Are All People Equal?

Do all people have equal value? YES…all are created in the image of God. Is everyone equal? No…even a five year old knows that some people can run faster than others, one person can juggle and the next person does not have that kind of coordination. Some people are naturally bigger in stature and thus stronger than others. One is better at math than others. Some paint beautiful, valuable works of art and others struggle to even paint a wall neatly. Men are different than women…I think it is obvious that women can do many things that men cannot. People are not equal in talents, strength, beauty…and not all turn out equally or are they supposed to. They have different family backgrounds, skills, intelligence levels, talents and personalities and so they end up at different places in life.

Because of this people handle their finances in different ways and thus they will reach different economic levels. One reason is wisdom or the lack of it. Some will make better economic decisions than others. Some will spend all they make and some will save part of what they make. Some will borrow and pay interest on items and others will save and buy items for cash, allowing them to invest the money they would have spent on interest. Some will use their money to buy a hard asset like a house that increases in value, but others will spend their money on depreciating items like cars and vacations.

Another huge differentiator among peoples’ economic levels is called risk and the reward that comes from taking risk. Rabi Lapin, like many others, equates risk with faith. It was taught as a financial principal to the early Hebrews. Lapin calls God’s lessons to the Hebrews a benefit package, “there is a benefit package that often accompanies biblical faith…one of the most important of these benefits is faith itself.  Having faith accustoms people to making major commitments without assurance of success.  Couples must marry without the help of a crystal ball that would predict all the ups and downs of their future together.  Farmers plant and await crops that may or may not ripen.  Investing capital, starting a business, hiring new employees – all involve risk and require faith. (1)

Generally speaking individual people have different levels of risk tolerance. They are not equal in this area. Some seem to have a greater capacity to take financial risks (and sleep at night), and those people generally get more financial rewards. In my book, A Practical Path to a Prosperous Life, I call this financial courage. However, I do believe we can ask God to increase our financial courage and I have done so personally with positive results. As a practical step forward in your finances, ask God to give you more financial courage and see what He does.

(1) Rabbi Daniel Lapin – ‘America’s Real War’, pages 220-221,©1999 Multinomah Publishers, Inc..

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Brian’s Daughter Worked at Subway

So last week we learned about Steve Forbes daughters. What about my daughters? I will mention their experiences in a moment…

But first let me give some context. There is a move in the US to have federal, local and state governments increase the minimum wage significantly. The thinking is that increasing the minimum wage will decrease income disparity. Proponents view increases as a way to ensure low-wage workers earn incomes above the poverty line, and to narrow the disparity between rich and poor Americans. Opponents say raising the minimum wage discourages hiring and encourages employers to invest in automation or move jobs to lower-wage states or countries. (1)

Emily Bruno, founder of Silver Spring, Md.-based Denizens Brewing Co., said a minimum-wage increase would disproportionately hurt the local businesses that Montgomery County officials often tout, because small firms have less ability to absorb large cost increases than national chains do. An increase to $15 an hour would raise her labor costs by $300,000 a year, nearly equal to the brewery’s annual profit, she said. “My employees are like family, I want to pay them as much as I can,” Ms. Bruno said. “But I also need to make a profit to remain in business.” (1)

Now let’s get back to my daughters. We encouraged my oldest daughter to get a job as a teenager and she did at a local Subway restaurant. It was a just above minimum wage entry-level job. She was working there a few months when the owner/manager asked to meet with her. The owner handed her the key and ask her to start coming in and opening up the restaurant in the morning. My daughter was 17 years old and not even a senior in high school. Can you imagine the boost to a 17 year olds self-confidence that came along with this promotion? She eventually got a .50/hour wage increase. Amazing. Another of my daughters as a teenager left our house at 4:30 AM to be at work at 5:00 AM to open a coffee shop at another retail business. This job was a stepping stone for other job opportunities for her.

Andy Puzder recently wrote a Wall Street Journal article entitled. The Minimum Wage Should Be Called the Robot Employment ActMandating $15 an hour doesn’t help poor youth. It helps Flippy, the new burger-grilling machine…In the article he highlights how increasing the minimum wage is eliminating entry level jobs. “Taking automation to the next step, Miso Robotics and the owner of CaliBurger announced in March they have developed a robotic arm, called Flippy, that can turn burgers and place them on buns. CaliBurger plans to install them over the next two years in 50 restaurants world-wide. By encouraging automation, cities that significantly raise the minimum wage destroy opportunities for the least-skilled workers.” (2)

How else does a young person learn the reward of hard work as promised by the Bible? (Proverbs 10:4) One of my kids’ sports teams had a t-shirt for the players that said, “Hard work beats talent every time”. Simply and sadly stated, governments efforts to “fix” income disparity ends up increasing it.

I recently heard Biz Stone, the millennial co-founder of Twitter speaking at a banquet. One of the things he said was “Private enterprise is the answer for poverty. Government will not get the job done.” He also said, “It took me 10 years to become and overnight success”. As too often happens, government’s misguided best efforts to help people actually ends up hurting them. The free markets should function so young people can learn to work and advance.

(1) Has the Movement to Raise the Minimum Wage Reached Its Limit? by SCOTT CALVERT and ERIC MORATH April 6, 2017 WSJ

(2) The Minimum Wage Should Be Called the Robot Employment ActMandating $15 an hour doesn’t help poor youth. It helps Flippy, the new burger-grilling machine…by Andy Puzder April 3, 2017 WSJ

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Steve Forbes’ Daughters Worked at McDonald’s

Even though Steve Forbes owned Forbes magazine and was worth over $400 million dollars (at the time), he had his daughters work at McDonald’s restaurant to learn the value of money. Obviously he had enough of money to buy several McDonald’s restaurants and give his daughter everything they wanted. Instead, he chose to lead his daughters down a wise path (1).

God puts a value on working for what we eat and possess. We remember that when the children of Israel where wondering in the desert, God kept his covenant with them and provided for their needs through supernatural provision. There was manna from heaven every day, but the same day that they entered into the Promised Land the manna stopped. In the Promised Land they were expected to work and live off of what the land produced. In addition to that, they had to physically fight for the land that they were promised. It caused them to value the land that they were given to possess. Even Adam who was placed in a beautiful garden was told he had to dress and keep the garden.

We remember the Bible story of Ruth gleaning in the fields of Boaz. The laws concerning the gleaning of fields in Leviticus 19:9-10 and also Deuteronomy 24:21 require the poor to work by picking up the leftovers at the edge of the fields. Work was required and it was not a free handout. Proverbs indicates that God puts a value on wisdom and diligence. It says the wise and diligent should advance above and beyond those who were foolish and lazy.

God delights in giving gifts and blessings to his children, but he expects them to be used in a productive way. Jesus did not have nice things to say about the steward that took his talent and hid it. We were created to be productive.

(1) Fasting for Financial Breakthrough by Elmer L. Towns (2002) Baker Books.

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Jacob Was a Capitalist

Some of us struggle with the idea that capitalism is a Biblical concept and economic system. As always we must give the scriptures more weight than our own opinions or things we have heard from others.

So in the Bible we find a simple example of “God ordained” capitalism in the Old Testament in Genesis 35 when God gives Jacob a financial plan to use the capital he had, and to increase it. His capital? “It was speckled or spotted sheep, every dark-colored lamb and every spotted or speckled goat (verse 29)”. Through a very specific plan of breeding that was given to him by the Lord, Jacobs flocks (capital) increased. “In this way the man grew exceedingly prosperous and came to own large flocks, and maidservants and menservants, and camels and donkeys (verse 43)”.

We see in the Old Testament the Jews fully expected to prosper financially. They believed their culture was inspired by God, and therefore superior to others. They expected that if they lived by God’s principles they would advance beyond those around them. Because God’s hand was involved developing the Jewish economic system, they had confidence the application of these capitalistic principles would bring His blessing. Harold Eberle says the following:

The belief that their way of living is, at best, God inspired and, at worst, better than others’ ways has been a source of strength for Jews throughout history. It has also been a source of heartache. That belief has allowed the Jews to advance, but non-Jewish people have often looked upon the Jewish sense of confidence as arrogance….Gentiles have recognized how the Jews have repeatedly risen to the top even when they were put at political and financial disadvantages. They have been persecuted for their tendency to succeed but in spite of that, they have indeed prospered.

I can see there is a risk that others could easily mistake our Bible inspired confidence as arrogance.  But for the Christian today, we must have a robust confidence that God’s desire for our prosperity is both Biblical and practical. Remember, Jacob had a God given, practical plan for how to increase his finances.

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How Is Capitalism Supposed to Work?

So we understand God rewards personal initiative and risk. He said that a laborer is worthy of his hire. For Scripture says, “Do not muzzle an ox while it is treading out the grain,” and “The worker deserves his wages.” 1 Timothy 5:18.

How does capitalism work? Listen to Fernando De Soto in his 2003 book, The Mystery of Capital, describe how capital accumulation can begin to work for individuals owning their own home.

The United States became the most important market economy and producer of capital in the world…Westerners houses no longer merely keep the rain and cold out. Endowed with representational existence, these houses can now lead a parallel life, doing economic things that could not have been done before.

Houses can lead a parallel life? What is he saying? That house as it is paid off develops  value, which can be leveraged to start a small business or investment. The big separator between poverty and the middle class is home ownership. But we will discuss this more in the future. The accumulated capital in the house can be made available for investment. This is called an asset. Here the wise, prosperous mind will go. But unfortunately, the mind driven by poverty thoughts will waste this capital opportunity on consumer goods that lose value and do not produce income, thus short circuiting a practical opportunity for financial prosperity. Don’t do this.

But there is more. The stock market offers a way for average investors to buy into the fastest-growing companies in the world, helping spread the company’s wealth to the average person. De Soto explains more:

Citizens of advanced nations are thus able to split their assets into shares, each of which can be owned by different persons, with different rights to carry out different functions. Thus a single factory can be held by countless investors, who can divest themselves of their property without affecting the integrity of the physical asset.

Amazing. Enter the stock, which is a small share of a company that anyone can own. About half of American households own shares of stock, mostly in retirement funds of some type. Some are fond of criticizing large companies as “greedy” when they are selling a product for a profit at the price the market will bare (or what someone is willing to pay), but this profit goes back to the owner of the stock, the shareholder. Likely even those that criticize these “obscene profits” receive some of them in their retirement funds. Ironic.

Here is a practical example. Amazon.com Inc., was sold publicly in 1994 at a value of $440 million. Anyone could have bought a part of this company by purchasing shares of this stock. That same $440 million investment is now worth about $358 billion. That investment grew at over 800% over those 23 years or roughly 35% each year. Capital invested has the opportunity to bring increase, although always with some risk.

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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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