I think that this passage is why the letter of James fell into disfavour with Martin Luther. He crusaded the principle that believers are Christ's through faith alone. It had nothing to do with what a person did. This was in sharp reaction to the Church's doctrine of the time which centred on working one's way into heaven. However, James is clearly correct in his declaration that faith without works is dead, non-existent, because how can you demonstrate your faith except by acts dependent on faith? There is an argument put across in this passage that declaring that one has faith should be sufficient, but James destroys this challenge by stating that even demons believe in God. The parable of the sheep and goats which Jesus told, rings in my ears again: the difference between those accepted by God and those rejected was down to what they did or didn't do. James reminds his readers of two rather controversial episodes in the Old Testament: Abraham being prepared to sacrifice his only son in faith that God would still raise up a nation from him in fulfillment of His promise, and Rahab the prostitute, who hid those who had come to spy out the city of Jericho where she lived. She had faith that the God of Israel would be victorious and so it proved due to her actions. What have you done as a result of your faith? Have you provided for the needs of another human being, either directly or through a charity? And have you done this because you can see God's hand at work? I suppose the big question both the apostle James and I would like answered is 'What difference has being a Christian made to your life?' 'In which ways have you ensured that you are on the side of the angels?'
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