Personal Incentive Destroyed in Haiti

As we have previously stated the three pillars of capitalism are Personal Incentive, Property Rights and Freedom as defined by Adam Smith in his book the The Wealth of Nations. Let’s focus on personal incentive. It is the idea that a person should be rewarded for their efforts and hard work. The Scriptures are many, here are just a few.

Poor is he who works with a negligent hand, but the hand of the diligent makes rich. For Scripture says, “Do not muzzle an ox while it is treading out the grain,” and “The worker deserves his wages.” Proverbs 10:4; 1 Timothy 5:18  

Let’s look at what the elimination of personal incentive has done to a nation like Haiti as presented by Mary Anastasia O ‘Grady in the Wall Street Journal:

In 2010 Hurricane Matthew devastated Haiti with the death toll above 1,000 people. Homes were shredded by fierce winds and crops wiped out. Residents lost the little food they had. Of course planeloads and shiploads of humanitarian aid arrived in the country, as it should. The desperate plight of so many in Haiti spurred a surge of charitable giving that was sorely needed.

Unfortunately the humanitarian aid, necessary in an emergency, morphed into permanent, long-term aid, which undermined local markets and spawned dependency. It created harmful distortions in the local economy because – when what would otherwise have been traded or produced by Haitians is given away – it drives entrepreneurs out of business.

Haiti wasn’t always so tragically helpless. The country was once self-sufficient in rice thanks to the work of rural peasants. That changed in the early 1980s long before Hurricane Matthew. That’s when Haiti opened its rice market and the U.S. began dumping subsidized grain in the country with the goal of “ending hunger”. Most Haitian farmers could not compete with Uncle Sam’s generosity and they lost their customers.  

The Haitian economy was too rigid for farmers to adapt. The glut of locally grown rice was not easily exported because Haitian farmers weren’t efficient enough to overcome their competitive disadvantages caused by tariffs and subsidized markets abroad. More U.S. rice donations after the 2010 earthquake compounded the problem.

Donations of bottled water, clothing, shoes and even solar panels destroyed the local businesses in the same way. Just ask Jean-Ronel Noel, who co-founded the solar-panel company Enersa in his garage in the mid-2000s and expanded it to more than 60 employees. He was proud of his workforce, which came mainly from Port-au-Prince’s notorious slums.

The company was doing a robust business until the 2010 earthquake. “After the earthquake we were competing mostly against NGOs . . . coming with their solar panels and giving them away for free. So what about local businesses?” The demand stopped because it’s hard to compete with free. Mr. Noel zeroes in on another related problem: “Those NGOs are changing the mentality of the people. Now you have a generation with a dependency mentality.”

Personal incentive to work and start businesses was destroyed. When the cleanup from Matthew was finished, aid groups should have packed their bags and left so the Haitians could enjoy personal incentive to work and see the reward of their labor.

Source: The Curse of Charity in Haiti by MARY ANASTASIA O’GRADY Wall Street Journal. Oct. 16, 2016

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Break Out of the Prison of Poverty

Winston Churchill once said, “Democracy is a bad system of government, except when compared to all the others.” Much the same might be said of capitalism. It is a Biblical economic system, susceptible to greed and other shortcomings when not governed by the Biblical principals that came with it. Capitalism is limited until you consider the alternatives, which we will do.

It is better than what we see in the Developing World economies, and better than the socialist economies, capitalism makes it possible for the vast majority of the poor to break out of the prison of poverty; to find opportunity; to discover full scope for their own personal economic initiative; and to rise into the middle class and higher.

Sound evidence for this proposition is found in the migration patterns of the poor of the world. From which countries do they emigrate, and to which countries do they go? Overwhelmingly they flee from socialist and Third World countries, and they line up at the doors of the capitalist countries.

Another way of bringing sound evidence to establish the advantages of capitalism is to ask virtually any audience, in almost any capitalist country, how many generations back in family history they have to go before they reach poverty. For the vast majority of us in the U.S. we need go back no farther than the generation of our parents or grandparents. In 1900, a very large plurality of Americans lived in poverty, barely above the level of subsistence. Most of our families today would be described as relatively affluent. Capitalist systems have raised up the poor within family memory in the USA.

When all the people in a nation, especially the able-bodied poor, see that their material conditions are actually improving from year to year, they are led to compare where they are today with where they would like to be tomorrow. They stop comparing themselves with their neighbors (coveting), because their personal goals are not the same as those of their neighbors. They seek their own goals, at their own pace, to their own satisfaction. So they were free from coveting and happy to see the reward of their own efforts.

In upcoming blogs we want to take a practical look at how Biblical Capitalism is supposed to work. We also want to examine the European socialistic economies, which is of special interest to millennials.

Thoughts from this blog come from a reprint of a Wall Street Journal Article by Michael Novak on Feb. 17, 2017.

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What about Enron?

As we have been stating the Bible teaches the principles of capitalism as a godly economic system but includes the many safeguards we have been teaching here to govern it and keep it from spiraling out of control. The Moravians were able to keep these safeguards in place but this is not always the case as is evidenced by the Enron Scandal.

Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded in 1985 as the result a merger. Before its bankruptcy on December 2, 2001, Enron employed approximately 20,000 staff and was one of the world’s major electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion during 2000. Fortune actually named Enron “America’s Most Innovative Company” for six consecutive years.

At the end of 2001, it was revealed that its reported financial condition was sustained by systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron has since become a well-known example of willful corporate fraud and corruption.

The scandal also affected the greater business world by causing the dissolution of the Arthur Andersen accounting firm, which was one of the top five accounting firms in the USA at the time. In effect Arthur Anderson was complicate in the cover up of all the accounting fraud. As an outside auditor they helped to cover up the fraud and went out of business because of it…because no one could trust them to do an honest audit. Honesty is very important in the auditing world and the business world for that matter.

Chairman Ken Lay was indicted by a grand jury and was found guilty of 10 counts of securities fraud. Lay died while vacationing, three months before his October 23 sentencing. A preliminary autopsy reported Lay had died of a heart attack caused by coronary artery disease. Lay left behind “a legacy of shame” characterized by “mismanagement and dishonesty. Other top Enron executives were prosecuted as well.

Lay’s company, Enron, went bankrupt in 2001. It was the biggest bankruptcy in U.S. history. In total 20,000 employees lost their jobs and in many cases their life savings. Investors also lost billions of dollars. Enron employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices. Sad. 

So critics of capitalism would like to site Enron as an example of why capitalism is a failed economic system. However we find the Biblical safeguards meant to govern capitalism were not followed. Just a few follow and speak for themselves:

Exodus 20:16 You shall not bear false witness (lie) against your neighbor.

Mark 8:36 – For what does it profit a man to gain the whole world, and forfeit his soul?

Proverbs 13:11 – Wealth obtained by fraud dwindles, but the one who gathers by labor increases it.

Proverbs 22:16 – He who oppresses the poor to make more for himself or who gives to the rich, will only come to poverty.

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The Basel Mission Trading Company

The Basel Mission Trading Company started as a training school for missionaries called the Basel Evangelsitic Mission Society sending missionaries. One of those missionaries to India was an able and experienced businessman by the name of Gottlob Pfleiderer who made a noticeable difference in the success of the missionary venture. Under his experienced guidance both trade and industry prospered as well.

This led in 1859 to the founding of a separate Mission Trading Company. General mission offerings could not be used for commercial enterprises so capital was needed (capitalism). So 100 shares in the company were sold bearing 6% interest. After the interest was paid any remaining profit was divided between the investors and the mission, however any loss was born by the investors. It was recognized that this was an experimental approach to funding missions so a ten-year trial period was set. Success bred another ten-year charter and their mission statement became:

“to promote the work of the Basel Evangelistic Mission Society by supplying its stations and workshops with needed European provisions, by introducing the converted Christians and heathen to Christian commerce, and through financial support”

As stated another major focus for the Basel Mission was to create employment opportunities for the people of the area where each mission is located. To this end the society taught printing, tile manufacturing, weaving and employed people in many fields using the local resources available.

The mission trading company continued to provide very substantial income for the mission treasuries. The original 100 shares had been sold at 2000 Swiss Francs each. When the Trading Company celebrated its 50th anniversary in 1909, it contributed out of its annual profits 354,760 francs to the mission treasury that year, plus a special Jubilee gift of 150,000 francs for the pension fund, from which retired or invalid missionaries and widows were supported. Astonishingly…the mission society received 15 million Swiss Francs from the trading company in the company’s first 100 years of existence (not corrected for inflation).

Sometimes the Trading Company paved the way for the establishment of mission stations. It was able to use its economic leverage at times to persuade African chieftains to keep peace so that Moravian missionaries could safely come. Sometimes when the Mission Society could not afford to open a mission station, the company would open a trading post, where its employees would witness to the gospel. Amazing.

Profit for the Lord – Economic Activities in Moravian Missions and the Basel Mission Trading Company (1971). Prof. William J. Danker

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Communism, Socialism or Capitalism – The Moravian Answer

I do plan to take a more in depth look at these three economic systems and how they were expressed in history and currently around the world, but for now lets take a quick look at what the Moravians found and applied. We are again quoting from Prof. William J. Danker book, Profit for the Lord – Economic Activities in Moravian Missions and the Basel Mission Trading Company.

The first twenty years after its founding in 1742, Bethlehem had a thorough communal economy. Even the meals were taken together; instead of by families…these communal practices were adopted because they implemented spiritual objectives, especially the mission to the heathen. Interestingly, while Russian communism had an avowed program of moving through socialism to pure communism, the Bethlehem Moravians moved in the opposite direction. After twenty years of pure communism, they dropped back to socialism, and eventually assimilated themselves to the economic development of the surrounding capitalistic culture.

Bethlehem became a beehive of activity and in pre-revolutionary Pennsylvania a craft center of no small significance. They were clothed with textiles their own hands and machines had woven, among them no less than eleven qualities of linen. Outsiders eagerly sought the products of their large pottery at standard prices. Their brewery was able to supply their neighbors with plenty of good beer. The tannery was particularly profitable. They knew that their labors at Bethlehem were part of a general Moravian mission effort supporting missionary endeavors in the West Indies, Nicaragua, Greenland, Suriname…and in many other regions and countries of the world.  

The followers of Zinzendorf sought to develop economic bases to support the Moravian community life and a large number of missionaries.

And next week we will take a closer look at the Basel Mission Trading Company that became a financial engine to fund the Moravian missionary movement and help it become the greatest missions movement of all time.

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Why Do Millennials Think Communism is Cool?

Why do millennials think communism is cool?

Millennials are one of history’s luckiest generations. They were born around the end of the Cold War a quarter century ago, when the tyrannical Communism embodied in the Soviet Union came tumbling down, also knocking socialism down a few pegs along the way. But a Gallup poll in June 2015 found that almost 70% of U.S. millennials would be willing to vote for a socialist presidential candidate. Even more shocking, barely half of millennials believe “Communism was or is a problem.”

The same poll found that a quarter of millennials hold favorable opinions of Vladimir Lenin, while 18% think favorably of Mao Zedong. More than 10% even have positive feelings about Joseph Stalin. Never mind that these men were responsible for the deaths of tens of millions and the impoverishment of hundreds of millions.

These polling numbers are frightening—especially when the Communist-ruled and socialist nations in the world today, from North Korea and Cuba to Venezuela, show so clearly how such systems invariably lead to repression and declining standards of living for their populations.

Millennials who wish to see a socialist or Communist Party-ruled nation in action should look to Venezuela, Cuba and North Korea. Venezuela’s current troubles make daily headlines. The country is crippled by inflation and shortages of basic goods, and the government takes more control over the economy each day. No wonder even millennials want to get out. A poll conducted in September found that 69% of youths there wanted to emigrate.

Millennials have grown up in a world where, for the most part, economic and personal freedoms are the rule rather than exception. So it is understandable that communist and socialist leaning university professors find them to be a willing audience. However, as Michael Novak is fond of saying, “ Capitalism is a bad system of economics, except when compared to all the others. Young people living in Communist and socialist countries today need our prayers not our admiration. There was nothing to admire about the Soviet Union, and there is even less to admire in countries that seek to perpetuate its failed philosophy at the expense of the Biblical truth that holds a high value for liberty and prosperity.

The content of this blog is taken from the article Is Communism Cool? Ask a Millennial by Andrew Clark that appeared in the Wall Street Journal on Dec. 22, 2016.

 

 

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Profit for the Lord

Anyone who studies world missions will find one of the most significant missions movement of all time was the Moravians. They were known for a deep spirituality (calling Jesus “the Savior”), praying around the clock and for sending many missionaries to foreign nations. However, the Moravians did not find a conflict between their deep spirituality and their fervor for making money to finance the mission of world evangelism. They called it “profit for the Lord”.

Prof. William J. Danker documented their passion for both world missions and business in his book, Profit for the Lord – Economic Activities in Moravian Missions and the Basel Mission Trading Company. The Moravians created an essential and honored role for the craftsman and especially the businessman in its worldwide mission. The latter was able to do more than keep the accounts of mission’s expenses. He was given free scope for what a businessman ultimately needs to do if he is to stay in business – make a profit.

Early on some Moravians urged that all profits could best advance the cause of the Lamb by being directly devoted to missionary activity, but other, more capitalistic, Moravians saw that if some of the profits were ploughed back into the business, they could then multiply financial support for missions in the future.

As well the Moravians felt that demonstration was as important as proclamation in world missions. The Christian businessman practicing “faith in love” in the daily affairs in the market place rather than hidden away in the monastery became a powerful audiovisual aid in their Christian missions. They felt every Christian is a missionary and should witness through their daily vocation. In the context of a Moravian missionary endeavor, a businessman was essentially elevated to the honored place of preacher, teacher and physician in world missions.

Danker says, “While faith and love for the Savior were the fuel, these business enterprises were the rockets that hoisted pioneer Moravian satellites in to the missionary heavens in an age when other Protestants were doing next to nothing.

In later posts we will learn about the amazing Moravian mission funding engine – The Basil Mission Trading Company.

 

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