The Essence of Economic Freedom

The Essence of Economic Freedom

The following is an excerpt from a lecture given by Dr. Barry Asmus at the 2014 Summit Adult Conference. Dr. Asmus is a senior economist with the National Center for Policy Analysis and a much-loved member of Summit’s faculty. Together with Dr. Wayne Grudem, he wrote The Poverty of Nations, which explores in depth the principles of the free market and biblical social ethics as a global solution to poverty.

The Essence of Economic Freedom“The only other topic besides Jesus, God, and the Spiritual that I’m interested in, that I’ve given my life to, is economics. I decided to go into economics my freshman year in college, and I stayed for bachelor’s, master’s, and doctorate degrees in economics. I’ve stayed there and I’m glad because it seems like there are a lot of terrible misunderstandings in economics, and it’s easy to misunderstand. But it’s been a joy to be in economics, especially the piece of economics that talks about freedom, entrepreneurs, etc. I really enjoy that.

“Dr. Wayne Grudem and I got together three years ago, and have been friends for 17 years. Wayne wrote the book Systematic Theology, and he and I were elders at Scottsdale Bible Church for a few terms together. Wayne and I have been in our home fellowship, and that’s been a joy. We’ve been mighty close the last 17 years. Wayne and I travelled the world three years ago and saw some of the poorest places in the world: New Guinea, India, China, South America, Africa. We’ve had the privilege of giving 20 hours of lectures: half-hour Wayne, half-hour me, half-hour of Q&A. We’d do that all day Friday, all day Saturday, half a day on Sunday. Then on Sunday afternoon, Wayne and the local churches would come in with pastors, and Wayne would answer questions that these pastors would have about the Bible. So he answers questions from about 12 noon to six o’clock Sunday night, and we’d call it a day and climb on an airplane and go home.

“Here is a picture of the nations [image not available]. The green make $20,000 annual per capita income, and that is not particularly high. The United States is $52,000 per year, and that is not great. For those that are blue, that’s in the $8,000 to $20,000 range, and those are medium, modestly wealthy areas but nothing to be that excited about. Then the reds are from $3,000 to $8,000, and then the dark browns are poor at $3,000 per year. The reason why I want you to see this, and it’s about 2012, is the color of these countries. Just imagine if it was just 200 years ago.  Two hundred short years ago, if we had a chart like this, I would hold up the world and it would all be brown. It would all be dark red. I mean poverty is and has always been the natural condition. Poverty is not hard; anybody can do it. Every country in the world figured it out. They said, ‘Hey, we can do poverty.’ So just imagine this: Thousands and thousands and thousands of years and there’s the picture of the world in poverty — about $2 annual per capita per day. In the United States, we are something like $50 or $60 per day. The world was very, very poor. And the world tried everything. The world tried hunting and gathering, and the world tried subsistence farming, and the world tried slavery, and the world tried feudalism, and the world tried mercantilism, and the world tried socialism, and the world tried communism. So you can walk through this, walk through these systems, and all of them for different kinds of reasons just won’t get the job done.

“Slavery has been the most common, the most persistent, and even the one today that we can’t get out of our blood, but we don’t have to go back very far: Egypt was built on the backs of slaves. China has by and large lived under dynasties and pseudo-slavery its entire history. It ends 4,500 years of history with the last hundred years of communism, and now things get even worse. Why? Because communists say our main principal is to abolish private ownership. Here’s the problem with that idea: It doesn’t work. Without property rights, there are no human rights. In other words, the last thing in the world you could expect from communism is freedom. Freedom will not happen without property rights. I’m not genius to think of that — John Locke thought of that and many other thinkers. Our founding fathers were well-versed in what really does create some prosperity. Our founding fathers said it’s not communism, nor is it socialism: It’s free-market capitalism. What Wayne and I learned really quickly when we went to Europe and South America is the world is not going to put up with the word capitalism. Wayne and I found out that if we mention the word capitalism, they shut their ears. We learned very quickly to get that out of our vocabulary and call it the free market. So what we tell audiences around the world, poor audiences especially, is that the free market is the only way out of poverty. The free market is a way out because all the market is a communicative mechanism. The market is a miraculous instrument of communication. Because as we are all living our lives with volunteer exchange (you buy, you sell, they buy, they sell), for trade, economics, prices, interest rates, and so on, the market is just a conduit. It is a beautiful conduit of telling us what’s going on in the world, reflected in these prices. The prices, then, can be very, very meaningful. So the market is a miraculous instrument of communication. The market is a stupendous transmitter of wisdom while determining value. The market is like a galactic bathroom scale where supply and demand determine price. Supply and demand determine interest rates and profits and losses. The free market is the best way to go, but it’s not the producer of wealth, it’s just a conduit. It’s a conduit of entrepreneurship.

“We have founding fathers here in this country that get together and say we are going to put together a different kind of a country, and it’s going to be by-and-large a free market. We’re going to put together a country that is going to have verifiable addresses. Well, who cares about verifiable addresses? Let me tell you why verifiable addresses are important. The poor people of this world have some housing (trillions of dollars worth), but individual poor housing (cardboard, tin shacks). Here’s the problem: They have some housing, but they don’t have title to that housing. The poor people of this world grow some crops, but they don’t have deeds to those crops. The poor people of this world have some small little businesses, but no articles of incorporation. Here’s the problem with all of that: They don’t have property documents. Unless you have property documents, you can’t show that you own it. You can’t ever borrow a dime. You go to a bank and say you want to borrow $50. They would say, 
 ‘What’s your collateral?’

‘I don’t have any collateral.’


“That’s why they need a verifiable address, a place to hang a shingle. Even though it’s poverty (cardboard, tin, nothing), they need to let people have verifiable addresses. Believe me, most presidents, prime ministers, and leaders of poor countries don’t understand what we’re talking about. We say, ‘That’s your main job.’ We try not to overemphasize it. In fact, sometimes we lecture all weekend long and never mention the United States one time. You’re an American crowd, so I can say United States here.

“Thomas Jefferson helped sign the Constitution, but in writing the Declaration of Independence of 1776 a few years later, Jefferson had the insight to say: Americans need verifiable addresses. So they laid down a measurement system in northern Ohio: north, south, east, west. All of America comes from that axis system. Six miles by six miles is called a township. They open up the shop and let people start buying land, which was unheard of. No nation has ever let its people own land. No nation has ever let its people own oil rights. No nation has ever let its people own anything. Our founding fathers said we are going to be a country of limited government and maximum ownership. A miraculous thing happens when you have verifiable address and can collateralize wealth, and be able to increase wealth. We share this with countries and it is helping them.

“What is it that creates entrepreneurship? What is it about a person who looks at a situation, and every time they see an opportunity? Early on, Eli Whitney, from the late 1700s, developed the cotton gin. It was Eli Whitney’s idea of interchangeable parts. Eli Whitney walks into Thomas Jefferson’s office (the year is 1800, we’re just a brand new country), and he has six gunny sacks. He dumps everything out. Eli Whitney says to Jefferson, ‘Take a piece from each of these sacks, Thomas, and put it together.’ And he did. He made a musket. This was the first time a musket was made out of interchangeable parts. Then he said, ‘You know, this creates an agricultural revolution.’ Cyrus McCormick makes a reaper, and others make combines, rakes, and plows. Although growth went straight for thousands and thousands of years, you come to the year 1800 and the growth curve begins to slowly bend upward because of the agricultural revolution. Agricultural revolution: Those are just fancy words. Cyrus McCormick’s reaper can do the work of 15 men. No wonder mankind is starting to get a little more productive. Then there’s the industrial revolution, and a huge part of that comes out of the United States. We don’t say that far and wide. We just pretend that England and Western Europe were important because they feel more comfortable with that thought. The fact is, Thomas Edison gives a laboratory with 1,000 inventions. Henry Ford gives the gas engine and the car. Entrepreneurs. Entrepreneurs. Entrepreneurs.

“But the main point I’m getting back to is that what the market system does is nurture and cherish and encourage entrepreneurs. Just like Eli Whitney, Thomas Edison, Henry Ford, Bill Gates, Steve Jobs — this system produces builders, creators, dreamers, doers, inventors, and engineers. There are entrepreneurs by the millions, you just have to get out of their way. China lives under 5,000 years of slavery, oppression, and dynasty. Next, they have a hundred years of lousy, stinking communism. Who would believe in a million years that Deng Xiaoping, who trained under Mao Zedong, would wake up eight days into becoming premier of China and decide public ownership won’t work. No kidding, Lone Ranger. This is the same Deng Xiaoping who killed those students in Tiananmen Square. This is no flag-waving act for Deng Xiaoping, so don’t start thinking he’s one great guy. I’ll tell you one thing he did was he said that public ownership is not going to work and he began to allow people economic freedom. Religious freedom — no. Freedom of the press — no. Freedom to congregate — no. Freedom to live where you’d like to live — no. But he did allow a few economic freedoms — that is: to move, to own, to operate, to begin entering into a market system — and, all of a sudden, China begins to get some lift off. I wonder why.”