Category: Poverty

and112812blogSince its inception in the 1990s, the payday lending industry has grown at an astonishing pace. Currently, there are about 22,000 payday lending locations—more than two for every Starbucks—that originate an estimated $27 billion in annual loan volume.

Christians and others worried about the poor tend to be very uncomfortable with this industry. While there may be forms of payday lending that are ethical, the concern is that most such lending is predatory, and that the industry takes advantage of the poor and others in financial distress.

So what makes a payday loan a predatory loan? The obvious answer would seem to be “high interest rates.” But interest rates are often tied to credit risk, and so charging high interest rates is not always wrong. Another answer may be that the loans appear to be targeted toward minorities. But research shows that the industry appeals to those with financial problems regardless of race or ethnicity.

What then tips a loan into the predatory column? At a blog hosted by the New York Federal Reserve, Robert DeYoung, Ronald J. Mann, Donald P. Morgan, and Michael R. Strain attempt to answer that question:

foreign-aid-corruptionGiving foreign aid directly to poor countries may end up keeping those countries poor.

For most readers of this blog and others associated with the Acton Institute this claim will be neither surprising nor controversial. Indeed, it’s been a core assumption behind our work on PovertyCure. But until recently, many Americans would have found the idea to be counter-intuitive, if not obviously wrong.

But thanks to the work of the Angus Deaton, the recent winner of the Nobel prize in economic sciences, the conclusion that long-term aid can hinder a country’s economic growth is becoming so mainstream it’s almost a matter of conventional wisdom.

One of the reasons for the change is because Deaton is particularly adept at explaining the reasons why aid can hurt the poor in a way that are easy for the public to understand. For example, Deaton explains how foreign money often changes the relationship between a government and its people:

Blog author: bwalker
Tuesday, October 13, 2015

While it has been pointed out repeatedly by your writer and others in this space that Pope Francis’ Laudato Si contains much to recommend it for the beauty, compassion and depth of spirituality contained within, there remains much that is problematic. For example, there’s this:

At the same time we can note the rise of a false or superficial ecology which bolsters complacency and a cheerful recklessness. As often occurs in periods of deep crisis which require bold decisions, we are tempted to think that what is happening is not entirely clear. Superficially, apart from a few obvious signs of pollution and deterioration, things do not look that serious, and the planet could continue as it is for some time. Such evasiveness serves as a license to carrying on with our present lifestyles and models of production and consumption. This is the way human beings contrive to feed their self-destructive vices: trying not to see them, trying not to acknowledge them, delaying the important decisions and pretending that nothing will happen.

All this is consistent with Pope Francis’ warning that fossil fuels are contributing to climate change, but what he should be advocating for is energy abundance rather than this:

There is an urgent need to develop policies so that, in the next few years, the emission of carbon dioxide and other highly polluting gasses can be drastically reduced, for example, substituting for fossil fuels and developing sources of renewable energy.

Yet, how does the Pope reconcile his call for reduction of fossil-fuel use with his call for cleaner water and increased green space in the following quotes?

Here’s Pope Francis on water:

“Globalization must do more than connect elites and big businesses that have the legal means to expand their markets, create capital, and increase their wealth.” –Hernando de Soto

6898950_7a0fd3b3d9_bWhen assessing the causes of the recent boom in global prosperity, economists and analysts will point much of their praise to the power of free trade and globalization, and rightly so.

But while these are important drivers, we mustn’t forget that many people remain disconnected from networks of productivity and “circles of exchange.” Despite wonderful expansions in international free trade, much of this has occurred between “outsiders,” with many partners still languishing due to a lack of internal free trade within their countries.

Much of this is due to an absence of basic property rights, as economist Hernando de Soto argues throughout his popular book, The Mystery of Capital. If the global poor don’t have the legal means or incentives to trade beyond families and small communities, so-called “globalization” will still leave plenty behind. (more…)

cellphone-africaFor the first time in world history, less than 10 percent of the global population will be living in extreme poverty.

According to World Bank projections, at the end of 2015 only about 702 million people, or 9.6 per cent of the global population, will still be living in extreme poverty. Over the past three years, an additional 200 million people have climbed above the international poverty line.

What makes this feat even more remarkable is that it’s based on a new definition of extreme poverty. The World Bank, which sets the benchmark for the global extreme poverty line, is shifting the line from $1.25 a day to $1.90 a day. Valerie Kozel, a professor at the University of Wisconsin-Madison, explains the reason for the shift:

The highly popular “buy-one, give-one” models — as epitomized by the popular TOMS Shoes brand — have long held the attention of Western do-gooders. It’s quick, it’s easy, and hey, people like the shoes. And let’s not forget the power of the Warm & Fuzzies.

Yet many are beginning to raise concerns about the actual impact of these activities. As Acton’s Michael Matheson Miller recently explained in an interview with Knowledge@Wharton, “The one-for-one model can undermine local producers. When you give free things, why would you buy local shoes?”

In the debut of his new smarty-pants comedy show, “Adam Ruins Everything,” Adam Conover chooses to set his sights on precisely this:

To their credit, TOMS Shoes has taken certain steps to reconsider its model, including a decision to “employ 100 Haitians and build a ‘responsible, sustainable’ shoe industry in Haiti.” But alas, by all public appearances, there is still a ways to go. (more…)

The global conversation on poverty alleviation has taken some interesting turns over the past decade, with an increasing range of economists, government leaders, and even rock stars beginning to challenge the status quo of economic development and foreign aid.

Contrary to the longstanding model of top-down solution-seeking, we are seeing a new emphasis on the power of markets and the importance of bottom-up “searchers.” And yet, even as we begin to make productive steps toward improved quality of life and widespread economic progress, we must be careful that our efforts don’t simply replace the problems of poverty with those of prosperity – enabling vice and replacing old struggles with new temptations.

As Christians, this risk is particularly clear, and we are well aware of the solution to meet the need. As explained in the following excerpt from the PovertyCure series, the Gospel is the only solution that can truly set free the human spirit, and that includes redeeming the fruits of economic progress.