The nations of the world are facing economic turmoil. Why do prices keep going up? Why do we have inflation, recessions and continual financial crises? There are answers. God's Word sheds light on the mysteries of today's confused economics.
INFLATION is the number one present danger the Western world now faces. When prices are soaring and the value of money is tumbling, everyone is affected — housewives, wage earners, pensioners, large corporations, international banks and national governments. Newspapers and magazines are filled with articles about the inflation problem — a problem that is showing signs of becoming a raging fire storm. But even if it were allowed to continue at its present rate, economists and government experts tell us inflation could easily destroy the fragile fabric of every democratic society and pave the way for a dictatorship — either to the right or left.
A Threat to Democracy
Denis Healey, Britain's Chancellor of the Exchequer, recently warned: "Unless we can somehow halt the present inflationary trend in our economy, the political and social strains may be too violent for the fabric of our democratic institutions to withstand." Many European bankers and economists are warning that unless America and Europe work together to bring inflation under control, the world will be pushed into a recession comparable in length and distress only to the big depression of the 1930s. Arthur F. Burns, Chairman of the Federal Reserve Board, recently said "inflation has emerged as the most dangerous economic ailment of our time."
A Worldwide Problem
Inflation is worldwide in scale. It has swept across national borders to infect almost every country at the same time. As a result the financial plight of some nations is extreme. The yearly inflation rate in many Western countries is running close to 20%. Britain is on the threshold of its worst-ever economic crisis. Both the United States and Japan are doggedly attempting to beat back the fires of inflation before they create a state of emergency. Inflation is a matter of deep concern to the whole world. It is reducing the buying power of wages and pensions, devouring family savings and spreading insecurity. As prices continue to soar, families struggle to recoup lost purchasing power. When wages fail to keep up with prices, workers demand bigger and bigger wage increases. This leads to more strikes, demonstrations — and adds yet more impetus to the inflationary spiral. Where will it all end? A growing economy needs a growing stock of money to cover increases in the output of goods and services. If money is created faster than a nation's productivity, there will be greater demand for goods and prices will rise. All seems to go well as long as the inflation rate is kept low. But too much inflation will eventually cause the economic balloon to burst. Keeping the balloon inflated at the right pressure has seldom been achieved by governments in the Western world for any length of time. Governments have tried to control inflation by manipulating taxes and interest rates, by instituting wage and price freezes, credit controls, and by many other means. But controls are seldom applied with sufficient vigor or duration to accomplish their desired ends. After a freeze, there is usually a rapid thaw that makes the problem even worse. The higher cost of oil and shortages of basic raw materials are other factors that have recently added fuel to the fires of inflation. And these fires now appear to be heating up. More and more we get the uncomfortable feeling that no one quite knows what to do about it.
What is the Solution?
As Irving Friedman, economic advisor to the President of the World Bank, said: "The persistence of inflation makes it necessary to look deeper for causes and effects. Unless these are understood, we will not understand why persistent inflation is a destroyer of modern societies and we cannot know how to begin to deal with this problem effectively" (Inflation — A World-wide Disaster. Hamish Hamilton, London, 1973, page 7). When there are soaring prices the economy is suffering from price inflation. Economists recognize that this is usually the effect — the result — of excessive monetary inflation. Money has lost its purchasing power and no longer buys very much. Such a situation is described in the Bible. The Prophet Haggai vividly portrays what could be described as the effects of inflation in our day when he said: "Consider your way of life. You have sown much [worked hard] but reaped little; you eat but never as much as you wish, you drink but never more than you need, you are clothed but never warm, and the labourer puts his wages into a purse with a hole in it" (Haggai 1:5-6, N.E.B.). Our money doesn't buy very much and soon vanishes, as if our purse or billfold had a hole in it. But there is a cause for every effect. There is something drastically wrong with this world's economy. All the suffering, poverty and economic problems we see in the world around us are the result — the penalty — of living in violation of laws and principles God set in motion at creation. Surprisingly, God's Word — the Holy Bible — reveals the root cause of economic troubles.
God is the Lawgiver
The Bible is a book of law. It lays down fundamental principles and rules for the conduct of men and women in their daily lives. It also gives civil laws, including economic laws, for perfect government — the only laws that can bring peace, happiness and prosperity to the individual and the nation. God is the one source and origin of all basic laws. This is true whether they govern the material universe, the physical creation or the spiritual, moral and economic life of man. Our very health and prosperity, our conduct individually, socially and governmentally are all regulated by laws. If we, individually or as a nation, keep and observe these laws, we will be blessed with peaceful, prosperous and abundant living (Lev. 26:1-13). God revealed all of His laws to ancient Israel. The Ten Commandments (Ex. 20) formed the basis of God's Law, but in addition to these Commandments, many statutes were also given for the general well-being of the people — together with judgments for the protection of everyone's legal rights. These statutes and judgments are all perfectly just and designed by God for the perfect working of a nation (Ps. 19:7-9). God's Laws embrace all the needs, activities and requirements of men and nations. At least in principle. they cover every type of situation and give the solution to moral, social and economic problems. There are statutes in God's law for regulating sickness, disease, legislation, farming, international affairs, sex and marriage, warfare, state and religious ceremonies, politics and government. And there are economic statutes for regulating land tenure, taxation, commerce, labour relations, debtors, welfare, weights and measures and finance.
Perfect Economic System
Ancient Israel was to demonstrate to the world the perfection of God's Law in operation (Deut. 4:1-8). God gave Israel an economic system designed to produce prosperity and full employment for all. This system of law made Israel great as long as the leaders administered and obeyed the statutes and judgments God gave. But Israel departed from obeying God's Law and as a result suffered from the curses described in Leviticus 26 and Deuteronomy 28. Those same curses are upon our nations today because of violating every economic law and principle that God gave to ancient Israel. Whether we have poverty, a period of inflation, recession or a depression — it's because economic laws have been broken and we are paying the penalty. (This is not to say there are not other factors involved in world economic problems: war, famine, drought, political problems which affect the stock market, etc. — all play their part.) We need to understand what those laws are. Many of God's laws were designed to protect the family unit. Families in Israel were economic units that formed the foundation of a tribal community. They had to be safeguarded from poverty and given fair access to land that would provide the means to sustain a living. God's economic system made that possible.
A Free Land Grant
When ancient Israel entered Palestine forty years after the Exodus, the land was distributed to each family according to its size (Numbers 33:54). It was a land reform program that has never been equaled since. Each family received a free land grant sufficient to maintain a livelihood. This land would always belong to the family as an inheritance. The purchase of large estates was not profitable because of another statute. If the land were ever sold, it automatically returned to the original family in the year of Jubilee. This meant the land was actually sold under lease and for no longer than 49 years (Lev. 25:10-13). The sale price was according to what the land would produce during the lease period (verses 14-17). Land speculation — one of the factors that increases inflation — was impossible under such a system. Property tax (or rates) and inheritance taxes (or death duties) did not exist! Instead of taxation at rates from 20 to 90 percent, God gave Israel the tithing system. One tithe or tenth (10%) of the increase in crops and herds produced from the land was given to the Levites for an inheritance (Numbers 18:21). As the "civil servants" of that day, the Levites served in the tabernacle under Aaron and his sons who were the priests (I Chron. 23:28-32). Israel's was a theocratic government headed by God and consequently certain of the temple officials were among the highest in the land. It wasn't just a matter of maintaining the building and its furnishings, or of acting as porters or gatekeepers. Many assisted the priests in the administration of justice (I Chron. 23:4); others were in charge of the treasury (I Chron. 26:1-24). Levites were teachers (Deut. 24:8), singers (I Chron. 9:33), overseers and musicians (II Chron. 34:12-13). All of these governmental services were paid for out of the tithe. For those few who were poor and in need of help, additional provision was made every third year out of the seven-year cycle (Deut. 14:28-29). Israel also had a free food program for the poor (Lev. 19:9-10; Deut. 23:24-25), but different from the kind we have in America today. The people had to work to get the food they wanted (II Thes. 3:10).
Interest was not to be charged on loans given to the poor (Ex. 22:25). The term "usury" in the Bible meant any amount of interest, not just exorbitant interest as usury is considered today. Any form of gain made at the harmful expense of another person was forbidden. This law applied to all Israelites, not only the poor, but excluded foreigners (Deut. 23:19-20). The enormous sums involved in interest charges alone have enslaved individuals and entire nations in financial bondage. Usury is the most destructive principle in the economy of any society. (See one example in Nehemiah 5:1-12.) High interest rates increase the cost of production (if a corporation has to borrow money for capital investment); rob the nation of its wealth and encourage financial parasites. Yet our entire economic and social systems are built on this false principle which God's Word calls an "abomination" (Ezek. 18:8-13). God's way is the way of giving and helping. Loans between Israelites were to be made out of love and desire to help — not for personal gain. Christ taught the very same principle (Luke 6:30-35). A Christian can receive interest from savings and investments — but should not exact it from a "brother" in the family or church.
No Long-term Debts
God's law forbidding usury made it possible to create credit without multiplying debt — a masterpiece of legislation. The economic laws given to Israel (if obeyed) were designed to abolish poverty, injustice and indebtedness. Debt has become the 20th century American and British way of life. The entire financial system is elaborately geared to keep money moving in vast quantities from lenders to borrowers. At a time when the cost of borrowing (usury) is at record highs, people and businesses are going deeper and deeper into debt. It's all part of the inflation psychology. God gave a law to Israel that made it possible for His people to get out of debt. According to Deuteronomy 15:1-6, no debt could be paid or collected after the end of the sixth year of the established financial seven-year cycle. The seventh year was the time of "release" or clearing of all debts. (However, if this were suddenly done in today's society, economic chaos would result. Creditors would be wiped out!) This law protected the people from long-term loans and released them from bondage to creditors. Living in debt only lasted the maximum of six years after which a new start could be made. Our bankruptcy laws today are somewhat similar to this law of ancient Israel but are not so comprehensive. Think of a world where people will be able to buy what they need when they can afford it and when they have the cash to pay for it. A world where there is no interest charged on loans, where no loans last longer than six years and a world without twenty-year mortgages. That's what God wanted for the nation of Israel. A perfect economic system also needs to include a perfect and stable medium of exchange. Our money system is one of the root causes of our economic problems today. Ancient Israel could have avoided the same problems if they had obeyed God's Law which said: "You shall have a perfect and just weight, a perfect and just measure" (Deut. 25:13-16).
A Perfect Standard of Value
The ancient "shekel" used by Israel was both a weight of gold or silver and the unit of value in transactions. Abraham, for example, gave four hundred shekels in weight of silver for the cave of Machpelah (Gen. 23:16). Similarly, the "pound sterling" in Britain was originally a pound weight of sterling silver which also represented a denomination of money. Today it's merely a paper note. God intended that Israel should adopt an invariable standard of value. The words "shekel of the sanctuary" (Lev. 27:25) may refer to a standard weight kept in the tabernacle. This was to be the stabilizing factor in the economy. But both ancient Israel and Judah eventually departed from using a perfect and just measure of value. According to Amos 8:4-7, they made the ephah (measure of capacity) small and enlarged the shekel (weight of money). In other words, more money was required for less goods. Because they falsified all weights, balances and measures by deceit, money lost its value and purchasing power. Other ancient nations did the same. The weights of Babylon and Assyria conformed to no general standard through the ages. Weights varied greatly. Both "heavy" and "light" standards were used and undoubtedly to the advantage of the merchants. Our laws today have set the standard for weights and measures. But there is no standard of value. "Divers weights and measures" are in the bag of high finance. We have a standard of weights and measures that remains constant. The yardstick, pound (weight) and gallon do not change. But we don't have a stable standard of value that will enable currency to be a perfect and just measure of that value. A foot is always twelve inches, but how long does a dollar have the same value — the same purchasing power? Money that remains stable in value is as necessary as a yard that always remains at 36 inches. Changing values and prices tend to enrich the seller at the expense of the buyer. A stable, inviolate standard of value is needed to stabilize prices. Of course this is only part of the problem. Money can maintain the same value, say in relation to gold, but that won't keep prices from going up or down.
A Stable Money Supply
A perfect economy must include a system in which money maintains its value in terms of purchasing power. This would mean regulating the supply of money at the same ratio as the amount of productivity, according to economists like Milton Friedman and Henry Hazlitt. Inflation, they say, is primarily caused by government and the banking system when they increase the supply of money and credit beyond and in excess of the increase in goods and services. Henry Hazlitt explains what happens: "When the supply of money is increased, people have more money to offer for goods. If the supply of goods does not increase — or does not increase as much as the supply of money — then the prices of goods will go up. Each individual dollar becomes less valuable because there are more dollars. In the old days, governments inflated by clipping and debasing the coinage [and so produced a larger circulation of coins for the same amount of gold and silver]. Then they found they could inflate cheaper and faster simply by grinding out paper money on a printing press" (What You Should Know About Inflation by Henry Hazlitt, D. van Nostrand Co., Toronto, London, New York, 1966, page 2). The depreciation of currency is a major world problem. Most major nations are running the printing presses too much or creating excessive credit in their banking systems. That's why a growing number of jittery investors have lost confidence in the value of paper money. They are buying land, art, antiques, farm commodities, gold, silver and other metals. But at some future date, even gold and silver may become totally valueless (see Ezek. 7:12-19).
Human Nature Causes Inflation
Our money system today depends on human nature and its craving for more material goods. Selfishness, pride and greed are the prime motivating factors in today's economy. Too many people are taking more from society than they are prepared to give. They are trying to get more than their share of the world's resources. This greed in human nature is a prime cause of inflation. Businessmen and other promoters of the super-abundant life encourage the public to borrow more and spend more. Governments all over the world have been too permissive in spending money to satisfy their voters. Companies and individuals continue to spend more than their income. Few can live within a budget. Too many are taking short cuts to riches and the "good life" — buying everything in sight with no regard for where the money comes from or how it should be spent. We don't like living with inflation, but who will be the first to restrain his spending — to set an example of self-discipline and self-control? Which government will be the first to live within its budget even at the risk of recession? Which company? Which person? To control inflation requires the control of human nature. But that requires a supernatural power with a strong world government which can build an entirely new economic system possibly similar to the one God gave the ancient theocracy of Israel. Historically, Adam Smith's "invisible hand" failed to provide a perfect economy. John Keynes' "visible hand" of government manipulation is failing now. What the whole world needs is "a strong hand from someplace" to change human nature and establish a perfect economy that's in harmony with God's law. Inflation will be abolished in the world of the future. Thankfully, that world will soon be here and you can have a part in it. In the meantime, if you need help with your private monetary problems, read our free booklet entitled Managing Your Personal Finances.