James 2:5-7 meaning

James has just given an illustration where believers display "personal favoritism" and make "distinctions" based on "evil motives" (James 2:1, 4). The illustration is when a rich man enters the assembly of believers and is given the best seat in the house. Then when a poor man enters the assembly, he is made to stand, or sit on the floor. James condemns such treatment, saying that those who act in such a way have "become judges with evil motives" (James 1: 4).

James proceeds to snuff out these evil motives with truth:

Listen, my beloved brethren: did not God choose the poor of this world to be rich in faith and heirs of the kingdom which He promised to those who love Him? (v. 5).

James's chastisement is coming from a place of love; he cares for his readers and wants them to live in step with their faith in Jesus. He calls for his audience to Listen, pay attention, this is important, and he calls them beloved brethren. They are James's brothers and sisters in Christ who also believe in Jesus, and they are beloved by him. But their motives are evil in this instance; they are not thinking straight. James shows them a better way to think. Not the world's way of thinking, but God's:

did not God choose the poor of this world to be rich in faith and heirs of the kingdom which He promised to those who love Him? (v. 5).

James asks his readers a rhetorical question about whom God has called to follow Him: did not God choose the poor of this world to be rich in faith? The expected answer is "yes," God did choose the poor of this world to be rich in faith. It will be acts done in faith that will gain the greatest reward in His kingdom that is to come (Matthew 8:10-12; John 20:29). To be rich in faith is to be great in God's kingdom. 

James contrasts material poverty with spiritual wealth: poor of this world with rich in faith. While the poor of this world will never be important in the kingdoms of men, they can be heirs of the kingdom of Jesus Christ. God has promised this inheritance to those who love Him.

The Apostle Paul makes a similar comparison:

"For consider your calling, brethren, that there were not many wise according to the flesh, not many mighty, not many noble; but God has chosen the foolish things of the world to shame the wise, and God has chosen the weak things of the world to shame the things which are strong, and the base things of the world and the despised God has chosen, the things that are not, so that He may nullify the things that are, so that no man may boast before God."
(1 Corinthians 1:26-29)

Neither Paul nor James are saying that financially poor men are by default more righteous than wealthy men. But there is a strong temptation for those with great wealth, or strength, or worldly power to think they have no need of God. 

Jesus, in His "Sermon on the Mount," began by saying,

"Blessed are the poor in spirit, for theirs is the kingdom of heaven."
(Matthew 5:3)

To be poor in spirit is to realize spiritual poverty, to recognize our spiritual need. To be poor in spirit means to reject the idea that we do not need God, or that God favors us because we are wealthy, or strong, or clever. To be poor in spirit is to depend on God. This is the essence of faith—full trust in God above all else. 

Jesus teaches that the poor in spirit are blessed/prosperous because they will receive the kingdom of heaven. The kingdom of heaven refers to the new spiritual and political order that Jesus came to bring. It will one day manifest as a physical kingdom on this earth, with Jesus Christ as the King of Kings ruling the world and bringing perfect harmony. If we do not recognize our spiritual need, we will not seek the benefits of the kingdom of heaven. 

The benefits of heaven come through spiritual dependence, now and in the future. In Revelation, Jesus tells the church of Laodicea, "I advise you to buy from Me gold refined by fire so that you may become rich" (Revelation 3:18a). The passage goes on to describe the method to acquire such an infinite supply of gold—listen to the voice of Jesus and pursue the same kind of intimacy with Him as we would have with a close friend at a dinner. 

Such intimacy will result in transformation through a renewed mind—we will realize that our best life comes through living life as a sacrifice to God (Romans 12:1-2). God has promised to greatly reward those who live their lives for Him. Believers have the opportunity to be fellow heirs with Jesus if we suffer with Him. The Apostle Paul eludes to this in his letter to the Romans, that we are

"…fellow heirs with Christ, if indeed we suffer with Him so that we may also be glorified with Him."
(Romans 8:17)

Jesus intends to reward those who learn the obedience He learned by sharing with them the incredible reward of reigning over the earth in harmony and in service to Him (Revelation 3:21). 

Believers have this amazing opportunity to co-reign in Jesus's coming kingdom. But only if we suffer in the same way Jesus did, by obeying God and depending on Him, enduring the rejection of the world. This would necessarily mean that we would not pursue worldly ambition by treating people with partiality because we think they can do something for us. God desires to greatly reward His people who love Him, and are content with worldly loss and rejection. He will give incredible blessings to those who love Him and follow Him even to death (1 Corinthians 2:9; Revelation 1:3). 

This is what James is referencing in his letter here, that the heirs of the kingdom are those who are rich in faith and who love God. Believers who live their lives by trusting and loving God will live as Jesus lived, and will suffer as He did. This is because the world is at war with God, as James will make clear in a couple of chapters (James 4:4).

James has likewise described how God's kingdom is organized, that the least important people (by the world's standards) will rule in the coming kingdom if they love God and serve Him with their lives. He continues with But. But, James's readers are not showing love toward God or an interest in becoming heirs of the kingdom if they treat the poor man disrespectfully. Such actions betray that they care about the kingdoms of men:

But you have dishonored the poor man (v. 6).

The poor of this world, who are called to spiritual wealth and to be future co-rulers in God's kingdom, have been dishonored by James's readers. James is saying, "You are mistreating God's chosen. You're mistreating the people who are important to Christ's future kingdom." One way to look at the perspective offered by James is that he is telling us, "These people who are given no value in this present earth are going to be great princes and princesses in the kingdom that is to come—you would do well to treat them well."

James then casts some criticism on the rich, highlighting why it does not even make sense in this world for his readers to try to ingratiate themselves with the wealthy:

Is it not the rich who oppress you and personally drag you into court? (v. 6)

Why, James is asking, do you elevate the rich, when the rich oppress you? The point seems to be "This rich man got rich by being good at taking advantage of others, why do you think you can gain a benefit from him?"

He cites an example of the wealthy taking his readers into court, presumably in some sort of attempt to shake them down for money, rather than for legitimate legal reasons. Most people during the time of James's writing were not financially well off. His readers were likely not very different from the "poor man" in his illustration about favoritism. 

We can take this as an illustration rather than a categorical assertion—there are many examples throughout the New Testament of wealthy men and women who believe in Jesus and use their resources to serve their brothers and sisters, rather than exploit them. Joseph of Arimathea, Barnabas, Phoebe, and Mary Magdalene provide a few examples, among many others (Matthew 27:57-60, Acts 4:36-37, Luke 7:2-5, Romans 16:1-2, Acts 16:14, Philemon 1, Luke 8:2-3). The Old Testament too is replete with wealthy men who walked with God (Abram - Genesis 13:2, Isaac - Genesis 26:12, Job - Job 1:3, Solomon - 2 Chronicles 9:20). 

James is writing general truths in this letter, not a comprehensive indictment against wealthy people. His point is not so much about how much money someone has, but one of motive. His audience has an upside-down perspective of what matters. They do not understand how to pursue treasure that lasts by seeking treasures in heaven. They have been fawning over the wealthy in their community despite having been persecuted by them in the courts. 

All money and possessions accumulated on this earth will be left behind (Luke 12:20-21). It is only our good deeds done as unto the Lord that we can take with us to the next life (Matthew 6:3-4; 1 Corinthians 3:11-17). 

Likewise, Jesus rebuked the wealthy and powerful Pharisees for exploiting the poorest of the poor:

"Woe to you, scribes and Pharisees, hypocrites, because you devour widows' houses."
(Matthew 23:14)

But these wealthy people are not only abusive to their poorer brethren, they are disrespectful to the name of Jesus. James asks another question,

Do they [the rich] not blaspheme the fair name by which you have been called? (v. 7)

Again, it seems to be the case that James is addressing specific problems among his readers. Perhaps some of the wealthy in the assembly of believers had personally dragged their fellow believers into court, and James was rebuking them for mistreating their poorer brethren. In doing so, this rich man had blasphemed (or dishonored) the fair name by which all believers are called (the beautiful name of Jesus the Son of God). 

James is pointing out that there is a corruption in this assembly of believers, that they are honoring wealthy men who have taken advantage of them and who disrespect the very name of Jesus by their action. His aim may be twofold: 1) to tell these believers to stop showing favoritism and to treat everyone in their assembly with equal service and love, and 2) to humiliate the litigious rich man who hurt his brother-in-Christ by suing him. 

Surely, James wants this rich man to repent, and to no longer sully Jesus's name by preying on other believers. 

In the following section, James will speak more broadly about sin, and how obedience to God is based on love.