Category: Economics

Blog author: ehilton
Tuesday, July 22, 2014
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Economics, at first glance, doesn’t seem very…well…sexy. It’s all about numbers, right? How the stock market is doing, how much people are willing to spend on stuff they need or want, whether or not people have jobs. That’s economics, right?

As the Rev. Robert Sirico is fond of saying, economics is fundamentally about human action. If this is true, then economics applies to sexual activity as well. In the following video (from the Austin Institute), today’s sexual landscape is examined through the lens of economic truisms.

Recently, the World Bank agreed to partner with Nicaragua to give the country 69 million U.S. dollars in aid. This poses the immediate question of whether or not this aid will be effective in producing its stated goal of decreasing poverty and increasing economic productivity. Should the World Bank continue to give money to the government of Nicaragua, which – especially of late – has been showing a decrease in political stability and democratic processes? History shows that international loans provide little help when countries suffer from decreases in stability and equality within their system.

The World Bank justifies the money that Nicaragua receives: “Nicaragua has achieved a real Gross Domestic Product (GDP) growth of 5 percent in 2012 and 4.6 percent in 2013, returning to pre-crisis growth levels.” GDP, however, does not paint a complete picture of the country’s performance. Most of the wealth within Nicaragua is located among the upper class, making the GDP less accurate for the country as a whole. Gross Domestic Product in purchasing power parity (PPP) in 2012 was estimated at $20.04 billion USD, and GDP per capita in PPP at $3,300 USD, making Nicaragua the second poorest country in the Western Hemisphere.
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As leaders of HOPE International, an organization that empowers men and women across the globe through business training, savings services, and small loans, Peter Greer and Chris Horst have witnessed the transformative impact entrepreneurship can have on individuals and communities, particularly when paired with the power of the Gospel.

In Entrepreneurship for Human Flourishing, a new book for AEI’s Values and Capitalism project, they explore this reality at length, offering compelling stories of businesspeople that illustrate the profound importance of free enterprise and entrepreneurship in equipping the poor and empowering the marginalized.

Watch the trailer for the book here:

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Integrated Justice - front cover (1)Christian’s Library Press recently released Integrated Justice and Equality: Biblical Wisdom for Those Who Do Good Works by John Addison Teevan, which seeks to challenge popular notions about “social justice” and establish a new framework around what Teevan calls “biblically integrated justice.”

Weaving together thought and action from a variety of perspectives and points throughout history, Teevan offers a refreshingly integrated economic, philosophic, and biblical framework. For young evangelicals in particular, who have grown fond of leveraging the vocabulary of “justice” and “equality” toward particular aims and ends, Teevan’s blend of careful analysis and practical application offers a needed challenge to the status quo.

To celebrate the release, CLP will be giving away three copies of the book. To enter, use the interface below. There are three ways to enter, and each will increase your odds. The contest will end Friday night (July 18) at 11:59 p.m.

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searching-blindfolded-manIn the latest edition of First Things, Acton’s Director of Research Sam Gregg discusses how adherence to Catholic social teaching does not require a limited economic viewpoint. In fact, such a limited vision, or blindness as Gregg states in the article’s title, is what holds back development in many parts of the world. (Please note that the full article is available by subscription only, but is excerpted here.)

Gregg recounts how the aggressive or “Tiger” economies of East Asia have resulted in positive changes, despite problems such as endemic corruption.

To be sure, not everything is sweetness and light in East Asia. Memories of the region’s severe financial meltdown in 1997 linger. More ominously, China’s mammoth banking system is a hopelessly run extension of its government. The same banks are heavily and rather incestuously invested in propping up thousands of underperforming Chinese state-owned enterprises. That’s a recipe for trouble. Corruption remains an endemic problem, most notably in China and India, which rank an unimpressive 96 and 134, respectively, in the World Bank’s 2014 Ease ofDoing BusinessIndex, while Singapore, Hong Kong, South Korea, Malaysia, and Thailand are ranked in the top twenty.

Nonetheless, the overall benefits of greater economic liberty in East Asia can’t be denied. In 2010, the Asian Development Bank reported that per capita GDP increased 6 percent each year in developing Asian countries between 1990 and 2008. Christians should especially consider how this growth has contributed to the reduction of poverty. The ADB estimated that between 1990 and 2005 approximately 850 million people escaped absolute poverty. That is an astonishing figure.

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In the latest issue of Faith and Economics, a bi-annual journal from the Association of Christian Economists, Dr. Robert Black reviews two of CLP’s four tradition-specific primers on faith, work, and economics: Chad Brand’s Flourishing Faith (from a Baptist perspective), and David Wright’s How God Makes the World a Better Place (from a Wesleyan perspective).

Black reviews each book quite closely, aptly capturing the key ideas and themes in each, and concluding that both are “well suited as a non-technical introduction to biblical and theological aspects of work, wealth, church history, and economic systems.”

Wright - Copy

As a sample, here’s Black’s summary of the Wesleyan connection between Christian conversion and broad-scale human flourishing:

The final section of [Wright’s] book…contrasts an unconverted will at work with the converted will at work. While we may wish not to work at all, we are not freed by conversion from work. Instead, we are freed to enjoy work, “to experience work as the expression of all that is most beautiful and magnificent about us.” Instead of a “lifetime of self-centered pursuit,” Wright encourages us to “use [our] influence to nurture the kind of economic and legal systems that favor meaningful, rewarding work.”

What kinds of people are Christians called to be and how do those characteristics affect economic activity? Chapters 1, 2, and 3 of Part Three develop three character traits to which converts to Christ are called to be: people of assurance, people of integrity, and people of authenticity; Assurance of God’s calling overcomes the “[i]nsecurity and fear [that] are terrible burdens to carry into our work” (p. 28). In a “world … awakened to the desperate need for the renewal of ethics,” personal integrity is most welcome (p. 35). Authentic Christians, who are true to the character of Jesus Christ, the original ideal for us, are an antidote to those people who seek to be authentically true to their own selfish hopes and misguided desires. (more…)

eximbank1

With its authorization charter expiring at the end of September, the U.S. Export-Import Bank has come under increased scrutiny from rabble-rousers and the hum-drum alike. An otherwise obscure fixture in the grand scheme of federal-government corporatism, Ex-Im finances and insures (i.e. subsidizes) foreign purchases of U.S. goods for those who wouldn’t otherwise accept the risk.

So far, we’ve seen a variety of good arguments made against the bank. It privileges certain companies over others. It doesn’t meaningfully improve national exports, despite many claims to the contrary. It will surely yield losses for taxpayers. And so on.

But there’s a bigger and broader reason to reject such schemes that has less to do with line-item analyses of exports vs. imports or how much Boeing will benefit vs. General Electric, and more to do with how they distort, inhibit, or prevent the efforts of those aren’t on the radar in the first place, but perhaps should or could be — the “unseen,” as Bastiat would call them.

Over at Economic Intelligence, Veronique de Rugy does us a service in highlighting this aspect, noting that Ex-Im and other corporatist schemes tend to cramp the economy at large by distorting signals and inhibiting innovation and possibility outside of the privileged few:

However, the real problem with Ex-Im pertains to the many groups who are affected by Ex-Im activities but have been ignored so far. These people don’t have connections in Washington, and they don’t have access to press offices and lobbyists. But they matter, too.

It is difficult, but extremely important, that we consider the unseen costs of political privilege, whether they take the form of market distortions, resource misallocation, job losses, destroyed potential or higher prices… (more…)

davebratIn a piece today for the NYT Magazine, economics reporter Binyamin Appelbaum examines David Brat’s fusion of faith and free-market economics. Appelbaum finds that mixture problematic, to say the least, but it’s hard to sort out whether it is the religious faith or the free-market sympathies that Appelbaum finds more troubling.

In the opening paragraph, Appelbaum asserts that before Brat’s rise to prominence “there was plenty of skepticism about whether he merited the label of academic economist.” Who these skeptics are, who knew so much about Brat “even before” his “out-of-nowhere” victory, we are simply left to ponder. It seems some of his colleagues at Randolph-Macon College now harbor such skepticism. (Brat is running against a Randolph-Macon sociologist, Jack Trammell. Brat once wrote that “Capitalism is the major organizing force in modern life, whether we like it or not. It is here to stay. If the sociologists ever grasp this basic fact, their enterprise will be much more fruitful.”)

Brat’s academic record is a wortwhile question to take up, and one that there has been a great deal of interest in following his primary victory. I, like many others, wanted to find out more, and went in search of Brat’s publications (with the help of one of our interns). I’ve had a chance to look at a few, and even turned up the paper on Ayn Rand that had gained such notice. The Rand paper turned out to be a co-authored piece with a student, and something which barely qualified as a poorly-edited introduction to a conference presentation. It is certainly not a smoking gun for tracking down Randian sympathies.

The problem with Appelbaum’s piece isn’t that he is asking questions about Brat’s academic record. These questions should be asked. The problem is the tone of Appelbaum’s inquisition and his presumption against the coherence of Brat’s position. The sarcasm oozes from Appelbaum’s prose: Brat “is certainly not in danger of winning a Nobel Prize.” Likewise Brat has written “discursive papers devoid of math,” “cited Wikipedia as a source,” and “never been published in a significant journal.”
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Exodus36As economic prosperity has increased, and as the American economy has transitioned from agrarian to industrial to information-driven, manual labor has been increasingly cast down in the popular imagination.

When our youth navigate and graduate from high school, they receive pressure from all directions to excel in particular areas and attend a four-year college, typically in pursuit of “white-collar” work. The trades, on the other hand — including brickmasons, plumbers, butchers, and carpenters — are not high on the minds of many, whether parents, pastors, teachers, or politicians.

In the latest issue of Christianity Today, Chris Horst and Jeff Haanen offer a challenge to this trend and the supporting stereotypes, arguing that the church has a particular precedent to build on when it comes to the ways we approach “work with the hands.”

Not only does a thriving economy and society need craftspeople, but the Bible elevates these occupations as filled with worth and dignity. Craftspeople are image-bearers, they argue, reflecting “the Divine Craftsman who will one day make all things new”:

Craftspeople (harashim)—masons, barbers, weavers, goldsmiths, stonecutters, carpenters, potters—are replete in the Bible. The first person Scripture says was filled with the Spirit of God was Bezalel, who was given “ability and intelligence, with knowledge and all craftsmanship, to devise artistic designs, to work in gold, silver, and bronze” (Ex. 31:1–5, ESV). Passages like these suggest God cares about craftsmanship, above all in his most holy places. From the tabernacle to the temple, what was built was meant to reflect and reveal God’s character. The temple was not just a majestic building; it spoke powerfully of his holiness. (more…)

AHB with tank.jpgThe Great War began 100 years ago last week.

From an economic perspective (from Pulitzer Prize economist Liaquat Ahamed) the European nations paid for WWI not with taxes, but with massive debts financed largely by America. The warring nations could not pay their way out of debt so many resorted to the easier route: inflation. But that inflation destroyed the savings of the middle class and that did not make European nations more stable.

Germany finally defaulted on its war debts after the 1929 crash. The international financial system also collapsed. Of course, German people listened to Hitler’s ideas about blame and solutions, while France, half destroyed by the war, looked at Germany (where few battles were fought) and wanted the Germans to pay for that destruction. The Depression made each nation more economically isolated which added to the misery as trade shrank. Europe was ripe for WWII.

WWI could be taken as a lesson on the perils of excessive debt. Governments have discovered three nasty advantages:

  1. They can borrow beyond emergencies (war) to pay for anything.
  2. Government pensions (more debt) are excellent ways to buy votes with the vague idea that ‘future growth’ or ‘future generations’ will easily cover the massive pension obligations.
  3. Governments have more recently seen that they can lower interest rates and ‘print money’ without being held accountable as they will be bailed out by other countries through central banks which will do, as Mario Draghi famously said, “whatever it takes.” These financial gimmicks look like serious plans because the men wear suits and because their ideas work, at least until the office holders retire.

However, as with WWI debt and the Crash of 1929, a severe crisis will come and prove that these leaders (while possibly not as incompetent or corrupt as the political leaders of Detroit) were wrong.