Centennial Review - June 2014

THE ONLY SOLUTION
TO WORLD POVERTY
By Wayne Grudem
Tere is only one efective
solution to world poverty. It is
the only solution that has ever
worked or will ever work. It
is evident from the history of
every wealthy nation today, and
is consistent with the teachings
of the Bible about productivity,
property, government, and
personal moral values.
My personal interest in this topic was kindled by reading
statements like this in the Bible: “Blessed is the one who
considers the poor!” (Psalm 41:1). But what
was I doing to help the poor? Very little.
I wondered if my work as a professor of
theology and biblical studies might equip me
to make some contribution to the problem of
world poverty.
Ten I began talking with a professional economist, Dr.
Barry Asmus, who happened to be a fellow elder with me at
Scottsdale Bible Church in Arizona. We discovered that we
had a combination of academic backgrounds (economics
plus biblical ethics) that gave us deeper insight into the
problem of poverty.
Seventy-nine Critical Factors
After several years of research, we now think we understand
why some nations became wealthy and why other nations
remained poor. In fact, our research discovered 79 factors
within nations that have led to increased prosperity in
whole nations over the last 250 years. Tese fall into three
large categories:
■ A nation’s economic system must be a free-market
system with efective rule of law and easily documented
property rights;
■ A nation’s government must be one in which leaders
use their power to beneft the nation as a whole rather
than simply themselves and their friends; and
Editor, John Andrews
Principled Ideas from the Centennial Institute
Volume 9, Number 6 • June 2014
Publisher, William L. Armstrong
Wayne Grudem is research professor of theology and biblical studies at Phoenix
Seminary in Arizona. With degrees from Harvard and Cambridge, he has authored
15 books, including Politics According to the Bible (2010) and The Poverty of
Nations: A Sustainable Solution (2013). This essay is adapted from his lecture at
Colorado Christian University on April 11, 2014.
Centennial Institute sponsors research, events, and publications to enhance
public understanding of the most important issues facing our state and nation.
By proclaiming Truth, we aim to foster faith, family, and freedom,
teach citizenship, and renew the spirit of 1776.
Can biblical
values help
raise GDP?
■ A nation’s cultural values and beliefs must refect such
moral teachings from the Bible as telling the truth, not
stealing, valuing literacy and education, viewing one’s
daily work as a responsibility from God, and believing
that God will one day hold all people accountable for
their actions.
Our book, Te Poverty of Nations: A Sustainable Solution,
details these fndings. It does not discuss how to help poor
individuals or local communities, since many others are
doing good work in these areas. Rather, our book addresses
the causes of poverty and prosperity at the level of the
whole nation.
Tis is because we are convinced that the primary causes of
poverty are factors that afect an entire nation. We are not
aware of any other book that addresses poverty at the level
of the whole nation from an explicitly biblical or Christian
perspective.
Poor Haiti, Rich Norway: Why?
Two basic economic concepts are important
for understanding how nations can escape
from poverty.
First, per capita income is the standard
measure of whether a country is rich or poor.
Income per person is very low in poor countries such as
Haiti at $1300, Uganda at $1400, or Pakistan at $2900.
Countries in the low-middle income range would include
India at $3900—on its way up, but still poor. Still more
prosperous are countries in the high-middle income range,
such as China at $9100 or Mexico at $15,300.
Finally, there are countries with a high per capita income,
such as Japan at $36,200, Germany at $39,100, the United
States at $49,800, or Norway at $55,300.
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Second, gross domestic
product (GDP) is the
standard measure of what
a country produces in a
year. Gregory Mankiw has
defned it as “the market
value of all fnal goods and
services produced within a
country” in a given year.
1

In concrete terms, it is the
total value of all the things
like shoes, sweaters, apples,
potatoes, automobiles,
and services produced in
an economy in a year.
Imagine Honduras Overtaking China
Gross domestic product at the national level is the main
factor that determines a country’s wealth or poverty at the
individual level. Per capita income is calculated by dividing
the country’s GDP by its total population.
To take a simplifed example in very round numbers,
consider the nation of Honduras. It has 8
million people and a GDP of $36 billion.
Dividing the latter by the former, we see that
Honduras has a per capita income of $4500,
still quite poor.
Now, imagine that somehow Honduras could
double its GDP from $36 billion to $72 billion. Dividing
that new fgure by the same 8 million population, we’d
suddenly fnd that Honduras had moved into the high-
middle income category with per capita income of $9,000
—on pace with China, and substantial progress in escaping
from poverty.
Te focus of any poor nation’s eforts to overcome poverty
must therefore be on increasing its production of goods
and services. Leaders must focus relentlessly on the goal
of increasing GDP. Tis alone will bring a country out of
poverty.
“What will increase our country’s GDP?” Tat’s the most
important economic question facing any poor nation. And
that’s the question our book attempts to answer. Te book
brings a message of hope, because it gives poor nations
those 79 concrete steps that can be taken to begin to move
Centennial Review, June 2014 ▪ 2
Foreign aid
is often
harmful.
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out of poverty. Even if a country cannot implement all of
them at once, every step taken will be somewhat helpful in
the struggle to escape poverty.
Four Wrong Answers
What about other approaches that have been tried, other
answers that have been proposed? None of them works.
■ Foreign aid doesn’t work. Whether sent by governments
in rich countries or by the World Bank, it often does more
harm than good. No poor country has ever escaped from
poverty by means of such foreign aid. If the aid is given
through government channels, it will be distributed by
government ofcials in the poor country. Almost inevitably,
much of the money will end up in the pockets of these
rulers and their friends.
Te problem does not end there. Soon, everybody in the
poor nation knows that the quickest path to riches is to gain
control of the government, because then you have access to
the nation’s treasury and all the aid money. Tis foments
military coups and civil wars. Rulers try to cling to power
for their whole lives. Tere is little hope for a genuinely
democratic government or free and open elections.
Government-to-government foreign aid can
never solve poverty. Not even the Marshall
Plan after World War II is an exception—
since Germany was already a wealthy
country, and the Marshall Plan simply
rebuilt what the war had destroyed.
■ Debt forgiveness for poor nations doesn’t work either.
It just becomes more foreign aid given in a two-step process
—frst the loan, then its cancellation.
■ Lack of natural resources is not what causes poverty.
Many nations in Africa and Latin America have abundant
natural resources, but they remain poor. By contrast, some
nations have few natural resources but they have become
very prosperous—think of Japan, Taiwan, and Singapore.
■ Nor does blaming poverty on outside factors solve
the problem. We devote an entire section of our book to
analyzing such complex factors as colonialism, the world
economic system, multinational corporations, or richer
nations’ impact on poorer ones.
But there is little that any poor country can do to infuence
them. For every poor country, the solution to poverty will
only come when a country places its focus on what it can
do—by looking forward in a positive way—to produce more
goods and services of value each year.
Workfare in Ancient Israel
Te Bible supports the idea that nations must produce their
own prosperity. When Israel came into the Promised Land,
God did not promise them perennial donations of riches
from other nations.
He promised them hills flled with iron and copper, which
they would have to dig and fnd, and felds of vines and fg
trees, which they would have to tend and harvest each year.
God’s blessing of prosperity was to come through productive
work (see Deuteronomy 8:7-10).
Te manna from heaven that the people of Israel ate in the
wilderness—celestial foreign aid, if you will—ceased on the
day after they ate from the frst harvest in the Promised Land
(Joshua 5:12).
Even the poor in Israel had to work for what they
got by gathering the gleanings that were left at the
edges of the felds (Leviticus 19:9-10). Tere is
no thought in the Bible that poor people or poor
nations were to become dependent on donations
from others year after year.
Beware Paternalism
Tis is not to oppose charitable donations such as sending
food, medical care, and other gifts to poor individuals (not to
governments) in other countries. Such donations often meet
urgent needs, and this is good. But such gifts are treating the
symptom rather than the cause.
If I bring food to hungry people in a poor nation, that solves
the symptom, hunger. But it does not treat the cause—the
poor nation’s failure to produce enough of its own food.
Sending medical teams likewise treats the symptom, disease.
But it does not treat the cause—the poor nation’s failure to
produce enough of its own medical care. Sending teams of
teachers treats another symptom, lack of education. But it
does not treat the cause—the poor nation’s failure to produce
enough of its own teachers.
Dependency ultimately is not the answer, and that’s why our
book can be a source of encouragement for leaders in poor
nations. Unlike those who tell such leaders, “You need to
depend on people in other nations to solve your problem of
poverty,” we are saying the opposite:
“We believe that you can solve this problem yourselves, and
here are helpful steps that other nations have taken in the
past and that are supported by the ethical teachings of the
Bible, as well. We believe that you can implement these steps
in your own nation, and that when you do, they will bring
many positive results.”
Centennial Review, June 2014 ▪ 3
Te great advantage of such an approach is that it avoids
paternalism—doing things for people that they can do for
themselves.
Look at History
Have any poor nations ever brought themselves out of
poverty? Yes. In fact, every wealthy nation in the world
today has done that at some point in the last 250 years.
For most of human history, there were no wealthy nations.
Tere were a few wealthy kings and royal families, but
most people remained poor.
Ten suddenly with the Industrial Revolution, starting
about 1770, Britain’s factories began producing cotton
and other goods faster, cheaper, and better than anybody
else. Northern Europe and North America soon followed.
Te per capita income in these nations doubled, then
quadrupled, and kept on rising.
Te same pattern has continued more recently. In the
early 1900s, Japan was a poor nation. Now it
produces cars, TVs, steel, and ships, boasting
the third largest economy in the world.
South Korea was poorer than many nations
in Africa in the 1950s, but today it is the
world’s twelfth largest economy, producing
cars, phones, and other high-tech products that are sold
around the world.
Chile has become a high-middle income nation largely
through exports of fruits and vegetables. China is rising
out of poverty by producing thousands of manufactured
goods. Every nation in history that has risen out of poverty
has done so by producing its own prosperity.
Wanted: Heroic Leaders, Engaged Readers
To anyone in a leadership role in a poor country, the hope-
flled message of
our book is this:
there is a solution
to poverty that
really works.
It has been
proven again and
again in world
history. And
it is supported
by both the
history of world
e c o n o m i c
d e v e l o p me n t
and the moral
teachings of the
Bible.
Here’s a
proven
roadmap.
“When you reap the harvest of your land, do not
gather the gleanings. Leave them for the poor.” Ruth
gleans, watched by Boaz (Gustave Doré, 1832-1883).
Centennial Review
June 2014
Te Only Solution
to World Poverty
By Wayne Grudem
Increasing a nation’s economic output
so as to raise income per person is the
one antidote for poverty. Foreign aid
doesn’t work, nor are scarce resources
and colonialism to blame. Historical
experience identifes 79 prosperity
factors, summed up in a market economy, a responsive political
order, and biblical values.
Centennial Institute
Colorado Christian University
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Lakewood, CO 80226
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Centennial Review, June 2014 ▪ 4
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If this solution is put into place, it will lift whole nations
out of poverty, not just a few individuals. We are asking
heroic leaders in poor nations to consider this solution for
their nations as well.
To anyone in a wealthy country who is genuinely concerned
about the poor, we encourage you to read our book and
become much better informed about what really causes
poverty and wealth. From there, you can more
intelligently consider what you also can do to
help.
Depression and Oppression
Tis issue is much more important than many
of us realize. People who live in wealthy societies
often think of poverty in terms of the lack of material things
such as adequate food and shelter. But Steve Corbett and
Brian Fikkert tell us that the tragedy goes much deeper:
While poor people mention having a lack of material
things, they tend to describe their condition in far more
psychological and social terms than our North American
audiences. Poor people typically talk in terms of shame,
inferiority, powerlessness, humiliation, fear, hopelessness,
depression, social isolation, and voicelessness . . . .
Low-income people daily face a struggle to survive that
creates feelings of helplessness, anxiety, sufocation, and
desperation that are simply unparalleled in the lives of the
rest of humanity.
2

Millions of poor people around the world today remain
trapped in such lifelong poverty. Tey are not poor because
people in other nations are rich. Tey are poor because
their nations are living under oppression.
Set Tem Free, Let Tem Prosper
Tey are oppressed by economic systems that cannot
bring prosperity, except for a tiny despotic elite. Tey
are oppressed by laws and governments that
cannot bring prosperity except for a tiny
group of privileged rulers. Tey are oppressed
by dominant cultural beliefs and values that
perpetuate poverty and cannot produce
prosperity.
Te Poverty of Nations: A Sustainable Solution points heroic
leaders in poor countries toward 79 specifc steps that they
can take, steps that will enable them gradually to set their
people free from these oppressions and gain for them the
freedom that God intended them to have, so that they will
increasingly produce their own prosperity.
Tis is a genuinely sustainable solution to world poverty.
Tere is no other. ■
Footnotes:
1. N. Gregory Mankiw, Principles of Economics (Orlando, FL: Dryden
Press, 1998), 480.
2. Steve Corbett and Brian Fikkert, When Helping Hurts (Chicago: Moody,
2009), 52–53, 70.