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  1. 1. ARTICLE Personal Finance and Economics in the Writings of Larry Burkett: How Should Christian Economists Respond? I am, after all, a teacher on personal finances—not an economist. Larry Burkett (1993, p. 9) O ver the last two decades, Larry Burkett has been a strong advocate of applying biblical principles to personal and family financial management. Burkett has had a significant impact on many Christians in the United States by calling attention to our tendency to dichotomize faith and personal financial management. It seems that Christian spirituality does not pertain to the area of personal finance. The dichotomy has lead many Christians toward consumptive lifestyles, high indebtedness, and family financial vulnerabilities that mirror the world around us. Burkett has been a relentless voice in calling Christians to apply biblical principles to personal finance, especially in regard to personal debt. In this respect, Burkett’s contribution should be recognized. In the area of economic analysis, however, serious flaws appear in his works. In this paper we present a synopsis of Larry Burkett’s themes, pointing out both his contributions to personal finance and his problematic economic analysis. Family Financial Realities A few years ago we began offering family financial management work- AUTHORS shops in our church. We discussed Christian financial values from the Charles H. Anderton scriptures and covered basic budgeting and debt reduction methods. Much and David K.W. Chu of the material for our seminars was drawn from the personal finance are Associate Pro- books of Larry Burkett (1985, 1989) and Ron Blue (1991). During the semi- fessor of Economics nars, we discovered that few practiced serious financial planning. Among and Associate Profes- those who monitored their finances, few discerned the difference between sor of Accounting, respectively, at retroactive accounting of their expenses and prospective budgeting. Fail- College of the Holy ure to budget prospectively meant that families did not have funds for two Cross (MA). kinds of events: (1) recreational activities such as vacations and eating out, © Association of Christian Economists 12 SPRING 1997
  2. 2. ARTICLE and (2) household emergencies such as for the family, and help the less fortunate. leaky roofs and automobile breakdowns. Burkett stresses that Christians need to be ...Larry Under such circumstances, families often content with a balanced material life that Burkett’s resort to credit cards as a payment device. God has provided and not indulge in over- personal The lack of prospective budgeting would consumptive lifestyles leading toward repeat itself annually resulting in ever financial bondage and constrained king- finance books deeper indebtedness. We discovered that dom impact. Contentment, however, does are useful, extensive credit card debt (in the thou- not mean a lack of financial planning. indeed sands of dollars) among some Christian Burkett believes that rigorous financial families was normal. Unpaid balances planning is absolutely essential if Chris- essential, for were compounding at annual rates of tians are to be good stewards of the many Christian interest in the 14–18 percent range.1 Some financial resources entrusted to them. and non- families with healthy income flows were Healthy family financial management financially vulnerable.2 We were surprised leads toward more giving in the church, Christian at the lack of planning and forward healthier intra-family behavior, and a families strug- thinking. Some families seemed to be stronger basis for families and churches gling with living week-to-week. Longer range issues to help those in need. like college planning, retirement, and financial After developing a foundation of development of an emergency fund often proper values and attitudes, Burkett problems. were not addressed. stresses several major themes: (1) avoid the mentality of living only in the short-term; Larry Burkett’s Personal Finance always plan ahead and anticipate upcom- Framework ing financial issues; (2) live within your It is to these problems that the personal means. Be disciplined in your spending finance books of Larry Burkett, Ron Blue and rigorous in your planning in order to and other Christian financial planners keep spending below income; (3) avoid the have been directed. It is our general consumer debt trap, especially credit card conclusion that Larry Burkett’s personal debt. Avoid going into debt to finance finance books are useful, indeed essential, consumer items (food, clothing, appli- for many Christian and non-Christian ances, automobiles) and make it a top families struggling with financial prob- priority to reduce mortgage debt.3 Burkett lems. Even though we do not agree with believes that each family should develop a every element of Burkett’s personal clear, realistic, and rigorous budget that financial system, we would not hesitate to incorporates these themes and reflects recommend his books to others; our Christian priorities and values. Rejecting a families have benefitted greatly from budgeting approach to family finances them. could be perceived by some Christians as Burkett’s family financial planning depending more on God and rejecting system begins with a grounding in biblical worldly materialism. Burkett believes that values and attitudes toward finances. most Christian families that spiritualize Burkett (1985, pp. 13–66) describes the the material realm in this way actually attitudes of contentment, planning, and move toward financial bondage. Failure to servanthood that should permeate the budget, rather than a sign of Christian Christian’s approach to money. He be- spirituality, leaves many Christian families lieves that a desire to increase one’s wealth with little or even negative kingdom is often misperceived as worldliness. The impact in regard to finances. real issue, however, is not the accumula- In many respects, Ron Blue’s (1991) tion of wealth per se but the underlying financial planning methods and ideas are values and motivations for wealth accu- similar to Larry Burkett’s. While Blue mulation. Many Christians should be touches upon some basic economic issues, motivated to accumulate wealth to sup- it is almost exclusively from the perspec- port the Church and its missions, provide tive of family financial planning.4 For BULLETIN 13
  3. 3. ARTICLE example, he discusses inflation as an The three themes imply a fourth and ...[The] important ingredient to consider when capstone theme of Burkett’s economic capstone theme thinking about retirement (Blue 1991, writings: an economic catastrophe is pp. 45–54). In the few cases where Blue imminent. Burkett likens the catastrophe of Burkett’s ventures into broader economic themes, he to an earthquake that will devastate the economic is quite restrained. Burkett also ventures U.S. economy. The coming collapse will be writings: an into basic issues of inflation and unem- of the magnitude of the Great Depression. ployment in the context of family financial Burkett sees a number of tremors in the economic planning. economy that herald the coming economic catastrophe is earthquake (e.g., the S&L crisis, the cost of imminent. Larry Burkett’s Economic Analysis AIDS, and the under-capitalization of In some of his writings, however, FDIC, the insurance industry and social Burkett ventures far away from family security). finances and tackles the realm of general The economic earthquake scenario economic analysis (1991, 1993). These follows a certain logic. Secularization, writings feature a number of inter-con- government intrusion, and the entitlement nected themes. The first is the increased mentality lead to ever-growing private secularization of American society. Both and public debt. Greater societal indebted- Christians and non-Christians are ignoring ness is a symptom of the underlying or rejecting biblical principles in many rejection of biblical values in the material facets of their lives. In the family financial realm. Eventually greater debt, especially realm, rejection of biblical values leads to public debt, must give way to depression materialistic lifestyles financed by over- or hyperinflation followed by economic indebtedness, dishonesty in business collapse (1991, pp. 150–54). Although dealings, token giving, an entitlement Burkett identifies major changes in the mentality, and a general indifference political realm that could forestall the toward the poor (1991, pp. 206–213, 222; economic calamity, he believes the col- 1985, pp. 14, 212–214). In the economic lapse is highly likely. Although he states realm, secularism leads to materially that it is impossible to predict when the dependent families and over-indebted collapse will occur, he believes it will come government. These in turn lay a founda- “in the midst of what appears to be eco- tion for detrimental cycles of inflation and nomic prosperity” (1991, p. 222). Based recession (1991, pp. 82–182). upon the Kondratieff cycle, Burkett A second theme of Burkett’s economic suggests the depression might occur writings is the increased presence of somewhere around the year 2000. government in U.S. society. He cites Mixed within the apocalyptic economic numerous examples of government analysis are some doubtful interpretations domination of business, banking, com- of economic history and some factual merce, and the macroeconomy (1991, errors. For example, Burkett (1991, pp. 19– pp. 27–39, 128–143; 1993). 29) describes how the stock market crash The first and second themes are closely of 1929 precipitated the Great Depression. connected to a third: American society is If the stock market crash of 1929 was increasingly driven by an entitlement a major cause of the depression, why did mentality (1991, pp. 97–100, 145, 152, 222; the stock market crash of 1987 (of the same 1993, pp. 183–189, 240). American citizens relative magnitude as the 1929 crash) not desire more from government, but they precipitate a great depression or even a don’t want to pay for it (1993, p. 203). The recession? Sorting out the causes of the excess demand for government provisions Great Depression is a lively topic in the leads to an ever-growing national debt, an economics profession, but Burkett glosses increasingly intrusive government, and over much that is important in under- decreased initiative for healthy family standing that economic catastrophe. financial management. 14 SPRING 1997
  4. 4. ARTICLE Burkett’s analysis of the rise of this instance reflects the kind of problem- Keynesian economics—a philosophy he atic historical economics found in his ...we find holds partly responsible for government writings. [Burkett’s] ‘domination’ of the economy today—is also problematic. For example, he states: economic How Should Christian Economists Franklin Roosevelt was...educated Respond? analysis to be Harvard, where he was It is difficult to respond to the economic superficial, exposed to the philosophies of writings of Larry Burkett; we find impor- overly John Maynard Keynes of England. tant points of agreement but also serious Keynes, an avowed socialist, had areas of disagreement. We agree with apocalyptic, long advocated the use of govern- Burkett’s concerns about excessive govern- and fraught ment control over banking and ment intrusion and the entitlement mental- with factual business to ensure prosperity for ity and we believe he should be com- all. The philosophy was not new. mended for his insistence that the secular- errors. Karl Marx had advocated essen- ization of society manifests itself in the tially the same doctrine...(1991, realm of economics and family finances. p. 27). Nevertheless, we find his economic The General Theory of Employment, Interest analysis to be superficial, overly apocalyp- and Money, published in 1936, could not tic, and fraught with factual errors. There have influenced Roosevelt decades are obviously numerous alternatives to the earlier at Harvard. Indeed, Keynes met collapse scenarios that he paints.6 While with Roosevelt in the 1930s in an effort recessions are highly probable over a ten to convince the President that govern- year period (based on past experience), ment deficit spending could revive the predicting economic calamities of Great U.S. economy. Roosevelt thought that Depression magnitude based upon the Keynes’ ideas were fanciful.5 Kondratieff cycle is highly speculative. Burkett’s linkage of Keynes and Marx Other (non-Kondratieff) forms of is equally problematic. As Gwartney and economic analysis in Burkett’s writings Stroup (1990, p. 228) put it: have a certain logic to them, but they too Some critics of Keynes thought his are problematic. These other forms of ideas were a threat to the market economic analysis center upon escalating economy. Personally, Keynes national debt. Ever-growing national debt believed his ideas strengthened must lead to monetization of the debt or a the case for the private sector by growing threat of government default of proposing a cure for its most its debt obligations. By printing money to serious shortcoming: the reces- meet its debt obligations, inflation and sion. He praised the virtue of nominal interest rates would rise. Carried profits. “The engine which drives out excessively (because of excessive debt), enterprise,” Keynes wrote, “is not monetization could lead to hyperinflation thrift but profit.” He was unim- and eventually economic collapse. If the pressed with Marxian ideas, government refuses to monetize the debt, which he found to be “illogical ever-increasing national borrowing and and so dull.” the threat of default would push interest Nobody would claim that Gwartney and rates up, leading toward economic col- Stroup are Keynesians. We are not trying lapse. Either way, escalating national debt to defend Keynesian economics, which leads to economic collapse. has some flaws that are well recognized Burkett’s near-term economic collapse in the economics profession. The prob- scenarios are not credible (nor were they lem here is that Burkett’s treatment of credible in the early 1990s) because they Keynes and Roosevelt is not accurate; are not reflected in long term Treasury bill the facts are wrong. Burkett’s analysis in rates. If either of Burkett’s collapse sce- narios were imminent, holders of T-bills BULLETIN 15
  5. 5. ARTICLE would be unloading them, initiating rising distinguish Burkett’s concerns and values ...surely the interest rates today. Even if somehow the (where we have common ground) and his ways in which government tried to conceal its monetiza- apocalyptic and erroneous economic tion of debt or its borrowings, such activity analysis (where we have little common families would still percolate through the financial ground). Third, Burkett has some valuable allocate their markets to be dissected by tens of thou- things for Christians to hear in the realm of financial sands of analysts. We see no evidence of family finances. It would be unfortunate if resources is a impending government default or hyper- we dismissed Burkett for his problematic inflation in the financial markets today. economics, only to miss the important and significant part Even within Burkett’s own writings valuable influence that he has in the realm of economics. there are irreconcilable contradictions that of family financial management. demonstrate the overly apocalyptic nature When we first became interested in of his economic analysis. For example, teaching personal financial management in Burkett (1991) warns of government our church, we did not view the subject as default and collapse by the year 2000, but “economics.” Yet surely the ways in which then he classifies government-backed families allocate their financial resources is securities as one of the best forms of a significant part of economics. By what investment (1992, p. 89). He also states: criteria are inefficiency, slow economic Among those I have counseled who growth, unemployment, inflation, and were more than 50 years of age, pollution economic problems—but over- government-backed securities indebted, financially vulnerable families dominated their best investment list. not an economic problem? Consider the This does not imply that CDs,T-bills, question from a positive economic view- bonds and the like are the best point. A society that is made up of a performers. As mentioned earlier, relatively large proportion of financially they are usually selected for their over-extended families might be expected lack of risk, not their return (1992, to have longer and deeper recessions than p. 90). a society with a small proportion of such They can be selected for “their lack of risk” families.8 Financially vulnerable families only if the collapse scenarios that Burkett may be more prone to divorce. Their paints are not credible. behavior affects their willingness and ability to give, enjoy life, assist children Can Larry Burkett Influence Us? during the college years, and retire with- It is important to recognize that out assistance from others. These in turn Burkett’s economic analysis creates have a significant influence on our obstacles for Christian economists and we economy and society, including the will be prone to dismiss him. This would church. Surely a society with 30 million be unfortunate. First, Burkett is influenc- families practicing a Burkett/Blue form of ing the economic thought of thousands of family financial management is going to Christians. We need to be aware of his be a different economy and society than economic thought and offer other perspec- one where only 5 million families do so. tives that balance his apocalyptic analysis.7 The effects of family financial practices on Second, there are areas of concern where families and the economy are matters for many Christian economists would tend to scientific investigation by economists. find common ground with Burkett. For There are significant positive economic example, Burkett’s concern about govern- questions to be investigated within the ment intrusion is consistent with a public realm of family financial management. choice perspective. We can indicate to We view family financial management fellow Christians where we think the as an economic subject with the potential economics profession (or subsets of it) for synthesizing Richardson’s (1994) view tend to agree with him. It is important to that Christian economists should be good 16 SPRING 1997
  6. 6. ARTICLE economists and the desire of some of our 3 Some Christian financial teachers colleagues to do “Christian economics.” maintain on the basis of Romans 13:8 A good economist will want answers to that the Bible prohibits borrowing, e.g. questions that stem from treating family Institute in Basic Life Principles (1983), financial management as an economic pp. 75–87. Although Burkett is negative topic (Is long term credit card debt ratio- and cautious about debt, he does not nal? Are recessions deeper and longer in take the position that the Bible prohibits societies with certain family financial it: “There is not a verse directing God’s management norms? How do family people not to borrow money (not even financial norms affect economic growth Romans 13:8)” (1985, p. 107). or the role of government in society?). 4 For example, Blue (1991, pp. 45–54) Development of a “Christian economics” discusses inflation as an important might start with the family as the funda- ingredient to consider when thinking mental unit of analysis (as opposed to the about retirement. individual or society). While Gary Becker 5 The video series Economics USA and others have already launched “family (Annenberg/CPB Collection 1986) economics,” Christian economists can states: make unique contributions to the field. Popular history has it wrong, We wonder what our economics textbooks Franklin Delano Roosevelt did would look like if the family, along with not come to the White House society and the individual, was treated as convinced of the need for a a fundamental unit of analysis. Consider Keynesian program of public the gains to society and the church from spending to revive the shattered Christian families practicing healthy economy. In fact, he considered financial management. Instead of needing deficit spending a desperate and assistance, families would be able to assist. dangerous measure. FDR had Increased giving in our churches, growing spent much of the 1932 cam- out of a base of family financial health, paign declaring his faith in a would surely transform churches and balanced budget and blasting society. Too much of our economics Hoover as a big spender. focuses on the individual and society and 6 This is not to say that some form of whether to have “more” or “less” govern- economic or societal collapse could ment. Scientific and normative economics never happen in the United States. would benefit greatly from family eco- History shows that every civilization nomics and the perspectives of Christian comes to an end. Blue (1991, p. 15) economists. For all of the problematic quotes Alexander Tyler’s conclusions economics in Larry Burkett‘s writings, he regarding the decline of the Athenian does have his finger pointed at a subject republic: we should take seriously. A democracy cannot exist as a permanent form of government. ENDNOTES It can only exist until the voters discover that they can vote 1 See Brito and Hartley (1995) for a model themselves a largess from the explaining why credit card loans can be [public] treasury. From that attractive relative to bank loans. moment on, the majority will 2 It was during the time of our initial always vote for the candidates seminars that then-Boston Red Sox promising the most benefits from baseball player Jack Clark filed for the public treasury, with the bankruptcy in spite of his $2 million result that a democracy always annual salary. collapses over loose fiscal policy and is always followed by a dictatorship. BULLETIN 17
  7. 7. ARTICLE The average age of the world’s REFERENCES greatest civilizations has been 200 years. These nations have Annenberg/CPB Collection. “John progressed through this se- Maynard Keynes.” Economics USA, quence: from bondage to spiritual 1986. faith; from spiritual faith to great Blue, Ron. Master Your Money. Nashville: courage; from great courage to Thomas Nelson Publishers, 1991, abundance; from abundance to revised edition. selfishness; from selfishness to Brito, D.L. and P.R. Hartley. “Consumer complacency; from complacency to Rationality and Credit Cards.” Journal apathy; from apathy to dependency; of Political Economy, 1995, Vol. 103, from dependency back again into No. 2, pp. 400–433. bondage. Burkett, L. Whatever Happened to the Blue directs the theme of Tyler’s American Dream? Chicago: Moody statement to the United States. Al- Press, 1993. though Blue (1991, p. 16) believes that a _________. The Coming Economic Earth- societal collapse could come to the U.S., quake. Chicago: Moody Press, 1991. he draws a longer-term, non-apocalyp- _________. Debt-Free Living. Chicago: tic picture. Indeed, Blue endorses the Moody Press, 1989. book cited in the following note that _________. Using Your Money Wisely. describes the U.S. economy as safe and Chicago: Moody Press, 1985. secure. Gwartney, J.D. and R.L. Stroup. Economics: 7 A book that balances Larry Burkett’s Private and Public Choice. New York: apocalyptic economics is Bruce Harcourt Brace Jovanovich, 1990, 5th Howard’s Safe and Sound: Why You Can edition. Stand Secure on the Future of the U.S. Howard, B. Safe and Sound: Why You Can Economy. Wheaton, IL: Tyndale House Stand Secure on the Future of the U.S. Publishers, Inc. 1996. Economy. Wheaton, IL: Tyndale House 8 See King (1994), whose cross-section Publishers, Inc., 1996. analysis is prefaced by the view that “In Institute in Basic Life Principles. Men’s the early 1990s the most severe reces- Manual, Vol. 2. Oak Brook, IL: Institute sions occurred in those countries which in Basic Life Principles, Inc., 1983. had experienced the largest increase in Keynes, J.M. The General Theory of Employ- private debt burdens.” ment, Interest, and Money. New York: Harcourt Brace Jovanovich, 1936. King, M. “Debt Deflation: Theory and Evidence.” Abstract of his European Economic Review Presidential Address in Economics Alert, No. 2, June 3, 1994, Amsterdam: North-Holland, pp. 1, 8. Richardson, J.D. “What Should Christian Economists Do? ‘Economics!’” ACE Bulletin, 1994, No. 23 (spring), pp. 16– 33. ■ 18 SPRING 1997