Profit and Productivity

An interesting video: money doesn't motivate people to be productive. People are motivated to be productive when they can master challenges and make a contribution.

Deadbeats

Here is an article from our local newspaper that narrates the stories of all the deadbeats in Northeastern Ohio who could perfectly well work if they weren't so lazy and didn't enjoy sitting around at home and doing nothing while taking the money of good, honest taxpayers.

Rolls of Needy Swell

For those who don't know me, I assure you that I am being facetious.

There is a recession on, people. There but for the grace of God go you and I. Pretending that "my" get-up-and-go in contrast to "their" laziness will keep me in a job is just a form of magical thinking.

Christian Economic Life - Post 3: Human Rights

I wanted to think a bit about human rights in the context of Christian economic life. This might seem like a digression, but I don't think it is because a lot of the debate about what kind of economic system is just often seems to center around the concept of human rights.

The first problem I have is about talking about human rights is that, theologically, I don't believe in them. According to Christian theology everything that human beings have is mercy or grace, including our very lives. The Lord gives and the Lord takes away, blessed be the name of the Lord. Therefore, if we are speaking strictly in Christian theological terms, we can't really speak about "rights".

However, I'm not ready to dismiss the concept of human rights out of hand. I suspect that, no matter which position one takes in regard to economics, all of us would have an instinctive problem with the "tough luck" approach. "You are poor, despite working 18 hours a day, tough luck; in the eyes of God you have no rights." Or "You worked hard for that money, but we're taking it away from you in order to help others less fortunate than you; tough luck, in the eyes of God you have no rights." I suspect that at least one of those statements will rankle you!

For me, the concept of "human rights" is a secular expression of the Arminian (and catholic) theological belief that "God is no respector of persons" (to use the KJV/AV language).

Theologically, I believe that God wants all people to come to him, regardless of rank, status, skin color, community affiliation, sexual orientation, gender or any other characteristic that people can think of. God does not love aristocrats more than peasants. He does not love rich people more than poor people. He does not love men more than women. As the African congregation I served in London often said at the beginning of the service: "Whoever you are, you are welcome here. Whatever you nationality, tribe, language, skin color or gender, everyone is welcome in the house of God."

This message seems like something so natural to many of us in the United States, that we don't even question it. Yet, it was certainly part of Jesus' original Good News, because it was taken for granted in the Greco-Roman culture that the gods did prefer some people to others and that - for example - aristocrats, men, and the freeborn were ontologically better people than peasants, women and slaves. My African readers can correct me if I'm wrong, but one of the reasons this message was so powerful in the London African congregation was that, back home, different tribal groups were often viewed as being ontologically better than others. This congregation understood this part of the Good News because the opposite reality had been part of their life experience.

I think that this theological conviction that "God is no respector of persons" can very adequately be expressed in secular language by the idea that all people are endowed with certain inalienable rights. It is actually the matter of "What are these rights?" that is probably going to be the big bone of contention. I'll try to start thinking about that in the next post.

Christian Economic Life - Post 2: Capitalism

Capitalism. What, exactly, is it? Is it a process of running an economy? Or is it a philosophy, or a set of beliefs? And what, if anything, is the "opposite" of capitalism?

My take on popular American culture is that capitalism is regarded as both a way to run an economy and as a philosophy. I also think that, in popular American culture, the opposite of capitalism is communism. Socialism is the soft-form of communism, but it is still viewed as a form of stealing: stealing from those who have worked hard in order to give to those who do not work hard.

I also think that the specter of The Cold War is embedded deeply in American culture. And, since major social experiences typically live on for generations, our culture will carry the shadow of the Cold War for many decades into the future. The shadow of The Cold War provides us with the belief that "Communism and socialism are the enemies of Christianity and the enemies of capitalism, therefore capitalism is a Christian virtue."

This causes many Christians to view capitalism in a very uncritical way. After all, God clearly does not want us to have a communist or socialist society, therefore God must want us to have a capitalist society.

It might surprise some people to hear that I'm actually in favor of capitalism. I'm also in favor of socialist values and I don't think that the two are mutually exclusive.

But I don't believe in free-market, laissez-faire capitalism. I don't believe in the capitalist mantra that allowing capital and labor to flow into and out of sectors according to the laws of supply and demand will result in the greatest social good. I also don't believe in "trickle-down". As I say these things, I also acknowledge that the question of "How should an economy be regulated?" is a difficult one with no easy answers.

And, if I believe in socialism, I'd much rather that the socialism was embedded in our value system of how we want our society to behave. What I mean by that is that my dream is a society where there is a broad consensus that governments, communities and individuals will work to "love their neighbor".

In sum, I believe that capitalism can be used as an operating system to further an objective (philosophy) of "the greater good" or "loving one's neighbor". Using a capitalist operating system doesn't necessarily mean having to follow a survival-of-the-fittest philosophy. And pursuing a philosophy of "pursuit of the greater good" in our society doesn't necessarily have to mean top-down direction and, as far as I am concerned, it certainly doesn't imply iron-fisted totalitarianism.

I'm imagining at least one person saying that pursuing an approach of "loving one's neighbor" is not something that can be legislated, that it requires a conversion experience. I agree. But I am talking here about a Christian approach to the economy. But I also think that, to a large extent, European Socialism does embody more of a social consensus to love one's neighbor and to look out for the poor. I do believe that, however much empathy an American individual might have for those who are down on their luck, that as a society we believe in and embrace the pursuit of profits as the greatest social and spiritual good that we can collectively pursue.

Your thoughts?

Christian Economic Life - Post 1: Foundation

I'm going to try a thought-experiment here. I want to think about what an economy run on Christian principles might look like. And this is quite literally a "thought experiment". At the moment, I have no idea of what I intend to write in the future, but I want simply to think out loud, building on ideas step by step.

So here are some initial thoughts for a foundation:

1) Christian thinking on economics should begin with Christian and biblical principles, not with economic principles.

2) That being said, it seems to me that a good principle for a Christian thought experiment on our economic life would be: honor God and love your neighbor. (There are actually a number of principles that the bible expresses on economic life that a lot of us might not like; forbidding the giving or receiving of debt is one of these.)

3) As I think and write, I will try to separate "What works" from "What should be". I will recognize that "What should be" doesn't always work well. In separating the two principles, I intend to avoid what seems to me to be a usual problem in Christian economic thinking: "That operational method doesn't work, therefore it is unjust".

4) The unconscious, unarticulated principle of American economic life is free-market capitalism. I do not accept free-market capitalism as being uncritically "good" or "just" in Christian terms. I intend to reject a lot of the values that under-pin free-market capitalism, particularly the view that the possession of money (capital) endows an individual with more status in the eyes of God.

Your thoughts welcome.

Short Question

Do Americans understand that the current financial crisis was directly caused by a lack of governmental regulation and by the belief that the establishment of free markets will always make our economy come out right in the end?

I think not.

The Emperor's Newly Eased Clothes?

OK, is it just me? I realise that I've been totally out of the loop in terms of market chatter and I was never a 'monetary' or an 'economic' bod anyway, but...

...I really don't get the point of 'quantitative easing'. The new liquidity is going to purchase Gilts? Aren't Gilts already overbought? How does that put money into the economy? Isn't this 'new liquidity' just going to stay in Gilts and not go anywhere because the banks are scared out of their wits to lend? And people are scared out of their wits to spend? (It seems like every other person I talk to here in the Midlands has seen colleagues at work laid off and is hoping the axe doesn't fall on them next.)

Didn't Japan try something similar and it didn't work? Can someone explain to me how this supposed to get the economy going?

Someone Must have my Money

Over the last few months, I've seen a number of people on the internet saying something like 'Where has all my money gone? Someone must be benefitting from it.'

I'm going to go where angels fear to tread and try to explain why no-one has 'stolen' your money and why 'you never had it in the first place'.

This post is not going to use financial jargon and won't satisfy the financial version of the question 'How many angels can dance on the head of a pin'? I want to try to communicate in simple terms why no one has stolen money from your investments. And I'm going to stick with explaining stocks and shares (equities) because that's my area of knowledge. I'll leave someone else to to explain 'fixed income and bond pricing for beginners'

First A Really Simple Explanation

You know the chap who insists that his house is worth £125,000 and that he's not going to accept a penny less? When the house across the street that is exactly the same as his house (but in better decorative order) gets sold for £100,000 this chap still insists that his house is worth £125,000.

Silly man, we say. A house is only worth what someone is prepared to pay for it. It's not worth £125,000 just because you say it is.

Well, exactly the same principle applies to stocks and shares. They are worth what people are prepared to pay for them. And just like people are willing to pay less for a house in a housing slump, so too are people willing to pay less for stocks and shares in a recession.

A Bit More Complicated Explanation

Suppose I start a business manufacturing widgets. I invest £1000 to build a factory and to buy all the raw materials I need to manufacture widgets. Some people might say that my business is now worth £1000, because I can sell my factory and raw materials for £1000. Some people might say that my business is now worth £900 because my used kit won't command full price on the second-hand market.

Now suppose I have a reputation for being the very best widget maker in the world and I've just left United World Conglomerates to go out on my own as a specialised widget maker. My mythical economy is growing at 4% and the widget market is growing at 8%. But people think that because of my know-how and reputation, I can grow PamBG's Widgets at a rate of 20% per year and they think that I can do this easily for the next 5 years (I'm going to grab a lot of customers away from UWC.) They might then decide that my business is now worth £2239.49 (£900 compounded by a simple 20% for 5 years).

'Wow!' I say. 'I thought my business was only worth £900 but it seems that everyone out there thinks that it's actually worth more than twice that amount! They think it's worth £2239.49! Fantastic!'

You can see where I'm going, I think. Suppose the economy suddenly slows from a 4% growth rate to a 1% growth rate. But people only want to buy widgets when the economy looks good. Suddenly, instead of the demand for widgets growing at 8%, it's now growing at 1% - same as the economy.

'Woah! Hold on!' People say. 'PamBG's Widgets is the best around but when we thought her business was going to grow at 20% a year, we thought the widget market was growing at 8% a year! Now we think PamBG's Widgets is only going to grow at 2.5% per year, so actually we now think the business is really worth £1018.27 (£900 compounded by a simple 2.5% for 5 years) and that's all we're prepared to pay for it.'

So, did I lose over £1000? No, I never had it in the first place. No one has 'taken' that money from me and no one has 'stolen' it from me. No one now has £1000 in cash to go out and spend that I used to have. That money never existed.  In the same way that the chap who thought his house was worth an 'extra' £25,000 never had that money in his hand to spend.