Biblical Economics

How consistent or divergent is the Bible with conventional economics? Are there coherent theories around economics and finance in scripture that could be applied to modern society? I suggest that at least ten fundamental principles of “Biblical Economics” can be identified:- God is the source of economic prosperity: The Bible affirms (in Psalms 24: 1 and 1 Corinthians 10: 26) that “The earth is the LORD’s, and the fullness thereof…” and in Deuteronomy 8: 18, “But thou shall remember the LORD thy God: for it is he that giveth thee power to get wealth…” The implication of this is that prosperity is sustained only on God’s conditions-“seek ye first the kingdom of God, and his righteousness; and all these things shall be added unto you” (Mathew 6: 33). What then will we make of the reality that wealth is more likely to be obtained from the evil sources in today’s economy? The Bible implies that while wealth procured from evil means may bring anguish and lack sustainability, “The blessing of the LORD, it maketh rich, and he added no sorrow with it” (Proverbs 10: 22). The Bible counsels against undue materialism-“the love of money is the root of all evil (1 Timothy 6: 9-10) warning that “no one can serve two masters;…You cannot serve God and mammon” (Mathew 6: 24). Abundance not Scarcity: While contemporary economics is founded on the notion that resources are limited and scarce, the Biblical view is that God cannot be limited-he is the sovereign God who created all things, and who can do all things and can give his children all things! When God put Adam and Eve in the Garden of Eden, they lacked nothing and had all things in abundance, until they disobeyed and brought scarcity into the world. With the recompense of Adam’s sin by Jesus Christ, Christian believers could operate under a revived dispensation of abundance since God can add “all” things once his “kingdom” is obtained. Jesus Christ declared “I am come that they might have life, and that they might have it more abundantly” (John 10: 10) and Ephesians 3: 20 proclaims “Now unto him that is able to do exceedingly abundantly above all that we ask or think…” Stewardship of Talents and Resources: If God gives abundance and wealth, rather than our cleverness or dexterity, we are necessarily “trustees” of that wealth for HIS higher purpose. Christ’s parable of the Talents implies that our resources and talents are held as stewards with a concurrent responsibility to manage them to the benefit of the Kingdom. While God could and did give everything, we are “to lay up for yourselves treasures in heaven” i.e. our worldly possessions were less important than our souls and after-life and “from everyone who has been given much shall much be required” (Luke 12: 48). Sowing and Reaping: In Genesis 8: 22, a fundamental economic principle is established-“As long as the earth endures, seedtime and harvest…will never cease”! I have argued that this is the source of economic cycles-boom and bust; growth and recession seasons that recur persistently in human economies. The most popular example comes from the Bible itself-the seven years of plenty and then famine in Joseph’s Egypt. Man stands to profit from understanding economic cycles, macroeconomic principles, and political economy! While the Israelites benefited from the economy of seasons, they suffered for not projecting political scenarios-for then arose in Egypt, a King who knew not Joseph!!! This principle establishes the nexus between actions and consequences-hard work and success, policies and development outcomes, investment and prosperity, and socio-economic behavior and social conditions. Five Causes of Poverty-Laziness, Trial, Punishment, Social Injustice or Affliction: The Bible prescribes diligence and skill as (ant)idotes to poverty (Proverbs 10:5, 12: 11 and 12: 24). There are numerous scriptures in which poverty is the consequence of slothfulness-“He becometh poor that dealeth with a slack hand: but the hand of the diligent maketh rich…” (Proverbs 10: 4-5); “…a little sleep, a little slumber, a little folding of the hands to sleep: So shall thy poverty come…” (Proverbs 6: 10-11); Job’s life is evidence that it could be trial from God; Deuteronomy 28 suggests that a man’s “field”, “basket” and “store” could fail due to God’s sanctions; several scriptures imply poverty could become widespread because the rich and powerful oppress the poor; and people could be poor because of diabolical powers and spiritual wickedness in high (and low) places! Spiritual Blessings, then Physical Wealth: The Biblical perspective is that God first ordains things spiritually before they are manifested physically. King Solomon’s wealth was preceded by a promise from God; same with Abraham, Isaac and Jacob-it is the blessings of the Lord that “maketh rich”. Economics has a rather different sequence though not composition-wealth is a consequence of the correct application of the “factors of production” and wealth then results in human satisfaction. Giving Precedes Receiving (More): Acts 20: 33-35 says “It is more blessed to give than to receive” and 2 Corinthians 9:7 proclaims (to the joy of Church treasurers!!!) “God loves a cheerful giver”! Throughout the Bible, God rewards those who sacrifice their possessions-Abraham and Solomon being prominent examples Save and Invest: The Bible urges Christians to save-“Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth” Ecclesiastes 11: 2 (See also Proverbs 6: 6-8 and 21:20). The essence of the parable of the talents however is that saving is not enough, investment is critical. Christians are counselled to take investment risk-“cast your bread upon the waters…” (Ecclesiastes 11: 1), based on wisdom, knowledge and understanding as well as the grace and leading of God. Our women must invest too-“she considers a field and buys it; from her earnings, she plants a vineyard” (Proverbs 31: 16) Leverage What You Have: The most important question potential entrepreneurs ask is how do they know what business they should go into? My “consultant’s prescription” is same as the Bible’s-“What is that in your hand?” as God asked Moses! I typically urge people to start from what they know, love or are passionate about, their “hobbies” even. The Bible says “whatever your hands find to do, verily do it with all your might” (Ecclesiastes 9:10) Obey God’s Laws and Keep Your Hands Clean: The Bible expresses a causal relationship between obedience (to God’s commandments) and success, and disobedience and failure. There are specific stipulations in the Bible that relate to economics, business and finance including repaying your loans (Psalm 37: 21; not lending to the poor and brethren at punitive or excessive interest rates (Proverbs 28:8); avoiding guaranteeing debts (Proverbs 11: 15 and 22: 26-27); refraining from hoarding and excessive profits (Proverbs 11: 26); not engaging in bribery and corruption (“oppression makes a wise man mad, and a bribe corrupts the heart”-Ecclesiastes 7:7 and Amos 5: 12); paying taxes (Mathew 22: 17-21 and Romans 13: 6-7); paying employees’ wages promptly (Deuteronomy 24: 14-15, Leviticus 19: 13 and 1 Timothy 5: 18) and avoiding false measures and fraud (Proverbs 11: 1 and 20: 10, Leviticus 19: 35).

The Socio-Political Christ

The natural tendency of people is to isolate Jesus Christ as a spiritual phenomenon. However he lived as a human being within a family and society, and in a polity in which there were rulers, governors, judges, the practice of politics and the exercise of political power. Given that Jesus Christ was offered to us as a complete and comprehensive example, there must be socio-political aspects of his life from which we can draw lessons and inspiration even for these contemporary times. Easter offers us an opportunity for reflection on this intricate issue in addition to our celebrations of the death and resurrection of the author of our faith. The first thing that strikes me in the context of this discussion is that the powerful people in his society always tried to destroy Jesus Christ-and this was right from his birth, even before he uttered his first words in ministry! When Herod heard from the three wise men about the birth of someone who was “born King of the Jews”, the Bible records that he was “troubled” and devised a scheme to kill the young messiah and indeed ended up massacring innocent babies in an attempt to truncate the life of Jesus. Why would a King be “troubled” about the birth of a child, except that he immediately understood that the Kingdom foretold would threaten his power base. This opposition from the “powers-that-be” dogged Christ all through his life and indeed led to his crucifixion. What that tells me is that because darkness and light, according to scriptures are irreconcilable, a true Church which is fulfilling its divine mission will always face opposition from the kingdoms of the world. The converse of that may be that any Church which persistently receives the approbation of corrupt kings and powers must ask itself whether it is fulfilling the mission of the father! Another obvious insight from Christ’s life and work was that the focus of his ministry was the “multitude”-or what you may describe in today’s language as the “masses”! He was not unduly focused on the rich and powerful, indeed asserting that it was easier for a camel to go through the eye of the needle than for a rich man to enter the Kingdom of God! He was driven by compassion for the poor, sick, broken-heated, weary, weak and vulnerable-that is why he fed the five thousand; healed the sick; raised the dead; delivered the afflicted; and restored hope to the distraught and helpless. His beatitudes is perhaps his most recognized “mission statement” and it reveals very clearly his “target audience”-“Blessed are the poor in spirit…Blessed are those who mourn…Blessed are the meek…Blessed are those who hunger and thirst for righteousness…Blessed are the merciful…Blessed are the pure in heart…Blessed are the peacemakers…Blessed are those who are persecuted for righteousness’ sake…” If Jesus Christ lived in Nigeria today, there is no doubt who his focus will be-the 60-70 percent of our people living in poverty; the 25 percent of our people who are unemployed; the millions who can’t afford a good education, decent healthcare and the simple pleasures of life. His friends were the under-privileged-fishermen, artisans, women (in that time, women were a marginalized group), children and young people (“let the little children come unto me; for theirs is the Kingdom of heaven”), despised people like tax collectors, sinners, those delivered of witchcraft (!), even the convicted thief obtained Christ’s friendship right on the crucifixion ground! Jesus famously declared that he came not to those who were upright and therefore not in need of salvation, but to the sick who needed healing. Of course the dominant theme of his life’s work was love, charity, fellowship…for him the great commandment of all was to love God with all our heart, soul and mind…and the second was to love our neighbours as ourselves! Jesus Christ would have been saddened by wars, terrorism, murders, ethnic and religious warfare and all other divisions that arise out of the absence or deficit of love. The parable of the Good Samaritan suggests that even though Christ did not necessarily seek to abolish nationalities and peoples, he envisaged the possibility of universal love and brotherhood and the prospect of peace and reconciliation between “Jews and Gentiles”! Yet as much as Jesus espoused peace and reconciliation, he was also a revolutionary and the powerful people in his time considered him a “troublemaker”! He himself declared, “Do not think I came to bring peace on earth. I did not come to bring peace but a sword”! He drove out the traders and thieves from the temple; he railed against the Pharisees and other “principalities and powers” of his time; he had little patience for the hypocrisy and false piety of the religious people and was loud in his condemnation of the social, political and religious establishment. I have no doubt that if Jesus Christ suddenly emerged in Nigeria today, some of our religious elite will not recognize him and would promptly reach an alliance with the politicians to crucify him a second time! Jesus was a strong leader, though he was not a politician. People voluntarily submitted to him-John the Baptist who could have argued that he came earlier; the twelve disciples who had no apparent reason to follow an unknown carpenter; the 70; his followers; the large multitude; and through the ages to this day, the Church. The life of Jesus Christ illustrates the fact that true leadership is not based on power, wealth, or position, but influence. He taught his disciples that “whoever desires to become great among you, let him be your servant” establishing the principle of servant leadership. He also re-inforced the concept of rule of law (“I did not come to destroy the law, but to fulfil it”) and instituted the separation of Church and State-“Render therefore to Caesar the things that are Caesar’s, and to God the things that are God’s”.

Poverty and the Flow of Capital (2)

I have emphasized the critical role of capital as a factor of production, productivity, wealth creation and poverty reduction and stressed drawing on Hernando de Soto’s writings on “dead capital” in “The Mystery of Capital”, the negative implications of sub-optimal deployment and circulation of capital which is endemic in poor and under-developed economies. In particular in the case of Nigeria, I identified four “sectors” and one socio-cultural “force” which militate against the effective flow of capital within our economy and which in my view, are significant contributors to the phenomena of poverty, unemployment and inequality in our society. These “sectors” are government/politics-prevalent corrupt and rent-seeking nature of our polity ensures that public resources are diverted to whoever succeeds in “capturing” power thus marginalizing the poor and powerless; banks/financial system-receive deposits from rich, middle-class, average, and poor customers, but by-and-large lend only to large corporations and the (very) rich thus denying SMEs (not to mention micro enterprises) capital for building their businesses; crony capitalists/oligopolistic and monopolistic firms-charge higher prices than are economically justifiable, offer less-efficient products and services than would obtain in competitive markets and based on their alliance with or incorporation in the first group (government/politics-their initial and often sustaining profits are typically from economic rents transferred from the public sector) are beneficiaries of a prebendal, possibly fascist or even feudal political economy; and large religious organisations-receive voluntary or induced “taxes” from their members (and increasingly from government/politicians as well!) and not being established or structured to act in economically efficient manners, often spend huge resources in ways that erode the productivity of capital for instance by building inordinately large auditoria, buying fleets of expensive cars or acquiring private jets costing millions of dollars, while shirking the critical role they could play redressing social ills. The socio-cultural factor in my hypothesis are destructive aspects of culture and lifestyles that prevent capital accumulation-frittering away resources on marriages (introduction, engagement, “wine-carrying”, “alaga-ijoko”, wedding, reception, thanksgiving etc.!!!), funerals, child naming, chieftaincy, birthday and other celebrations; deploying scarce capital towards death rather than life and enterprise (a professor friend once wondered why in our society, if an unemployed young graduate asked family members to contribute N250,000 towards a business idea, he was unlikely to get any response, but double that amount would surface within days if the young man’s father were to drop dead!); investing huge resources in expensive cars and dormant houses while sometimes failing to pay children’s school fees or maintaining aged parents; our inclination to discourage local production in favour of everything foreign thus exporting not just capital, but jobs…!!! The list of our capital and (domestic) productivity destroying patterns of behavior may be in-exhaustible!!! You will notice that in all these, no one has necessarily set out to do anything sinister or evil to society-everyone is simply acting in their own selfish interest or according to “culture and tradition”. Politicians seek power and privilege; banks lend to the safest and most profitable segments of the market; businesses try to maximize profits; faith institutions seek as much donations as possible, the faithful try to live by the injunctions of their faith; and our people are caught in a culture more suited to traditional pre-metropolitan societies while living in 21st century internet age economies! What we lack are visionary leaders who can transform culture and society like Lee Kuan Yew did to Singaporean society substituting an ethos of excellence and productivity for old Confucian fatalism and docility; and institutions that can moderate behavior in manners defined by an enlightened sense of common good. I have already hinted at what I think the solutions should be. Government should define as its primary responsibility the protection of the poor and helpless rather than the rich and powerful, who in any event are well-placed to protect themselves. We need a fundamental paradigm shift in politics and government that places the welfare of ordinary people at the centre of policy. Economic success would in such a paradigm be measured in terms of human development, poverty reduction, life expectancy, quality of public education and not just growth in gross domestic product and our politics and government must become more egalitarian and less-prebendal! I would advocate a self-regulatory policy by banks and other financial institutions that undertakes to channel as a minimum whatever percentage of their deposits is sourced from MSMEs back into credits to such enterprises while eliminating prohibitive transaction charges against small or retail customers. As I mentioned in the earlier instalment, we need a robust competition and anti-trust law and policy regime to roll-back the emergence of oligopolies and monopolies across economic sectors and ensure that our markets are fair and competitive. Religious institutions will continue to receive funding from adherents. But those responsible for appropriating those resources must become socially sensitive and economically savvy, and this is consistent with their duty to God and man, as they are indeed trustees of societies’ “talents” and must manage them in a manner that makes economic sense and is socially responsible. I will like to see religious organisations setting up microfinance banks, venture capital and private equity funds, technical and skill acquisition centres, industrial parks, technology-incubation centres, universities of science and technology, polytechnics, schools and hospitals such that they become agents of social justice, economic productivity, equality, opportunity and egalitarianism rather than allies of a corrupt, uncaring and oppressive state.

Poverty and the Flow of Capital

My recent three-part series, “Why Nigerians are Poor” was an attempt to distill my thoughts on poverty, unemployment and inequality over the past several years for the benefit of policy makers and the general public. I continue today with a focus on another aspect of Nigerian poverty-our sub-optimal deployment of capital and how it perpetuates endemic poverty in our society. Hernando de Soto in his seminal book, “The Mystery of Capital” emphasized the central role that capital plays in economic productivity and development noting that “great classical economists such as Adam Smith and Karl Marx believed that capital was the engine that powered the market economy…the principal part of the economic whole” quoting Smith to the effect that “capital was to be the magic that would enhance productivity and create surplus value”. He argued that “the lifeblood of capitalism is not the internet or fast-food franchises. It is capital. Only capital provides the means to support specialization and the production and exchange of assets in the expanded markets. It is capital that is the source of increasing productivity and therefore the wealth of nations”. De Soto worried about “dead capital”-“assets that cannot be used to their fullest” i.e. capital that is not optimally active and productive and estimated that about $9.3trillion (as at 2000) dead capital lay in real estate held but not backed by legal title owned by the poor in third world (Nigeria included) and former communist economies. Other manifestations of dead capital cited by him include agricultural crops not backed by deeds and businesses not supported by incorporation and limited liability. As I reflected on de Soto’s concerns over the years, I have recognized that Nigeria has a worse problem with capital than he conceived in his book! We have four socio-economic “sectors” which capture capital and prevent its optimum deployment to generate economic productivity, create wealth and alleviate poverty. These are government and politics; banks and the financial system; crony capitalists/monopolies and oligopolies; and religious institutions. There is a fifth “force” which destroys capital and that is our culture and lifestyle. I will examine each of these in turn. Government in Nigeria is not primarily a system of offering social services to the citizenry, especially the poor. It does not by-and-large provide security for the common man; and it fails to prevent breach of its laws, especially by the rich, strong and powerful. In short, Nigeria’s governments do not perform, at least not successfully, the critical functions for which governments and thus politics were established. Instead politics is essentially a vehicle for seeking capture of state resources which are obtained primarily from extractive resources. It is not a co-incidence that the richest Nigerians are present, past or “present-continuous” office holders and their friends, agents and associates. Nigeria’s corruption is offensive not just because it denies the public services and infrastructure, but because it subverts the flow of capital, putting enormous resources in the hands of a few, who then hide those resources in physical, monetary or other assets within or outside the country, turning resources which should have generated wealth for all into essentially “dead capital”!!! The Banks lend money of course and in theory circulate capital-the problem is who or what they lend to! They lend to government in form of treasury bills to fund government operations (recall what happens to government resources discussed above); and to big corporations, multi-millionaires and billionaires, shutting out small and medium enterprises from the asset side of the financial sector even though their deposits are a significant component of the liability side. With this cycle of exclusion, it is not at all a mystery that Nigeria has created billionaires in units and poverty in hundreds of millions!!! This defective structure of capital (mis)allocation is compounded by our practice of crony capitalism! Our most successful businesses are in reality an extension of the phenomenon of state capture earlier highlighted. Crony capitalism (which tends to result in the creation of monopolies and oligopolies) is not based on economic competitiveness, but transfers of economic rents from government to its cronies in the private sector. The poor then suffer a “double-whammy”-publicly-owned resources are cornered by a few entrenching their poverty; and the emerging uncompetitive market structures mean they pay more for goods and services! The solution is to enact a robust competition law and policy regime!!! Finally much as I am reluctant to say this, the economic reality is that big religious institutions secure huge financial and other assets (in effect taxes on their members) which are often deployed in ways that erode economic productivity and therefore entrench poverty and deprivation. I understand of course that people must fulfil the financial obligations of their faith, but it is important that religious leaders are socially sensitive in deploying such accumulated capital. What is wrong for instance if such groups request their chapters to set up universities, polytechnics, secondary and primary schools, hospitals, hospices, technical and skills acquisition schools etc. in large numbers such that the social value of their activities offsets the economic cost of sequestered capital! Then we have destructive aspects of culture that destroy capital formation-excessive amounts spent on weddings, funerals and other celebrations, even by the poor; the tendency to consume foreign-made items whether food, football clubs, holidays, clothes, education, medical treatment, furniture, wine and spirits, and shoes! A huge amount of capital would be released for wealth creation and economic productivity if we reform many aspects of our lifestyles!!!