The powerful combination of free markets, honest government and biblical ethics are the critical components to growing economies and climbing out of poverty, according to a new book that also declares government-centered solutions a guaranteed ticket to failure.
The United States spends many billions of dollars in foreign aid every year in an effort to help Third-World nations escape the grips of rampant poverty. The country has waged a domestic “War on Poverty” for more than 50 years. Supporters say the results are far better than had we done nothing, and many critics suggest these efforts are extremely expensive failures. Hardly anyone claims they are effectively reversing poverty at home or abroad.
In their new book, “The Poverty of Nations,” theologian Dr. Wayne Grudem and economist Barry Asmus explain why they believe government programs have largely failed.
“The solution to poverty has never come through foreign aid or domestic aid. The solutions to poverty come when people and nations are enabled to produce their own prosperity. The question is not equality. The question is, ‘Is there opportunity? Is there freedom in the workplace? Is there economic freedom? Is there governmental freedom from excessive regulations so that people who are at the lower end of the income bracket can progress and hope to progress toward higher income?,’” said Grudem, a research professor of theology and biblical studies at Phoenix Seminary.
He added, “There are no examples in history where a country has risen out of poverty, without a free-market economic system. We go through the history of the world and all the economic systems that have been tried, from hunting and gathering and subsistence farming into slavery and feudalism and mercantilism, and of course more recently socialism, communism (and) high government control. Those have all failed to produce prosperity. The only way that nations have come from poverty to prosperity throughout all history is through a free-market economic system.”
According to Grudem and Asmus, their book is designed as a prescription for nations rather than individuals to emerge from poverty. They contend there are three critical components. The first is an embrace of the free markets.
“The essence of it is you have the freedom to own property. You have freedom to buy and sell. You have freedom to produce and enter the marketplace. That is what leads to economic freedom,” said Grudem, who noted the Heritage Foundation’s Index of Economic Freedom consistently shows the nations with the most freedom in the marketplace are the most prosperous.
The second critical component on their list is a strong, ethical government, where there is strong respect for the rule of law and government officials serve for the good of the people rather than themselves, their families and their political allies.
The final key factor is biblical ethics, whereby individuals engaging in these free markets conduct themselves with integrity.
“Values and beliefs in a culture are what determine the direction it goes in terms of government and economics,” Grudem said, adding, “We found that moral teachings, things like not stealing and telling the truth, viewing your work as a calling from God, to whom you are accountable, those things lead to economic prosperity. Those biblically based moral values have really influence economies on positive ways throughout economic history as well.”
So while nations must set the stage for individuals to prosper, individuals need to conduct themselves above reproach. Grudem also said intact families are a huge step toward escaping poverty.
“The greatest single determinant of poverty is a single-parent family,” he said. “We should do what we can to help single-parent families, but when government encourages rather than discourages single-parent families, it’s harmful to families and harmful to the economy.”
Grudem said the sub-Saharan African nation of Botswana is a shining example of how these factors come together to generate prosperity.
“They had the benefit of having a leader. They had a hereditary king, but then he became elected as president of Botswana. He has wise policies that were instituted, and we think that was affected by the Christian training that he had in the schools that he went through,” said Grudem, who added that the nation is not only well ahead of most other African nations but is on the brink of being classified among the wealthier nations of the world.
Overall, Grudem said the world is a mixed bag in terms of embracing these principles or moving away from them, although he thinks the trend is moving in the right direction. While much of Latin America is embracing government-controlled economies, he notes, Great Britain, Germany, the Scandinavian nations, Chile and South Korea are sterling examples of nations where greater freedom means greater prosperity, and in some cases leaving socialist policies.
And what about the U.S.?
“People immediately begin to say, ‘What about the things we’re doing in the United States? Aren’t we having more government regulation, higher taxation, disincentives to productivity, disincentives to work? Aren’t we having moral breakdown in the way that people think of honesty and truthfulness, not breaking contracts and obedience to the rule of law?’” he said. “There are many things our country is doing that are actually hindering our economic growth and, of course, that results in a stagnant economy essentially.”