March 26, 2020

Ethical Investing and Helicopter Money

Tim Aka’s article, originally published before the COVID-19 pandemic and its disruption of global markets, shows the intimate interconnection between world business, market investment, and moral thinking. Editors

Baristas, Boeing, and Bailouts

The COVID-19 pandemic has had deadly consequences for those who have contracted the disease. The economic impact from this global pandemic is only beginning.  Many industries have been virtually shut down and workers laid off. Airlines, hotels, and hospitality businesses are all reeling from the shutdown of our communities, cities, states, and countries. Inevitably, it will hit hardest on the average worker who works hard to make ends meet.

The barista at your local Starbucks who is a college student trying to pay for a $30,000 tuition; the single mom working two jobs, waiting tables, and cleaning hotel rooms to support her family;  the Boeing executives who spent most of their profits to buy back their stocks so they can get multimillion dollar bonuses ... but wait, one of these things is not like the others! 

Yet they are all in the same line of people supposedly in need of a bailout! Boeing used its $58 billion profits of the past 10 years to buy back $43 billion of its stock. Now the executives are asking for a $60 billion bailout. Hardworking people affected by the shutdown of local communities spent their hard-earned dollars to buy a house and feed their families. So, who deserves the bailout?

Still, there is an underlying question about an economic system that is so fragile that everyone from the average family to small businesses and giant corporations are in need of government support. There will be time to reflect on these issues as many of us will be sitting at home by order of the government. How have we come to this point, when we were supposedly in a strong economy? Is it just the COVID-19 virus? Or is it an infection of another kind — an ethical kind, perhaps?

Here follows the original article, which had the original heading, “Ethics and Investment.”

Tobacco, alcohol, gambling, adult entertainment.... When many Christians hear the term ethical investing, they typically think about industries they must exclude from investing. More recently, climate change, identity politics, and corruption have come to dominate this discussion. Still, a new discussion, brewing for a while, may prove a bigger topic of conversation this year, viz., income equality.

 The Big(ger) Deal

While we may not think about this as your typical ethical investment issue, or even as an investment issue at all, income inequality threatens to become the economic world’s biggest societal issue. And heading into the U.S. presidential elections in November 2020, it may become even more heated. To the extent that investment performance has been driven by economic and monetary policy, the income inequality debate will have a large impact on investments. Certainly, in the investment industry, discussions around monetary stimulus, social spending, and “helicopter money” are becoming more pronounced.

What in the world is “helicopter money”? Economics fans may know it’s the idea that a country or its central bank can provide direct financial stimulus to its citizens, even if they have to proverbially rain it down from a helicopter on to the people. The idea, made famous by Ben Bernanke, former chair of the U.S. Federal Reserve Board, is to bail out a country’s economy by “bailing out the people.” While you might think that’s a ridiculous notion, it is precisely what is on the discussion table today. And it may not sound so ridiculous if you think about the trillions spent to bail out banks, corporations, and Wall Street in the past decades, while main street has suffered from job losses, stagnant wages, and soaring costs for tuition, health care, and other basic living needs. Some may agree that perhaps it is a good idea or a good time to bail out the consumer.

Is capitalism right? Moral? Ethical?

This is not just an issue for those living in a “flyover state,” those rural parts of the country forgotten by the nation’s economic development; it’s not just a red state vs. blue state issue (Democrats vs. Republicans); or boomers vs. millennials. It is an issue that affects us all, but certainly in a polarized way. For some, government intervention into financial markets has been a great benefit, while for many others it has distorted the economics of daily life and caused much pain. Some may argue that if not for bailouts, we would all be suffering. Others would say that bailouts have long overstayed their welcome and we need to return to sound money principles.

The Ethics of It

The big question in investment ethics today may be the very nature of our economic system. Is capitalism right? Moral? Ethical? Or should we embrace something that looks more like socialism? Would a centrally planned system be a more egalitarian society, in which wealth redistribution is managed by a central authority? But then, is it right to take something that “belongs” to someone and give it forcibly to another? On the other hand, is it right to maintain a society where a few people flourish while many struggle to get basic necessities?

The argument needs to be expanded. Is it moral for one country to have great wealth and modern luxuries while other countries remain entrenched in a so-called third world existence? Do we feel comfortable in the West to be able to buy cheap goods made in far-off countries, where people who are paid very little work in unsafe conditions? Should we rather buy things that are “Made in the USA,” “Made in Canada,” or “Made in [your home country]”? Should we buy things that are made in a country that oppresses its own people? People everywhere wrestle with these deep questions about the economic systems that govern their societies.

So who’s wrong and who’s right? Is it socialism or pure capitalism? Some question whether we even have real capitalism today — a fair and open system of business and finance. Some insist that it’s just crony capitalism, in which those aligned with people in power get the capital. Some suggest that we need a “new deal” right now — a fairer distribution of money. But how far are people willing to tear down our current economic foundations to get to a fairer system? What does a free and fair society look like? Protesters in Paris, Beirut, Hong Kong, and elsewhere want to find and experience it. Economic fairness will be the question of this decade.

The Roots of the Problem

The problem originated in the West, where a free-market system has been transformed into a warped system that prioritizes money over people. Central banks have exacerbated it, distorting monetary principles to inflate asset prices to keep wealth secure. But central banks now seem to be trapped in a corner with no ability to get back to what was once normal monetary policy. When the U.S. Federal Reserve tried “normalization” in 2018, the stock market plunged 20 percent. The Fed quickly reversed course to “save” the markets. Stock markets then rose to all-time highs, but the idea of continuing to bail out Wall Street is becoming much less palatable in our social-political climate. The average consumer, responsible for much of the economic activity, has reached her limits of spending. Since we’ve bailed out corporations and the wealthy in the past, shouldn’t we now bail out ordinary citizens? And is “helicopter money” the placating answer? Given the
central banks’ inflated asset bubble, we may have no way to keep the system in balance but by “reflating” consumers so they can keep buying. It is a solution to our financial problems that relieves individuals of personal fiscal responsibility. 

I am the traitor if, as a person, I fail to faithfully do whatever the Spirit bids me do.

Our world stands on a dubious platform, an economic construct that requires perpetual growth. Rein in the growth and chaotic rebalancing occurs. Much of today’s continuous economic expansion is likely unsustainable. Uneven wealth distribution depends too much on continued cooperation by the have-nots. On the other hand, experiments in centralized control — communism, socialism — have been mostly disastrous. Even where capitalism and socialism seem best in balance — Canada, perhaps — societies still rely on the global capitalist system. Canada’s oil, minerals, and real estate all benefit from the global financial system. Communist China and Vietnam are committed to building capitalist-like financial systems in order to access funding to fuel their growth. In the end, capitalism and socialism ultimately fail for the same reason — selfish human nature, the corruption that power inspires.

Solving the Problem?

Whether we choose to bail out Wall Street or main street, the problem is that eventually it’s our grandchildren and great-grandchildren who will pay. Moreover, our children, having already spotted the non sequiturs in our economic faith, are looking for a better system of financial governance that will bring fairness and equality. Is there such a system? And can we get to it without causing chaos?

Heading into this new and potentially tumultuous decade of the 2020s, where do we stand as Seventh-day Adventist Christians? Do the different economic systems of Bible times offer helpful suggestions or solutions for us today? Shall I leave a corner of my field to be gleaned by the poor, and forgive all debts after seven or 50 years? Beyond this, should believers in Christ become economic justice warriors? Finally, what did God Incarnate teach us about relating to poverty or wealth, high or low social status? Thankfully, even in our current Christian living we may enjoy a life of economic godliness consistent with the principles of economic peace and balance that will rule the new heavens and new earth we shall soon inhabit. Here’s a list of a few of those principles:

1. Heirship. We are already heirs of Christ’s superior kingdom. This world is no match: “What good is it for someone to gain the whole world, yet forfeit their soul?” (Mark 8:36, NIV).

2. Stewardship. While we accept who God made us to be and where He placed us, we strive to be ever better stewards of the talents He has loaned us so we may live and flourish: “Each person should live as a believer in whatever situation the Lord has assigned to them, just as God has called them” (1 Cor. 7:17, NIV). And “my God shall supply all your need according to his riches in glory by Christ Jesus” (Phil. 4:19, NKJV).

3. Sacrifice. Besides being fiscally responsible for ourselves, we need to create capacity to help others. We do this by living simply and keeping our living expenses low. Then, as greater needs arise, we are ready to make the greater sacrifices required. “All the believers were one in heart and mind. No one claimed that any of their possessions was their own, but they shared everything they had.... Those who owned land or houses sold them, brought the money from the sales and put it at the apostles’ feet, and it was distributed to anyone who had need” (Acts 4:32, 34, 35, NIV).

4. Fellowship. We serve God and community regardless of our personal socio-economic situation. Perhaps being a “social justice warrior” begins with my neighborhood rather than my political leaders: “Defend the weak and the fatherless; uphold the cause of the poor and the oppressed” (Ps. 82:3, NIV).

5. Faithfulness. In a world with imperfect or even broken economic systems, clamoring for change in public policy may be an exercise in futility. I am not a traitor to economic godliness because I accept society’s prevailing rules that may [seem to] benefit me. I am the traitor if, as a person, I fail to faithfully do whatever the Spirit bids me do: “Is not this the kind of fasting I have chosen: to loose the chains of injustice and untie the cords of the yoke, to set the oppressed free and break every yoke? Is it not to share your food with the hungry and to provide the poor wanderer with shelter — when you see the naked, to clothe them, and not to turn away from your own flesh and blood?” (Isa. 58:6, 7, NIV). 

Our financial world is broken and neither capitalism or socialism offer the ultimate solution. Our most vital role as Adventist Christians may well be to help somebody else to survive the coming economic onslaught. Our sacrifice and acts of love will share with them the true gospel of Christ.

Tim Aka is associate treasurer and director of investments for the General Conference of Seventh-day Adventists in Silver Spring, Maryland.