"Idol Gives Back" and What God Giveth

According to E!, last weeks TV extravaganza, "Idol Gives Back," raised over 60 million dollars for domestic and foreign aid! Although that only represents about three dollars per viewer, it's definitely NOT chump change. It represents a measurable improvement from just thinking about shoes!

That being said, it's time for a little Light-work perspective. Reading publications from the World Bank does not normally thrill me, but Kirk Hamilton and his team have a word of wisdom for everyone who wants to help those in need. It's captured in the pages (188 of them) of the book, Where is the Wealth of Nations: Measuring Capital for the 21st Century, published in 2006. Okay, so the title doesn't exactly shout New York Times best seller. (It doesn't read like one, either.) So why all the L-W hubbub?

You can read the book to find out; or you can get the Reader's Digest version in the article and interview of the author by Ronald Bailey at Reason Magazine - highly recommended! Or, I can give you the quick and easy summary right now. (It leaves out a lot of really good stuff, but will get right to a key point.) Mr. Hamilton (good name for an economist!) proposes that the wealth of nations is found in three forms - natural capital, produced capital, and "intangible capital." Natural capital is represented by cropland, forests, oil reserves, and mineral deposits - the things you would label "natural resources" on a map from geography class. Produced capital represents machinery and structures, the things men build from natural resources.

Intangible capital, explains Mr. Hamilton, "includes human capital, the skills and know-how embodied in the labor force. It encompasses social capital, that is, the degree of trust among people in a society and their ability to work together for common purposes. It also includes those governance elements that boost the productivity of the economy. For example, if an economy has a very efficient judicial system, clear property rights, and an effective government, the result will be a higher total wealth" (p. 87). Effective governance can be measured by "voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption" (p. 92).

Using this three-fold grid, the wealth of 120 countries is measured in Where is the Wealth? The startling conclusion is that intangible capital, not rocks and minerals, is what makes a country wealthy. A country blessed with great natural resources but without regard for property rights will be much worse off than a country with comparatively modest natural resources but well-established respect for property rights. Makes sense - who would commit to farming or mining if your land (and investment) could be easily and capriciously taken away?

This book affirms a change in the World Bank's approach: Fifty years ago, it was all about infra-structure (dams, roads, buildings), as if the presence of such improvements would magically usher in peace and prosperity. Hasn't happened. Hamilton's study explains why: These projects will produce negligible long-term improvement in poor countries unless education, the strength of communities, and the effectiveness of government is addressed.

So what does this have to do with "Idol Gives Back?" Our efforts to help the poor must go beyond merely addressing their need for food and shelter. Our investment in immediate needs must be transcended by a commitment to give people skills and know-how, raise up an efficient and equitable justice system, and restore trust among a society of people.

This is not a quick and easy solution. Hamilton recalls, "If you think of some of the most important institutions we have in the Anglo-Saxon world-things like the beginnings of rule of law and control of the power of the elites-the roots go back to the Magna Carta. The roots of English Common Law go back even farther than that." The prosperity we enjoy has deep roots in our history.

But we will make no lasting change unless we mine the good from that history and find ways to export it to poorer nations. Many poorer countries are glad to receive our cash. Unless they are willing to embrace the institutions which produce intangible capital, even though that means embracing aspects of a culture they disdain, they will remain poor. Their need for "Idol Gives Back" will never go away.

The World Bank has helped me appreciate one of God's good gifts. The Mosaic Law outlines how to create immense reserves of "intangible capital." Family based education, a society built on mutual trust and respect, and an efficient and fair justice system - it's all there. Mr. Hamilton's under-appreciated work affirms what the Psalmist has known all along: The Mosaic Law comes from a God who understands what is needed for the good of a people to be promoted. Where is the Wealth confirms what Psalm 119 long ago declared: I have rejoiced in the way of Your testimonies, As much as in all riches (Vs. 14); I rejoice at Your word, As one who finds great spoil (Vs. 162). When God gave Israel the Law, He gave them something far more valuable than material wealth, He gave them the intangible capital by which to TRULY PROSPER.

Comments

[ms]

Right on! Some recipients of western welfare have said NOT to send more money - it simply gets siphoned off by petty beaurocrats and does not trickle down as far as the needy, thus perpetuating or even elevating the level of distrust.

[Alex Marshall]

The name of the book is, I'm guessing, a play off of Adam Smith's (the "founder" of modern Western economics) book "The Wealth of Nations." So its half-way clever... I wonder if he's intending to critique Smith's ideas or critique how they are being implemented (seems to be the case from your description) or something else entirely.

I would definitely agree that "prosperity" (using that in a purely economic way) is significantly limited by your intangible capital, especially human capital. Side note- this is actually a problem the west is about to be facing in a huge way with the retirement of the "baby-boomer" generation, which doesn't just mean strain on social security, but a huge depletion of our workforce that won't be fixed for a long while.

What's interesting to me is that the conditions that we talk about that are necessary for good human capital- a good justice system, a basically non-corrupt government (as we well know in the states, corruption always exists), defined property rights, etc., all developed in the west as a result of increased economic development. In other words, there wasn't a one-first, then the other, process. They happened simultaneously. As the middle class emerged, the legal system that favored the aristocracy was no longer acceptable, so they demanded reforms that led to the democratization that defines the west. So this leads me to think that perhaps the best strategy for us in the west to help these things develop in other parts of the world is to promote active trade with them so that their internal economies grow, putting pressure on their governments to change. This process has already had tremendous effect on places like China, which now has opened huge swaths of its country to free-market trade, the result being a slow democratization of their government (obviously, Tibet is not one of these fortunate areas of China).