Christianity and Capitalism Part IV

A Review of “Just Generosity”, Part I

By

Brent Hardaway

Before we get into the review, I want to preface my comments by stating that I think that overall, Just Generosity is a book worth reading, and a lot of research and thought went into it, and unlike Rich Christians, is reasonably balanced. Its strongest points are its anecdotal stories of how some people have been brought out of poverty through both policy changes and spiritual transformation; good presentation of points and counterpoints on several hot-button topics (like school vouchers); and insightful observations about obstacles to economic opportunity for poor inner-city residents that people in the mainstream may miss; and finally, lots of good demographic data. I don’t want the reader to forget these points as I lay out my sometimes sharp disagreements with Sider, which mainly involve his assumptions, and some important conclusions not drawn from the data he presents.

Also, my treatment of education will be focused on its role in our society as an economic resource. By no means do I mean to deny that education is important for many other reasons. But our focus here is economics. Likewise, issues in education that rightly concern Christians and many other mainstream Americans as well will be touched on, such as schools teaching values at odds with those taught at home, but mostly as they intersect issues related to poverty and economics.

There also are some calculations regarding inflation over the years. These calculations were made using the U.S. Department of Labor’s inflation calculator, which can be found here.

Widespread U.S. Poverty - Myth or Reality?

“What would it be like to live in the United States on $16,350 a year? That’s the poverty level for a family of four. In the richest nation on earth, 36 million people struggle to survive at or below this level. Try to imagine what your family, or the family of four you know best, would need to give up to exist on $16,350 a year.” [Sid.JG.19]

Sider begins by posing these questions, and then lists the number of things that the middle-class American family would have to give up. They’d have to trade their house for either a two-bedroom apartment or a house in a poorer neighborhood, cars for public transportation, fashionable clothing for thrift store items, and give up eating at restaurants. After presenting what a budget on this income would look like, he adds,

“Notice what this budget does not include. No household appliances, no vacations, no toiletries, no birthday or Christmas gifts, no recreation, no visits to the dentist, no private health insurance, no donations to church, no child care, no movies, no travel outside the city, no private music lessons, no sports equipment for the children. However unthinkable from a middle-class perspective, somehow they manage to spend less on some of the other items or receive help from family, friends or church.

Any volunteers? No, I don’t mean for three years of graduate school while you prepare for a secure middle-class livelihood. I mean year after year with little hope for improvement. That’s what millions of our neighbors struggle with in our affluent nation.”

Sider describes this situation as “a tragic injustice” [Ibid, 33], and a a “scandal” [Ibid, 222), After 12 pages on data and background information, he gets to an analysis done by Robert Rector, of the conservative Heritage Foundation.

“The picture just outlined reflects the mainstream analysis of U.S. poverty today. But some, especially Robert Rector at the Heritage Foundation, have argued that the notion of widespread poverty in America is a myth. If poverty means not having enough nutritious food, clothing, and a place to live, according to Rector, ‘There are few poor persons remaining in the United States.

“Rector cites much interesting data from U.S. government agencies about people below the poverty line. In 1995 , 41 percent of poor households owned their own homes. Seventy percent of poor households owned a car. Ninety-seven percent had a color TV, and two-thirds had air conditioning….On average, poor children in the United States consume about the same amount of protein, vitamins, and minerals as middle-class children.” [Ibid, 32]

The article that Sider quotes Rector from can be found here. Some of the other information that Rector conveyed was that; Only 7.5% of poor households were overcrowded; 60% had two or more rooms per person; 27% owned two or more cars; 64% owned a microwave oven. 84% reported that their families had enough to eat; And poor children actually consume more meat than higher-income children.

In January 2004, Rector updated the relevant information based on more recent data. Some of the significant changes in 2002 were that car ownership was above 75%, home ownership was up to 46%, 78% had a VCR or DVD player, 76% had air conditioning, 62% had a cable or satellite TV hookup, 25% owned a personal computer, and 25% owned a cell-phone. In 1998, 70% reported being able to meet all essential expenses during the year. 58.5% reported zero financial or material problems, and 19.6% had one problem. 19.9% had one or more late payments for utilities, 12.9% failed to pay their full rent or mortgage on time, and only 0.9% were evicted for failing to pay their rent/mortgage, versus 0.3% for the population as a whole. Overall, poor households did have more problems with upkeep issues in their homes, but the percentage experiencing each individual problem was in the single digits, with the exception of a leaky roof or ceiling (10.5% of poor households experiencing - versus 6.9% for the population as a whole).

Furthermore, even though the bottom fifth of all households in 1995 averaged $8,350 in income, the U.S. Department of Labor reported that they actually spent $14,607, indicating that lower-income households actually have more resources to live on than they earned in that year. To this, Sider replies,

“Until Mr. Rector is ready to have his family join the bottom one-fifth of households who, as he calculates, have $14,607 a year, we need not take seriously his suggestion that living at the official poverty level is not much of a hardship.” [Ibid, 34]

Thus, he concludes that poverty has not been mostly eradicated in the U.S.

Some time has gone by, so let’s look at some more recent Department of Labor figures (2002). Now for some unpacking.

We begin by noting that the bottom fifth of households doesn’t include all of the people living below the poverty line. The top limit for that bracket was $14,599, while the poverty rate for two persons was $11,756 for that year, and $14,348 for three persons. The poverty rate for 4 and 5 persons was $18,392, and $21,744 respectively. Some of the poverty households with these amount of people would actually be in the next income quintile. However, it does give us a glimpse into the living conditions of many poverty households, and it serves as a useful approximation. And one thing is clear - many below poverty households spend more than they supposedly take in. Now, in 2002, the average bottom fifth household earned $8,316, but spent $19,066. Also, Sider likes to talk about “families of four” in poverty, but the average bottom-fifth household actually had 1.7 people. Thus, in order to give Mr. Rector a feel for what life in the bottom fifth was like, he would have to have someone pay for all of his children’s expenses, and then 30% of his wife’s expenses.

Of course there is not a poverty-level income for 1.7 people, but if we interpolate between the number for one person ($9,183) and for two persons ($11,756), we come up with a figure of $10,984. That means that what these households consume actually comes to 174% of the poverty level -and this doesn‘t count housing subsidies, and donated food and clothing. But the Dept. of Labor data is detailed enough to tell us if these households are deprived of the things that Sider says that they are. We will compare the expenditures of households in the $40K-$49.9 (about in the middle) with those in the $0K-$4.9K and the $5K-$9.9K bracket.

 

 

Income Group

Persons per household

Expenditures

Expenditures Per head

% of middle bracket

$40K-$49.9K

2.6

$41,787

$16,071

100%

$0-$4.9K

1.7

$19,699

$11,588

72%

$5.0K-$9.9K

1.7

$16,488

$9,699

60%

 

 

 

Do not adjust your PC monitor. Yes, the $0K-$4.9K households actually spent more than the $5K-$9.9K bracket.

Food

Sider told us that living at poverty level meant $1 per person per meal.

Income Group

Expenditures

Expenditures per head

Per head per meal

$40K-$49.9K

$5502

$2116

$1.93

$0-$4.9K

$3485

$2050

$1.87

$5.0K-$9.9K

$3051

$1907

$1.74

 

 

 

 

Personal Care Products

Sider says that America’s poor have to do without toiletries.

Income Group

Expenditures

Expenditures per head

% of middle bracket

$40K-$49.9K

$551

$212

100%

$0-$4.9K

$300

9

$176

83%

$5.0K-$9.9K

$252

$148

70%

 

 

 

Food Eaten Away From Home

Sider says that America’s poor can‘t afford to eat in restaurants.

Income Group

Expenditures

Expenditures per head

% of middle bracket

$40K-$49.9K

$2261

$870

100%

$0-$4.9K

$1278

$752

86%

$5.0K-$9.9K

$1027

$604

69%

 

 

 

 

Staying in Fashion

Sider talks about the poor not being able to stay in fashion. Oddly, he mentions Nike shoes, which were made fashionable by lower-income inner-city youth!!

Entertainment

Sider says that America’s poor can‘t afford movies or other diversions.

Income Group

Expenditures

Expenditures per head

% of middle bracket

$40K-$49.9K

$1924

$740

100%

$0-$4.9K

$867

$510

75%

$5.0K-$9.9K

$721

$424

57%

 

 

 

And how much fun can the least fortunate Americans have on an entertainment budget of $424? In my neck of the woods, they could do this in a year (transportation costs to out of town activities amount to about $30 of gasoline, when shared with one other person, and about $9 of public transportation costs, or about 6% of that bracket’s expenditures for each mode. Parking costs for all activities are assumed shared with one other person as well.)

Activity

Cost

Movies, between 16 (all theater, non-matinee showings) and 35 (all 5-day, new release rentals)

$144

6 baseball games, Class AAA Fresno Grizzlies (parking and outfield reserved seats)

$63

3 trips to the local family fun center (1 round miniature golf, 1 round of laser tag, and 25 game tokens each time)

$51

2 hockey games, minor-league Fresno Falcons (parking and balcony seats)

$27

Season Pass, local waterslide park

$50

1 day at Six Flags Magic Mountain, just north of L.A. (admission, less easily-obtainable $5 off coupon, and parking)

$45

1 trip to see the S.F. Giants play at SBC (formerly Pac Bell) Park (bleacher ticket)

$16

1 day of hiking at Yosemite National Park (Park Entrance Fee shared with one person)

$10

1 day at the Fresno County Fair (Admission, parking, and ride ticket packet packet)

$18

Total

$424

 

And that’s more stuff than I got to do as a middle-class kid growing up in the 70s, let me tell you.

So what can we say about Sider’s claim that Rector is wrong and poverty in the U.S. is still widespread? Let’s examine several pieces of criteria.

1. The Biblical standard. One of the headings of his chapters, Sider quotes Job 24:4-12

“the poor of the earth all hide themselves…They lie all night naked, without clothing and have no covering in the cold…Hungry, they carry the sheaves…They tread the wine presses, but suffer thirst. From out of the city the dying groan.”

This is how the Bible describes poverty. Contrast this with cable TV, the above entertainment budget, and enough food to eat. Now contrast this with what the Bible says that we are entitled to:

“For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that.” 1 Tim. 6:7-8

Now, Sider points out that the term “food and clothing” is a Hebrew phrase that takes on a mean all of its own (like the English word “butterfly“) and means “what is essential”. He interprets this as what is essential for “participation in community”. Not just material needs, but what we’ll call “the gravy” of a society. This includes the ability to participate in the common social events, and to own enough property to be a “respected, dignified member of the community.“ This essentially amounts to an argument that poverty is relative. Now, there is some legitimacy to this, in my opinion. In biblical times, few people had the luxury of transportation by camel, horse, or chariot. Thus, cities were not spread out very far. You could travel to work or the market on feet. In America, however, affluence has allowed the bulk of the population to have access to transportation, whether their own or public. When this began to happen, cities began to be built in a more spread out fashion. Thus, it is very difficult to get to work, buy food, or conduct personal business without transportation. And so, transportation has moved from the “luxury” category to the “need” category.

Also, health care, like food, is sometimes necessary for survival. Yes, the OT Law didn’t spell out plans for a health care system, because outside of miracles, health care didn’t exist in any substantial form. But much of the ministry of Jesus and some of the prophets was healing the sick, and via modern medicine, we have the means to administer some of this healing power to those who are ill. We can also probably throw in, say, heating in a home, as this keeps illness at bay.

So we can be somewhat flexible with the term “need”. Perhaps we could define it as “an item whose absence causes very significant discomfort or hardship.“ Some of these things didn’t exist in earlier times, but since they do, it’s unreasonable not to allow people the opportunity to have access to them. But extending it to the gravy of a society is strained. To say that I need to not only eat, but also eat at nice restaurants from time to time, is just too much. The Biblical authors never demanded a higher standard of living for citizens living in wealthier societies, whether it be Israel in the time of Solomon or Corinth in New Testament times. But even if it did, the typical poor American is not doing without American gravy.

2. The historical and global standard. This is sort of related to the first standard. Now, according to these standards, virtually everyone agrees that poor Americans are not poor. Sider may not get many takers from his intended audience, but he would certainly get takers from 80% of the denizens of the planet. Instead of demurs, Sider would get skeptical “what’s the catch?” squints. As commentator Dinesh D’Souza writes,

“Indeed newcomers to the United States are struck by the amenities enjoyed by ‘poor’ people in the United States. This fact was dramatized in the 1980s when CBS television broadcast a documentary, People Like Us, which was intended to show the miseries of the poor during an ongoing recession. The Soviet Union also broadcast the documentary, with a view to embarrassing the Reagan administration. But by the testimony of former Soviet leaders, it had the opposite effect. Ordinary people across the Soviet Union saw that the poorest Americans have TV sets, microwave ovens, and cars. They arrived at the same perception that I witnessed in an acquaintance of mine from Bombay who has been unsuccessfully trying to move to the United States. I asked him, ‘Why are you so eager to come to America?’ He replied, ‘I really want to live in a country where the poor people are fat.’”

So America’s poor are very, very fortunate compared to the plight of many living today, and hundreds die every year attempting to obtain poverty-level status in the U.S. But some still argue that it constitutes poverty.

Gregg Easterbrook, a fellow at the Brookings Institute and a frequent contributor to The New Republic and Atlantic Monthly, writes from a theologically liberal Presbyterian background,

“Today’s minimum wage man or woman may, in some respects, experience better living standards than known to middle-class men and women four generations ago, but that constitutes no excuse to accept that millions suffer money anguish in our moment. To say that we shouldn’t care about the working poor today because the are better off than many of previous centuries is like saying that if your child is hit by a car he or she shouldn’t be taken to the hospital, because in a previous century an injured kid would have died anyway.” [Eas.PP.260]

(Easterbrook is talking specifically about the working poor, while we are taking all of the poor into account - we’ll deal with work, wages, etc. in the next essay.)

Who is saying that we shouldn‘t care about the poor? The question is, are those who are called poor actually poor? Caring about them and saying that they are necessarily entitled to a higher standard of living are two different things. We would agree that there are a few Americans that do suffer from lack of material need and that that is something we should try to change. It is just that the problem is not nearly as big as we’ve been led to believe. The 36 million figure (or whatever it happens to be in the current year) is thrown around in such a way to make it sound like all 36 million are suffering in agony. We have shown that the typical “poor” person is not in the dire straits that words like “poverty” and “anguish” and “struggle to survive” convey. Every available piece of data shows that the number is actually a fraction of that. Poor Americans are better off than the middle class of four generations ago in some respects???. Try ALL respects. It turns out that they are, on average, as well off as the middle class only one generation ago and in some respects, as well off as the contemporary middle class!!! When did 75% of all American households own a car? In 1955. When did 78% of all households own a VCR, 25% own a PC, and 62% percent have cable? As recently as the early and mid-1990s. [Lom.SE.78] As Rector noted in his first piece, American adults coming of age during World War II were malnourished to the point that they were 1 inch shorter than today’s adults, whether born into poor or non-poor households. So in terms of nourishment they are better than those living two generations ago. When you balance all of the amenities out, it comes out to about one generation behind. And interestingly enough, one generation ago Sider was complaining in Rich Christians that Americans were too rich and owned too many gadgets. Now the poor are even more gadgetized than the upper class were then!

Easterbrook describes an episode where he tries to convey what American poverty is like. Bringing back lunch from a gourmet sandwich shop to his office one day, a single mother, who was a receptionist in the building making minimum wage, took a look the bag that he was holding. Her face lit up as she described how she loved those sandwiches, but she could only afford to eat at McDonalds. He says “this is not right”. [Ibid, 262-63]

This is analogous to being run over by a car and not being taken to the hospital? We are not talking about this woman not eating, or having to make her own lunch (as many cost-conscious middle class people do), we are talking about her having to eat fast food. As a kid, going to McDonalds was a major life highlight for me!! The idea that eating there constituted some sort of indignity would have been incomprehensible to me and my chums. And what about people like me today, who only get a half-hour for lunch and have nothing but fast food around my workplace? Rather than Easterbrook’s accident victim analogy, the situation is more like saying that people thirty years ago felt lucky to have a color TV (And without remote control- can you imagine?), thus people should not feel unfortunate that they don’t have a large-screen HDTV. (But even here, 25% of poor households own large-screen TVs!!)

But for the sake of argument, let’s suppose that Sider is right and poverty is relative. Let’s look at…..

3. The Sider standard. Over the course of the book, Sider will present a game plan for eradicating poverty in the U.S. by making sure that each household has income (through wages and income redistribution) of at least 120 to 130 percent of the poverty level. But we have already demonstrated that the average bottom-fifth household actually lives at 174 percent of the poverty level. How can there be widespread poverty if the proposed solution involves a lower standard of living than the current problem? Everything that Sider says that poverty looks like is. in fact, not what it looks like for the average poor person.

4. The Siderian “simple lifestyle” standard. In Rich Christians, you may recall, Sider called Christians to live a lifestyle that was more simple than the typical North American family. This meant living at the poverty level + $5100 (plus emergencies). But the typical bottom-fifth household lives at poverty level + $8082!! So by his own words, they are more than flirting with sinful levels of affluence, they’re living in it!!! In Rich Christians Sider spoke of how advertisers demonically convinced us that we needed to attain a certain lifestyle to be happy. [Sid.RC.22-23] Previously, that message came from Satan, but now it is supposedly God‘s word calling for it. In Rich Christians Sider lamented the foolishness of Americans feeling down because they weren’t as affluent as their neighbors. [Ibid, 242] And it’s still something we need to overcome - except this time it isn’t by choosing to seek our fulfillment outside of material possessions or overcoming covetousness. Now, material possessions play a legitimate and important role in a person‘s self-esteem. What Americans felt that they were entitled to was previously the product of our materialistic society, now whatever Robert Rector and other middle-class Americans would settle for is the Biblical standard! Likewise, there is no fretting over how increased living standards among poor Americans might destroy the planet. No, if Sider is correct now, then everything about simple lifestyles in Rich Christians must now be disregarded.

Sider’s assertions about what the conditions of what poverty is like have been shown to be atypical, and the standards that he gives for its eradication have been shown to be largely met. He has cornered himself. Thus, U.S. poverty turns out be widely scattered, not widespread. Terms like “struggle to survive” aren’t appropriate to American-style poverty, as survival isn’t in question. It is largely a struggle for comfort, and sometimes it’s not even that.

But how do America’s poor enjoy a higher standard of living than their incomes would indicate? Here are several reasons;

1. Some who are considered poor are actually rather well-healed. Because the poverty rate is calculated based on a household’s income for one calendar year, it opens up a rather interesting quirk; It is possible to be counted as impoverished, yet be comfortable or even rich. A six figure income earned by a small business owner or full-commission sales rep can be zero or close to it the next, especially if one works in an industry where market conditions tend to fluctuate (such construction contracting and real estate sales). Such individuals may have a very low income in one year, but still have significant assets to live off of. I also have personally known several single people who earned a good income for a number of years, and just decided to take a year or two off. They earned nothing in those years, and thus were counted as being in poverty. In 1995, Rector noted, that 900,000 poor persons owned a home worth more than $150K, and 200,000 owned a home worth more than $300K. U.S. home values have risen somewhere around 80% since that time, so in today’s market these homes would be worth about $270K and $540K, respectively. Such is a probable reason why so many poor households have large-screen TV’s.

2. Some households actually have higher incomes, but this may be missed because it is paid on an informal or “under-the-table” fashion. This is particularly true of recent Latin American immigrants.

It seems likely that many people in the $0-$4.9K bracket are from the first two categories, as some form of assistance (Welfare, Unemployment, Social Security, Disability) will usually get you into the $5K-$9.9K bracket. That helps explain why the lower income bracket actually has more money to spend, even though their “poverty” is sometimes called “severe”. In 2001, the American Housing Survey reported that among homeowners in the $0-4.9K bracket, the median single-family home had a median square footage of 1602, not that far from the median income bracket’s 1688 square feet. Out of 2.59 million reporting households, 836,000 had a house larger than 2000 square feet, and 479,000 had over 2500 square feet.

3. Among adults, poverty is clustered around the young (who may have middle-aged parents willing to help of things get tough) or the elderly (who may have middle-aged children willing to help). My spending during college always exceeded my income for two reasons: financial aid and help from family. Sider notes that 6 percent of the poor are college students. [Ibid, 32] Even if a young person is not in school, their parents may still help them out with cash or housing from time to time, especially if the children are single parents. Likewise, these middle-aged folks in their prime earning years may also help their elderly parents, if they fall below the poverty line. We note this Census Bureau table, showing that poverty rates among adults hit a high of 18% at age 21, first drop below 10% at age 34, and hit a low of 6.2% at age 51, and then continue up with age from that point. In addition, such things like cars, appliances, VCR’s, etc. are frequently handed down from the middle-aged relative as well.

4. Some households may experience a significant period where the main breadwinner is unemployed, but they dip into savings or borrow some money to make ends meet. Thus, like people in the first category, they spend money made in other years.

However, Sider hints at an important distinction. Sider says that voluntarily living below poverty for a few years while completing school doesn‘t count. I myself experienced that kind of poverty, Although I didn‘t realize it until my annual Social Security statement arrived this past year, and with my mind geared up to write about these topics, I noticed that my income in 1993 was only $3,853. In 1994 it was $8,773, and about ½ of that came in the final three months of that year. It was my last year in college and my first year out. Like most college students, my income during school was narrowly above the poverty level. During my last semester and the nine months afterward, I quit working to finish up school and then had trouble finding permanent work after graduation. I eventually swallowed my pride and did the boomerang thing back to mom and dad. During that time, I didn’t go hungry, but my leisure activities were more restricted, and I spent more time at the library and the local $2 movie theater, where flicks already out on video were shown. I would describe the experience as frustrating, stressful, and difficult, but there was no chance I was going to die, or even get ill, from my “poverty.” It’s really a matter of psychological, rather than physical discomfort.

However, it isn’t difficult to imagine that a prolonged period of time without a steady income would have begun to feel especially agitating and grating. It’s not that things are so terribly bad, it’s just that an existence that is less difficult and stressful seems so very, very close, so close that you can taste it, but you just can’t quite get there. Thus, long-term poverty should be our main concern. Short-term poverty can be difficult, but it is frequently manageable. And a significant amount of American poverty is this short-term type. Sider notes that from 1979 to 1991, 34% of Americans were poor, and ½ of these were poor from 1 to 3 years. 5% were poor for ten years of more. [Ibid]

The stop-gap measures and coping strategies that we’ve described above usually can’t be continued indefinitely. And even the fact scripture doesn’t say anything to the effect that living in an affluent country entitles you to be materially comfortable, the fact remains that the United States offers outstanding economic opportunity, and if a person is not able to break out of long-term poverty, something is clearly wrong. The question is, what?

But first, some a look at Sider’s foundational assumptions.

.

How Important is Inequality?

Sider makes it clear that he believes that a mere inequality of economic outcome is not a problem biblically.

“Equality of income is not the biblical norm for equity…Up to a point, the answer is, differences are morally acceptable. In fact, even morally necessary. In a moral universe, bad economic choices rightly produce negative economic consequences.” [Sid.JG.67]

The “Up to a point”, though, is the operative phrase.

“Does that mean that biblical people should be indifferent to great extremes between rich and poor? Not at all. Precisely because of what Scripture tells us about sin and power, biblical people must always oppose great extremes of power. In a fallen world, powerful people will almost always take advantage of weak neighbors. And money, especially in a market economy, is power. Therefore great extremes of poverty and wealth threaten justice and democracy.” [Ibid]

Also, in Rich Christians, Sider likened the concentration of wealth in today’s market-oriented economies to the centralization of economic power under communism. [Sid.RC.236]

That, Sider argues, is one of the main problems with America today. He spends a number of pages on wealth and income distribution in the U.S. For example, from 1962 to 1997, the top 20% of wealth holders saw their share of the national wealth grow from 81% to 84.3%. [Ibid, 44] Adjusted for inflation, the top fifth of income earners saw their mean income rise 39%, with the top 5% rising 65%. The lowest fifth saw theirs drop 10%. On the other hand, other industrialized countries, particularly the high-tax quasi-socialist countries of Europe, like Germany, France, and Sweden get praise for having a more equitable distribution of income. But the situation in America, according to his reading of the Bible, leads to an imbalance of power and oppression. To prove his point, he cites Micah 2:1-2.

“Woe to those who plan iniquity, to those who plot evil on their beds! At morning’s light they carry it out because it is in their power to do it. They covet fields and seize them, and houses and take them; They defraud a man of his home, a fellowman of his inheritance.”

If you’re wondering how A follows from B here, well, it doesn’t. This is Sider’s foundational material, and he gets off track by quoting OT passages and assuming some sort of equivalency between Ancient Israel and the U.S., and expects the reader to see the connection, with very little qualification or appreciation for the vast differences. He’s comparing apples and oranges, and sometimes apples and planetary nebulae.

For example, what caused the oppression? The biblical passages say absolutely nothing about it being caused by differences in wealth. In fact, the oppressed had wealth! The problem was that it was either seized from them or taken through fraud. Wealth didn’t prevent it from happening! Now, what is the possibility of such things happening or being exacerbated in the U.S. because of great wealth and income differences?

Let’s imagine a scrawny 30-something Silicon Valley techno geek who is the CEO of the latest new search engine, called Goohoo. One day he calls up his balding and overweight 50-something venture capitalist who got him launched and says “Hey! Guess what? Our incomes increased from $20 million to $40 million last year! And it gets better - the incomes of the bottom fifth dropped from $9500 to $9000. It means our power is increasing. Unlike before, we can now oppress! We can lie about our profits and defraud stockholders! And we can go ravage inner-city Oakland and throw people out of their homes.”

The latter isn’t going to happen because the U.S. isn’t a Third World country, or Israel in the time of Micah, where property rights and the rule of law aren’t respected. Our prospective perpetrators aren‘t even going to try such a suicidal stunt, and even if they were, it‘d be a hilarious spectacle that I’d pay good money to see. As for the former, the perpetrators were as capable of defrauding stockholders when the income gap was $19,990,500 than when it was $39,990,000. What is the problem that causes defrauding? SIN! There will always be people trying for dishonest gain, and a person so inclined to try to do it will try whether he’s worth $2, $20K, or $2 billion. But just to confirm, let’s take a little trip across the pond to France, where the gap between rich and poor is smaller. Well, it seems there was a huge oil corruption scheme that came to light last year. And while were at it, let’s just take the train to Brussels and see what’s cookin’ at EU headquarters - Hmmm! The books, apparently. Imagine that! And with so many member states being quasi-socialist! Just like Enron - even down to the point where the whistleblower got suspended from her job in an apparent cover-up attempt. It would seem that it can happen anywhere, not just aggressively capitalist countries. Now, Sider doesn’t actually argue such, that’s just what logically follows from the scriptural passages that he quotes. His argument is a much more vague one, that the Bible teaches that large wealth differences almost inevitably lead to some form of oppression. In America specifically, what he argues is that campaign contributions to politicians come from the rich, giving them more power and a much stronger voice than the poor. We’ll deal with that shortly, but first, let’s ask some questions.

What remedy did God prescribe? Higher taxes? Wealth redistribution to give the poor a better ‘balance of power‘? No, but for oppressors to REPENT! In the first essay, we noted the charity provisions of the OT, and the provisions were there to provide for the needs of the less fortunate, and a “fair” share of the national wealth was not one of them.

“He (a righteous man) does not oppress anyone, but returns what he took in a pledge for a loan. He does not commit robbery but gives food to the hungry and provides clothing for the naked. He does not lend money at usury or take excessive interest.” Ezek. 18:7-8

Central to Sider’s argument is his interpretation of the Jubilee, which ensured that each family would have a piece of land, even if they had to rent it for some years. In his view, God doesn’t want the productive resources of a society to become concentrated in the hands of the few. Thus, governments need to intervene when wealth differences become too great. But land was the ONE resource where equality was protected. It did not apply to fishing boats or houses within walled cities. But more importantly, it did not apply to what the Bible considers to be the primary measures of personal wealth, namely livestock, currency, and servants.

“Abram had become very wealthy in livestock, and in silver and gold.” Gen. 13:2

“The weight of the gold that Solomon received yearly was 666 talents…the king had a fleet of trading ships at sea along the ships of Hiram. Once every three years it returned, carrying gold, silver and ivory, and apes and baboonsSolomon accumulated chariots and horses; he had fourteen hundred chariots and twelve thousand horses…” (1 Kings 10:14-26)

“In the land of Uz there lived a man whose name was Job…he owned seven thousand sheep, three thousand camels, five hundred yoke of oxen and five hundred donkeys, and had a large number of servants.” Job 1:1-3

Now, why was land the only asset subject to equality? Why would land be so crucial? Because in an agricultural society is the most basic income-producing resource. A person who owns land in such a society will be able to earn their own living. So what we need to do is come up with an equivalent for own society. And Sider gives an answer - education and job skills - with which we will concur. There is not a perfect correspondence between education and income in our society, as some very educated people (social workers, for example) earn relatively modest incomes and some people have natural abilities that enable them to command very high incomes (entertainers, sales people, pro athletes) without a substantial education. But the bulk of occupational skills that are in demand in our society are ones that need to be taught, and on average, the more educated a person is, the more he or she will earn.

It’s important to note again, as we did in the first essay, that Israel’s land ownership regulations didn’t actually cause anyone financial loss. A renter paid only for the years that he would rent the land. Education is somewhat different in that I must pay taxes to provide it for other people. But other people paid taxes for my the education so I could earn a living, so I benefited and now I am returning the favor to the next generation. Also, if I live long enough, the people whose education I paid for will provide me with services, innovative new quality-of-life enhancing products and disease cures in my old age, so in the end it’s an investment with dividends for me.

But, back to Sider’s two more specific arguments about the harm of inequality.

1. The wealthy contribute much more to political campaigns than other people, so politicians cater to them and not the poor or middle-class. This gives them much more power. This has been a particularly hot-button political issue over the last few years. Is the American aristocracy buying democracy? Are campaign contributions legalized bribery? Does this contribute to economic injustice? There are several points that significantly blunt these assertions.

1) Campaign contributions do not play a large role in who wins elections. Republicans have been better funded than Democrats for a long time, but this was very little help to Bob Dole in the 1996 presidential race. Bill Clinton had the advantage of being an incumbent at a time when the economy was improving from its slump in the early 1990s and had excellent personal charisma. Likewise, in the most recent Democratic primary, Howard Dean was the best-funded candidate; but in the end many Democrats thought he would not be the best candidate to beat President Bush in a one-on-one race. There are some Democrats who are convinced that more campaign spending inequalities has lead to Republicans gaining control of Congress, especially the House of Representatives, over the past decade. However, a much more significant factor has been that many conservative Democrats, especially in the South, have switched parties because the liberal social views of the party were too dominant.

2) The assumption behind this assertion is that a politician’s votes simply fluctuate with what contributions they are offered. There are times when this certainly seems to be true. However, there is another possibility - politicians have philosophical viewpoints that lead to policies favorable to the contributor, and thus the contributor gives money to that politician’s campaign. Democrats generally support policies favorable to labor unions and trial lawyers, so that’s where their contributions go. Likewise, Republicans are more likely to support policies more favorable to business, so businesses tend to contribute to Republicans.

3) When a politician breaks from supposed principals, it is frequently to pander to the electorate, not just donors. For example, Bill Clinton signed welfare reform in 1996, something we would typically not expect a Democrat to do. But, an election was nearing, and welfare reform was something that the public was favorable to. Likewise, we would expect a very conservative Republican like former Senator Jesse Helms of North Carolina to favor low government spending. And for the most part, he did. But he also favored subsidies for tobacco farmers in his home state, which helped him remain elected.

4) The American aristocrats are by no means an ideologically cohesive bunch (in contrast to communism), and on most issues where wealthy campaign donors have a vested interest, there are many middle or even low income people in the same downline. Agricultural subsidies are one example. The bulk of the money goes to very large corporate farms, but smaller farmers also get them. Other rich and middle-class Americans have a vested interest in stopping them, because it means they have to pay higher taxes. Also, American steel CEOs and their middle-class workers had a vested interest in seeing tariffs on steel imports raised in 2003, but CEOs and workers of companies that consume steel have a vested interest in seeing lower steel prices. So instead of Godzilla and King Kong ravaging Tokyo, it’s more like Godzilla and King Kong duking it out.

5) The percentage of campaign contributions given by the wealthy (a lot) and the poor (very little) is likely to be pretty much the same as long as any significant inequality exists. Would a super-rich individual give less in contributions if his net worth went down from $500 million to $200 million? Probably not. If the incomes of the bottom fifth were raised to $50,000, how much would go to contributions? Probably very little. Another argument along these lines, though not expressed by Sider, is that campaign contributions allow for the wealthy to have access to politicians. You, on the other hand, have no chance of getting “alone time” with a politician. But this has always been true, and always will be. If it isn’t a contributor getting the politician’s ear, it is going to be a person of great privilege and power anyway (like a former Ivy league frat brother). Is it fair to say, as Sider does, that because of this, politicians care more about their wealthy donors than about the poor? Probably. But if this has led to a total neglect of the poor, why does Sider’s book contain another 200 pages evaluating current proposals to help them, as well as a look at previous well-meaning attempts that failed? Once again, bribery and neglect of the poor are sin-nature problems, and trying to create a general parity isn’t going to stop them.

6) Once again, let’s ask what things are like in Europe. Is democracy stronger there? That’s very much open to question. To give a very recent example, many of the European countries, particularly France, are aghast that the United Kingdom is actually going to have a vote on the new European Union constitution. What? Let the people decide on something that important? Why, they might vote it down! The UK, we note, is more capitalist than the continental countries, and yet democracy is apparently stronger there.

If we’re looking for threats to democracy in the U.S., we should be looking at activist judges who imagine things into constitutions and effectively legislate from the bench, usurping the power from democratically elected legislatures (like the Massachusetts Supreme Court trying to impose gay marriage on the state, and other judges who will certainly try to declare the Defense of Marriage Act and other similar democratically enacted state laws unconstitutional if it ever gets before them.)

2. A vast distribution of wealth deprives some people of the productive resources necessary to earn a living. Sider simply doesn’t appreciate the vast differences between an industrialized society and an ancient agrarian society. In the ancient world, the main craft was labor-intensive agriculture. This is a task that pretty much anyone could be taught to do as well as anyone else. Plant the seeds at a certain time, plow, feed the animals, harvest. There’s not a whole lot of ways to improve on agriculture unless you add in capital equipment, of which very little existed back then. Thus, a given plot land could be expected to 1) produce nearly the same amount of income for whoever used it and 2) produce about the same amount of goods for the society, regardless of who used it.

However, the same cannot be said for modern capital. To illustrate, let’s bring back Ted, our entrepreneur from the first essay. At the end of a very good year, let’s say that Ted has an extra $50,000 in cash in his business. He sees an opportunity to open another surfboard construction shop and purchase some new equipment. On these investments, Ted can earn a return of 30%, or $15,000. Now, can we redistribute this capital to the general public and still earn the same return?

No, we cannot. If we redistribute this $50,000 to 10 “average Joe’s” that we determine should receive a just share of the wealth, the money will not be in Ted’s business and it will not go towards that type of investment. These 10 individuals, who are about average in business acumen, receive $5,000 each, and being “average Joes”, they are not very likely to put it into an entrepreneurial business. Why? Because they are not skilled entrepreneurs. Now, they could invest it in a non-publicly traded corporation, many of which are entrepreneurial startups. But because of the risk factors and the skill needed to evaluate these types of companies, it is not in their self-interest to do so, and they probably won‘t. So, they will probably do something like this; One half of it in U.S. government T-Bills, which return 4% in the hypothetical year being discussed, and the other half in stock mutual funds, which returns 10% (about the historical average) this year, for an average return of 7%. Thus, all 10 combined earned $3,500, much less than Ted would have earned.

But there’s more. Ted’s new shop would have employed more people. Thus, taking the capital from his hands lessons his ability to create jobs. By far and away, firms with under 500 employees create the most net job growth (between 1989 and 1999, the percentage ran as high as 75% - see here, bottom of page 1 and down). These firms are largely owned by people in the top 5 percent of both income earners and wealth holders. Rather than being an oppressor and opportunity-denying class, these individuals are the opportunity-creating class.

In 1996, 1 in 5 U.S. millionaires was retired. Of that 80% who were working, 67% were self-employed (That leaves us with 53.6%). Of that 67%, 75% were entrepreneurs (the rest being self-employed doctors, lawyers, etc.) [StDa.MND.8-9] That leaves us with 40% of all millionaires as entrepreneurs who create economic opportunity for the vast bulk of the population.

And finally, there is the other side of the equation - goods production. One of the greatest boosts to American prosperity was the assembly-line approach to manufacturing, implemented by Henry Ford in 1913. It was his idea that instead of one or more workers building a car from the ground up, each worker should put on the same part on every car, and then pass it to the next person. This allowed him to produce a great many more cars for the public. And he also wished to sell a high volume of cars, so he raised his worker’s pay to $5 a day, which was very, very good in those days. But it was the higher productivity of his workers that allowed him to pay his workers such a wage. Here, Ford clearly used the capital for societal benefit better than most other people could have. What’s more, other manufacturers followed his example and built assembly lines of their own. Here we clearly wanted the capital in his hands, and not an “average Joe”. In an ancient agrarian society, there wasn’t a problem with every family being self-employed. In an industrialized society, it’d the kiss of death, because the majority of people aren’t cut out to be self-employed entrepreneurs. The productive capacity of an industrial society exceeds that of an agrarian society by one-hundred fold. [PM.HBSV.6] And the concentration of capital in the hands of a few skilled entrepreneurs is how that hundred-fold increase came to be.

Does this mean that “average Joe” shouldn’t have capital? No, stock and debt equity ownership can provide financial security for life in general, but especially for retirement. But there’s a way that average Joe can get capital without redistribution of it. Joe can get an education, become gainfully employed for a business owner, and acquire the money needed to invest. And because Joe earns the money and produces wealth for the business owner, the business owner does not suffer a net loss like he would if the money was simply redistributed. What’s more, without entrepreneurs who guide (and have guided) their startups through the process of becoming a publicly traded corporation, we wouldn’t have stocks in which to invest in the first place. So, access to an adequate education for all, not wealth redistribution, should comprise the bulk of our evaluation of American society in regards to economic justice. This we will also examine in the next essay.

We noted in the first essay that there were other forms of wealth and capital in biblical times that were not subject to any sort of redistribution. These included cattle, profits from renting farmland, equity in merchant enterprises (like metalworking foundries), and houses inside of cities (I.e. residential Real Estate), etc. The main reason that agricultural land was singled out because it has a quality that the others don’t - it’s a zero sum good. If one person has it, that limits what other people can have. As the saying goes, “they aren’t making more of it.” And given that non zero-sum forms of wealth were not subject to a limit, it would seem that the real point of the Jubilee was not to limit the wealth of people, but rather to preserve each person a stake.

But now economic life has expanded beyond the confines of the ancient agrarian world and takes place largely within the dimension of non-agricultural commerce, which the ancients participated in, but they only waded into the most shallow waters. (In ancient Rome, the largest factory employed only 50 people. In medieval England, it was 18) [Ibid]. It’s like trying to apply the rules of automobile traffic to aircraft traffic. Suppose that the OT law was written to a modern society and prescribed that the speed limit should be 65 and that every person should own their own car. Should we apply those rules to air travel? No, because if planes were only allowed to fly 65, only very lightweight craft, like skycycles (gliders with small engines attached), could actually fly. A speed limit in auto travel makes sense, because if I am traveling much faster than those around me, I am endangering myself and others. But a jet airliner can travel five times as fast as a private four-seat Cessna without endangering it, since it cruises at a much higher altitude, and even if happens to be the same level, it can avoid it by going above/below them or around them, the former being something cars can’t do, and the latter being something that they may not be able to do, depending on traffic and how many lanes there are. And since flying an airplane is more difficult to master than driving a car, there would be far more fatalities if everyone did their own flying. But because people can fly on planes owned and flown by others, they can travel much faster and safer than they could own their own - just as they earn more for themselves when working for businesses owned by entrepreneurs.

Sider seems to be aware of this line of reasoning, and says “One could make a moral case for growing inequality it were the most effective way to improve the lot of the poorest. But the reverse happened.” [Ibid 42]

Has it? If one looks at the annual income of the bottom fifth, yes. But as we have seen, the standard of living for the bottom fifth is comparable to that of a middle class person in 1974, when Sider says that they were supposedly better off. Neither does Sider take into account that the bottom fifth in 1974 are largely not the same people that make up that group today. As we noted before, America’s poorest adults are younger than 35 and the elderly. The elderly from 1974 are nearly all dead, and 1974’s 21-year-olds would now be 51 and in their prime earning years.

There are other factors that Sider doesn’t consider, like the fact that young adults are taking longer to enter the workforce in earnest (working less hours, living at home longer, not choosing a career right away). Also, since around 1980, there has been mass immigration into the U.S. from Latin America. There are two implications of this.

1) The U.S. receives a constant inflow of poor people that must be lifted out of poverty (Europe, in the meantime, is far more restrictive of immigration and far more aggressive in deporting illegal aliens. So part of Europe‘s poverty reduction plans involve keeping a lot of poor people out!). Many of these people were not here in 1974, which demonstrates once again that 1974’s poor are largely not the poor of 2004. But that also leads to another question; What is happening to poor native-born Americans? There are indications that the lot of this group actually is improving. To cite one example from Easterbrook, the incomes of black Americans, traditionally disadvantaged, rose at twice the rate of whites during the 1990s. [Eas.PP.11]

2) As we have noted, Latin American immigrants are more likely to have unofficial income from being paid on an informal or cash basis.

In fact, it can be argued that in at least one case, inequality grew specifically because the lot of the poor improved. The phenomenon of Wal-Mart stores, for example, has led to greatly concentrated wealth in the hands of Sam Walton’s five surviving heirs, valued at $20.5 billion each in 2003 (see here.) But because of its ability to deliver low-cost consumer goods, the purchasing power of low-income Americans was enhanced. True, Wal-Mart did put other retailers (particularly independents) that couldn’t compete on price out of business, but they were not serving the public in terms of goods selection and price as well, evidenced by the fact that consumers chose Wal-Mart when given the choice. Thus in an economy where old trends had continued with more retailers and more dispersed wealth to go along with it, things would be worse for the poor.

Where Sider gets off track in all of this is his confusion of modern capitalism with the feudal/mercantilist and communist economies of yesteryear.

“We used to think of Europe as a class-based society in which aristocrats owned most of the wealth. Today wealth distribution is more equal in Europe than in the ‘land of the free.’ [Sid.JG.44-45]

Unfortunately, this confusion causes him to find a dark lining behind every sunbeam. How about increasing levels of stock ownership?

“But in 1995, 60 percent of all households owned absolutely no stock. The top 10 percent owned 88 percent of all stock, and the bottom 90 percent had just twelve percent. Eighty-six percent of the profits from stocks in the stock boom went to the top 10 percent.” [Ibid, 44]

So we had 40 percent of households with stock ownership in 1995. That’s an improvement over 31.6 percent in 1989 and 36.7 percent in 1992 [WA.124]. By 1998 it was up to 48.8 [Ibid], and in 2001 it was 51.9 [Statistical Abstract of the United States, Table 1210]. In fact, the percentage of households with incomes under $20K that owned stock increased from 6.5 to 12.4 percent between 1995 and 2001. [Ibid] As for the last two figures about the top 10 percent, WHO BLOODY CARES? Sider takes a nostalgic look back at the years 1962-83, because the total share of the wealth didn’t change much. But between 1983-97, inequality grew to the “crisis“ levels of today. I’m glad Sider can look back so fondly at the former period, but I lived through the last half of it, and I can’t. I remember high inflation, sky-high interest rates, and recessions every 2 or 3 years instead of one each decade. On Jan. 2, 1963, the Dow Jones Industrial Average was at 646.79. If it had just pace with inflation, it would have hit 2105 in 1983. But, no, it’s high in 1983 was only 1287.20. On the other hand, in 1997, it hit a high of 8259. [WA.121]. But if it had kept pace with inflation during that period, it would only have been at 2074.25. If 1962-1983 was a period of liberation and equality, please don’t liberate me, or make me equal, or help me in any way. I beg of you.

Medieval Europe, ancient agrarian, and communist economies of yesteryear are simply not comparable to the United States. Feudal lords/communist officials rose to power by appointment for loyalty, ancestry, or some sort of service to the king/politburo. As long as they behaved as the kings/politburo wished, they got to keep their privileged position. Ditto for many of the companies that were granted monopolies in Europe during the mercantilist era, like the British East India Company. In the U.S. an aristocrat more or less gets elected to his position by meeting a demand for a particular good or service that people are willing to pay a lot of money for. The main difference can be summed up as follows:

Capitalism: Person must serve and produce for the public to become an aristocrat, and he must do so more efficiently than the competition. Property, wealth and incoming-producing assets can be owned by increasingly many people.

Feudalism, Communism, and Mercantilism: Aristocrat doesn’t have to do a darned thing for the public, and frequently doesn‘t. There is no competition, so consumer needs will not be met. Property, wealth and income-producing assets really can’t be increased, and certainly the common person cannot own them.

Thus, we find Sider’s claims about inequality wanting.

Government - Good or Bad?

Sider’s second chapter, “A Biblical Foundation”, calls for a strong, active role for the government to play, intervening in the economy to establish Biblical justice.

Sider writes,

“But is there a biblical basis for those who seek to exclude government almost completely from the area of the economy? Not at all. The state is not some evil to be endured like an appendectomy. According to Romans 13, the state is a gift from God designed for our good. Hence, John Calvin denounced those who regarded magistrates ‘only as a kind of necessary evil.’ Calvin called civil authority ‘the most honorable of all callings in the whole life’ of mortal beings; its function among human beings is ’no less than that of bread, water, sun, and air……Sin makes government intervention in the economy necessary. When selfish, powerful people deprive others of their rightful access to productive resources, the state rightly steps in with intervening power to correct the injustice.” (p. 71-72)

This is clearly aimed at conservatives and their mistrust of government intervention. Now, this isn’t an all-bad passage. We can agree with Sider’s deference to Calvin here. But this leaves open the question of exactly what part it is supposed to play. The government does intervene in the U.S. economy. Our society has assigned it the task of providing the key productive resource (education) in our economy, and that they should is non-controversial. If someone does not have access to a quality education (a topic we’ll broach in the next essay), then the problem is that the government needs to do a better job at a task that it has already been assigned.

It is true that the Old Testament law did impose some regulations on economic life within the covenant community. However, whether it involves the level of government intervention that Sider calls for is open to question. Sider seems to think that because some regulations and some redistribution of resources occurred, that this translates out into a highly activist and highly redistributive government, along the lines of Europe’s quasi-socialist welfare states. But if that were the case, there certainly were models among Israel’s neighbors that would have been closer. For example, economic life in ancient Egypt during the Old and Middle Kingdoms (approx. 2650-2152 B.C. and 2000-1750 B.C.) was centered around a strong central government, and the government operated in a manner that was quite similar to a client-patron relationship. The common people were expected to give gifts to the Pharaoh, who would in turn bestow gifts back to the people. [Sas.CANE.1375-77] It is not a welfare state per se, but it still is much closer to the continental European model than the Mosaic Law, with its rather modest redistribution.

It is fairly common to see liberals in the U.S. appeal to the teachings of Jesus (see here for JP Holding’s review of Alan Combs’ “Jesus Was a Liberal” chapter), as if the problem with Judea at the time was that it was too capitalistic. But who did the Jews view as oppressors the most? Samuel son of Wal, a peasant from the village of Tel-Benton, who grew Dreidel-Mart into a huge corporate empire? No, TAX COLLECTORS, and so much so that they were almost always mentioned in the same breath as “sinner”. It’s not at all that Jesus didn‘t see the need for taxes (“Render unto Caesar what belongs to Caesar“) , but tax collectors often overcharged those who they collected from. This isn’t that different from a bureaucrat who wastes money (sometimes for personal expenses) and then asks congress for more money - he’s ripping off the taxpayer.

Speaking of the relationship between Judean peasants and colonial administrative elites, Herzog notes,

“From the time of the Ptolemies to the Period of Herodian rule, elites typically have monopolized any lucrative agricultural or manufacturing scheme…if their profits (of peasants) were significant, they would have attracted the attention of elites practiced in the business of stripping peasants of any profits they might enjoy while conducting a hostile takeover of the promising enterprise…an ‘administrative relationship’ is an exploitive political relationship; the two are not antonyms but synonyms…Kautsky is closer to the truth when he observes that the relationship between aristocrat and peasant is exploitive but concealed, and one way to provide ideological concealment to this exploitation is to attribute false reciprocity to it, such as the line that aristocrats provide protection to peasants. From whom do the peasants need protection? From the very aristocrats who are protecting them!” [Her.JJRG.101]

Thus the type of system that Judea’s poor needed to be liberated from has more in common with a high-tax, heavily bureaucratic government than free-market economies.

While we agree that civil government is a divinely ordained institution, there are two things that we should keep in mind. We should be worried about sinfulness in wealthy businessmen, but all people are sinful, and this does not magically change just because they go to work for the government, and there are even fewer mechanisms to keep that sinfulness in check. Fraud, waste, and inefficiency are very common in all governments, even in the developed world, where corruption is a fraction of what it is in the developing world. This is not an accident. The profit motive in the private sector rewards efficiency, whereas governments tend not to. If you’re inefficient with your resources, you don’t go out of business. You just go before Congress, whine about how your department is running out of money, make up stuff about how vital and important it is, and then just sit back. With the aid of the media, who always love an impending “crisis”, the odds are fairly good that you’ll get it.

We’ve noted the instance of fraud from EU headquarters. Examples from Europe and the U.S. could be multiplied almost endlessly. The U.S. government has such bad internal controls that the General Accounting Office has refused to form an opinion on the reliability of the Federal Government’s financial statements for six years running. How bad is that? Well, you may recall that Enron and Worldcom failed to produce financial statements that deserved to be approved by an auditor as accurate. But at least there was documentation to show that they were inaccurate. When an auditor says that he can’t give any opinion at all, it means that the organization being audited can’t produce the documentation necessary to form an opinion one way or the other! So you have a behemoth that is even more corrupt than Enron and Worldcom, and is far larger in scale to boot! (And to think that the Federal government, through the Securities and Exchange Commission, requires the financial statements of publicly traded corporations to be accurate! First, remove the plank from your own eye.) What’s even worse is that this sinfulness in government is far less likely to get punished than it is in the corporate world. When Enron and Worldcom’s scandals were made known, both of their stocks collapsed and were eventually de-listed. Now their executives are facing jail time (ironically prosecuted by the Feds!). But whose heads are rolling in the Federal Government? No one. Government employee union rules make it practically impossible to fire anyone.

Even with these problems, the government is still more efficient at providing some services than private industry can be. A police officer can’t be concerned about whether the suspect that he is chasing is has victimized his customer and not someone else’s, so the government runs law enforcement in a monopoly type fashion, and this is most efficient. The same principal applies to roads. It would not be practical to have toll-takers from private businesses taking money from customers who were turning off of competitors’ streets. It’d take forever to get anywhere. So government administers roads. But once we get beyond these common-good type items, we should be more skeptical about giving money to government or letting it handle too many things.

In fact, if we need money, and want to eliminate our deficit, there are plenty of places to cut spending on things that the government really doesn’t need to spend money on. It’s just a matter of political will. A key item is the recently launched Medicare prescription drug benefit, which was supposed to cost $40 billion a year. Now we know that it will cost much more than that. The issue is not that prescription drugs aren’t a legitimate medical need, it’s that the program covers ALL seniors, rich, poor, or in between. We can certainly agree that a senior citizen shouldn’t have to choose between drugs and food, but shouldn’t a senior of more comfortable means have to decide between drugs and a 50th anniversary cruise? Other examples (and if the amounts seem relatively low, there are many more that could be added) include Amtrak. It receives a government subsidy of $1 billion a year to cover costs for long-distance routes on which it isn’t profitable. Air travel is more efficient. Some people like riding on a train, but if they aren’t willing to pay what it costs, why should taxpayers be forced to make up the difference? And the National Endowment for the Arts receives $122 million. Of course, there are examples of dubious/offensive work that have been funded by this agency, but even though some of the art funded is legitimate, is it so important that taxpayers should be forced to pay for it when they wouldn’t by their own free will?

The other thing that we should keep in mind is that even though God has imputed some divine authority to governments, He has not chosen to actually give them divine powers. They cannot multiply loaves and fishes, they can only take them from somewhere else, and so, unlike Jesus, the maxim that “there’s no such thing as a free lunch” still applies to them, and a good number of attempts to “ensure social justice” end up having negative, unintended consequences which negate the previous problems or make them worse. In fact, in the next essay we will show that some poverty is caused specifically because of government intervention.

We’ve discussed the importance of the ability of entrepreneurs to accumulate capital and wealth to expand the economy. Part of Sider’s plan includes raising taxes. He doesn’t specify exactly how much his proposals are going to cost, but the implication is that he wants to raise them on high and even middle-income earners until all of his aid ideas are met. Some of the specific tax hikes include taxing the cost of medical insurance that middle-class workers receive from their employers and eliminating the home-mortgage deduction for households making over $100,000 a year. Tax, Tax, redistribute. And it won’t have any negative effects. We just take most of the money from the wealthy, who will just spend it on really expensive things that they don’t need, anyway. So it’s a free lunch! But, as we have mentioned, it is exactly these people who are creating economic opportunity for us all. We noted that millionaires are key in being entrepreneurs. In fact, part of the reasons that people get to be millionaires is by saving and investing, not by spending money on things that people associate with millionaires. In 1996, the median income among millionaires was $131K ($156K in 2004 dollars). [StDa.MND.9] Upper-middle class, to be sure, but not super-high, either. But through years of buying nice but not luxurious vehicles, by living in working and middle-class neighborhoods, and not buying expensive clothing (the highest price that a typical millionaire had paid for a suit in 1996 was $399, [Ibid, 31] or $479 in 2004 dollars, not the $2,000 or more that you might expect), they became wealthy. Taxing high incomes at high rates means taxing these people who are in fact, using their resources for socially beneficial purposes.

Wait a second! All of this is voodoo, trickle-down economics! We all know that doesn’t work!

Those that use such lines are at a loss to explain what is theoretically wrong with the model that we have sketched in the previous section. It is as if entrepreneurs, investors, and corporate executives, for some bizarre reason, forget to consider that tax rates must be factored in when trying to predict the profitability of a potential investment. (They do, after all, teach this in finance class). Perhaps they are under a voodoo spell. Anyway, they are at a loss to explain much empirical data as well. The U.S. had major tax reform over 20 years ago, where high marginal tax rates for the top bracket were eliminated. Ever since, growth and job creation have been strong, and recessions have been short and infrequent. Granted, top-bracket taxes were raised during the 90s. However, they were raised to a still relatively low 39%, noticeably less than the 70% rate that was in effect in the 70s.

But what do we find when we look at Sider‘s beloved European economies? Unemployment rates near 10%! And even in the Netherlands, where unemployment is officially low (around 2%), it is because many people not working are simply not classified as unemployed. Out of a Dutch working-age population of 7 million, 1 million are classified as disabled, which is completely absurd. [HF.IEF.Netherlands]

Now, it is true that economics is not the type of science where you can repeat experiments in a laboratory and always determine cause and effect with precision, especially in the short-term. But when consistent patterns show up over the long haul, it becomes much more difficult to attribute them to coincidence. We’ve talked about the U.S., but there’s more. Ireland, long a poor agricultural nation, began a low-tax regime in the early eighties. Taxes, especially corporate taxes, are low there, and guess what? Ireland is in a long-term boom! It receives 1/3 of all U.S. investment in the E.U., despite only accounting for 1 percent of the E.U.’s population. [HF.IEF.Ireland] The United Kingdom also languished for a long time under outright socialism as well as confiscatory taxes on high incomes. But when Margaret Thatcher removed them, The UK began to catch up with the rest of Europe. Inequality grew - but the nation as a whole prospered. There are few calls in the UK to a return to the good old days, and the Tony Blair Labour government, elected in 1994, remains in power at least in part by not calling for radical new changes. Once again, the German economic miracle all happened before the installation of the current welfare state, and since it has been a constant story of stagnation and high unemployment.

Now, there are other reasons why job growth has been so stagnant over Europe. Many “justice-seeking” regulations have done the job as well. Germany, for example, makes it very difficult to let workers go in a downturn, so guess what? Businesses are reluctant to higher them in the first place. [HF.IEF.Germany]

But a real irony is that even the government officials that American Europhiles so readily treat as demi-gods actually subscribe to the “trickle-down” economics that seems so absurd to them. In the EU, there has been a concerted effort to bully Ireland into “harmonizing” their tax rates with the other countries. Why? Because capital flows out of the high-tax countries and into Ireland (and also the other relatively low-tax countries, namely the U.S., U.K., Switzerland, and Luxembourg.) As the article quotes former French Prime Minister Lionel Jospin as saying,

“It is not acceptable for certain member-states to practise unfair tax competition in order to attract international investment and offshore headquarters of European groups."

It’s unfair! How dare you get in the way of our right to tax, tax, and tax some more!

And it isn’t just capital that could create jobs that go overseas. Highly skilled workers choose to emigrate to low tax countries (See here for the example of France), with the paradoxical result that even while these countries suffer high unemployment, there is a shortage of highly skilled labor! The connection is too well-established to deny - but rather than cut their own taxes, they insist that others raise theirs. So this is the other side of how to maintain parity: after keeping poor people out, the next step is to chase out those who would earn high incomes. It doesn’t actually help anyone, except for making people feel that things are fair. And once again, a major difference between the modern world and the ancient world emerges - the chief forms of capital, whether in the bank or the brain, are highly mobile. An ancient Israelite could not say “The Jubilee is coming! I will take my land and go up to Phoenica to evade it.”

 

A-ha! You didn’t talk about Sweden!

Indeed, Sweden has fared better than the countries previously mentioned. But they‘ve also had to cut taxes to keep from imploding in the early 90s, when Sweden‘s government consumed 73 percent of GDP. This was cut to the current figure (around 54%), which is still high. But even here, Sweden cheated. Writing in the Wall Street Journal Europe, Klas Eklund, chief economist at Stockholm’s Skandinaviska Enskilda Bank points out

“The wealth tax has been lowered in several European countries during the past years. However, in Sweden, the wealth tax – already one of the world’s highest – was increased after the SDP’s election victory in 1994. Some of the wealthiest share owners had already moved out – like IKEA’s founder, Mr. Kamprad, and the owners of Tetra Laval, the Rausing brothers – and now, others prepared to follow. The result: The government made a tax exception and created a loophole for “big majority share owners”. Now, ordinary households who own their house have to pay wealth tax but the richest capitalists do not have to – since the government fears they would otherwise leave the country.”

So, in order to keep that capital and tax base in the country, the Swedes have resorted to voodoo, apparently. But that still leaves entrepreneurs and skilled workers to leave Sweden, as this article from the International Herald Tribune shows. One government official is quoted as saying that these Swedes are leaving just to gain experience overseas. They will return eventually. Even if Sweden’s only unattractive feature was a miserable climate, that would still be wishful thinking.

To be continued…..

Reference Notes

[Eas.PP] Easterbrook, Greg. The Progress Paradox: How Life Gets Better While People Feel Worse. New York. Random House, 2003

[Her.JJRG] Herzog, William B. II. Jesus, Justice, and the Reign of God: A Ministry of Reconciliation. Louisville. Westminster John Knox, 2000

[HF.IEF] Heritage Foundation. 2004 Index of Economic Freedom. The latest edition can be found here

[PiMa.HBSV] Pilch, John J. and Malina, Bruce J. Handbook of Biblical Social Values. Peabody, Ma. Hendrickson, 1998

[Sas.CANE] Sasson, Jack W. Civilizations of the Ancient Near East. New York. Scribner, 1995

[Sid.JG] Sider, Ron. Just Generosity: A New Vision for Overcoming Poverty in America. Grand Rapids, MI. Baker, 1999

[Sid.RC] Sider, Ron. Rich Christians in an Age of Hunger. Nashville. W Publishing Group, 1997

[StDa.MND] Stanley, Thomas J. and Danko, William D. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. New York. Pocket, 1996

[WA] The World Almanac and Book of Facts 2002. New York. World Almanac Books, 2002