Monday, October 22, 2007

Money Myth #1 - All Debt Is Bad

So my friend Matt is pretty upset that I said we should "loan poor people money." From his perspective (and the perspective of some big-name Christian financial advisers, like Dave Ramsey) all debt is bad. The main verse cited for this argument is Proverbs 22:7 "Just as the rich rule the poor, so the borrower is servant to the lender." So Matt says, "Wouldn't it be better to just give to poor people rather than make them slaves?" The idea here is that any kind of debt makes the borrower a slave to the lender. Ramsey and others suggest that this is the "biblical" perspective.

I want to challenge this perspective on several points.
1. You cannot simply quote a verse from Proverbs and say, "This is what the Bible says about that." Proverbs are collected saying of the wise. However, they must be applied in the appropriate context, and they are sometimes contradictory. There is no claim that every proverb is true 100% of the time in every circumstance. Consider for example Proverbs 22:4-5: "
4 Do not answer a fool according to his folly, or you will be like him yourself.
5 Answer a fool according to his folly, or he will be wise in his own eyes.

Huh? How can they both be true? Well, the wisdom here is not in quoting the proverb. The wisdom is knowing when to apply verse 4 and when to apply verse 5. Sometimes verse 4 is appropriate, and sometimes verse 5 is best.
Proverbs cannot simply be quoted as the perspective of God. They are collected bits of wisdom which also require wisdom in appropriate application.

2. When we look at the Bible as a whole, we get a broader more flexible view of debt than simply, "Debt is dumb, stupid, and wrong" (Dave Ramsey). The Old Testament encourages us to lend freely to the poor on several occasions (e.g. Deuteronomy 15). Jesus himself recommends lending to the poor, even to those who cannot repay (Luke 6:34-35). Within this context, the warnings against debt in Proverbs 22 and other places, are warnings against the dangers of debt and especially the dangers of foolish debt.

3. From a Biblical perspective, especially the OT, charity is given to the poor to help them meet their immediate needs. However, we give loans to the poor to help them gain the means to provide for themselves. This is like a small business loan for a family who has a specific plan to better their lives. In this case giving a (low or no interest) loan and not a gift helps them to maintain their dignity. As their business succeeds, they will be able to pay off their loans. The loan is simply giving them the capital (money and maybe knowledge) to get started. This kind of loan actually frees someone from slavery rather than putting them into slavery.
Microfinancing and college loans are perfect examples of this kind of freedom-giving loans. In my home country, the USA, probably more than half of the university students would have to drop out of school if college loans were eliminated. Then only the rich kids would be able to get an education. That would further the gap between the rich and the poor. It would also decrease the quality of free education because huge portions of students would know that they had little hope of going on to university.

Yes, absolutely, some debt is enslaving (like "Pay Day Loans" or high interest loans to plant seeds). Yes, debt can be a dangerous trap. We can become so overwhelmed in our debts that we become slaves to our lenders and to our employers. I am definitely not saying we should just walk out into poor neighborhoods and say, "Hey, who wants to borrow some money?"
But some careful, prudent loaning can actually give freedom rather than take it away.

Thanks Matt for your comments. Because of your questions, when I actually preached the sermon, I made a point to clarify what I was trying to say.
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