Week 10 - Poverty, Foreign Aid, and the Limits of Charity
Day 1 - Getting Started
- Bernie Sanders, presidential candidate in 2020, stated, "Millions of Americans are working for totally inadequate wages. We must ensure that no full-time worker lives in poverty. The current federal minimum wage is starvation pay and must become a living wage. We must increase it to $15 an hour.…" Would increasing the minimum wage to $15 an hour give workers a "living wage" and help reduce the poverty rate in the United States. Why, or why not?
- No; increasing the minimum wage to $15 an hour would not give workers a "living wage" and help reduce the poverty rate in the United States. The reason is that employers would find creative ways to hire as few people as possible to get the job done, or they would limit the number of hours that their employees work. They might also only hire more qualified employees so they do not have to spend as much time training less-experienced employees. Furthermore, prices will go up as a result of the wage increase; for example, if the minimum wage goes up for employees working at a fast food restaurant, the employer will compensate by increasing the price of the food he sells. This will hurt poorer people who buy food from the restaurant.
- This week you will be learning about poverty in developing countries and foreign aid. Unlike poverty in the U.S., poverty in less developed countries is far more likely to involve hunger, malnutrition, and a much higher infant mortality rate. We’ve all seen the desperate pictures of starving, pot-bellied naked children and felt the outrage, and it just doesn’t seem to get better. What can Americans do to affect real change in developing countries?
- Americans can do three things: 1. Support developing countries in getting connected to other countries through trade, the Internet, etc. 2. Support developing countries in establishing an economic system of both freedom and a stable rule of law. There must be both a free market and private property rights. 3. Partner with developing countries to support local business. Instead of giving free goods to developing countries, encourage the business and entrepreneurship of the citizens of the countries.
Day 2 - Discovering Prudence
Minimum Wages and Unintended Consequences
- 1. What message did Richards discover on his quick read through the entire Bible?
- On his quick read through the entire Bible, Richards discovered that "the message from Genesis to Revelation" (43) is "God's abiding concern for the poor, and his expectation that we share his concern" (43).
- 2. Explain what is meant by Etienne Gilson’s quote, “Piety is no substitute for technique."
- Etienne Gilson's quote means "that having the right intentions, being oriented in the right way, doesn't take the place of doing things right" (45).
- 3. When it comes to helping someone in need, how can focusing on our motives become a stumbling block?
- When it comes to helping someone in need, focusing on our motives can become a stumbling block by "distract[ing] us from doing the right thing at the right time. Teenagers rightly ask, "What would Jesus do?" not "How would Jesus feel about what he does?"" (46).
- 4. What does “prudence” mean and why does helping the poor hinge on this particular virtue?
- The word "prudence" means ""to see reality as it is, and to act accordingly." If you're prudent, you'll strive to conform your mind, and then your actions, to reality" (46). Helping the poor hinges on this particular virtue because "in the economic realm, actions have all sorts of unintended consequences. We can't anticipate all of them. But we can anticipate a lot of them" (46). This means that "if you really want to help the poor, you have to exercise prudence---to know what the world is really like, and act accordingly" (46-47).
- 5. What “reality” does a fixed minimum wage ignore?
- The "reality" that a fixed minimum wage ignores is that to "a business, employee wages are costs. The fact that a government sets a minimum wage doesn't mean an employer can or will pay it" (49). It is crucial to remember that a "wage is a price on labor. Different kinds of labor, such as dishwashing and retina surgery, have different economic values, depending on who, where, when, what, and how of the labor" (49). A fixed minimum wage is "a form of price fixing that targets the very people who can least afford it" (49).
- 6. Who suffers the most as a result of minimum wage laws and why are the very ones they are intended to help, harmed most?
- The people who suffer the most as a result of minimum wage laws "are always those at the bottom" the unskilled, young, inarticulate, and handicapped workers, who need to grab the bottom rung of the economic ladder" (50). Why are these people harmed most? The reason is that in "a diverse economy...low-paying jobs are entry-level jobs. Like it or not, some people need entry-level jobs very close to the ground floor...Minimum-wage laws favor vocal and visible workers over the vulnerable workers who can least afford to be unemployed" (50).
- 7. Fill in the blanks below:
- Few Americans are stuck earning minimum wages indefinitely. The BLS concluded that 63 percent of minimum-wage workers receive raises within one year of employment and that, after three years, only 15 percent still earned the minimum wage.
- 8. What unintended consequence of the minimum wage law was noted by columnist, George P. Will?
- As noted by columnist George F. Will, raising ""the minimum wage predictably makes work more attractive relative to school for some teenagers, and raises the dropout rate. Two scholars report that in states that allow persons to leave school before 18, a 10 percent increase in the state minimum wage caused teenage school enrollment to drop 2 percent"" (2).
- 9. As opposed to misguided federal mandates that have not worked, what policies have brought many out of poverty in the 21st century?
- As opposed to misguided federal mandates that have not worked, "policies that promote free enterprise, job creation, education, and training [are the policies that] allow wealth to be created. And only the creation of real wealth will bring the poor out of poverty in the 21st century, as it has done for countless others in the previous two centuries" (3).
Reflections on the Minimum Wage and Poverty by Bishop Harry R. Jackson, Jr. (pdf - 108.23 KB)
Reflections on the Minimum Wage and Poverty by Bishop Harry R. Jackson, Jr.
Day 3 - The Limits of Charity
Fair Trade and Foreign Aid
- 10. What accounts for the price difference between what you pay for a cup of Java at Starbucks and the market price for coffee beans?
- The price difference between what you pay for a cup of coffee at Starbucks and the market price for coffee beans can be accounted for by the fact that "the economic value of the coffee has changed from [the coffee farmer to the Starbucks]. A pound of green coffee beans in Brazil hasn't been packaged, preserved, labeled, shipped, delivered, carefully roasted, prepared to extremely finicky specifications with expensive equipment, and served piping hot by a barista to a customer in a nicely appointed Starbucks in Bellevue, Washington. Economic value has been added over and over to the beans as they go up the supply chain" (51).
- 11. How does our paying of "artificially" high prices for coffee hurt the very people (i.e., poor coffee farmers in third world countries) it was intended to help?
- Our paying of "artificially" high prices for coffee "encourages poor farmers to enter or stay in the coffee market when it's against their long-term interest to do so...While the market price for raw coffee will get more competitive, the artificially high "fair trade" prices encourage some farmers to enter and stay in quirky markets when their products aren't all that competitive...As it is, the future livelihood of farmers who benefit from "fair trade" outfits depends on millions of people continuing to pay high "fair trade" prices while remaining clueless of the economics" (52-53).
- 12. How could the charity of those who would pay extra for the fair-trade label, be channeled to better help the farmers in countries that provide us with cheap coffee?
- The reality is that "most of the countries that provide coffee have abysmal property laws. Many farmers don't have solid titles to their land, so they're neither willing nor able to make a long-term investment in it or sell it and do something else...Even those who have titles often need advice on what to produce" (53-54). Since many "organizations are working to improve these situations" (54), the charity of those who would pay extra for the fair-trade label could be better channeled to help poor coffee farmers if it were used to "support projects that do long-term good for third-world farmers, even if those projects don't provide a quick compassion fix for American coffee drinkers" (54).
- 13. What do the incentives provided by foreign aid encourage the governments of poor countries to do?
- The incentives provided by foreign aid encourage the governments of poor countries to do many things, including the following: 1. Use the funds for their own gain, because with "few or no strings attached, it [is] all too easy for the funds to be used for anything, save the developmental purpose for which they [are] intended...A constant stream of “free” money is a perfect way to keep an inefficient or simply bad government in power. As aid flows in, there is nothing more for the government to do—it doesn’t need to raise taxes, and as long as it pays the army, it doesn’t have to take account of its disgruntled citizens" (3-4). The only thing that "the government really needs to do is to court and cater to its foreign donors to stay in power" (4). 2. Request more aid instead of working towards long-term solutions. When they are stuck "in an aid world of no incentives, there is no reason for governments to seek other, better, more transparent ways of raising development finance (such as accessing the bond market, despite how hard that might be). The aid system encourages poor-country governments to pick up the phone and ask the donor agencies for the next capital infusion" (4). Furthermore, the continuous aid hurts local workers and businesses. If the citizens of the country can receive a good or service at no cost, why would they purchase that good or service from a local business? This enslaves people in poor countries to foreign aid instead of encouraging them to support local businesses that can help families flourish and build up resources in the community.
- 14. How do the large inflows of aid money contribute to the civil strife and war that has plagued the continent of Africa?
- The large inflows of aid money contribute to the civil strife and war that has plagued the continent of Africa because civil "clashes are often motivated by the knowledge that by seizing the seat of power, the victor gains virtually unfettered access to the package of aid that comes with it. The ongoing political volatility across the continent serves as a reminder that aid-financed efforts to force-feed democracy to economies facing ever-growing poverty and difficult economic prospects remain, at best, precariously vulnerable. Long-term political success can only be achieved once a solid economic trajectory has been established" (5).
- 15. According to the author, what delivers growth and reduces poverty?
- According to the author, the economies "that do not depend on aid succeed. [This] is true for economically successful countries such as China and India, and even closer to home, in South Africa and Botswana. Their strategy of development finance emphasizes the important role of entrepreneurship and markets over a staid aid-system of development that preaches hand-outs" (6). Furthermore, governments "need to attract more foreign direct investment by creating attractive tax structures and reducing the red tape and complex regulations for businesses. African nations should also focus on increasing trade; China is one promising partner. And Western countries can help by cutting off the cycle of giving something for nothing" (6).
Why Foreign Aid Is Hurting Africa by Dambisa Moyo
Day 4 - Economic Freedom
The Path to Flourishing
- 16. Data from the World Bank and the International Labor Office indicates the past 25 years have witnessed the greatest reduction in global poverty in the history of the world. To what is this reduction in poverty attributed?
- This reduction in poverty is attributed "to the spread of capitalism. Over the past few decades, developing countries have embraced economic-policy reforms that have cleared the way for private enterprise" (1).
- 17. Why do college students and other young Americans have such negative views of capitalism?
- College students and other young Americans have negative views of capitalism because there is "a false analogy that linked the term with “exploitation.” Marxists thought the old economic system in which landlords exploited peasants (feudalism) was being replaced by a new economic system in which capital owners exploited industrial workers (capitalism)" (3).
- 18. How do biblical scholars describe the concept of flourishing (or Shalom) as used in the Old Testament, and what does it signify? What does Shalom denote about relationship?
- Biblical scholars describe the concept of flourishing (or shalom) as the Old Testament describes it; the "Old Testament prophets pictured shalom as the wolf living with the lamb, weapons turned into farming tools, deserts blooming, and the mountains streaming with red wine (Isaiah 2:4, 11:6, Ezekiel 36:35, Amos 9:13)" (1). The concept of flourishing (or shalom) "signifies a number of things, including salvation, wholeness, integrity, soundness, community, connectedness, righteousness, justice, and well-being" (1). Concerning relationship, shalom "denotes a right relationship with God, with others, and with God’s good creation" (1-2).
- 19. What are Christians called to do while they await Christ's return?
- While they await Christ's return, "Christians are called to work toward shalom...This working towards shalom can be described as flourishing" (2).
- 20. What three basic aspects of life are most harmed by a lack of economic freedom?
- The three basic aspects of life that are most harmed by a lack of economic freedom are "1) life expectancy 2) infant mortality and 3) the ability to work and survive" (2).
- 21. Do countries with economic freedom have much less corruption than those that are less free? Why, or why not?
- Countries "with more economic freedom have much less corruption than those that are less free" (6). The reason is that "corruption fills the void" (6) when "economic freedom is absent...Corruption benefits those who are already in power" (6).
The Ultimate Global Antipoverty Program by Douglas A. Irwin
Economic Freedom: The Path to Flourishing for the Poor by J. Connors and A. Bradley (pdf - 261.41 KB)
Economic Freedom: The Path to Flourishing for the Poor by J. Connors and A. Bradley
Day 5 - When Helping Hurts
Hearing the Voiceless and Restoring Relationships
- 22. Both the World Bank study and an informal survey of 20 HOPE International Rwandan clients highlight that “by nature, poverty is innately social and psychological.” How do the financially poor often characterize their situation and what harms result from our misunderstanding the root causes of poverty?
- The financially poor ""typically talk in terms of shame, inferiority, powerlessness, humiliation, fear, hopelessness, depression, social isolation, and voicelessness"" (2). When we misunderstand the root causes of poverty, we focus on charity; however, even "when offered with compassion, traditional charity, which should be only a temporary fix, can often enslave individuals—becoming a poverty trap—if extended into the long term. Instead of focusing on the potential of [poor people], charity cheats them of using their God-given abilities and talents" (2).
- 23. The downward spiral of charity is best described in Toxic Charity by author Bob Lupton. What are the five steps that comprise the negative cycle of giving?
- The five steps that comprise the negative cycle of giving are as follows: "1. Give once and you elicit appreciation; 2. Give twice and you create anticipation; 3. Give three times and you create expectation; 4. Give four times and it becomes entitlement; 5. Give five times and you establish dependency" (2).
- 24. Fill in the blanks below: Then answer this question: According to Giles Bolton, why is development a much better value than relief?
- Obedience to the biblical command to clothe the naked and to give food to the hungry requires us “to go beyond surface needs—the symptoms of poverty—an effective response demands a longer-term commitment." According to Giles Bolton, development is a much better value than relief ""because it gives poor people control over their own lives and enables them better to withstand future humanitarian disasters without outside help"" (3).
- 25. According to Paul Collier, what is the “romantic vision of the poor” and what has that vision led to?
- According to Paul Collier, our "romantic vision of the poor" is that they are ""being so exploited that they should just be left to retreat into self-sufficiency...the organic, holistic peasant, uncontaminated by the dirty business of a market economy"" (4). That vision "has often led to a broken system of aid...Aid doesn’t transform poverty to prosperity; it has actually hindered economic growth worldwide. Desmond Tutu, human rights leader and former Anglican bishop, has commented that, “[Aid] becomes a way of colonizing the economies of the poor countries—a system of economic slavery"" (4).
- 26. Now that there has been a rediscovery of what Nigerian-American writer Teju Cole calls the “White Savior Industrial Complex,” many in the global aid community are beginning to see there is a new model to alleviate global poverty. What is it?
- The "new model to alleviate global poverty [is] job creation" (5). Factors that contribute to this job creation include "trade" (5), "increased investment" (5), and "financial tools" (5).
- 27. Fill in the blanks below:
- The new approach used by the Central Baptist Church, Harare to help Fadzai, was “based on the belief that the greater gift they could give would be to equip Fadzai to provide for herself.”
- 28. What are four essential tools churches and faith communities need to aim to provide in order to best equip a family to work its way out of poverty?
- The four essential tools are "business training and job preparedness, financial literacy, business mentoring, and access to capital" (6).
- 29. What is the changing philosophy on poverty alleviation that Fadzai’s story reflects?
- The changing philosophy switches the heart of poverty alleviation from "handouts to enterprise" (6). It "focuses more on the dignity, creativity, and capacity of the poor, rather than their material deficit" (6). It encourages sustainable "development through business" (6), business "training and mentoring" (6), "access to capital" (6), and "opportunity, responsibility, and dignity to the poor" (6). The "leaders of this new movement are individuals like Fadzai—those who are creating jobs, providing for their families, and bringing hope to their communities" (6).
STOP HELPING US! A Call to Compassionately Move Beyond Charity