adults. This fact remained true in every census from 1890 to 1940”? Is anyone willing to advance the argument that the reason the illegitimacy rate among blacks was lower and marriage rates higher in earlier periods was there was less racial discrimination and greater opportunity?

Third, avoiding poverty is the result of good choices:

No one can blame a person if he starts out in life poor, because how one starts out is not his fault.

If he stays poor, he is to blame because it is his fault. Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And finally, avoid engaging in criminal behavior. It turns out that a married couple, each earning the minimum wage, would earn an annual combined income of $30,000. The Census Bureau poverty line for a family of two is $15,500, and for a family of four, it’s $23,000. By the way, no adult who starts out earning the minimum wage does so for very long.

Fourth, what stops people from making good choices is big government:

Since President Lyndon Johnson declared war on poverty, the nation has spent about $18 trillion at the federal, state and local levels of government on programs justified by the “need” to deal with some aspect of poverty. In a column of mine in 1995, I pointed out that at that time, the nation had spent $5.4 trillion on the War on Poverty, and with that princely sum, “you could purchase every U.S. factory, all manufacturing equipment, and every office building. With what’s left over, one could buy every airline, trucking company and our commercial maritime fleet. If you’re still in the shopping mood, you could also buy every television, radio and power company, plus every retail and wholesale store in the entire nation”. Today’s total of $18 trillion spent on poverty means you could purchase everything produced in our country each year and then some.

Regarding those last two points, here is Thomas Sowell:

Economist Thomas Sowell blames welfare for killing the black family
Economist Thomas Sowell blames welfare for killing the black family

To illustrate this point, here’s a graph with some helpful data taken from the U. S. Census.

Black women were more likely to be married before welfare programs
Black women were more likely to be married before welfare programs

In fact, there is a whole video featuring Thomas Sowell to go with this graph:

And an article to go with it:

If we wanted to be serious about evidence, we might compare where blacks stood a hundred years after the end of slavery with where they stood after 30 years of the liberal welfare state. In other words, we could compare hard evidence on “the legacy of slavery” with hard evidence on the legacy of liberals.

Despite the grand myth that black economic progress began or accelerated with the passage of the civil rights laws and “war on poverty” programs of the 1960s, the cold fact is that the poverty rate among blacks fell from 87 percent in 1940 to 47 percent by 1960. This was before any of those programs began.

Over the next 20 years, the poverty rate among blacks fell another 18 percentage points, compared to the 40-point drop in the previous 20 years. This was the continuation of a previous economic trend, at a slower rate of progress, not the economic grand deliverance proclaimed by liberals and self-serving black “leaders.”

Ending the Jim Crow laws was a landmark achievement. But, despite the great proliferation of black political and other “leaders” that resulted from the laws and policies of the 1960s, nothing comparable happened economically. And there were serious retrogressions socially.

Nearly a hundred years of the supposed “legacy of slavery” found most black children being raised in two-parent families in 1960. But thirty years after the liberal welfare state found the great majority of black children being raised by a single parent.

The rest of the article points out how even crime rates among blacks were caused by the implementation of soft law enforcement policies by progressives. Just look at the big cities if you want to know what it is like for blacks to be ruled by Democrats. It sucks!

If everybody started to read more Thomas Sowell books, we would be much better off as a country! Only good things happen when people stop watching TV and listening to music and watching movies, and instead settle down in a chair with a Thomas Sowell book. I recommended a bunch of them in a previous post.

The pilgrims experiment with communism before the second Thanksgiving

The First Thanksgiving
Less than half the original pilgrims made it to the the first Thanksgiving

Here’s an article from The Stream about the second Thanksgiving, by Dante Witt. I like this article because it tells us so much about the character of the United States of America. Why are we so conservative about economics?

She briefly retells the story of how the pilgrims were helped by Squanto, which I blogged about in a previous Thanksgiving Day post, then she talks about the troubles they had next.

Excerpt:

Although Squanto’s farming techniques worked better than their old ones, the pilgrims still could not produce enough food. Was it bad luck? Bad soil? No. The Mayflower pilgrims were part of a joint stock company which stipulated that the pilgrims would pool their resources, and receive a share of the profit.

The strategy turned out to be deeply misguided, working about as well as various communist economic schemes hundreds of years later. The sad state of the colony after two years of communism, wrote William Bradford, “may well evidence the vanity of that conceit of Plato’s and the other ancients applauded by some of later times; that the taking away of property and the bringing of community into a commonwealth would make them happy and flourishing; as if they were wiser than God” (p. 121).

So the pilgrims amended their contract so that each family was now responsible for its own provision. The difference was stark. Bradford explained:

This had good success, for it made all hands very industrious, so that more corn was planted than could have been by any other means the Governor could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

In fact, it’s estimated the colonists planted about six times the crops they would have planted otherwise.

That shows where Americans get their views of economics, but what about the praying and the gratitude?

More:

With new farming techniques and an amended government, the pilgrims did all they humanly could to ward off starvation. But they could not control the weather. A drought settled on the colony and threatened to kill the corn before the harvest. Recognizing with the Psalmist that “except the Lord build the house, they labor in vain that build it,” the colonists turned to God. According to Bradford, they “set apart a solemn day of humiliation to seek the Lord by humble & fervent prayer, in this great distress.” What was the outcome?

And he was pleased to give them a gracious & speedy answer, both to their own & the Indians admiration, that lived amongst them. For all the morning, and greatest part of the day, it was clear weather & very hot, and not a cloud or any sign of rain to be seen, yet toward evening it began to overcast, and shortly after to rain, with such sweet and gentle showers, as gave them cause of rejoicing, & blessing God. It came, without either wind, or thunder, or any violence, and by degrees in that abundance, as that the earth was thoroughly wet and soaked therewith. Which did so apparently revive & quicken the decayed corn & other fruits, as was wonderful to see, and made the Indians astonished to behold. (p. 131)

Seeing the speedy results of the Puritans’ prayers, an Indian named Hobanak said, “Now I see that the Englishman’s God is a good God, for he hath heard you, and sent you rain, and that without storms and tempests and thunder, which usually we have with our rain, which breaks down our corn, but yours stands whole and good still; surely your God is a good God.” (pp. 64-5)

Then William Bradford again proclaimed a day of Thanksgiving to God, the forerunner of the American tradition of Thanksgiving.

So, this story explains why the United States has this character that values the free enterprise system, hard work, individual achievement, prayer, and gratitude. These are the values that make us American, that made us into such a great nation.