Is debt sin?

I stumbled upon an interesting article today called, “Debt is Sin“.  The author, Bob Mallory writes:

The fact is, everyone knows that debt is wrong, and no one refers to it as if it’s a good thing. Yet the further we seem to wade into financial bondage in America, the more our Christian financial counselors and pastors falter when it comes to the Word of God.

Let’s cut to the chase: Debt is a sin. It’s a sign of a covetous heart, and not trusting that our Heavenly Father will provide us with everything we need. Since American Christians worship an insufficient savior, they turn to credit to purchase the things they want. The Scriptures are consistently negative when discussing financial debt for believers. It’s never neutral or positive, as many financial counselors will tell you.

He lists a set of scripture verses as proof texts:

Exodus 22:25-27; Deuteronomy 15:6; Deuteronomy 28:12; Deuteronomy 28:43-45; Leviticus 25:35-38; Nehemiah 5:1-5; Psalm 15:5; Psalm 37:21; Proverbs 6:1-5; Proverbs 11:5; Proverbs 12:9; Proverbs 22:7/1 Corinthians 7:23; Ezekiel 22:12; Matthew 5:42; Matthew 6:24; Luke 6:34-36; Luke 16:13; Romans 13:8; 1 Timothy 6:6-10; 2 Timothy 3:1-5.

Now first of all, many of these texts warn against covetousness and the love of money (e.g., 1 Tim 6.6-10; 2 Tim 3.1-5; Matt 5:42; Matt 6:24), but not against debt.  Others, to be sure, counsel the Christian to avoid debt (Rom 13.8), explaining that debt puts the person into virtual slavery to the creditor (Proverbs 22), and naturally, it was a blessing that Israel was to be a creditor nation, not a debtor nation, unless it sinned against the Lord, in which case they would become a debtor nation (cf. Deuteronomy).  Proverbs 6.1-5 actually counsels against providing security for someone else’s debt.  Finally, in Israel, it was against the Torah to charge another Israelite at interest.  But do these passage all say that debt is sin, no matter what kind of debt it is?

First, I would suggest that this way of thinking is basically a “fundamentalist” approach to the Scripture (see this post) in that it attempts to create a new law for Christians; that if the Christian followed that law, he would be on the path of blessedness.  It may be true that this path of avoiding every form of debt could be blessed.  Certainly in our current recession, had you avoided debt, you could be far ahead of those who were leveraged to the hilt, such as stock holders who received margin calls in 2008 and 2009; or Lehmans and Bear Sterns, which were highly leveraged investment firms.  Such advice might have seemed prescient for such people.  However, I approach the Bible differently.  The Bible contains wisdom and advice, which is bound to a particular context.  The crucial task of hermeneutics is to determine the principles taught by the Scriptures and to attempt to apply them in new cultural contexts today (see Klein, Bloomberg and Hubbard, Introduction to Biblical Interpretation, chapt. 11) through the help of the Holy Spirit and the accumulated wisdom of the church through the ages.  Thus, the categorical use of biblical advice as the new Torah is not a good way to apply the Bible today.

Contemporary financial advisers correctly distinguish between good debt (cf. this post) and bad debt. The effect of bad debt is that the debtor becomes a slave to debt payments.  The effect of good debt is the opposite.  It leads to profit and wealth.  I would agree that wisdom teaches us that bad debt should be avoided, and it is a sin if it is accompanied by greed and a lack of self-control.  A poor person who borrows in order to survive is probably to be pitied rather than called a sinner; the Bible often defends such people and condemns those creditors who exploit the poor.  However, people who accumulate credit card debt to buy consumer goods because they can’t defer gratification have a problem, not too dissimilar from alcoholism.  It is a spiritual problem related to a religion of consumerism.

But there is also good debt.  Good debt is money borrowed to make a gain or profit.  An example would be the borrowing of money to purchase a high yield stock.  As long as the interest rate is lower than the yield and the stock maintains its value or experiences a capital gain, the debt creates a profit for the debtor.  Another example would be the purchase of a house to live in or to rent out;  as long as the mortgage holder saves on rent, builds up equity through the repayment of the principle and capital gains, this is good debt.  Another example would be the line of credit that a business has in order to fill orders.  Without the line, they would not be able to make sales without first taking a large percentage of the cost from the buyer, which is actually a form of borrowing from the buyer instead of the bank.  This is not always convenient. So businesses will often borrow money from the bank in order that they do not have to charge their customer in advance.  Businesses also have what is called “net-30” or “net-90” etc.  This means that they extend credit to their customers of 30-90 days; the customer in turn has borrowed because they don’t have to pay for it up front–they can then in turn sell the item to their clients and pay their supplier only after they themselves receive payment.  Without these different kinds of debt, businesses today would come to a virtual standstill.  Our current economic system puts creditors with capital together with businesses and people who need it–banks serve as the go-between between these two parties, and everyone is supposed to make a profit from such transactions.  The question then is:  Would the Bible forbid categorically such transactions?  Is it so clear that good debt is sin?  I don’t think so.  My wife’s company which was started by my father-in-law about 45 years ago has debts;  it provides jobs to 25+ employees.  Now if we decided that it was sin to take on debt, undoubtedly we would have to close the business, and all those employees would lose their jobs.  I think it is better to use debt wisely and to continue to provide good jobs with benefits to these hard working men and women.  [Note it would be eventually possible to use retained earnings instead of bank credit to make these transactions–but Canadian tax law makes it very expensive to retain earnings in a company of this size].

But is there biblical support for my position?  Let’s consider the parable of the talents in Matt 25.14-30, which is the “canon within the canon” of this blog.  Jesus teaches that a man going away on a journey lends his capital to three of his servants, with the ostensible purpose that upon his return, he will receive a rate of return on his deposit.  These three servants receive 5, 2 and 1 talent respectively.  This is an  enormous amount of capital:  a talent is 6000 denarii, and a denarius is probably about 2-4 days wages at minimum wage in ancient Palestine.  So the man who received 5 talents had enough capital to pay 60,000-120,000 people minimum wage for one day; this would certainly be enough to start a business of some kind.  The servant with five talents received the equivalent of well over half a million US dollars.  The first two servants were entrepreneurs who were able to double their master’s money during that period. They would receive their reward for their diligence and their willingness to risk.  The one who received one talent was afraid of his master and of risking the capital, and so he buried the talent which equals about US $87,000-174,000 (considering $7.25 per hour as minimum wage). Imagine the master’s wrath!  He lent the wicked servant an incredible sum and the man buried it.  So the master says that he should at very least have given it to money lenders so that if he himself wasn’t going to risk it, they would at least find a suitable placement for the funds, and pay him interest on the money.  Jesus called this man wicked, and he received his reward (to be cast in outer darkness).  So Jesus teaches us that the wise risk of capital is not a sin; the sin here is the failure to put at risk the capital that has been lent.

This parable is amazing on so many levels.  But at very least we must acknowledge that Jesus commends those who are not afraid to take risks.  But he does not even tacitly condemn creditor/debtor relations in this parable.  He acknowledges them as facts of life and uses them to illustrate our relationship to the Kingdom of God.  We are debtors before God, because it is He who has made us his regents and lent to us his capital to see what we will make of it, and we need to use what we have from Him profitably so that on the day of reckoning our master will commend us as good and righteous investors.

I would like to conclude by making the following points:

(1) The New Testament is not the new Torah.  Its principles need to be applied to new contexts with judicious wisdom and with the guidance of the Holy Spirit.

(2) We need to distinguish between good debt and bad debt.

(3) Jesus does not condemn the wise use of good debt, but rather, told a parable in which standard business practices illustrate our indebtedness to God.

(4) In our culture, not all debt that leads to profit making is a sign of greed, for it can be vehicle for creating wealth (which is a blessing) and providing jobs.

(5) The wise servant is the one who can thrive in the circumstances in which he finds himself.  Thus, we must ask, given the current economic environment, culture,  and tax structures, how can we Christians learn to thrive and create wealth?

Plagiarism: An international education bubble

Prof. John Stackhouse writes about plagiarism on his blog.  He writes:

Plagiarism is a vital problem in academic work, since the academy is a culture of both honour and honesty. (Don’t get me started on how dishonorable or dishonest the academy can be—I’m talking about ideals here.) Without honour and honesty, we can’t do our work since so much of it depends on trusting each other to tell the truth, including truth about our sources.

In my time as prof (both in Africa and Canada), I have given what I think is a disproportionate number of “F’s” for plagiarism, not because I was too hard but because too many of my students were ill-prepared for their studies at the undergraduate or master’s level.  Generally I found that my academic deans were halfheartedly supportive, for it was disruptive of the process of higher education for one of the professors to mark students so hard.  I am of the opinion that some cases of plagiarism merit immediate dismissal; other students should be sternly warned and should fail the paper or class without remediation.  But in every case, I was advised to wield a lighter hand and to allow the students second and even third chances.

In my opinion, there is an international education bubble.  We have too many schools and too many people who graduate from the schools whose diplomas don’t indicate any real competence.  I know that I’ve passed a few students who had no business being in school.  I even had one case where a student repeatedly failed remediation in a course with me, a course which was necessary for his undergraduate degree; and yet the dean still allowed him to enter into a Master’s program and to defend his thesis while never having passed my course!  He is in Congo-Brazzaville now– I heard he became a professor in a faculty of theology there.

Paranoid fear of government

Craig Carter wrote an insightful post at his blog, “Applying the hermeneutic of suspicion to the state.”  Liberals, he says, are afraid of big business but trust the state.  He shows that such trust is utterly unfounded.  In my view there is insufficient fear of government.  Consider if you were a car manufacturer.  Now you are competing with Obama Motors (GM, Chrysler) and the US government is your competitor.  Wouldn’t it be frightening if all of a sudden your company was being investigated because of floor mats? I mean it isn’t as if everything in my GM cars works all the time.

Lord Conrad Black is in a federal prison today because he received non-compete payments which are perfectly acceptable in Canada. The Canadian media was urging the confinement of this Canadian because he is rich and a conservative.  But if you are terrorist in Guantanamo or subject to extraordinary rendition, or if you are on death row, the Canadian media gets out the handkerchiefs and begins weeping for you.  But with Lord Black, it was, “Throw him in prison and lose the key!”  Black’s conviction has put a huge dampening effect on my desire to do business in the United States.  In fact, forget it.  I told my brother on Saturday that I wanted to settle my 19% interest in our limited partnership in Austin, Texas, before the end of 2010.  It is too much hassle for me to conform to all the tax regulation.  I have enough problems worrying about what the CRA is going to do to me.  I want to stay out of US federal prison.  But I assure you, dear Reader, that the US federal government already has the power under the current federal law to throw me in prison for a very long time–not for substantial crimes but for procedural errors.  Not that the Feds would want to throw me in jail–there are bigger fish to fry–but the very existence of such powers makes me afraid, very afraid.

We test drove a RAV4 last week.  We made an offer and hopefully our new vehicle (for my wife) will be delivered by Saturday.  It was built here in Ontario.  It is our first “foreign” car (before we were married I owned a Mitsubishi pickup).  Currently we drive a Chevy Malibu and Pontiac Montana (which I’m keeping).  The 2002 Malibu has an appraisal value of $900 CDN from the original price of $28,000.  The A/C and heat don’t work, the ABS brakes are faulty, and the electrical system diagnostic light is malfunctioning.  Apparently, our new car is much more likely to maintain its value over the long haul.  As consumers, we are voting against government owned car companies and we believe that it is incorrect for the government to harass the competition. Therefore, we are using our own funds to support a NGCC (non-governmental car company).  We believe that the government should not have the power to eliminate their competition through unfriendly regulation and harassment.

Do contracts mean anything in Africa? II

My earlier post on contracts (originally at Palabre) resulted in quite a level of defensiveness on the part of respondents. However, I am not alone in my assessment that the frequency in the violation of contracts is a significant factor in sub-Saharan poverty. Yesterday’s Wall Street Journal offered a column entitled, “Why Africa Is Poor: Ghana beats up on its biggest foreign investors“, which is republished at Ghana’s The Statesman. The article cites the treatment of Texas-based Kosmos Energy, which has arranged a sale of part of its oil field in Ghana to Exxon. The Ghanaian government threatens to buy back oil fields at a cut rate; this would then give them the ability to sell the field to a third party at a huge profit. But it is a violation of their contract with Kosmos:

When Kosmos began its project under the then-ruling New Patriotic Party, the business environment seemed relatively stable with adequate protections for foreign investors. Under Ghana law, consent for a deal such as the one between Kosmos and Exxon can’t be unreasonably withheld, delayed or denied. Such contract protection began to dissolve in January 2009, with the election of the leftist National Democratic Congress.

Other foreign investors are also getting the Kosmos treatment.

The WSJ concludes:

Attracting foreign investment has been a pillar of Ghana’s development strategy, with the government pitching itself as the “Gateway to West Africa.” Spooking new investors by repudiating contracts will rapidly ruin the country’s prospects for long-term development.

The following comment to the WSJ article was made at the Statesman (sic):

Kwadwo mpiani the former chief of staff awarded contractas on humanitarian grounds and out of sympathy to foreign nationals and the NPP dont think these people needed to be probed. If any invester has a problem with following due process then we dont want him in our country. I think the writer of this article is so foolish that he would rather defend a foreign invester instead of his own country. The writer of this article is just as stupid as an ASS. James Bell , Accra , 18/02/2010 5:10:59 P

Unfortunately, Mr. Bell, corrupt practices like these create risk factors which are out of control, and no investor should ever be interested.

C. Edmond Wright, shrugging entrepreneur

C. Edmond Wright has become one of my favorite writers at the American Thinker.  He is an entrepreneur who closed his business on the day that President Obama was elected.  He explains today why he considers that to have been the right choice.  In his article today, “Dear Mr. President: Why We Are Not Hiring” he trys to explain to Mr. Obama about risk [italics his]:

And since you clearly do not understand business at all, let me give you a short primer:

Any business idea, from the first day it is hatched, is nothing more than a series of cost-benefit analyses that the idea-holder either acts on or passes on. Sometimes the first decision is to forget the idea. Sometimes the first decision is to move ahead and invest some cash.

Perhaps a few million cost-benefit analyses later, you might have Microsoft or Home Depot or ESPN. Or you might have Bill’s Plumbing or Johnson’s Quality Homes or a café or an electrical wholesaler, and so on. And those businesses still operate on a constant stream of risk-reward decisions. In the business world, there is no neutral gear.

(There: Now you have more useful information than Jamie Gorelick or Franklin Raines got from Harvard.)

Thus, each time a risk factor is changed, the small business man has to determine whether he is going to hire, retain or layoff employees.  One huge risk factor in the US is the promise to raise tax on people making over 250K (or was it 100K? the number keeps changing).  Many limited partnerships and sole proprietorships are thus exposed to the full brunt of such taxes. Thus, the risk response will be to lower the number of employees and make less than that threshold where the extraordinary taxes kick in.  It is a promise based upon class envy and populism, and it is a real job killer.  The small business owner will not risk great amounts of capital unless the reward is also great.  Therefore, most will simply downsize their businesses to the point where they have few or no employees, or they will just simply shut their business down completely.  Now, the Bush tax cuts are expiring and there will be across the board tax increases on everyone.  This will obviously not help the employment situation in the US either.

Mr. Wright also mentioned how the environmental movement has sabotaged energy production in the USA and has increased the risk to business by raising the cost of energy.  Yet much of the current environmental pressure is focused on AGW (anthropogenic global warming), which is a hoax and based on counterfeit science.

Well, Mr. Wright, I for one have greatly benefited from this energy crisis because I’ve invested in Canada’s mid-cap (e.g., cpg, erf, nae.un) and junior oil and gas companies (mel, cta, psx, mox).  Now that Obama has announced further plans to remove tax cuts from oil drilling in the US, we can expect the whole Canadian oil industry to take off, as long as nothing stupid is done on the levels of our provincial or federal governments here in Canada, such as cap and trade or carbon tax.  (Perhaps the Luddites of the environmental movement want us to live as poor primitive peoples–but I’ve been to place where people live like that and I don’t know a single sane person who would ever choose to live like that.)

This is my comment on Mr. Wrights article at American Thinker:

Posted by: pwdunn Feb 12, 06:52 AM

Mr Wright: I found your article riveting; I too have decided to shrug for 12 years now for two reasons: (1) Taxes in Canada are so high that my wife already works for all levels of government until June 11th  or something like that [**actually June 17], and so why would I want to work for 6 months of the year for government as well? (2) I could teach at University level but I am neither black nor a woman, nor any other under-represented minority (actually I belong to an over-represented minority)–thought about changing my name to something Yupik, and I’d get a job in minute–but then who wants to be involved in higher education when the profs are hired on the basis of their gender or skin color. Not me.

More articles like this from business people would be greatly appreciate. Thank you American Thinker!