check mate

Check cashing places are very creative at extracting numerous fees from poor people, helping to keep them poor. But part of the blame lies with banks, which generally stay away from poorer neighborhoods, making check cashing places the only viable option for some people.

See Check Mate, an expose by the Internets Celebrities, which I found via Freakonomics.



Some quotes from the video:

"Debt drives the economy. Poor people drive the economy."

"I just can't wrap my mind around the idea of paying someone for my own money."

"The thing is with banks, is that, they're not always so nice to the poorer customers. There's this whole apparatus of fees and charges that, one follows after the other that you can find yourself very easily caught up in."

"You know you've made it when you go from check cashing spot fees to ATM fees."

"Banks in and of themselves don't have a responsibility to go to areas that are not profitable."

"Debt is the new money."

"It used to be a sin to be in debt; now, it's just, sort of, a way of life."

foreign aid: does it hurt more than it helps?

Massive amounts of aid in the form of free food have been going to Ethiopia since famine was first reported in the Western press, and we were in Lalibela the day one of the monthly shipments arrived. People from all over the countryside came into town on their donkeys -- well, not into town, but near it. The poorer you are, the more food you get, and no one wanted to show off his possessions, so everyone parked his donkeys about three kilometers from town and walked the rest of the way. There were hundreds of donkeys around, waiting on the edge of town, and hundreds of people in the center of town, waiting for the food trucks to arrive. With their arrival, fifty-kilogram sacks of wheat stenciled with the name of the contributing country -- some from the United States, some from Germany on this occasion -- were distributed.

While this was going on, glorious, lush fields all around Lalibela lay fallow because nobody farmed them anymore. An entire generation of Ethiopians has grown up without learning how to farm. Instead, to put food on the table, they go to town every month, park the donkey, and collect grain. Some recipients, the day we were in Lalibela, carried their ration of wheat directly over to the town market and started selling it. And so, in addition to that generation that has never learned how to farm, there is a generation of farmers who have simply stopped farming because they can no longer sell the fruits of their labor -- there is no way to compete with free grain.

Jim Rogers, Adventure Capitalist

At the turn of the millennium, retired investor Jim Rogers took a trip around the world with his fiancee. What he saw, particularly in Africa, was distressing:

Throughout the continent there are huge markets where on can find bundle upon bundle of T-shirts spread out for sale, donated by places such as the YMCA of Cleveland and the First Baptist Church of Charlotte. These and clothing of all kinds are given as donations in the United States destined for the poor of Africa, but by the time they reach the continent, they are sold as a commercial product. Not only do they enrich the entrepreneurs involved in the traffic, they also put local tailors out of business. The tailors cannot compete, nor can the people who weave cloth, spin yarn, or grow cotton, the people whose costs the tailor incurs. In Africa you used to see tailors everywhere. You would see them by the side of the road with their sewing machines. Now you see them only rarely. How can any of them compete with a product that the entrepreneur gets virtually free?

Has well-intentioned foreign aid hurt the people it was meant to help? Is Africa worse off today than it was before the West began sending massive amounts of goods in their direction?

But it gets worse. Non-government organizations (NGOs) have raised billions of dollars to send representatives to Africa to make their expertise freely available to the locals. But this form of "aid" may be the worst:

The Bangladesh International Network (BIAN), while we were there, filed suit against UNICEF, WHO, the World Bank, the Islamic Development Bank, NGO Forum, and other groups that were responsible for funding the sinking of wells contaminated by arsenic and other poisons. ... As a local newspaper reported, "The short and long term effect of arsenic poisoning is lethal. Research has proved beyond doubt that the source of arsenic poisoning is the shallow tube wells from which ninety-seven percent of the rural population receives its drinking water. People are drinking poisonous water every day from shallow tube wells while policymakers and their implementing agencies continue to sink these. While World Bank's own figures claim 20 million people are currently at risk and 75 million are potentially at risk of arsenic poisoning from tube wells, donors continue funding to sink tube wells."

Rather than stop digging wells, international agencies were conducting the Third International Symposium on Reducing the Impact of Toxic Chemicals on Bengal Basin's Economies -- the third -- in the midst of what may be the largest mass poisoning in history.

If all this is true, is there anything we can do to fix the problem? Rogers has the outline of a solution:

Forgive all the debt. Right now. African countries, combined, owe some $350 billion plus in foreign debt, according to the International Monetary Fund. While no one really expects these countries to pay back that debt, they are still required to finance it, making annual payments on the loans. If we assume the interest on the loans to be 8 percent, it means that African countries must collectively pay $26 billion a year in interest. That does not include principal payments. If we assume principal payments to be another 2 to 3 percent, annual payments to finance the debt total over $30 billion. Once the debt is forgiven, Africa's leaders will have an additional $30 billion annually that can be put to productive use, plus no debt hanging over them. Call the $350 billion reparation for supposed past sins, if it makes you feel better.

This much has been suggested before, by charitable organizations and even some western governments.

However, part of the deal would be no more foreign aid.

The effects would undoubtedly be profound. Africa would be left to survive on its own. The people of Africa, no longer relying on handouts, would learn to fend for themselves. The Ethiopian teenagers I met who had never learned how to farm would have to take up the plow. The madmen fighting on the Horn of Africa would stop receiving arms from around the world. Nigerian leaders would no longer be able to walk into banks and walk out with sacks of U.S. dollars. Those who run Mozambique would no longer be able to solicit flood relief money with which to line their coffers. The IMF and World Bank would go bankrupt, and local NGOs would be forced out of business.

Would it work? I don't know how this last part could possibly be enforced. But enabling Africans to solve their own problems is the only way to solve them.

More than eight hundred years ago, Moses Maimonides wrote that the best type of charity was to help people become more self-sufficient. When will today's advanced societies learn this lesson?

church and statism

Update: When I first posted this, my concluding paragraph did not get pasted into the edit window. I've corrected the omission.

A few weeks ago, John the Methodist linked to an essay titled The Liberal Temptation. John argued that the phenomenon discussed in that essay -- using state power to advance the church's agenda -- is a temptation of conservatives as well as liberals. He more accurately labeled it a statist temptation.

In the comments, Dan Trabue gave a lengthy defense of the idea that Christians should expect the state to help care for the poor -- and quoted several Bible verses to back his points.

I can understand both of their points of view, and to some extent I agree with both. There's no better indicator than that: John and Dan were actually discussing two different issues. I'll try to touch on both of them here.

First, the role of the state. The United States Constitution outlines the role of the national government and specifies its duties, one of which is "to promote the general welfare." Article I, Section 8 authorizes Congress to collect taxes for this purpose (among others).

So it would seem there should be no controversy there: If giving aid to people living in poverty promotes the general welfare (and I think it does), then the federal government has not just the right, but the duty to collect taxes for welfare programs.

Furthermore, through tax revenues the government has access to more resources than any individual or group could ever hope to collect. While most private charities do the best they can with the resources they have, the need is just too great. If we were to rely solely on voluntary charitable giving, a lot more people would fall into poverty.

The second issue here is the mandate Jesus gave to Christians to take care of those in need. Our salvation depends on it, according to Matthew 25:31-46.

But, as John points out in his post:

Compulsion is the enemy of evangelism, for there is no true conversion or sanctification unless is is uncoerced. Forced virtue, Left or Right, is no virtue at all.

If Congress votes to use our taxes -- everyone's taxes -- to fund a program to help the poor, we haven't fulfilled Jesus' mandate. Christian giving isn't simply a matter of helping those in need: It's also a matter of giving up our own desires and truly loving our neighbors as we love ourselves. If we give nothing more than what is automatically withdrawn from our paychecks, we are not really giving of ourselves.

Legislation of morality never works: The Volstead Act of 1919, which outlawed the sale of alcohol in the United States, did not eliminate the drinking of alcohol -- it merely created a new class of criminals.

Neither the right nor the left seem to be immune to the statist temptation: Just as we can't make people righteous by passing laws against abortion or homosexuality, we can't make people righteous by donating their money for them through tax laws. Laws may change a person's outward behavior -- or at least a person's public behavior --- but they cannot change people's hearts.

So I am left with two seemingly contradictory beliefs: Without the resources that only the state can muster, we can't hope to take care of all the people in need... but giving by proxy through taxes is not true charity.

But these are not mutually exclusive. It's not impossible to give to private charities and pay our taxes. It's no sin to expect our government to be responsive to the needs of its citizens. It's also no sin to give of ourselves to take care of our brothers and sisters.

still no living wage

The new Iraq spending bill, passed by Congress last month and signed by President Bush, contains a rider that will raise the minimum wage from $5.15 per hour to $7.25.

It may sound like a big raise, but it will be phased in slowly over three years, and even after the second increase minimum-wage workers will be earning less (adjusted for inflation) than they were in 1997. The third phase doesn't even occur until after the next election, which means that Congress members will be able to boast for two election cycles about how they have helped the working poor, even as they keep the minimum wage below the poverty line.

I, for one, am not impressed. The purpose of a minimum wage should be to lift people out of poverty, not to keep them in it.

I've heard all the arguments about how some work is more valuable than other work, and I think there is some merit in that. But that misses the point. The minimum wage is not a nationwide mandatory one-size-fits-all income for all people. Let the corporate CEOs, the baseball players, and the movie stars make their millions, but give the janitors, the dishwashers, the farm hands, and the administrative assitants enough to take care of a family.

Now it may be true that some of these people don't need to make enough to raise a family. Maybe that administrative assitant is married to that janitor, and with their combined incomes, they can already make ends meet. But there was a time in American history when a family did not need two incomes just to stay out of poverty. There was a time, not too long ago, when even families of modest means could make a choice of whether to have one parent stay home and raise the children while the other parent brought home enough money to cover expenses. For an increasing number of families, that choice is no longer available.

I'm quite aware that some families make comfortably more than a poverty wage, and still choose to have both parents work. That's fine. I'm all for letting people have that choice. I just think that the same choice should be available to those at the bottom of the employment ladder.

Furthermore, a living wage would benefit the growing number of families who, for whatever reason, have only one adult in the household. If a single parent could stave off poverty with a single job, they will have more time to devote to their children.

Ultimately, that's what minimum wage laws are all about: Enabling parents to spend more time with their families. In a nation as prosperous as the United States, a nation whose leaders consistently give bold lip service to "family values," we could afford to keep working families out of poverty if we wanted to.

Do we want to?

trying to do something constructive

My recent post Law of the Marketplace has produced a lengthy discussion between OneOfMany and Steve Hayes. I think there is common ground to be found here.

In his most recent comment, OneOfMany said, among other things:

As regards hard living and doing without, that is a subject that I’ve tried to do something about by visiting with and spending time with and working with and helping poor people, hard living people, blue collar not well educated working class independent proud teeter tottering on the edge of economic crisis don’t want no handouts people who will not listen to you, to whom you have no right to speak until you have earned the right to speak to them by actually caring and trying to do something constructive to help them.

This matches my own experience. Most poor people want to help themselves. They need a helping hand, not a handout. Many charities are not designed to really help. Whether by design or by accident, they send a clear message that the giver and the receiver are not equals.

About ten years ago I volunteered a few times at food distribution center. I won't name the organization. Once a month, families were allowed to come and receive a shopping cart loaded with dry goods. As I recall, each month there were two lists, one for families with an infant or a toddler, and one for families with older kids. My job was to fill the cart from the list, push the cart out their car, unload the food, and bring the cart back. The recipients were not allowed to do anything for themselves. Wouldn't want them making substitutions in their rations, or running off with a cart.

Every person arrived with a frown or a scowl on their face. They didn't appreciate it -- and why should they? It's humiliating enough to have to rely on handouts in the first place; it's much worse not to be allowed to do what you can.

I remember a boy who must have been about 10-11 years old, who came once with his mother. As I finished filling the cart, he said, "I want to push the cart out." This was a clear violation of the rules. I rolled the cart ouside the door, then, once we were out of view of other volunteers, I let him push the cart to his car.

In all the times I volunteered there, I think that boy was the only person I saw who showed even a glimmer of hope. The setup simply was not conducive to really helping people. I don't fully blame the charity. With the number of people they served, and the limited supplies available, they needed to keep a tight control on their inventory. If people were allowed to choose their own food, some items would be gone before some people could get there.

Even in the most prosperous nation in the history of the world, the need is great. One out of every seven people in the United States lives in poverty. It's good that churches and other groups provide assistance. But the problems are too severe to solve through voluntary programs. The problems are systemic, so any solution must begin with changing the system.

I don't know what the answer is. As OneOfMany points out, no other economic system has proven effective at providing justice and opportunity. Unfortunately, neither does market economics. If we want any semblance of a fair and just society, we need to find a new model.

an ounce of prevention

Across the water from the prison island, next to yet another sewage plant and trash-deposit station in Hunts Point in the South Bronx, there's a multistory prison barge that has been used in recent years for children in detention. Several thousand juveniles thirteen years old or older have been held there at one point or other in a given year – about one hundred at a time – while they awaited transfer to more permanent facilities. It's a tremendous structure, with six floating floors of prison cells, one of them under water. From the sky, however, it looks decorative. It's painted in clean colors, blue and white, and looks as if it might be some sort of a pleasure craft, a cruise ship possibly.

The city spends $64,000 yearly to incarcerate an adult inmate on the prison island. It spends $93,000 yearly to incarcerate a child on the prison barge or in the very costly and imposing new detention center built on St. Ann's Avenue. That's abut eleven times as much as it is spending, on the average, for a year of education for a child in the New York City public schools during the last years of the 1990s – eighteen times what it is spending in a year to educate a mainstream student in an ordinary first-grade classroom in the schools of the South Bronx. There are countless academic studies of allegedly "deficient" social values in the children of the poor, but I do not know of any studies of the values of the educated grown-ups who believe this is a healthy way to run a social order.

- Jonathan Kozol, Ordinary Resurrections

It's a story that is repeated in slums throughout the United States. The policy makers who can't find the money to give impoverished kids a decent education must then find a much larger sum to lock the kids away. And yet, there's more to it than that. As Kozol points out elsewhere in his book, it would be worth it to keep the kids in school and away from gangs and drugs and violence even if it were not cost effective to do so. What price can you place on a child's future?

Every human life is precious, and although we'd all like to believe we live in a society where we are all equal, the reality is that kids born into poverty don't have the same opportunities that the rest of us take for granted.

In a neighborhood where the major industry is sewage treatment, it is inevitable that many of the children will develop health problems. Where three square meals a day are not always possible, hungry kids will have trouble learning effectively in school. Where adult role models are few, because many fathers have been sent to prison or have simply abandoned families they were not able to take care of, children are more likely to turn to gangs.

It's true that people ultimately are responsible for their own choices, but people do not make these choices in a vacuum. In a society that increasingly turns its back on its most vulnerable citizens, many children are being denied even the hope that they can escape their circumstances. When everything they see tells them that there is no way out, it becomes a self-fulfilling prophecy.

And all this is happening in a nation in which 75% of the population claim to be Christians! How far we have strayed from the one who began his public ministry with these words:

The Spirit of the Lord is upon me,
because he has anointed me
to bring good news to the poor.
He has sent me to proclaim release to the captives
and recovery of sight to the blind,
to proclaim the year of the Lord's favor.

- Luke 4:18-19

It's easy to talk about it, as I'm doing now. What takes courage is to do something about it. But what's the answer?