Wintery Knight

…integrating Christian faith and knowledge in the public square

Does the free market work to reduce poverty?

Economist Walter Williams

Economist Walter Williams

From Investors Business Daily.

Excerpt:

There has never been a purely free market economic system, just as there has never been a purely communist system. However, we can rank economies and see whether ones that are closer to the free market end of the economic spectrum are better than ones that are closer to the communist end.

Let’s try it.

First, list countries according to whether they are closer to the free market or the communist end of the economic spectrum. Then rank countries according to per capita gross domestic product. Finally, rank countries according to Freedom House’s “Freedom in the World” report.

People who live in countries closer to the free market end of the economic spectrum have far greater income than people who live in countries toward the communist end — and enjoy far greater human rights protection.

According to the 2012 “Economic Freedom of the World” report by James Gwartney, Robert Lawson and Joshua Hall, nations ranking in the top quartile with regard to economic freedom had average per capita GDP of $37,691 in 2010 compared with $5,188 for those in the bottom quartile.

In the freest nations, the average income of the poorest 10% of their populations was $11,382. In the least free nations, it was $1,209.

Remarkably, the average income of the poorest 10% in the economically freer nations is more than twice the average of those in the least free nations.

Free market benefits aren’t only measured in dollars and cents.

Life expectancy is 79.5 years in the freest nations and 61.6 years in the least free.

Political and civil liberties are considerably greater in the economically free nations than in unfree nations.

Leftists might argue that the free market doesn’t help the poor. That argument can’t even pass the smell test.

Imagine that you are an unborn spirit and God condemned you to a life of poverty but gave you a choice of the country in which to be poor. Which country would you choose?

To help with your choice, here are facts provided by Robert Rector and Rachel Sheffield in their report “Understanding Poverty in the United States: Surprising Facts About America’s Poor.”

  • Eighty percent of American poor households have air conditioning.
  • Nearly three-fourths have a car or truck, and 31% have two or more.
  • Almost two-thirds have cable or satellite TV.
  • Half have one or more computers.
  • Forty-two percent own their homes.
  • The average poor American has more living space than the typical non-poor person in Sweden, France and the U.K. Ninety-six percent of poor parents stated that their children were never hungry; in other words, they could afford food.

The bottom line is that there is little or no material poverty in the U.S.

At the time of our nation’s birth, we were poor, but we established an institutional structure of free markets and limited government and became rich.

This might be a good article send along to people who want to bash our free-market system. It’s easy for them to make assertions that we have to do this or that policy to redistribute wealth. But the real solution to helping the poor is not to take from one and give to another, it’s to put into place a system that causes wealth to be created for all. That’s what happened in the United States, and you can see how it happened in other capitalist economies like Chile, Hong Kong and Singapore. Capitalism turns poor nations into rich nations.

Filed under: Commentary, , , , , , , ,

Sweden turning to capitalism as money for government spending runs out

I hear a lot of people in my office predicting doom and gloom for the United States. Rubbish. The worst that’s going to happen is that we have the kind of slow economy that France has, and that will only last until we run out of money to borrow.

Yahoo News explains what happens when socialists run out of money.

Excerpt:

The Nordic model, known for high taxes and its cradle-to-grave welfare system, is getting a radical makeover as nations find themselves cash-strapped.

[...]In the wake of a banking crisis in the early nineties, Stockholm scrapped housing subsidies, reformed the pension system and slashed the healthcare budget.

A voucher-based system that allows for-profit schools to compete with state schools was introduced, and has drawn attention from right-wing politicians elsewhere, including Britain’s Conservative Party.

In 2006, conservative Prime Minister Fredrik Reinfeldt’s government accelerated the pace of reform, tightening the criteria for unemployment benefits and sick pay while lowering taxes.

Income tax in Sweden is now lower than in France, Belgium and Denmark, and public spending as a share of GDP has declined from a record 71.0 percent in 1993 to 53.3 percent last year.

Just so you know, his numbers might be out of date.

The latest Heritage Foundation Index of Economic Freedom says this:

The top individual income tax rate is 57 percent, and the top corporate tax rate has been cut to 22 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden is 44.5 percent of GDP. Public expenditures make up about half of GDP, and public debt is below 40 percent of GDP. The government is attempting to expand investment in infrastructure and research while reining in welfare spending.

The United States had this:

The top individual income tax rate has risen to 39.6 percent, and the top corporate tax rate remains at 35 percent. Other taxes include a capital gains tax and excise taxes. The payroll tax holiday expired at the beginning of 2013. The overall tax burden amounts to 25.1 percent of gross domestic income. General government expenditures are slightly over 40 percent of GDP. Total public debt equals over 100 percent of the size of the economy.

So we are actually worse than Sweden now, in terms of government spending as a percent of GDP.

Denmark, too

More from the Yahoo News article:

If Sweden is the Nordic country to have gone the furthest in shrinking its welfare state, Denmark has moved the fastest.

When her Social Democratic government took power in 2011, there was little to suggest Prime Minister Helle Thorning-Schmidt would make any dramatic changes to the country’s cherished welfare state — funded by the world’s highest tax burden.

After a centre-right government had raised the retirement age and reduced the unemployment benefits period from four to two years, “Gucci Helle” — as she is known among her detractors — went on to cut corporate taxes to 22 percent from 25 percent.

Other reforms have included requiring young people on benefits to undertake training, and withdrawing student aid to those taking too long to finish their studies.

Denmark has been spurred into action by a persistently sluggish economy since a housing bubble imploded in 2007, leading to anaemic household spending.

But among Danes there is also a sense that the welfare state was ballooning out of control.

In 2011, a TV report aiming to show what life was like for the poor in Denmark visited the home of a single mother on benefits, whose disposable income turned out to be 15,728 kroner (2,107 euros, $2,860) per month.

“Poor Carina”, as she was later nicknamed, sparked a national debate on the level of unemployment benefits, with one pollster crediting her with fuelling a rise in the number of people who felt benefits were too high.

It would be nice if we had journalists who could do a story like that.

A different article from a Swedish newspaper called The Local has more on the new Sweden.

Excerpt:

One in ten Swedes now has private health insurance, often through their employers, with some recipients stating it makes business sense to be seen quickly rather than languish in national health care queues.

More than half a million Swedes now have private health insurance, showed a new review from industry organization Swedish Insurance (Svensk Försäkring). In eight out of ten cases, the person’s employer had offered them the private insurance deal.

“It’s quicker to get a colleague back to work if you have an operation in two weeks’ time rather than having to wait for a year,” privately insured Anna Norlander told Sveriges Radio on Friday. “It’s terrible that I, as a young person, don’t feel I can trust the health care system to take care of me.”

The insurance plan guarantees that she can see a specialist within four working days, and get a time for surgery, if needed, within 15.

I used to make fun of Sweden for being so socialist, but then I started to read more about them on Reason.com and from the Cato Institute (two libertarian sites) and my mind changed. These new articles confirm for me  that Sweden is improving their economy by embracing the free market system and rejecting socialism. Obviously, there is more to do, but the trend is good, and the results cannot be questioned. What could the United States do if we acted more like Sweden? It seems like just as they are moving away from government control of health care, we are moving towards it! We are embracing old ideas, and we need something new.

I am still worried about the European countries because of the breakdown of the family, the disrespect of marraige and the low fertility rates. But still, this is a good sign for those of us who are worrying that we need to cheer up. This is how socialism ends. We’ll get there.

Filed under: News, , , , , , , , , ,

Does the Bible teach government-controlled wealth redistribution to help the poor?

Eric from Ratio Christi posted an essay by famous Christian philosopher J.P. Moreland entitled “A Biblical Case for Limited Government”. 

About the author:

I am the Distinguished Professor of Philosophy at Talbot School of Theology, Biola University in La Mirada, California. I have four earned degrees: a B.S. in chemistry from the University of Missouri, a Th.M. in theology from Dallas Theological Seminary, an M. A. in philosophy from the University of California-Riverside, and a Ph.D. in philosophy from the University of Southern California.

Here’s the intro from the essay:

In what follows, I shall argue that, when properly interpreted, biblical teaching implies a minimal government with a specific function to be mentioned shortly. I will begin by describing the three-way worldview struggle in our country and explain why two of those worldviews have a vested interest in big government. I will then present a biblical methodology for getting at scriptural teaching about the state. I will apply that methodology to support the claim that Israel’s ethical policies in the Old Testament are better analogies for the church/covenant community than for the government, and in this context I will clarify the role that “defining terms of address” plays in my discussion. I will then distinguish negative and positive rights and argue that the best texts for unpacking biblical teaching about the state are two:  four key New Testament texts and the obligations placed on pagan nations by the Old Testament prophets. I will try to show that these key texts depict the state as a protector of negative rights and not a provider of positive rights. Thus the scriptures support a limited view of government and its function.

Next, I will turn to a description of the decisive feature of New Testament ethics in general, and Jesus’s ethics in particular, namely, virtue ethics with voluntary adherence to the love commands. I will show that, given this ethic, the state may be able to show mercy, but it cannot show compassion due to both the nature of the state and the nature of compassion. I will close with a brief treatment of the importance of Natural Moral Law in the state’s fulfilling of its God-given role so as to avoid a theocracy. And I will examine the charge that commitment to the Natural Moral Law makes one an intolerant bigot.

And here’s the best part:

[W]e need to make a distinction between positive and negative rights. A positive right is a right to have something given to the right-holder. If Smith has a positive right to X, say to health care, then the state has an obligation to give X to Smith. In general, positive rights and duties are correlative. That is, if someone has a positive right to something, then a duty is placed on others to provide that right to that person (or class of persons). Thus the state has the moral right to impose on citizens the duty to provide that right to the right-holder. A negative right to X is a right to be protected from harm while one seeks to get X on one’s own. If Smith has a negative right to X, say to health care, then the state has an obligation to protect Smith from discrimination and unfair treatment in his attempt to get X on his own. We learn much if we approach key biblical texts about the state armed with the distinction between positive and negative rights.

Then he brings up the Romans 13 passage that Wayne Grudem mentioned yesterday in the post on the Bible and capital punishment, which talks about how the state can punish evildoers.

More:

A second feature of the Romans 13 text is that it seems to depict the state as the protector of individuals from harm due to negative-rights violations (and as the praiser of those who do not engage in such law-breaking behavior) rather than as the provider of positive rights. In the preceding context (Romans 12:17-21), the issue in focus is someone who has had evil done against him, i.e., has had his negative rights violated. The passage makes clear that in such a case, the individual is not to take revenge and repay evil with evil. This would most naturally raise a question of criminal justice, viz., will the person have to pay for what he/she did to me in this age? Romans 13:1-7 answers that question in the affirmative by stating that such justice is precisely the purpose of the state. Moreover, in the verses that follow Romans 13:1-7 (verses 8-10) the focus is on showing compassion and love to one another, a topic mentioned in Romans 12:20 in the context of providing things (food and drink) for one who has harmed you. Now while compassion, love, and providing for others are mentioned just before and after Romans 13:1-7, it is significant that these topics fall from sight when the nature and function of the state is in view. A good explanation for this is that the state is not to be in the business of showing compassion (for more on this, see below) or providing positive rights for others. That is an  individual moral responsibility. No, the state is the protector of negative rights.

[...]By contrast with the voluntary nature of compassion and genuine ethical action, the state is coercive and forces conformity to its dictates. The coercive approach works well when the state is protecting negative rights, but it raises an ethical problem if the state tries to provide positive rights. While the state can show mercy—it bears the sword and can refrain from using it—the state cannot show compassion. As an individual, a representative of the state can have compassion in his heart as he gives to the poor; but this compassion is exhibited by him qua individual and not qua representative of the state. The state’s care for the poor is coercive since it redistributes wealth by force. It takes from some and gives to others, all by the force of law. Such actions count for very little in God’s eyes because they do not reflect the features of Jesus’s ethic identified above. And because Jesus was not a utilitarian, even if such actions accomplish good ends, the end does not justify the means. In a biblical ethic, helping the poor by the coercive power of the state is of little ethical value. If I am right about this, then it follows that when the state steps outside its role of protecting the violation of negative rights, the state will be incompetent and less effective than private or charitable alternatives.

And J.P. Moreland is right about it. This is a great essay and it helped me to understand how to talk about these issues. I think you should print this out and read it. Send it to everyone, especially young people who seem to be so confused about the free market system.

You can grab the PDF here from the Institute for Faith, Work and Economics (IFWE). It’s only 11 pages long, without footnotes. It took me only 15 minutes to read it.

Filed under: Polemics, , , , , , ,

Arthur Brooks: earning your own success through work makes you happy

In the Wall Street Journal.

Excerpt:

Earned success means defining your future as you see fit and achieving that success on the basis of merit and hard work. It allows you to measure your life’s “profit” however you want, be it in money, making beautiful music, or helping people learn English. Earned success is at the root of American exceptionalism.

The link between earned success and life satisfaction is well established by researchers. The University of Chicago’s General Social Survey, for example, reveals that people who say they feel “very successful” or “completely successful” in their work lives are twice as likely to say they are very happy than people who feel “somewhat successful.” It doesn’t matter if they earn more or less income; the differences persist.

The opposite of earned success is “learned helplessness,” a term coined by Martin Seligman, the eminent psychologist at the University of Pennsylvania. It refers to what happens if rewards and punishments are not tied to merit: People simply give up and stop trying to succeed.

During experiments, Mr. Seligman observed that when people realized they were powerless to influence their circumstances, they would become depressed and had difficulty performing even ordinary tasks. In an interview in the New York Times, Mr. Seligman said: “We found that even when good things occurred that weren’t earned, like nickels coming out of slot machines, it did not increase people’s well-being. It produced helplessness. People gave up and became passive.”

Learned helplessness was what my wife and I observed then, and still do today, in social-democratic Spain. The recession, rigid labor markets, and excessive welfare spending have pushed unemployment to 24.4%, with youth joblessness over 50%. Nearly half of adults under 35 live with their parents. Unable to earn their success, Spaniards fight to keep unearned government benefits.

Meanwhile, their collective happiness—already relatively low—has withered. According to the nonprofit World Values Survey, 20% of Spaniards said they were “very happy” about their lives in 1981. This fell to 14% by 2007, even before the economic downturn.

That trajectory should be a cautionary tale to Americans who are watching the U.S. government careen toward a system that is every bit as socially democratic as Spain’s.

Government spending as a percentage of GDP in America is about 36%—roughly the same as in Spain. The Congressional Budget Office tells us it will reach 50% by 2038. The Tax Foundation reports that almost 70% of Americans take more out of the tax system than they pay into it. Meanwhile, politicians foment social division on the basis of income inequality, instead of attempting to improve mobility and opportunity through education reform, pro-growth policies, and an entrepreneur-friendly economy.

These trends do not mean we are doomed to repeat Spain’s unhappy fate. But our system of earned success will not defend itself.

What I find most interesting is that the people who vote for Obama don’t even realize how they are making themselves more and more unhappy by being more and more dependent on government. It’s the bluest states that have seen the lowest income growth, the lowest job growth, lower home prices, and the highest unemployment. All of this talk about taxing the rich and spreading the wealth around through bigger and more intrusive government hasn’t worked.

More government means less prosperity, and less prosperity means fewer jobs, and fewer jobs means less happiness. Punishing your successful neighbor and borrowing huge amounts of money from the next generation of Americans does not create jobs. And without a job, you’re not going to be happy.

We need to have a public policy that recognizes that human beings are spiritual creatures, and we aren’t happy unless we chart our own course and earn our own success instead of depending on government to take it from someone else and hand it to us.

Filed under: Commentary, , , , , , , , , , , , , , ,

Food stamp president: nearly 16 million more people getting food stamps since Obama’s election

From CNS News.

Excerpt:

 Since taking office in 2009, food stamp rolls under President Barack Obama have risen to more than 47 million people in America, exceeding the population of Spain.

“Now is the time to act boldly and wisely – to not only revive this economy, but to build a new foundation for lasting prosperity,” said Obama during his first joint session address to Congress on Feb. 24, 2009.

Since then, the number of participants enrolled in food stamps, known as the Supplemental Assistance Nutrition Program (SNAP), has risen substantially.

When Obama entered office in January 2009 there were 31,939,110 Americans receiving food stamps.  As of November 2012—the most recent data available—there were 47,692,896Americans enrolled, an increase of 49.3 percent.

Not only are we borrowing trillions of dollars to pay for all these handouts, but being dependent on government is not good for people.

Arthur Brooks explains in the Wall Street Journal.

Excerpt:

Earned success means defining your future as you see fit and achieving that success on the basis of merit and hard work. It allows you to measure your life’s “profit” however you want, be it in money, making beautiful music, or helping people learn English. Earned success is at the root of American exceptionalism.

The link between earned success and life satisfaction is well established by researchers. The University of Chicago’s General Social Survey, for example, reveals that people who say they feel “very successful” or “completely successful” in their work lives are twice as likely to say they are very happy than people who feel “somewhat successful.” It doesn’t matter if they earn more or less income; the differences persist.

The opposite of earned success is “learned helplessness,” a term coined by Martin Seligman, the eminent psychologist at the University of Pennsylvania. It refers to what happens if rewards and punishments are not tied to merit: People simply give up and stop trying to succeed.

During experiments, Mr. Seligman observed that when people realized they were powerless to influence their circumstances, they would become depressed and had difficulty performing even ordinary tasks. In an interview in the New York Times, Mr. Seligman said: “We found that even when good things occurred that weren’t earned, like nickels coming out of slot machines, it did not increase people’s well-being. It produced helplessness. People gave up and became passive.”

Learned helplessness was what my wife and I observed then, and still do today, in social-democratic Spain. The recession, rigid labor markets, and excessive welfare spending have pushed unemployment to 24.4%, with youth joblessness over 50%. Nearly half of adults under 35 live with their parents. Unable to earn their success, Spaniards fight to keep unearned government benefits.

Meanwhile, their collective happiness—already relatively low—has withered. According to the nonprofit World Values Survey, 20% of Spaniards said they were “very happy” about their lives in 1981. This fell to 14% by 2007, even before the economic downturn.

If we really cared about people, we would give incentives to job creators (“the rich”) to create jobs for them. Earned success makes people happy.

Filed under: News, , , , , , , , , , , , , , , , , , , , , , , , ,

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