The Financial Seminary
“The main story of the U.S. economy over the last third of a century evokes Charles Dicken’s classic “A Christmas Carol.” Starting in the late 1970’s, the labor market turned ferociously against those with less education and in favor of those with more. This was not Ronald Reagan’s fault, nor George Bush’s (either one) nor Mitch McConnell’s. It just happened. And except for a brief shining moment during the Clinton boom, the Great Disequalization has continued unabated to this day. You might have thought the government would push back against this trend, but you’d have been wrong. Instead, our government has opted for lavish tax cuts for the haves and crumbs (or worse) for the have nots. In consequence, America may now be the greatest place on earth to be rich and an awful place to be poor.”
Professor Alan Blinder
Former Vice Chair of the Federal Reserve
The Wall Street Journal
December 17, 2010
My holidays were a time for reflecting on the inequalities of America’s economy. Perhaps as I felt the sharp pains of poverty while growing up, I’ve long felt the most serious problem America faces today is not deficits or debt but our large inequalities of income and even larger inequalities of wealth.
It seems we tend to focus on the wrong issues, which cause us to make questionable private and public policy decisions. It’s just not common sense that America is the richest nation the world has ever known, as data confirms, while its citizens feel poor, as most of us do these days. The explanation is the old saying “we don’t see reality as it is but as we are,” which causes many Christians to see our country as struggling financially. We struggle with meeting our budget so the federal budget deficit must be a dickens of a problem. We struggle with our mortgage so the federal debt must threaten our Tiny Tims in the future. Yet common sense should tell us the only way most Americans struggle while America remains very rich is that a few Americans, and I am among those lucky few, have so much more than most Americans do. So what should we do, as Americans and as Christians?
The first thing all of us should do is understand the reality that inequality is higher in America than in most nations and is apparently getting higher. That is particularly true of wealth but also income. Still, it may not be as bad as some suggest. In a September 17 post on The Economist magazine’s website, there was a story entitled “Is Rising Inequality in America Exaggerated?” It was a response to Slate magazine’s often-cited ten part series. It was written by Timothy Noah and explored the rise of America’s “stinking rich.” I won’t summarize it as it’s available on Slate or Google. Suffice it to say, The Economist says that most studies are flawed and when we consider the fact that many goods consumed by America’s poor have actually gotten cheaper during recent years, their purchasing powers may not have fallen and any increase in the gap has been due to the very rich (1%) making considerably more. In other words, relative poverty may be higher but absolute poverty is not.
While that’s hopeful news, there is still no doubt our inequalities are serious, even matters of life and death. The February 28, 2009 issue of The Economist said: “Within the rich world, where destitution is rare, countries where incomes are more evenly distributed have longer-lived citizens and lower rates of obesity, delinquency, depression and teenage pregnancy [which probably means abortions] than richer countries where wealth is more concentrated.”
It’s been estimated by Businessinsider.com that nearly 35% of America’s wealth is controlled by 1% of our population, while 70% is controlled by 10% and another 25% is held by the rest of the top half. The bottom half of our population gets by on the remaining 5%. Of course, that reality prompts many progressives to suggest we need to raise taxes to make things more equal. I’ve grown to despise politics so I’ll not enter that debate. I would simply note that Sir John Templeton once surprised the board of a mega-church by suggesting the estate tax should be 95% so more people would give their accumulated wealth to charity. John’s experience was that inherited wealth impeded moral development which he thought was the purpose of life. Economically, even the strongest advocate of supply side economics must hope there are enough people with money to buy what he’s selling. Yet while our supplies pile up, demand has lagged lately, creating serious economic imbalances.
What I will do is suggest Christians transcend the political and/or economic debates and think differently about the matter. Of course, that means starting with scripture. And of course, that means you can find what you want to find. Taken individually, some teachings are surprising and some are contradictory, particularly when taken out of context. For example, I’ve been reading the new Stewardship Study Bible from Zondervan. If you don’t have it, I’d suggest you get it as it’s quite good. But understand it was written by the Acton Institute in Grand Rapids. It has been sufficiently conservative over the years to grace the editorial pages of The Wall Street Journal on numerous occasions. And when discussing Numbers 26:52-56, it offered some contradictory thoughts. Notice the first portion of this passage sounds progressive, almost Marxist when speaking of allocating resources according to need, while the second part sounds conservative when suggesting God intentionally wants rich and poor:
“God told Moses that the promised land was to be distributed according to the relative size and needs of the various tribes. ‘To a larger group give a larger inheritance, and to a smaller group a smaller one’ (Nu 26:54). In this way, socioeconomic equity was ingrained in the very DNA of Israel’s agrarian economy...Similarly, when we look to the New Testament, the book of Acts provides an outstanding example of how the equitable distribution of resources became an important characteristic of the early church. Today the same principle should govern our financial decisions. Second Corinthians 9:11 tells us that God makes us rich in every way so that we can be generous on every occasion. Thus, distributing resources equitably means recognizing the fact that in God’s economy he equips some with more so that they can bless others who have less.”
Chuck Colson recently recommended a book that I thought might be more help so I began reading it over the holidays. It’s titled Money, Greed and God and was written by Jay Richards of the Discovery Institute. To paraphrase Dickens again, I found it to be the best of books and the worst of books. There’s some solid, if selective, economic theology here. The worst omission might be that it doesn’t exactly focus on Jesus telling his closest followers to sell what they have and give it to the poor. It therefore assumes, as does homo economicus these days, that more wealth is always a good thing, regardless of what St. Francis, Luther, Calvin and others have taught us. As its subtitle is “Why Capitalism is the Solution and Not the Problem,” I assumed it would be pretty conservative, maybe libertarian. I was not disappointed. If you think Ayn Rand was a closet Christian despite aspiring to be the greatest enemy of religion ever, this is your book. If you don’t know recent forms of casino capitalism are still morally superior to Stalin’s Russia, this is your book. But if you’re wondering if the American economy couldn’t be more ethical and prudent, much less compassionate, you’ll likely find little of interest here.
Richards essentially explains he can see no middle ground between extreme statism and market fundamentalism. That might appeal to those who see the world as black and white, and many prefer that worldview, but it does great harm to St. Paul’s “moderation in all things.”
Richards seems to lapse into the moral relativism, other-worldliness and so on that we deplore. For example, he writes: “Of course, a modern capitalist society like the United States looks terrible compared with the kingdom of God. But that’s bad moral reasoning. The question isn’t whether capitalism measures up to the kingdom of God. The question is whether there’s a better alternative in this life. If we’re going to compare modern capitalism with an extreme, we should compare it with a real extreme-like communism in Cambodia, China, or the Soviet Union (page 32).” Of course, Richards is hardly as relativistic when discussing America’s government. Elsewhere, he writes: “Where there’s scarcity, there’s competition. We can’t do anything about that. It’s how the world is. The peaceable kingdom of God with limitless plenty isn’t one of the options (page 64).” Huh? Why did Jesus spend all that time talking about the kingdom and teaching us to pray “thy kingdom come, on earth...”? And since when is scarcity theology Christian? God supposedly taught Moses better than that in the desert.
At another point, Richards argues there have been no studies proving Wall Street has been any greedier than other sectors of the economy. Perhaps. But I don’t need a study to prove I need air. Richards could have cited any one of a dozen books written by Wall Street insiders who have described what The Economist called “the evil of Wall Street.” In particular, he might have mentioned the work of John Bogle, the respected, Christian founder of the Vanguard Mutual Funds. John’s recent book Enough began with this quote: “The country’s moral guardians are forever looking out for decadence out of Hollywood and reality TV. But the most rampant decadence today is financial decadence, the trampling of decent norms about how to use and harness money.”
Perhaps most sadly at this point in history, when America can desperately use all the Christian peacemakers we can find, Richards took the seemingly mandatory dive into the pure propaganda of highly partisan politics. On page 52, he shares a dramatic chart of soaring federal spending and writes: “Government spending as a portion of GNP has grown exponentially in recent decades.” Unfortunately, that is absolutely, positively incorrect. As a percentage of our national income, federal spending since World War II has fluctuated around 20%. It’s risen to 24% during the wars and Great Recession as we’ve bought guns and butter. Meanwhile, the lowest federal tax rate is 15% of GDP, the lowest they’ve been for many decades, creating the largest deficit since World War II. Richards’ also takes the growth in federal spending out of the context of our growing economy, making federal spending appear far worse than it is.
Yet the passages that caused me to stop reading the book were Richard’s defense of inequalities. At one point, he says he learned all he needed to know about economics in kindergarten when his teacher gave each person a present and said they could trade them. Rather than him being stuck with a present appropriate for a girl, he could trade for something he wanted, as could the other kids. He correctly concluded that the more people could trade, the more happiness there was. He therefore concluded modern capitalism not only delivers the bacon but paradise. He never wondered how happy everyone would have been had the teacher given half the presents to 10% of the class and only one or two presents to 25% of the class in reflection of the real world. In short, the dickens of a free market is that it only makes us happy if we have something to freely trade.
My informed guess is that Richards essentially agrees with Ayn Rand’s elitist philosophy that the economy of a society is dependent on the 10% and they are therefore morally entitled to whatever they can get. At one point, Richards denounces the U.N. Millennium Campaign for pointing out Carlos Slim, Bill Gates and Warren Buffett “control” more wealth than all 600 million people living in the world’s poorest countries. He states: “Complaints about gaps almost always reflect a basic confusion about the nature of wealth.” He explains we wouldn’t be bothered by such painful realities if progressives would simply say those three men “created” more wealth than the 600 million. That might be appropriate in the political arena. And few think tanks want to irritate their wealthy donors. But Moses cautioned us to never think we make ourselves rich. We all, but Christians in particular, might wonder how rich Gates and Buffett would be had God let them be born in Mozambique. In other words, Christian thought has been that God creates and we merely steward. Apparently, “Christian homo economicus” agrees with Rand that business leaders like her fictional savior John Galt, now have God-like creative abilities. They therefore get to also own a very disproportional share. .
Yet even a Christmas television show revealed that as nonsense. My sister suggested we watch Undercover Boss, a show I had never seen. As the name implies, it is about company CEO’s who go undercover to work in the lowest levels of their companies. The episode I saw was about a large company that did fulfillment for internet retailers. Basically, manufacturers sent goods ordered by the retailers to this company. It stored them and then packaged and shipped them when consumers ordered them. The first job the CEO attempted was on the loading dock. He made an absolute mess of loading the first truck. So he was assigned to the packing line. If you’ve ever seen the classic and hilarious episode of I Love Lucy where she tries to keep up with a speeding assembly line, you have a good idea of how he performed. He also tried to retrieve the goods to be packaged from the storage bins. Suffice it to say the CEO was fired before the day was over as he couldn’t do the simplest jobs at the company.
Academics who spend their time in ivory towers rarely appreciate that reality. But it’s precisely why legendary management consultant Peter Drucker, who used to teach Judeo-Christian principles for doing business, used to rail that very few CEO’s are worth more than twenty times the salary of the average employee. (Obviously, it would be different with company founders who don’t use the public’s money and so on.) Perhaps better than anyone who’s lived, Drucker understood the Judeo-Christian principle that people are simply parts of the same body. No part is all that more important than any other part. As stated by a graphic but profound metaphor about our various body parts at work, a dysfunctional rectum can befuddle the thinking of the most brilliant brain and cloud the vision of the finest eye.
So as for me, this Christmas affirmed that Christ is still the head of our human body....and that Ayn Rand is still the dysfunctional rectum of our political-economy. But God bless us everyone. And may God’s most gracious mercy be on those Scrooges who haven’t signed the pledge of Gates and Buffett to give away half of what they cannot keep; for they will soon meet the true Creator and Owner of all.
Gary Moore is a Sarasota-based investment counselor and published author on the subject of morality of political-economy. He is a representative of NPC of America, member FINRA/SIPC. Opinions expressed here are his alone. His comments are included in the More Good $ense newsletter in an effort to expand stewardship leaders’ understanding of broader economic issues.
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