Perhaps mine is the last generation to have lived with the memory of the Great Depression. Not because we were born then, but because we grew up hearing the haunted stories of homes, businesses and farms lost, of bank repossessions, of one third of the manpower of the nation unemployed, of dreams abandoned, hopes dashed. My grandparents had nine children in a two bedroom wooden cottage, when my grandfather worked as a ganger on the railways, fearing every day he would be told he was on the dole. Church charities provided nightly soup and bread, but many were too proud to be seen taking it.

Both Beverley and I had mothers who lived in the Depression, and who then became widows having to care for small children and to pay off their homes. Beverley’s mother became a widow when Beverley’s father died a year after her birth. Her mother was a trained tailoress, so she started a business from her home making dresses and hats for ladies who lived nearby. She worked hard at her sewing machine, and paid off her house and kept her children, of whom Beverley was the baby, with a needle and thread. She was a fount of wisdom in pithy sayings:

“Cut your coat to suit your cloth.”
“A stitch in time saves nine.”
“The love of money is the root of all evil.”
“A place for everything and everything in its place.”
“A penny saved is a penny earned.”
“A woman’s work is never done.”
“An ounce of prevention is worth a pound of cure.”
”As you sow so shall you reap.”
“Take care of the pennies and the pounds will take care of themselves.”
“If a thing is worth doing, it is worth doing well.”

We sometimes say these to each other and laugh because our grandchildren haven’t the faintest idea what we are talking about.

My mother became a widow when her husband dropped dead aged 38 just after the birth of my baby sister. I was the eldest child of four. My mother had her husband’s business (he had been a baker and pastry cook) to run and to lift out of debt and then later to pay for our home. She worked hard from the early hours of the morning making the doughs and throughout the day making cakes. At night she counted the takings.

At home I saw her having difficulties with wages, taxation and accounting records work for which she had never been trained. Late at night when the three younger children would be in bed, she would settle down to count the day’s takings. I used to help her at the kitchen table placing all of the coins in rows. The ha’pennies were placed side-by-side, six abreast and in rows of four, making one shilling. The pennies I placed in rows, twelve to a row, making a shilling; by ten rows, which meant the pennies were in groups of ten shillings. So were the threepences in rows four across and the sixpences two across. The shillings were piled up twenty deep and the two shillings ten deep. We occasionally had a five-pound note or a ten-pound note but usually, when people bought cakes and pies and loaves of bread, it was with small change.

Pies were threepence and a loaf of bread was seven pence. The day’s takings were counted, sorted, rolled in little brown paper spills and taken next morning to the bank. There were no night safes in those days, but we waited until the radio announcer said, “It is 10 a.m. and the Commonwealth Bank is now open for business”.

Our mothers taught thrift was a virtue. I don’t remember hearing or reading anything about thrift in recent decades. Yet our country was built on thrift.
Thrift is not our way of saving money, but God’s way of building our character. Neither mother ever wasted money – it took too much work to gain it. They grew their own vegetables, and home cooked every meal. (Neither Beverley or I had ever been to a restaurant until we were about to get married.) They made clothes for their children, or repaired hand-me-downs. Both dug their gardens and mowed their lawns (until I was old enough to take over the lawns).

My mother taught me principles of economics with sayings such as:

“The time to learn to save is now, not when you are broke.”
“Only those who have learned to be thrifty can afford to be generous.”
“It is not a bargain no matter how cheap it is, if you do not need it.”
“Buy quality. The joy of quality lasts after the price has been forgotten.”
“Watch your costs. A constant drip can empty a large water tank.”
“In time of trouble: work harder to increase your income or cut your expenses. The former is always better than the latter.”
“Look after the pennies and the pounds will look after themselves.”
“Early to bed, early to rise, makes a man healthy, wealthy and wise.”
“Don’t spend your money before you have earned it.”
“All that glitters is not gold.”

When I was a teenager and began to read the works of Charles Dickens I came upon this piece of advice. It was in line with the economics my mother taught. “My other piece of advice, Copperfield,” said Mr Micawber, “Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

How we see today what ignoring those pieces of homespun economics have cost our nation. Although my mother never realized it, many institutions in Box Hill, Victoria had church based institutions designed to encourage thrift. Most of them were started by churches. We purchased all of our chemist supplies at the United Friendly Societies Dispensary, to which we paid a small contribution weekly and received cheaper medicines. The Friendly Society collector who came to the door each Friday, from AMP (A Mutual Provident Society) collected one shilling from my mother as an insurance on my father’s life should anything happen to him. His sudden death and prompt payout enabled her to pay off most of the debts from his new business.

Everyone in our community could get involved in grassroots saving and investment institutions, including building societies, mutual funds, saving book accounts and credit unions. Every scholar in school brought bank money once a week for their school savings account. From childhood we had our little golden moneyboxes, with the Commonwealth Bank head office pictured, into which went daily savings no matter how small. We understood the saying, “Great oaks from little acorns grow.”

In a paper entitled, “Thrift as a Solution to the Credit Crisis” (The Journal of Faith in Business Quarterly Volume 12, Issue 1), Dr Peter S. Heslam stated the following:
 
“While most of these pro-thrift institutions provided loans, they demanded evidence of credit worthiness and required a substantial deposit before allowing someone a loan. My Building Society, for instance, when we purchased our first house in 1970 insisted we had to have 25% of its value in hand, we could borrow 80% of the value, but had to have the rest in cash plus the legal and tax costs. In other words we had to have a long and successful record of savings before we could borrow. There was no purchasing with what we did not have or borrowing beyond our capacity to repay.

Lotteries, casinos, predatory pawnbrokers and other forms of thriftlessness were either outlawed, or looked down upon when they had to be used. Pawnbrokers, bookmakers and loan sharks existed, but their operations were generally considered disreputable.

Today the institutional landscape looks very different. While a pro-thrift sector still exists, it fails to serve ordinary citizens. Indeed, many commercial banks and investment funds have abandoned the small saver, all children, most aged pensioners and the like in favour of ‘high net worth individuals’ to whom they supply an ever-increasing variety of tax-efficient investment opportunities and credit cards.

Simultaneously, financial institutions targeting low-income (‘sub-prime’) consumers have proliferated, along with credit card, hire purchase and student loan companies, cheque cashing outlets, loan brokers, lotteries and online gambling facilities. The growth of this anti-thrift sector is partly responsible for the high levels of consumer debt that have become an accepted feature of advanced economies but now threaten to undermine them.

Our current two-tier institutional framework serving rich investors and poor debtors not only raises questions about the morality of debt, about which today’s moral and religious leaders are generally outspoken, but also about the importance of thrift, about which such leaders are generally silent.

Despite this silence, Hebrew and Christian scriptures provide solid foundations for a theology of thrift. Literally thrift means ‘prosperity’ or ‘well-being’ – meanings encompassed in the Hebrew notion of shalom, which is central to the biblical theme of redemption. Thrift is a combination of attitudes and behaviours that leads to prosperity.

Jesus warned against laying up treasure on earth (Mt 6:19-21). But his warning is against greed and miserliness, which undermine thrift. I have always loved His Parable of the Talents (Mt 25:14-30). One servant, criticised by Jesus, was fearful of financial loss, so acted in ways that were unimaginative, unproductive and risk-averse. The fearless words and actions of the two servants who ‘put their money to work’ reflect a God who inspires imagination, productivity and responsible risk-taking.”

These two servants were praised by God, ‘I will put you in charge of many things. Come and share your master’s happiness’ (Mt 25:21,23). Their thrift is rewarded with greater stewardship responsibility and with happiness. Thrift was a sign of providential faith.

Today we suffer from a decade of easy credit for which people have never counted the cost. Jesus taught us to sit down and count the cost before we borrowed to build our towers. How many people have just assumed that good health will always continue, that two incomes will always be earned, that property and share values will always increase.

What do you say to mature people who mortgage their houses and invest in shares believing they will continue to appreciate in value? And then when they don’t, you have 15,000 such people in Storm Financial who have lost their houses and their entire life savings in hope of getting rich quick. What did our mothers say about not putting all your eggs into one basket?

The economist Paul Krugman, the Nobel Prize winner for Economics, confesses, ‘This looks an awful lot like the beginning of a second Great Depression.’ Professor Peter Heslam, the Cambridge based economist asks, “Where has all the money gone?’ Where is Mr Madoff’s $50 billion? Where are the millions and billions lost by the banks that two generations of taxpayers will be shoring up like creaking wooden huts? What’s happened to all the money poured into the banks?”

The current recession stems from a deeper moral and spiritual recession. At stake is a virtue on which capitalism depends – thrift. Peter Heslam argues for the recovery of this virtue as a solution to the current credit crisis. The Scriptures provide solid foundations for a theology of thrift.

According to Dr Peter Heslam, “All this seems a long way from the situation today, in which debt levels have increased disproportionately to income. The tragedy with anti-thrift institutions is that they promote a culture of debt in which people often find it impossible to delay gratification and fulfil goals that go beyond material concerns. A psychology is instilled that emphasises the hedonistic rather than the productive use of money.

This psychology is alien to the creative, future-orientated and purposive mindset that is commended in Jesus’ parable and which encourages investment. The lottery now presents itself to poor debtors as a means of redemption. Decoupled from hard work, reward is attached to chance and fate. Would-be habitual savers and investors prepared to delay gratification are being made habitual bettors content only with instant gratification.

What can be done about this? Those who say ‘nothing’, either because the obstacles are too high or because the market needs to be left to its own devices, are like those who argued that nothing could be done about the wearing of seat belts or smoking in public places” (The Journal of Faith in Business Quarterly 12:1).

But is the Australian Government doing the right thing in borrowing a hundred billion dollars from China, in order to spend our way out of the recession, leaving it to our children to pay the interest and repay the borrowings?

When they had finished putting together the $10.4 billion “cash splash” handouts last October, Kevin Rudd thanked the secretary of the Treasury, Ken Henry, for his efforts with a gift. The Prime Minister handed his senior official an inscribed copy of one of the most famous and influential books of the last century, “The General Theory Of Employment, Interest And Money.” The British economist John Maynard Keynes published it during the Great Depression in the 1930s. And as Rudd gave it to Henry in front of a small gathering of officials he remarked, “We’re all Keynesians now” (Peter Hartcher, “Dead economists’ society may be way to save our own, 28 February 2009, The Sydney Morning Herald).

What does this mean? Lord Keynes, who disdained ordinary people as “the boorish proletariat”, was the man who gave governments the intellectual authority to stimulate the economy, such as Rudd has done. It used to be that Governments stood aloof from economic trends. Depressions went on and on, unemployment hit unprecedented levels, while governments sat back. Economies were supposed to be self-correcting. But Keynes smashed through the doctrine with his opus. Economies were not self-correcting, he argued. And it was the legitimate role of governments to raise aggregate demand in the economy to restore equilibrium.

So governments started to spend money on a grand scale specifically to create jobs. So in five months, the Rudd Government has given economic support with a measurable value of $90.7 billion. That’s good news and bad. The good news is that the spending will stimulate the economy.

The bad news? It had to borrow the money at considerable cost. Already the Government is talking about a deficit next year of $35.5 billion, but they’re planning to add extra infrastructure spending in the May budget so we think it’ll end up with a deficit next year of $50 billion. Then what about the education revolution and health reform? And the promise to increase the pension? And the promise of paid maternity leave? And the fear of coming job losses, and the worry that manufacturing cannot survive in Australia?

Now we borrow money from China to buy products made in China, to help Chinese industries prosper and their employment to grow and to whom we must repay our borrowings. The twenty-first century really does belong to the Chinese.

The answer is not a return to protectionism: Australia had a century of experience with industry protection and learned this lesson. Protectionism is economic nationalism and it does not work. The test of Rudd’s wisdom will be to discern between the firms that are crisis-stricken yet viable and the ones that are not. These must be let go. The others must be supported especially those that will build our infrastructure, not just sell us more plasma screen TV’s. There are many things in this life we can do without. There are latest models of everything we do not need. As our mothers said, “Live within your means.”

The economics of our mothers can yet save us.

Rev The Hon. Dr Gordon Moyes, A.C., M.L.C.

Friday, 6th March, 2009, 10:38 am | Editorials, Home and Garden