Public Square

Why Economic Freedom Matters for the Poor to Flourish

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There is something missing in the fight against global poverty: economic freedom.

In our constant effort to define poverty, we have focused too narrowly on the symptoms of poverty and not enough on the actual cause.

We go after short-term solutions to treating hunger instead of finding long-term solutions to the causes of hunger: lack of local agriculture investment, insecure infrastructure to protect from natural disasters, unstable markets, etc.

By not considering the roots of poverty, attempts to treat it will only provide temporary relief and likely negative effects in the future.

Along with paternalistic power structures and outdated charity efforts, the key aspect keeping the poor from reaching their God-given potential is the widespread lack of economic freedom in many developing countries.

Rule of Law as a Means to Economic Freedom

The Index of Economic Freedom defines economic freedom as:

The fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest…in economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion…to protect and maintain liberty itself.

These ideas about economic freedom relate very closely to the biblical ideas of human flourishing.

In a research paper for IFWE, biblical scholar Jonathan Pennington writes that,

God’s saving work, his redemptive activity, his goal for humanity and all creation is precisely this: that we flourish fully even as he himself flourishes perfectly, completely, and with overflowing abundance.

God desires for us to use our gifts and talents to contribute to human flourishing. However, when communities lack economic freedom, their creative potential is stifled.

The majority of developing countries do not have the institutional or legal structures providing the necessary aspects of economic freedom—stable rule of law is difficult to find. According to economist Hernando de Soto, author of The Mystery of Capital, “In two-thirds of the world, there isn’t yet the rule of law.”

Rule of law provides communities with access to formal markets, secure and protected property rights, and justice in the courts.

Without rule of law, the weakest in society are more vulnerable and less likely to have the economic freedoms needed to prosper.

The Excluded Poor

According to the documentary film Poverty, Inc.:

It’s not that people do not have the capacity to be much more efficient, it’s that the access is not democratized.

The film shows one Ghanaian man, Charles Mends, who started his own small juice processing company based in Ghana.

Mends is finding it difficult to grow his business.

Mends is a young man with no collateral or land property, making it difficult for him to access a loan. The interest rates on any loan Mends could receive are too high. He claims no business would be able to make the profit needed to pay off the loan.

Without a loan, it is very difficult for Mends’s company to move into the “middle state” where his company could start to make more money.

Another example given by a Ghanaian entrepreneur, Herman Chinery-Hesse, is of local farmers, which make up 60 to 70 percent of the population in Ghana.

These farmers do not have property rights. Chinery-Hesse explains that the farmers end up “buying” land four or five times but do not actually own that land. As a result, they are unable to go to the bank to borrow money to buy necessary farming equipment. Chinery-Hesse concludes,

You cannot start an economy without ownership being in question.

The poor, therefore, continue to be excluded from the formal market and unable to overcome their poverty.

Changing the Direction of Efforts to Aid the Poor

The underlying causes of poverty reveal that economic freedom matters greatly.

Creating lasting change in the realm of foreign aid and international development requires a strong understanding of the nature of poverty.

The poor lack access to the market, they have no property rights, and they have little to no justice in the courts.

By understanding the components of economic freedom, we can change the direction of our efforts to aid the poor and start to place a greater emphasis on creating more economically free societies that protect the poor and promote their flourishing.

Editor’s note: Learn more about the best path to human flourishing in For the Least of These: A Biblical Answer to Poverty.

On “Flashback Friday,” we publish some of IFWE’s former posts that are worth revisiting. This post was first published on Mar. 2, 2016.

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