Monday, November 9, 2015

The Refugee Crisis, Costs and Benefits of a Solution

Recently a student in a local Catholic school asked us for help on a question in economics class: “Present three (3) economic costs and three (3) economic benefits that would be associated with the short-medium term solution to the crisis of people fleeing violence and poverty from countries in Africa and Asia.”  From the Just Third Way perspective, this appeared pretty straightforward.

"Give me 100 words on how to solve the world's problems."
Not so from the usual frame of reference.  First, the question implied that there is a single solution that fits the short- and mid-term.  That is incorrect (and saying that would have gotten the student a failing grade. . . .).  Using the terminology in the question, the answer had to be framed as a short-term expedient to meet current needs (calling it a “short-term solution,” not an expedient that is anything but a solution), and a mid- to long-term solution to the underlying problem.

The short-term expedient (“solution” . . . that is not a solution) is charity/redistribution.  If private resources prove inadequate to assist people, governments may levy additional taxes to assist people to avoid harm to the common good.  This is an instance of the “extreme cases” noted by Pope Leo XIII in § 22 of Rerum Novarum that permits redistribution as an expedient.  The economic costs associated with this include:

Draining the tax base to no effect.
1. Stretching the tax base of the assisting countries to the limit, and sometimes beyond.  Governments then fall back on the hidden tax of inflation by issuing more debt (bills of credit), weakening their own economies and undermining their own productive capacity, and thus shrinking the tax base.  An extreme example of destroying the economy in order to provide social welfare payments is Greece.

Impure Jewish Science
2. Providing assistance to refugees encourages more refugees, thereby putting an even greater strain on resources and, more importantly, draining the countries from which they come of people who are needed to implement a financially feasible and sustainable solution in the short- to long-term.  This happened during the Third Reich in Germany, when many of the top scientists and philosophers were forced to leave . . . thereby ensuring that “Jewish science” would not pollute the purity of National Socialism.  The fact that some of the scientists were key to the development of the atomic bomb you may view as good or bad, but some authorities believe it prevented the Nazis from having nuclear weapons to mount on V-2 missiles to conquer the world.

3. It convinces people that the short-term (and costly) expedient is, in fact, a solution, when it is anything but.  This encourages those who are aware that it is not a solution to advocate withholding all aid, and those who think it is a solution to advocate beggaring their own countrymen for humanitarian reasons.  Neither group realizes that a short-term expedient only buys time so that a feasible and sustainable solution can be implemented.  See “Pope Francis and the Just Third Way”.

The benefits include:

Buying time to implement a feasible and sustainable (and, hopefully, just) mid- to long-term solution.  (This is a way to segue from the third “cost” into the first “benefit.”)  The caveat is that the solution must be based on correct principles.  In our opinion, of course, the principles are the three principles of economic justice (see the article linked to, above), implementing the four pillars of an economically just society (again, explained in the article).

Leo XIII: "Many excellent results will follow from this."
Leo XIII actually gave three benefits to a program consistent with the Just Third Way in § 47 of Rerum Novarum:

“47. Many excellent results will follow from this; and,

(1) “[F]irst of all, property will certainly become more equitably divided. For, the result of civil change and revolution has been to divide cities into two classes separated by a wide chasm. On the one side there is the party which holds power because it holds wealth; which has in its grasp the whole of labor and trade; which manipulates for its own benefit and its own purposes all the sources of supply, and which is not without influence even in the administration of the commonwealth. On the other side there is the needy and powerless multitude, sick and sore in spirit and ever ready for disturbance. If working people can be encouraged to look forward to obtaining a share in the land, the consequence will be that the gulf between vast wealth and sheer poverty will be bridged over, and the respective classes will be brought nearer to one another.

(2) “A further consequence will result in the great abundance of the fruits of the earth. Men always work harder and more readily when they work on that which belongs to them; nay, they learn to love the very soil that yields in response to the labor of their hands, not only food to eat, but an abundance of good things for themselves and those that are dear to them. That such a spirit of willing labor would add to the produce of the earth and to the wealth of the community is self evident.

(3) “And a third advantage would spring from this: men would cling to the country in which they were born, for no one would exchange his country for a foreign land if his own afforded him the means of living a decent and happy life.

“These three important benefits, however, can be reckoned on only provided that a man's means be not drained and exhausted by excessive taxation. The right to possess private property is derived from nature, not from man; and the State has the right to control its use in the interests of the public good alone, but by no means to absorb it altogether. The State would therefore be unjust and cruel if under the name of taxation it were to deprive the private owner of more than is fair.”


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