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Last November, James R. Rogers published a short essay titled “What’s Behind the Stunning Decrease in Global Poverty?”. Rogers examined studies from a variety of sources, all of which “confirmed the overall conclusion that the rate of extreme poverty in the world has undergone a stunning decline.” These studies primarily examine figures such as the number of people living on one US dollar per day, a typical measure of “extreme poverty.” But this “mountainous rise in well-being,” in which hundreds of millions of people moved out of extreme poverty over the past thirty years, is attested to by other measures as well.
One of the more popular is what has been called “the most important economic chart in Western civilization,” which measures gross domestic product (GDP) gains per capita over hundreds of years of human history. A version of this graph appears below in what is a kind of economic analogue to the famous “hockey stick”:
Source: Victor V. Claar, “The Urgency of Poverty and the Hope of Genuinely Fair Trade,” Journal of Markets & Morality 16, no. 1 (Spring 2013): 274. GDP figures from J. Bradford DeLong, “Estimates of World GDP, One Million B.C.—Present.”
This chart demonstrates just how real this “mountainous rise of well-being” has been over the last two centuries. What makes these economic gains even more astounding is that there has been a simultaneous population explosion. There are many more “capita” included in the “per capita” as the chart moves to the right, yet we still see enormous gains in per-capita GDP. As the economist Deidre McCloskey puts it,
Never had such a thing happened. Count it in your head: eight and half times more actual food and clothing and housing and education and travel and books for the average human being—even though there were six times more of them.
Yet a Barna Group survey released this past April found that most Americans remain unaware of these economic gains: “more than eight in 10 Americans (84%) are unaware global poverty has reduced so drastically. More than two-thirds (67%) say they thought global poverty was on the rise over the past three decades.” Both the reality of global poverty (1.2 billion people remain in extreme poverty) and the public perception of poverty’s pervasiveness and intractability deserve increased attention.
The Poverty of Nations
A recent book by Wayne Grudem, a theologian, and Barry Asmus, an economist, addresses the challenges of helping to increase affluence in the developed and developing world. In The Poverty of Nations: A Sustainable Solution, Grudem and Asmus aim to provide a comprehensive contemporary account of the nature and causes of the poverty and wealth of nations. The book is primarily directed toward Christian leaders in developing nations, but its message is relevant to non-Christians and those in the developed world as well.
The Poverty of Nations pursues two basic purposes. Although it accomplishes the first admirably, it ultimately leaves the second unresolved.
First, Grudem and Asmus provide a summary of contemporary development economics, particularly focusing on the conversation about the role of aid, enterprise, trade, and institutions in easing the poverty of developing nations. In this regard, The Poverty of Nations is a helpful entry point into some of the best literature and analysis in recent decades.
It is in the second, synthetic aspect of The Poverty of Nations that Grudem and Asmus strive to make their most original and ambitious contribution. Even though there have been many fine books about global poverty and development, “something is still needed,” write Grudem and Asmus: “a focus on the nationwide laws, policies, and cultural values and habits that determine so much of the course of economic development in a nation.”
The Causes of Wealth and Poverty
Grudem and Asmus attempt to gather the insights of the best development experts and present them in a coherent package that can guide economic reform efforts in poor nations. The result is “a composite list of factors that will enable a nation to overcome poverty,” consisting of seventy-eight factors divided into four categories: the national economic system; the national political system; the nation’s freedoms; and the nation’s values. Rather than reducing the relevant phenomena for economic development to one or two key considerations, as many studies do, Grudem and Asmus have compiled a diverse set of considerations. In their words,
The solution we propose is complex because economic systems are complex. That is because economic systems are the result of millions of human beings making millions of choices every day. Who can ever expect to understand all of this?
Grudem and Asmus have done their best to help their readers, particularly leaders in poor nations, come to grips with the scale of the challenge associated with moving “from poverty to prosperity.” At the level of economic analysis, however, the synthesis that Grudem and Asmus provide is not complete. In aiming to be comprehensive, the authors end up speaking in generalities that provide little practical guidance. Where might the reform-minded churchman, political leader, or business executive in the developing world begin?
Grudem and Asmus emphasize that cultural factors relating to “values” are the most fundamental:
These cultural values are therefore the most strategic matters that we discuss in this book, because they will ultimately determine all the other factors. The cultural values of a nation determine what kind of economic system it adopts, what kinds of laws and policies the government enacts, whether corruption is tolerated, whether freedoms are protected, and what kinds of goals individual set for their personal lives.
But The Poverty of Nations lists no fewer than thirty-five cultural values that a nation must have in order to develop economically, with little information about how to prioritize or relate these to other potentially significant factors.
In other places, Grudem and Asmus seem to indicate that legal institutions are equally foundational, as they argue that “leaders of poor nations need to consider all of the factors explained in chapters 3 to 9 [where these are developed]. Some of these factors (such as property rights and the rule of law) are more influential than others, but every one of them has some effect, for good or ill, on a nation’s economy.”
The difficulty for the reader in assessing which factors warrant more or less weight is exacerbated by the frustrating level of internal referencing in the main text, as more extensive treatments of various issues are quite often put off toward a later section of the book.
GDP, Economic Growth, and Human Flourishing
Grudem and Asmus do provide a guiding principle of sorts. Yet, in doing so, they tend toward the opposite extreme of reducing the terms of development and truncating our vision for wealth and prosperity. They argue that “The correct goal for a poor nation, then, is to become a nation that continually produces more goods and services each year.” Although this might be a more appropriate goal for the economic institutions of a nation, the basic idea here is sound. The larger problem is the authors’ tendency to equate economic productivity with GDP.
The authors advocate the maximization of GDP without acknowledging the limitations of the measure and the negative implications for a social order that sees increasing GDP as its main goal. To use a recent example from Canada, women who leave the full-time paid workforce to stay home and care for children are seen as a drag on GDP, since they are not paid. But, as the economist Shawn Ritenour observes, “leisure time spent raising children is an economic good,” and perhaps more significantly, it is a social good.
If a nation were to pursue GDP growth as its highest goal, it would probably institute policies and incentives to induce women to work outside the home and professionalize child care. GDP incentivizes specialization and the division of labor, since such transactions are the only things taken into account. As Ritenour concludes, “We ought not give into the temptation that all of human welfare is encapsulated in GDP.” Or in other words, man does not live on GDP per capita alone.
In a subtle way, measuring GDP can give the illusion that human flourishing is identical to economic growth and that economic growth is reducible to GDP. GDP is a useful, if limited, measure. But it should never be seen as a direct proxy for economic development, much less human flourishing.
The Synthesis of Theology and Economics
Grudem and Asmus should be praised for attempting what few others do: collaboration between a theologian and an economist that grapples with the complex problem of poverty. Ultimately, however, the book fails to integrate theological insights with economic analysis. There is far too much facility in the move from Scripture to prescription in The Poverty of Nations.
The book’s theology does not provide a sufficiently comprehensive check on the triumphalism of its economic analysis. The free market, for instance, is often presented as self-sufficient, even miraculous. A “fair” and “just” wage is simply “the price at which workers are willing to work in the labor market.” Although it needs to enforce “appropriate restraints on crime,” in the context of “a free market, no government officials have to force people to work. The government simply has to get out of the way and let the free market work all by itself.” The free market “is a complex, brainlike organism that evolves over decades.” One might think that what the market produces “could only happen in a utopian dream. But the free market is such a system, even though no one controls it.”
In other places, the language is more restrained. Grudem and Asmus write that they “do not believe that free markets make morally perfect people!” And yet they argue that the free market’s “virtues of greater economic productivity, of lifting the masses from poverty, of promoting virtuous behavior, and of frequent personal benevolence are unsurpassed.” It is not so much that Grudem and Asmus are wrong about the merits of the market system, even where their rhetoric waxes ecstatic. It's that theology and Scripture are more often invoked to justify the free market than to temper and critique all worldly powers and principalities, economics included.
Grudem and Asmus’s attempt to unite theology and economics exhibits the incompleteness that the economist Victor V. Claar describes as symptomatic of many such endeavors. As Claar writes, “the resulting product is not a cohesive synthesis of economic and theological thinking and tradition.” Rather,
the theologians do a little talking, and then the economists do some talking. Even if the theologians and the economists happen to be writing from the same economic policy point of view, the theologians seldom know enough about basic economics to do it justice. And it is even less likely that an economist knows enough theology to meaningfully employ it in his research program.
The point is not to say that Grudem, the theologian, knows little economics, or that Asmus, the economist, knows little theology. It is simply to say that, in this particular project, their knowledge is not adequately synthesized into a coherent argument that would be convincing for anyone who is not already enamored of the virtues of the free market.
No doubt some of the failures to achieve synthesis in The Poverty of Nations are unavoidable given the complexity of the topic and the ambition of the attempt. Grudem and Asmus ought not be unduly chastised for undertaking such an audacious project. Even if they are not ultimately successful, there is still much to be learned in the process.
First and Third World Problems
Perhaps the greatest service that Grudem and Asmus render is communicating that poverty is a very complex phenomenon, and that material factors are not the only relevant considerations. As they conclude, “institutions modify cultural values, but cultural values also create and modify institutions.” Or, as Ryan Anderson rightly observes, “Law and culture reinforce each other, either for or against human dignity and human flourishing.” There is a dialectic between law and culture, and sorting out the proper means for pursuing reform in a particular context requires great prudence, perseverance, and patience. When Grudem and Asmus are at their best, they remind their readers that human welfare is not reducible to material realities.
When we understand that economic development is a necessary but not sufficient indicator of what it means for human beings to develop and grow, we can better understand the juxtaposition between those who see great progress over the last two hundred years and those who continue to see those who are excluded, marginalized, and suffering. To overcome both material and spiritual poverty, we must first seek an integral perspective of what it means to be human and have life to the full.
Jordan J. Ballor (Dr. theol., University of Zurich) is a research fellow at the Acton Institute, where he also serves as executive editor of the Journal of Markets & Morality. His most recent book is Get Your Hands Dirty: Essays on Christian Social Thought (and Action). Follow him on Twitter.