brj logo

Recessions, Depressions, and the Biblical Jubilee
Part Three: The Business Cycle Then and Now
-- Jeff, Tuesday 02-17-2009, 6:30 pm CST


It is impossible to rightly-divide the twenty-fifth chapter of Leviticus -- or any of the rest of Bible from Genesis 1:1 to Revelation 22:21 -- without keeping straight "to whom" it is addressed. God is not addressing the Christian church, much less present-day governments or central banks, in Leviticus 25. Rather, via Moses, God gave these commands to Israel as it existed 3,500 years ago as an agrarian and pastoral society.

So Leviticus 25 doesn't offer prescriptions that can be adapted wholesale by, say, the United States Federal Reserve, the Bank of England or The People's Bank of China as a cure-all for what ails today's industrial and information-age economies. What we can learn from this chapter in God's Word, rather, are the principles upon which the specifics in Leviticus 25 are based.

By definition, principles identify things which hold true across all history and all time. Leviticus 25, it turns out, contains principles that have governed the economic life of this old world of weal and woe from time immemorial -- ever since Adam's fall. Principles which at this late date in history, for all our "smarts," have only recently begun to become visible to a small, but growing, minority of policy-makers, businessmen, economists, investors and traders.

As a matter of fact, since beginning this series, I have seen the principles upon which Leviticus 25 is based convincingly demonstrated as a matter of mathematics.

***

The ups and downs which define every economy known to history, during modern times have been dubbed the business cycle. Although many would argue the point, based on life in general along with evidence from God's Word, it is clear that -- just as human existence is governed by cycles of wake and sleep, work and rest, birth and death -- so the economies that human beings build are governed by similar cycles.

Cycles which, absent checks of the kind specified in Leviticus, always turn out to be cycles of boom and bust. [1]

The two parts to the business cycle, which can be seen by studying economies through the course of history and from the Word of God, can be summarized as follows:

Threshing_Grain_with_Oxen Here at the BRJ, we are first going to look at these cycles in the record in the Word of God. Leviticus 25 starts out by addressing the problem of recessions:
Leviticus 25:1-7
And the Lord spake unto Moses in mount Sinai, saying,

Speak unto the children of Israel, and say unto them, When ye come into the land which I give you, then shall the land keep a sabbath unto the Lord.

Six years thou shalt sow thy field, and six years thou shalt prune thy vineyard, and gather in the fruit thereof;

But in the seventh year shall be a sabbath of rest unto the land, a sabbath for the Lord: thou shalt neither sow thy field, nor prune thy vineyard.

That which groweth of its own accord of thy harvest thou shalt not reap, neither gather the grapes of thy vine undressed: for it is a year of rest unto the land.

And the sabbath of the land shall be meat for you; for thee, and for thy servant, and for thy maid, and for thy hired servant, and for thy stranger that sojourneth with thee,

And for thy cattle, and for the beast that are in thy land, shall all the increase thereof be meat.

God commanded a rest for the land every seventh year. In addition the soundness of this practice, from an agricultural point of view, of allowing land to lie fallow on a regular basis, there were also economic reasons behind this Sabbath.

The pattern appears the same in both agrarian, industrial economies. When business begins to boom, producers gear up to meet an ever-increasing demand. Over time, too many producers gear up too much. Before long, the increasing supply of goods and services outstrips existing demand. Left unchecked, this overabundance causes prices to fall, jobs to be lost, and production to taper off further than if the boom had been checked.

A check is what the Sabbath for the land provided for Israel. Instead of being pressured by falling prices into withdrawing lands from production and firing employees, every seventh year, by law, not only the land, but everyone who lived and worked on it, got a twelve-month vacation from work.

Sounds like a deal to me!

***

Next, Leviticus addresses the problems we call depressions:
Leviticus 25:8-18
And thou shalt number seven sabbaths of years unto thee, seven times seven years; and the space of the seven sabbaths of years shall be unto thee forty and nine years.

Then shalt thou cause the trumpet of the jubilee to sound on the tenth day of the seventh month, in the day of atonement shall ye make the trumpet sound throughout all your land.

And ye shall hallow the fiftieth year, and proclaim liberty throughout all the land unto all the inhabitants thereof: it shall be a jubilee unto you; and ye shall return every man unto his possession, and ye shall return every man unto his family.

A jubilee shall that fiftieth year be unto you: ye shall not sow, neither reap that which groweth of itself in it, nor gather the grapes in it of thy vine undressed.

For it is the jubilee; it shall be holy unto you: ye shall eat the increase thereof out of the field.

In the year of this jubilee ye shall return every man unto his possession.

And if thou sell ought unto thy neighbour, or buyest ought of thy neighbour's hand, ye shall not oppress one another:

According to the number of years after the jubilee thou shalt buy of thy neighbour, and according unto the number of years of the fruits he shall sell unto thee:

According to the multitude of years thou shalt increase the price thereof, and according to the fewness of years thou shalt diminish the price of it: for according to the number of the years of the fruits doth he sell unto thee.

Ye shall not therefore oppress one another; but thou shalt fear thy God: for I am the Lord your God.

Wherefore ye shall do my statutes, and keep my judgments, and do them; and ye shall dwell in the land in safety.

Modern observers of ancient Israel's economic system have made much of the strictures against usury (a.k.a. charging interest on money), asserting that such a "backwards system" would disallow the formation and growth of capital. Straight baloney. As a matter of fact, the economic system God gave to Moses was far more sophisticated and realistic than the lately-hatched schemes and scams that have brought the world economy to the precipice of collapse today.

First of all, Israelites were barred from charging interest on money lent to one another, but not to foreigners.[2] So the avenue of capital formation via money, which is well-nigh universal today, was not entirely precluded by the Law of Moses. But the main store of capital upon which the assets of Israel's economy were built was not interest-bearing money, but on the interest that could be realized from land and labor.

For present purposes, let's look at how land would function as capital within the system of Jubilee years.[3] Let's say I had land, but wanted to embark upon a business endeavor that would require money. Meanwhile you had money, but wanted to start farming. So what do we do? We make a deal: you loan me the money capital that I need against the land capital that you need.

Come the Jubilee Year, what happens? Well, for one thing, by then I would have paid you back the money that I owed you. No lender would schedule repayments beyond that year -- all parties being well aware that, at that date, all land returns to its original owner.

So how was the lender's return on his money capital realized? By the increase he reaped from the land during the period between making the loan and the Jubilee Year. And how was the borrower's return on his land capital realized? By the profits he gained from his business between taking on the loan and the Jubilee Year.

Then, after the Jubilee year, during the fifty years before the next Jubilee, these profits represented an increased capital base available to the economy of Israel as a whole. So much for Israel being "backwards."

But how did this scenario, with all its possible variations, serve to prevent depressions in Israel of old? And how does it relate to the business cycle now? We will delve into the answer to that question in Part Four of this series, "The Mathematical Exactness of Leviticus Chapter 25."

But before we do, having an overview of the business cycle "then," during the times of ancient Israel, let's take a look at it "now," in the times we live in today.

***

Great Reckoning Book Cover In the bookThe Great Reckoning: Protect Yourself in the Coming Depression (1993), James Dale Davidson and William Rees-Mogg were a decade and a half early predicting the current slump in the global economy. In Chapter Twelve, building on research into long-wave economic cycles pioneered by Russian economist Nikolai Kondratiev in the 1920s and by American accountant Ralph Nelson Elliot in the 1930s, they describe for a general audience the two kinds of downturns which affect modern economies:
Distinguishing "Recessions" from "Depressions"
Before World War II, it was common to refer to any business cycle downturn as a "depression." This confused the short-term cycles, normally inventory cycles that recur about every four to five years - what we now call "recessions" - with the deeper depressions, which are infrequent events, recurring every fifty to sixty years. Depressions seem to be driven more by weaknesses in balance sheets [a.k.a. runaway debt] than by errors in ordering and stocking of goods.

The difference between a recession and a depression can be described in terms of that old-fashioned toy, the yo-yo. When it is operating successfully, the yo-yo goes up and down on its string, and each fall is followed by a rebound. If the operator makes a mistake, however, the wooden sphere falls to the end of the string, and can only be restarted when it has been completely rewound.

A recession is a downturn that automatically rights itself, normally after little more than a year. A depression requires longer to play itself out. In a deep slump, the economy may unravel for years. The contraction of 1929 took three and a half years to hit bottom in the United States. The U.S. economy shrank by 30 percent. The fall was so severe that the United States did not surpass its 1929 output until 1939. The depression of 1837 deepened for four years before the recovery began. After the economy started down in the depression of 1873, it continued to fall for five years, five months.

Recessions are sometimes local in character, affecting one nation only. They are often relatively mild, resulting in only shallow drops in gross national product and the other statistical measures of economic output. For example, the U.S. 1981-82 recession, considered the most severe of the postwar period [as of 1993, when this book was written], caused just a 2 percent drop in GNP. The economy recovered to surpass its 1981 output by 1983. Recessions often last less than a year, and seldom drag on for more than eighteen months.

Depressions, on the other hand, are usually global is scope. They tend to be most severe in the most advanced countries, but are felt even in remote and backward areas. In Indochina in the 1930s, for example, the peasant farming economy was upset when the world depression led to a one-dollar fall in the price of rice. This led to widespread rioting and the abandonment of 560,000 acres in cultivation. The guerilla wars that flared into the open after World War II were set in motion by the bitter reaction of peasants to the impoverishment that followed the collapse of the world price of rice.

To summarize, recessions are brief, shallow episodes of contraction. They recur, on average, every four to five years in mature industrial economies, like the United States and Great Britain. Depressions, by contrast, are rare events, occurring every fifty to sixty years. They can cause steep drops in output. They tend to last two to three times longer than recessions, and require a longer recovery period.

Although no one questions the existence of some kind of business cycle, there are plenty of economists and others who would debate the inevitability, if not the existence, of a long-wave cycle of depressions which spans, more or less, a generation.

One problem that everyone in the debate faces, arguing the empirics from whatever angle, is the fact that the kinds of data that lend themselves to modern economic analysis date back only to the Great Depression or thereabouts. Records of any use at all rarely date back more than two-hundred or two-hundred-fifty years.

Except for the record in Leviticus, that is.

***

A Shepherd with his sheep In Part Two of this series I noted that, "The economic concept of scarcity, particularly, leaves tremendous room for error due to the limited scope of the natural man's knowledge." Due to that same lack of scope, the natural man also has trouble even perceiving -- much less discovering the causes -- of a cycle whose length is about that of a human lifespan.
I Peter 1:24-25
For all flesh is as grass, and all the glory of man as the flower of grass. The grass withereth, and the flower thereof falleth away:

But the word of the Lord endureth for ever. And this is the word which by the gospel is preached unto you.

Man is here today, and gone tomorrow. Generations come and generations go. They rise and fall; they live and die. The generation on deck receives an education in whatever knowledge has accumulated in the past, number one, by whatever their elders have opportunity and deign to share. And number two, from whatever previous generations managed to put down in writing and other recording media.

And that is it.

Meanwhile, the God of Moses, who is the God and Father of our Lord Jesus Christ, faces no such limitation, to say the least. He inhabits eternity.

Isaiah 57:15
For thus saith the high and lofty One that inhabiteth eternity, whose name is Holy; I dwell in the high and holy place, with him also that is of a contrite and humble spirit, to revive the spirit of the humble, and to revive the heart of the contrite ones.
I have seen, time and again over the last 34 years, how the Word of God fits like a hand in a glove, and how it works with a mathematical exactness and a scientific precision from Genesis to Revelation. I also count myself among the many witnesses who have experienced first-hand how God remains both able and willing to perform every promise He makes in His Word.

That's why it's no stretch for me to presume -- when He devotes an entire chapter in His Word instructing Israel of old how to deal with recessions and depressions -- that the chapter just might be based on principles that remain instructive today.

Turns out, they aren't just instructive, they address the root cause of the economic booms and busts that still come and go with a certain degree of regularity in our day-and-time today -- of which current events are making our particular generation so rudely aware.

It's a root cause that basically nobody in the field of economics recognizes. Not the Monetarists who run our Federal Reserve or the Keynsians who run our Treasury Department. Apparently, even the Austrians fall short of describing the two simple mathematical curves that controls the business cycle.

I didn't discover the mathematics either. But we are going to take a look at the two curves in Part Four: "The Math is Never Wrong".

***

_________________________

1. Alongside Leviticus, the first chapter of Ecclesiastes also points out the pervasiveness of cycles:
Ecclesiastes 1:4-7
One generation passeth away, and another generation cometh: but the earth abideth for ever.

The sun also ariseth, and the sun goeth down, and hasteth to his place where he arose.

The wind goeth toward the south, and turneth about unto the north; it whirleth about continually, and the wind returneth again according to his circuits.

All the rivers run into the sea; yet the sea is not full; unto the place from whence the rivers come, thither they return again.

2. As commanded in the book of Deuteronomy
Deuteronomy 23:19-20
Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury:

Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee in all that thou settest thine hand to in the land whither thou goest to possess it.

3. To begin study on how labor was used as capital, albeit before the advent of the Law of Moses, see the record of Isaac and his father-in-law Laban in Genesis chapters 28 through the first few verses of 32.

_________________________

Other Posts in this Series

***

HTML Comment Box is loading comments...

***