In 2020, it seems that there is one thing that is on everyone’s mind. What is going to happen as a result of this Coronavirus, and what is going to happen as a result of this lockdown? Will the treatment be worse than the disease? And can our economy recover from this, or are we entering something like the Great Depression?
The simple answer is that a Post-Covid depression does not have to happen, but in order to prevent such an economic disaster, men will have to take the time to understand economics.
The Importance of Economic Understanding
I often have sad conversations trying to explain to people why economic literacy is important. My words seem to fall on people who do not have ears to hear. It reminds me of a passage in the Bible in which God laments that His people are destroyed for lack of knowledge.
During the course of this article, I will make Bible references, however, this article is not being written exclusively for Christians. If you are an individual who cares about human wellbeing, this article is for you, and I hope you will continue reading.
Often my conversations go something like this: I try to explain that if we want to help the poor effectively, we need to take the time to understand economics. The other person will then dismiss what I have to say and will respond that they can give money to the poor without understanding economics.
But notice that I did not say anything about giving money to the poor. Throwing money at poverty is not the best way to help a poor person. Money is a tool, and if used effectively, it can have a thousand times the impact or more on helping the poor. (My criticism will apply to the stimulus packages and to the United States economy.)
Using Economics to Combat Poverty
In previous articles, I talked about poverty in the third world and explained some of the core issues that people face in the poorest regions of the planet. One major point that I often bring up in terms of combating poverty is the need for clean water. Knowledge of the need for clean water is important in understanding the economic situation of people in poor regions. Once people have access to clean water, this frees up many hours of their day, leaving time to focus on other needs, including food and education.
So providing clean water for some people raises their economic position immediately, and gives them the tools to begin building lives for themselves. This means that they can begin to climb the economic ladder, with access to clean water providing a step stool.
This can be done a few ways. There are water charities that can provide clean water for around $30 per person for the course of their entire lifetime. Let me say that again, just to be absolutely clear: a one-time donation of $30 can give a person clean water for the rest of their life.
Charities that are setting up clean water technology around the world are doing an amazing thing! They are saving lives, preventing disease, and giving people the opportunity to work, seek an education, and take care of themselves.
These clean water devices are raising people up so that they can rise out of abject poverty.
I normally try not to make my personal charitable contributions known, but one project I had the privilege of being a part of was through Kiva. I was able to loan a small amount of money without interest to a community in Africa. Thanks to the loan from myself and from other individuals, the people in this community were able to build a dam structure that helped give them access to clean water, and then they paid the money back.
This goal of self-sufficiency is what most charities ought to be about.
This kind of work is not only done by clean water charities. Private, for-profit companies have done more than anything else to raise people out of poverty. In the last few decades alone, billions of people have risen out of poverty thanks to Capitalism.
Because of private enterprise and international trade, unskilled workers might be provided a job that pays them a dollar a day. But that one dollar means the difference between life and death, and in some countries that dollar a day has become two dollars, and then five.
In South Korea the people were once very poor, but, because they embraced free markets, their one dollar a day has grown. Now the people of Seoul have a standard of living on par with those in the West — due to Free Market Capitalism. This all happened within the course of 70 years because a people understood the value of economic freedom.
To read more on this topic, click here:
Rethinking Poverty and Charity — Better ways to help the poor and the least of these
This article is going to be Part 1 of a two-part series. While my core target audience will be Christians who want to…
The Evil of Good Intentions
Now consider an alternative. A man could go to the grocery store and buy cases of the cheapest water bottles and then have them shipped to somebody in the third world. Perhaps he gets a good deal and only has to pay $30 for the shipping to Africa, and perhaps he does this 4 times a month for the rest of his life. And then he sits back, in his chair and watches TV, feeling proud of the wonderful thing that he did. He is proud of the fact that he has “practiced self-sacrifice” in giving money to the poor, and proud of the fact that he does not have to understand economics to do so.
Now imagine this man when he one day stands before God. He is asked why he failed to help the people that God called him to help. He finds that many of the programs he supported and fought for were not only inefficient, but actually harmful to the poor.
In his willful ignorance, this man imagined himself fighting for the poor and the downtrodden, but in reality he was causing more harm than good.
When I look at most programs out there designed to alleviate poverty, this is what I see. With even a basic understanding of economics, it becomes obvious that many of these programs are either woefully inefficient or are incredibly harmful.
I think of the wicked servant in the Parable of The Talents, a story told by Jesus in which a man leaves for a foreign country and leaves three of his servants in charge of a small amount of his money. When he returns, he finds that two of them invested and brought a return on their investment. He rewards them by putting them in charge of multiple cities. But the third servant only buried the money in the sand and returned it to his master.
The master reprimands this third servant and tells him he could have at least put the money in the bank, and the master would have received his money back with interest. The master calls the third servant evil and fires him. This is just one of many parables in which Jesus compares the Kingdom of Heaven to a capitalist endeavor.
Sadly, most Christians I talk to are like this third servant, because they disregard the importance of basic economics. They are also like the man who sent water bottles to Africa, wasting God-given money and resources instead of taking the time to understand the economic situation. How many more people could the man in my story have helped if he would have just taken the time to learn?
If someone wants to heal the sick, he needs to take the time to understand medicine. This is something that most people understand. A man can have all of the “compassion” in the world for the sick, but that does no one any good. The same applies to poverty and economics. A bleeding heart without knowledge does no one any good; all it does is make a mess.
America And The Modern Economics Revolution
In 1776 a man named Adam Smith wrote a book called The Wealth Of Nations. This book contributed to a revolution in the way human beings understood economics. Smith recognized that it was not gold that made a country rich, but farms, bakeries, and industries.
A country that had streets paved in gold, but no bread, would be a very poor country indeed, and such a country would not survive for long. But a country covered in fruit trees, grain, food, schools, and factories could be an almost Edenic paradise despite the lack of gold.
To borrow a concept from the economist Dr. Thomas Sowell, wealth is not created by printing big numbers on green paper.
The green paper money in your wallet has no real value.
I chose my words very carefully with that. I have the option to say that it has no value in-and-of-itself, or that it only has value within the system, but I want to be very clear that I am being intentional with my wording when I say that the green paper money has no value.
If a man were on a deserted island, the money in his wallet might be used for kindling or insulation, but even a wad of thousand dollar bills would have no more value than that while he is trapped on the island.
The wealth of a nation is not in the money. The money is used to symbolize value in order to make trade in a complex economy easier, but the money itself has no value. Otherwise poor countries could become rich simply by setting up a printer. The “value” of a one hundred dollar bill is only theoretical. It is a medium of trading value for value, not a talisman of any sort of value itself. (There seem to be references to this concept in the Bible, but that is perhaps a topic for another article.)
A lot of people will vaguely understand this concept but fail to understand the implications. Most government programs that are supposedly designed to help the poor end up failing because of this exact fallacy. And most private charities designed to target poverty commit this same error.
Sadly, many people look to money as if it had some superstitious mystical power, as if a man could hold a magical hundred dollar bill and groceries would suddenly appear.
But those groceries and other goods and services don’t come from money, they come from farms, factories, and other businesses. In economics, production is king. If people and machines are not out in the world making “stuff” then soon there is no “economy,” regardless of how much “money” is littering the streets.
I want to encourage you to read the longer article I have on this topic. In this article, I explain this fallacy in more detail and then go through and show many of the implications that someone might not come up with on their own.
The Biggest Economic Fallacy of All — Money VS Wealth
There are a lot of misunderstandings about economics, and many of these misunderstandings affect the decisions we make…
In the above, we see why it is an error when people think economics is about money. The reality is that economics has very little to do with money and a lot to do with just about everything else that human beings do. Economics is the study of how human beings obtain and trade goods and services. Money is simply a tool for convenience that human beings use to make these trades easier (and, in the case of the financial industry, for communication of value, projected value, and risk).
After I graduated from college in 2015, I came across videos from an economist named Dr. Thomas Sowell. At the time, I did not care about economics, or even know what economics was, but I found Sowell’s witty sarcasm and clear explanations to be entertaining. Since that time, I’ve read more than half of his books, and my life has been greatly changed for the better. I no longer feel like it is my job to solve the world’s poverty because I now understand how economics works.
I wish I could relay everything I’ve learned from this man in one article. But there is no need to. The playlist above includes the interviews Sowell has done with the Hoover Institute. Dr. Sowell breaks down relevant concepts and makes them very easy to understand. His books are also widely available on Audible.com.
Black Rednecks and White Liberals
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Audiobooks matching keywords Thomas Sowell | Audible.com
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Besides Dr. Thomas Sowell, I have also been influenced by other economists and philosophers. Yaron Brook was the man who red-pilled me on the superiority of Capitalism and helped me understand that we do not need government charity.
I highly recommend his talk “The Morality of Capitalism” for anyone who wants to understand economics, and wants to learn how to help both themselves and their fellow man. This video was one of the most important videos I’ve ever seen on this topic.
A Free Market, The Key Message From Economics
People often ask why they should take the time to understand economics. I find this to be a frustrating situation because I cannot explain the value of understanding economics without first helping someone to gain a basic understanding in the first place.
And far too often this ignorance is accompanied by an air of moral superiority. As if economics were an esoteric thing to be relayed to the world of feelings and personal opinions, rather than empirical fact that directly impacts the life of an individual. Far too often, decisions are made by private individuals and politicians based on what feels good rather than based on what has been empirically proven. Imagine if we did this with medicine, and think about the devastation it would cause to the patient.
This devastation is happening right now. Those who have cursed industry as being immoral (along with international trade) are now seeing the effects of their philosophy. I recently saw one YouTube celebrity (Laci Green) lament that the only brick and mortar businesses left in California soon will be the Walmarts and McDonalds. But hey, if business, industry, and production are such evil things that “exploit” human beings by “forcing” them to work, then why should this be a problem? Just give everyone free stuff from the government, along with universal incomes. Why not?
It is not just America that will suffer. People in the developing world who depend on international trade will suffer far more. I once heard a man on a Christian radio station who condemned the fact that businesses invest a certain amount of money in India and get back more than they invested. The implication was that Indians were being made poorer as a result. But the reality is that both the American businessman and the Indian employee both become richer as a result, and so does the consumer. In a free market trade, the typical result is that everyone becomes richer as more wealth is created and traded, using money as a medium of exchange.
The very thing that was raising people out of poverty was being cursed by this man on the radio because he assumed that a profit for one man equated with a loss for another. He assumed a zero-sum fixed pie.
Please note that I am not an economist, and I don’t pretend to be. My career is in science, but the statistical methods are quite similar, so there is a lot that I can appreciate. That said, I think economics is like history. With the right teacher, history can be a fascinating story of the journey of real human beings, but with the wrong teacher, one is stuck memorizing meaningless dates with no real connection to those involved. The same is true for economics, and just like history, I think economics can be a fascinating and relevant subject that anyone can understand.
If there is one lesson that I have learned from economics, it is this: When humans are free, they overwhelmingly tend to prosper, but when they are in bondage, poverty inevitably follows.
What do I mean by that? Imagine a country where people trade with one another freely. If a man wants to start a farm on his own property and grow apples, he can do so. He can then freely sell his apples at a stand or in a market, and both the people of his country and the government fully respect his freedom and his private property. Bakers buy his apples to make apple pie and factories use his apples to make apple juice.
Now imagine if a government comes into power that demands that this man has to sell his apples within a narrow price range. And imagine that the government sets a minimum wage or a maximum wage for the people that he employs. And perhaps the government buries this man in unnecessary regulations so that he has to focus on paperwork rather than on his farm. Or imagine that the government capitulates to irrational claims that this man’s apples cause cancer. Or imagine that the government demands that this man’s apples are a human right and chooses to take all or some of those apples by force “for the sake of others.”
A country might be able to sustain such immoral regulations for a time, especially as new technology develops, but these chains are heavier than we may think.
In America, these chains are heavier on some industries than on others. Those industries that are the most burdened, such as the medical industry, are typically the industries about which Socialists will scream “Capitalism isn’t working!” while those that are the freest, such as the smartphone industry, are seeing rapid technological innovation.
These Socialists like to ignore the fact that the reason college is so expensive is because of government subsidies, and the reason medicine is so expensive is because of bureaucratic government regulations.
I have heard far too many speeches about people having different opinions and feelings when it comes to politics and economics. Reality won’t change just because an ignorant person has a “feeling” about something, and such ignorance is regarded as sin in the Bible.
Hospitals ought to be run by doctors, not by self-righteous politicians who think they are gods among men. If a doctor lies to a patient, then the courts should step in, but if a doctor wants to include nutritional supplements to help his cancer patients, and he is upfront that these treatments have not been cleared by the FDA, then it ought to be up to the patient and doctor as to how the recommended treatment proceeds.
If we want to have a country of economic prosperity, the very best thing we can do is eliminate virtually all of the restrictions on our economy. We should allow our economy to be free. And by “our economy” what I really mean is private individuals who are not anyone else’s property, and who do not owe anything to anyone.
The apples that one man toiled to bring out of the Earth do not belong to anyone else as a “human right” just because another person may be in need. The Bible itself supports the value of private property, which is something I will cover in an upcoming article.
And if the man wants to buy robots to assist in his work, then all the power to him. Same if he wants to hire the poor for a mutually agreed-upon wage.
Wealth is not a “fixed pie.” Despite the dire Malthusian predictions, the world is not running out of food and water due to “overpopulation.” If anything, as people increase in number, more innovative minds are finding better ways to make the planet a better place for both human beings and other living things. But that cannot happen if people are buried in government red tape, or if the great capitalists of industry are chained so that they cannot produce.
Whatever one might think of either individual, Rockefeller has done empirically more to help the poor than Mother Teresa. With all due respect to the later, I would take one Rockefeller over a billion Mother Teresas any day. I say this not as a value judgment (or insult) on the individuals I mention; I say this purely on the basis of who is able to do more to help human beings.
If a man wants to grow apple trees, then let him grow apple trees. If a farmer wants to sell his cows or his milk directly to the consumer, then let him do so. If the state believes raw milk to be unsafe, then provide a warning label, but then do not treat grown adults as children. It is not the role of the government to micromanage people’s lives.
Also, get rid of all price controls, including minimum wage. The only thing that minimum wage laws do is price unskilled individuals out of a job. This effect is especially harsh on young black males who have a hard time getting their first job to build a resume. If an employer has to pay a worker $15 an hour, but they have to train the worker and are only able to get $11 an hour from their labor, then they are not going to hire that worker, because they are losing money by doing so.
Amazingly those who scream about a $15 minimum wage are also those who complain the most about “White Privilege” and ignore the fact that minimum wage laws were originally created for the express purpose of favoring white workers and pricing black workers out of a job.
Dr. Thomas Sowell and Dr. Walter E. Williams explain.
And of course, Communism is not the answer. When I hear politicians and Church leaders extolling the virtues of Socialism and Communism, it amazes me. The level of incompetence this suggests shows someone who is not just ignorant, but also immoral. Such men should not be the leaders of anything. A lot of this confusion comes from a Kantian “altruistic” ethic, not from the empirical facts of economics or from the Bible. (I have an upcoming article on this topic.)
Also, it’s not just people on the Left who fail basic economics. When I see people on the Right talking about outlawing automation to “save jobs” or cutting off international trade, because they think it will bring prosperity, it is clear to me that these people do not understand the first thing about economics. As much as I respect President Trump and Tucker Carlson on other issues, in regard to these matters they are just plain wrong.
Self-Driving Trucks, A Case For Automation
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As Thomas Sowell points out, it was not the stock market crash that caused the Great Depression, it was the tariffs, along with other government regulations that had “compassionate” motives, but which ultimately just caused problems.
As for automation, I’ve written articles about this in the past, but the counterintuitive reality is that robots always create more jobs than those that they replace, and the end result is always far better.
The bottom line: If we want men to prosper, then cut away their chains and let them be free.
There is more that I would like to write in this article, but this key message is the one that I need to get across: Those countries that are the freest also tend to be the most prosperous. The United States is a relatively free country, but the chains of government regulation come with a cost. There is room for certain types of law that keep people and companies from committing fraud. But no laws should violate the natural rights of an individual.
The market should be as free as possible. Laws should protect men from force, fraud, and coercion. They should not protect men from free-market competition.
As America starts to open up, if we allow men to be free and if we cast off the chains of unjust regulation, we will see a great deal of prosperity. We do not have to repeat the mistakes that lead to the Great Depression.
If we take the time to understand how economics works, we can discard a lot of the chains that are needlessly holding men back, and as a result, in the next few months, we can become more prosperous than we otherwise would have been even without a virus.
The wealth of a nation is not in its gold or in its green paper. Nor is wealth a fixed pie. Men create wealth by understanding the world with their minds. If a man goes into an orchard and begins pouring poison on the trees which he strongly “feels” to be a fertilizer, reality will not conform to his opinions. That orchard is the economy.
To summarize some of what Ayn Rand taught: Business and charity ought to be done by mutual consent, or not at all. And most certainly not at the point of a gun, government or otherwise.
I have no doubt that at the end of this article most readers will have questions. Since this is only one article, I encourage readers to check out some of my other writings, as well as the videos and articles from other authors at For The New Christian Intellectual.
Also, please take the time to watch videos from Thomas Sowell and Yaron Brook.
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