a group of young boys walking down a dirt road
Photo by Dulana Kodithuwakku on Unsplash

I’m reading through The Poverty of Nations by Wayne Grudem and Barry Asmus. I’m trying to understand how to solve poverty and how to best help the poor. This book is written to address the causes of poverty at the national level. It’s not exactly what I was looking for but it is close. Wayne Grudem and Barry Asmus are Christians with exceptional contributions to the topics of theology and economics respectively.

After almost 200 pages describing the benefits of free markets in contrast to alternative economic systems the following question is posed:

The answer given to this question is that:

poverty can only be alleviated permanently by the nation increasing its GDP by producing more goods and services of value.

As I’ve read through the book I have learned a lot, the general premise is “Show me a system that leads to greater prosperity than free-market Capitalism”. Taking this approach it is hard to argue against free-market Capitalism. There simply is no other system that has created wealth for the people to the same degree.

That being said they outline a few steps that can be taken to help address poverty. These are:

  1. Invest in for-profit businesses in the country primarily:
    1. Small to Medium-sized Enterprises (SMEs) requiring startup capital of $25,000 to $1 million.
    2. Micro-loans to family-based businesses requiring startup capital of between $250 and $1000.
  2. Invest in educational programmes in the country to promote free-markets and free-market government policies including:
    1. Free-trade
    2. Low taxes
    3. Easy acquisition of property
    4. Fair laws and application of laws
  3. Literature distribution to promote the above policies
  4. Investment in Seminaries that will train pastors who in turn influence the cultural values of the country.
  5. Financial Assistance programmes that provide scholarships for the country’s citizens to study abroad in these important topics

I would only add to that investment in educational institutions that deliver relevant business skills within the country.

Applying these principles in practice

I was pleased to read about this list here because so far it is in agreement with my own thoughts on the topic and agrees with what I have written about previously: that is that the only effective way to relieve the poverty in the World today is to educate the poor to bring themselves out of poverty. However, it needs to be coupled with a system of government that is sympathetic to the people being able to prosper.

Why write about this now?

It is because this problem has been written about by some great minds but still needs addressing. If you attend a church, or lead a church in the West then you naturally want to help the poor, and you want to be a good steward of the money given to the church. You cannot simply go ahead and invest in unvetted companies and business ventures in the poorest regions of the world, because this would be high-risk and likely to result in the money being lost or stolen.

Likewise, if you give to some of the larger organisations, such as the World Bank, or United Nations Development Fund, then that money also tends to be invested in only the very safest ventures usually run by a country’s government or already wealthy business owners. Again this is not what the church is looking for, they want to help the poor, but they need some guidance.

I think this is where a charity like Abraham’s Legacy can come in. As we grow and expand we could probably look at meeting each one of these needs, investing in small for-profit businesses, investing in medium for-profit businesses, developing or investing in education programmes and literature distribution and developing a financial assistance programme.

Abraham’s Legacy

In the book of Genesis the promise that God gave to Abraham is that through his offspring all nations will be blessed:

in your offspring shall all the nations of the earth be blessed — Genesis 22:18 (ESV)

Abraham’s legacy is about blessing the nations of the earth. This can directly point to Jesus and the spiritual blessing that is available through believing in Jesus. I think there is a very real physical blessing that is also available that isn’t limited to Christian believers. Whether we look at the inventions, patents, scientific, medical and financial progress that has come through the Jews; or if we consider that Judeo-Christian morals, laws and work ethic that have made the free market possible, we see blessing beside the spiritual.

Abraham’s legacy is both spiritual and physical, and likewise, this charity named Abraham’s Legacy is both spiritual and physical. Through God’s inspiration it may also be shorted to ABLE to emphasize that the focus is on enabling the poor to prosper through teaching them principles, policies, laws and morals; and through applying skills and investments where needed.

Being a European-based Charity will add trust to the charity and we will seek to maintain the highest transparency standards so that Churches, businesses and individuals can have confidence that their investments will be well-used.

Also, we will use modern social media effectively to promote the charity showing first-hand the impact of the work rather than relying on lengthy reports.

I have had trouble finding organisations that are already doing this, although I’m sure they exist. That may mean that there is an opportunity to apply for grants from larger aid organisations. If possible, we will consider applying for grant funding, but not if it means we lose focus on alleviating poverty.

Unanswered Questions

I still have unanswered questions regarding the free-market economy and I will go on to search for answers. Maybe I still find them in the book as I continue reading.

Is inflation desirable?

I think it is undesirable. I know that the theory is that it seemingly keeps people happier because they can experience wage growth and have a feeling of being wealthier, but I think there is another side that is often ignored.

Biblically, I think inflation, probably I should say the expansion of the money supply, goes against the “bear-false-witness” commandment. More specifically it is a false weight and measure. You are weighing your produce against a leaky bucket.

Practically, the price of goods is rising and people cannot tell because it is taking place slowly and being hidden by changing the rules. Secondly, house prices are increasing, and in the past, this could be justified by saying that wages are also increasing but only a few people compared the two to see that wages lag far behind house price growth. Thirdly, historical comparison becomes much more difficult because the value of the currency needs to be defined. Where others have made this data available, then I find that looking at the price in Gold is helpful.

In the real world where productivity is constantly improving, deflation should be the norm. Things become cheaper over time as the efficiency of the production processes improves and more suppliers of these products come on board.

For an article on this subject see this article at Forbes that concludes that incomes are down to one-tenth of what they were in the Sixties.

Is debt desirable?

My feeling on this subject is no. However, I have yet to find a study on the pros and cons of a debt-driven society. Possibly there aren’t any non-debt-driven free-market economies to study. What we do know is that debt enslaves the borrower and the lender owns the asset until the principal is paid off. Debt also leads to an absurd situation where there is more debt than there is money. Think of it as two friends. One lends a pen to the other and says but I want two in return. Between the two friends, only one pen exists so there can be no hope of two being paid in return. So it is with money, whenever money is printed it is never given out it is always loaned out at interest. Debt also leads to regular cycles of boom and bust in the economies rather than steady growth and progress. Usually, because there is too much money chasing too few returns leading to bubbles and burst bubbles.

Is free trade beneficial?

As a non-economist, my first thought was “no”. Actually, maybe the first thought of most non-economists is “yes”. The thing is “free” is generally good, and trade is good, so free trade must be good right?

Then I considered it this way, imagine you are a family with three children and each child has 1 dollar, euro or pound. Then imagine that each child has a coloured pen: red, green and blue. So if a child wants to purchase a coloured pen from their sibling they can give them their dollar and receive the pen in return. As a family, we still have three pens and three dollars. If a child decides not to trade with their sibling but instead to purchase the colored pen from the neighbour because they were willing to sell it for 80 cents then as a family we may now have 4 pens but only 2 dollars 20 cents. From reading the book I’ve learned that we are richer because we have 4 pens. I’m not so certain though, we’ve lost our ability to invest in more worthwhile trades.

The other problem is that our trading partners may not be playing fair. We see them putting children to work, paying pitifully low wages, and not providing safety wear; or Government assistance programmes are used to confer domestic advantages often until competitors go out of business. I believe in the book they would claim this is the exception but not the rule.

So I’m still on the fence here.

Is a high GDP desirable?

This is one of my basic problems with the premise of the book. They are looking at improving GDP (Gross Domestic Product, or the sum of everything bought and sold within a country) as the solution to poverty. The problem with GDP is that does not consider happiness and it does not consider inflation.

If you look at male, inflation-adjusted median income figures it looks as though income has remained the same since 1971 but if you look at it in Gold ounces, you see that income has declined to one-fifth of 1971 incomes as of 2010. It has no doubt declined further since then, as alluded to in the Forbes article referenced above. This is despite the GDP in dollars climbing to all-time highs.

Let me add to this my gut feeling and an analogy: a family producing their own food and owning their home and a plot of land are happier and richer than a family in a small apartment having to work 8 or more hours a day whilst living in debt and struggling to afford food. The former contributes zero to the GDP whereas the latter could be contributing $100,000 annually. You see GDP alone does not measure wealth and therefore aiming for a high GDP may not provide wealth. Although in the pursuit of GPD, provided the correct laws and morals are cultivated then perhaps wealth and happiness will be achieved.

Can we improve the free-market system?

Well, if you take my opinions on the questions above then that’s where I might start looking for improvements:

  1. Choose a gold-backed currency to eliminate the problems caused by inflation.
  2. Improve lending laws and reduce maximum terms to ensure nobody gets stuck in debt.
  3. Easy access to land, my preference would be free land for citizens and easy leasing options for non-citizens. I would also like to remove speculative home-buying.
  4. Abolishing corporations because I think the legal protections afforded to corporations lead to immoral behaviour but the laws could also be changed to encourage more moral behaviour of corporations.
  5. Promote sustainability and at the same time promote local production to ensure better oversight of employment and production practices and to protect local business.