THE ONLY SOLUTION TO WORLD POVERTY

By Wayne Grudem

There is only one effective solution to world poverty. It is the only solution that has ever worked or will ever work. It is evident from the history of every wealthy nation today, and is consistent with the teachings of the Bible about productivity, property, government, and personal moral values.

My personal interest in this topic was kindled by reading statements like this in the Bible: “Blessed is the one who considers the poor!” (Psalm 41:1). But what was I doing to help the poor? Very little. I wondered if my work as a professor of theology and biblical studies might equip me to make some contribution to the problem of world poverty.

Then I began talking with a professional economist, Dr. Barry Asmus, who happened to be a fellow elder with me at Scottsdale Bible Church in Arizona. We discovered that we had a combination of academic backgrounds (economics plus biblical ethics) that gave us deeper insight into the problem of poverty.

Seventy-nine Critical Factors

After several years of research, we now think we understand why some nations became wealthy and why other nations remained poor. In fact, our research discovered 79 factors within nations that have led to increased prosperity in whole nations over the last 250 years. These fall into three large categories:

■ A nation’s economic system must be a free-market system with effective rule of law and easily documented property rights;

■ A nation’s government must be one in which leaders use their power to benefit the nation as a whole rather than simply themselves and their friends; and

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Wayne Grudem is research professor of theology and biblical studies at Phoenix Seminary in Arizona. With degrees from Harvard and Cambridge, he has authored 15 books, including Politics According to the Bible (2010) and The Poverty of Nations: A Sustainable Solution (2013). This essay is adapted from his lecture at Colorado Christian University on April 11, 2014.

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Can biblical values helpraise GDP?

■ A nation’s cultural values and beliefs must reflect such moral teachings from the Bible as telling the truth, not stealing, valuing literacy and education, viewing one’s daily work as a responsibility from God, and believing that God will one day hold all people accountable for their actions.

Our book, The Poverty of Nations: A Sustainable Solution, details these findings. It does not discuss how to help poor individuals or local communities, since many others are doing good work in these areas. Rather, our book addresses the causes of poverty and prosperity at the level of the whole nation.

This is because we are convinced that the primary causes of poverty are factors that affect an entire nation. We are not aware of any other book that addresses poverty at the level of the whole nation from an explicitly biblical or Christian perspective.

Poor Haiti, Rich Norway: Why?

Two basic economic concepts are important for understanding how nations can escape from poverty.

First, per capita income is the standard measure of whether a country is rich or poor.

Income per person is very low in poor countries such as Haiti at $1300, Uganda at $1400, or Pakistan at $2900.

Countries in the low-middle income range would include India at $3900—on its way up, but still poor. Still more prosperous are countries in the high-middle income range, such as China at $9100 or Mexico at $15,300.

Finally, there are countries with a high per capita income, such as Japan at $36,200, Germany at $39,100, the United States at $49,800, or Norway at $55,300.

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Second, gross domestic product (GDP) is the standard measure of what a country produces in a year. Gregory Mankiw has defined it as “the market value of all final goods and services produced within a country” in a given year.1

In concrete terms, it is the total value of all the things like shoes, sweaters, apples, potatoes, automobiles, and services produced in an economy in a year.

Imagine Honduras Overtaking China

Gross domestic product at the national level is the main factor that determines a country’s wealth or poverty at the individual level. Per capita income is calculated by dividing the country’s GDP by its total population.

To take a simplified example in very round numbers, consider the nation of Honduras. It has 8 million people and a GDP of $36 billion. Dividing the latter by the former, we see that Honduras has a per capita income of $4500, still quite poor.

Now, imagine that somehow Honduras could double its GDP from $36 billion to $72 billion. Dividing that new figure by the same 8 million population, we’d suddenly find that Honduras had moved into the high-middle income category with per capita income of $9,000 —on pace with China, and substantial progress in escaping from poverty.

The focus of any poor nation’s efforts to overcome poverty must therefore be on increasing its production of goods and services. Leaders must focus relentlessly on the goal of increasing GDP. This alone will bring a country out of poverty.

“What will increase our country’s GDP?” That’s the most important economic question facing any poor nation. And that’s the question our book attempts to answer. The book brings a message of hope, because it gives poor nations those 79 concrete steps that can be taken to begin to move

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Foreign aidis often

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out of poverty. Even if a country cannot implement all of them at once, every step taken will be somewhat helpful in the struggle to escape poverty.

Four Wrong Answers

What about other approaches that have been tried, other answers that have been proposed? None of them works.

■ Foreign aid doesn’t work. Whether sent by governments in rich countries or by the World Bank, it often does more harm than good. No poor country has ever escaped from poverty by means of such foreign aid. If the aid is given through government channels, it will be distributed by government officials in the poor country. Almost inevitably, much of the money will end up in the pockets of these rulers and their friends.

The problem does not end there. Soon, everybody in the poor nation knows that the quickest path to riches is to gain control of the government, because then you have access to the nation’s treasury and all the aid money. This foments military coups and civil wars. Rulers try to cling to power for their whole lives. There is little hope for a genuinely democratic government or free and open elections.

Government-to-government foreign aid can never solve poverty. Not even the Marshall Plan after World War II is an exception—since Germany was already a wealthy country, and the Marshall Plan simply rebuilt what the war had destroyed.

■ Debt forgiveness for poor nations doesn’t work either. It just becomes more foreign aid given in a two-step process —first the loan, then its cancellation.

■ Lack of natural resources is not what causes poverty. Many nations in Africa and Latin America have abundant natural resources, but they remain poor. By contrast, some nations have few natural resources but they have become very prosperous—think of Japan, Taiwan, and Singapore.

■ Nor does blaming poverty on outside factors solve the problem. We devote an entire section of our book to analyzing such complex factors as colonialism, the world economic system, multinational corporations, or richer nations’ impact on poorer ones.

But there is little that any poor country can do to influence them. For every poor country, the solution to poverty will

only come when a country places its focus on what it can do—by looking forward in a positive way—to produce more goods and services of value each year.

Workfare in Ancient Israel

The Bible supports the idea that nations must produce their own prosperity. When Israel came into the Promised Land, God did not promise them perennial donations of riches from other nations.

He promised them hills filled with iron and copper, which they would have to dig and find, and fields of vines and fig trees, which they would have to tend and harvest each year. God’s blessing of prosperity was to come through productive work (see Deuteronomy 8:7-10).

The manna from heaven that the people of Israel ate in the wilderness—celestial foreign aid, if you will—ceased on the day after they ate from the first harvest in the Promised Land (Joshua 5:12).

Even the poor in Israel had to work for what they got by gathering the gleanings that were left at the edges of the fields (Leviticus 19:9-10). There is no thought in the Bible that poor people or poor nations were to become dependent on donations from others year after year.

Beware Paternalism

This is not to oppose charitable donations such as sending food, medical care, and other gifts to poor individuals (not to governments) in other countries. Such donations often meet urgent needs, and this is good. But such gifts are treating the symptom rather than the cause.

If I bring food to hungry people in a poor nation, that solves the symptom, hunger. But it does not treat the cause—the poor nation’s failure to produce enough of its own food. Sending medical teams likewise treats the symptom, disease. But it does not treat the cause—the poor nation’s failure to produce enough of its own medical care. Sending teams of teachers treats another symptom, lack of education. But it does not treat the cause—the poor nation’s failure to produce enough of its own teachers.

Dependency ultimately is not the answer, and that’s why our book can be a source of encouragement for leaders in poor nations. Unlike those who tell such leaders, “You need to depend on people in other nations to solve your problem of poverty,” we are saying the opposite:

“We believe that you can solve this problem yourselves, and here are helpful steps that other nations have taken in the past and that are supported by the ethical teachings of the Bible, as well. We believe that you can implement these steps in your own nation, and that when you do, they will bring many positive results.”

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The great advantage of such an approach is that it avoids paternalism—doing things for people that they can do for themselves.

Look at History

Have any poor nations ever brought themselves out of poverty? Yes. In fact, every wealthy nation in the world today has done that at some point in the last 250 years. For most of human history, there were no wealthy nations. There were a few wealthy kings and royal families, but most people remained poor.

Then suddenly with the Industrial Revolution, starting about 1770, Britain’s factories began producing cotton and other goods faster, cheaper, and better than anybody else. Northern Europe and North America soon followed. The per capita income in these nations doubled, then quadrupled, and kept on rising.

The same pattern has continued more recently. In the early 1900s, Japan was a poor nation. Now it produces cars, TVs, steel, and ships, boasting the third largest economy in the world. South Korea was poorer than many nations in Africa in the 1950s, but today it is the world’s twelfth largest economy, producing

cars, phones, and other high-tech products that are sold around the world.

Chile has become a high-middle income nation largely through exports of fruits and vegetables. China is rising out of poverty by producing thousands of manufactured goods. Every nation in history that has risen out of poverty has done so by producing its own prosperity.

Wanted: Heroic Leaders, Engaged Readers

To anyone in a leadership role in a poor country, the hope-filled message of our book is this: there is a solution to poverty that really works. It has been proven again and again in world history. And it is supported by both the history of world e c o n o m i c d e v e l o p m e n t and the moral teachings of the Bible.

Here’s a proven

roadmap.

“When you reap the harvest of your land, do not gather the gleanings. Leave them for the poor.” Ruth gleans, watched by Boaz (Gustave Doré, 1832-1883).

Centennial ReviewJune 2014

The Only Solution to World PovertyBy Wayne GrudemIncreasing a nation’s economic output so as to raise income per person is the one antidote for poverty. Foreign aid doesn’t work, nor are scarce resources and colonialism to blame. Historical experience identifies 79 prosperity

factors, summed up in a market economy, a responsive political order, and biblical values.

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If this solution is put into place, it will lift whole nations out of poverty, not just a few individuals. We are asking heroic leaders in poor nations to consider this solution for their nations as well.

To anyone in a wealthy country who is genuinely concerned about the poor, we encourage you to read our book and become much better informed about what really causes poverty and wealth. From there, you can more intelligently consider what you also can do to help.

Depression and Oppression

This issue is much more important than many of us realize. People who live in wealthy societies often think of poverty in terms of the lack of material things such as adequate food and shelter. But Steve Corbett and Brian Fikkert tell us that the tragedy goes much deeper:

While poor people mention having a lack of material things, they tend to describe their condition in far more psychological and social terms than our North American audiences. Poor people typically talk in terms of shame, inferiority, powerlessness, humiliation, fear, hopelessness, depression, social isolation, and voicelessness . . . . Low-income people daily face a struggle to survive that creates feelings of helplessness, anxiety, suffocation, and desperation that are simply unparalleled in the lives of the rest of humanity.2

Millions of poor people around the world today remain trapped in such lifelong poverty. They are not poor because people in other nations are rich. They are poor because their nations are living under oppression.

Set Them Free, Let Them Prosper

They are oppressed by economic systems that cannot bring prosperity, except for a tiny despotic elite. They

are oppressed by laws and governments that cannot bring prosperity except for a tiny group of privileged rulers. They are oppressed by dominant cultural beliefs and values that perpetuate poverty and cannot produce prosperity.

The Poverty of Nations: A Sustainable Solution points heroic leaders in poor countries toward 79 specific steps that they can take, steps that will enable them gradually to set their people free from these oppressions and gain for them the freedom that God intended them to have, so that they will increasingly produce their own prosperity.

This is a genuinely sustainable solution to world poverty. There is no other. ■Footnotes:

1. N. Gregory Mankiw, Principles of Economics (Orlando, FL: Dryden Press, 1998), 480.

2. Steve Corbett and Brian Fikkert, When Helping Hurts (Chicago: Moody, 2009), 52–53, 70.