In his editorial “Can Good Stewards Grow the Economy?” (March 2012), Bob DeMoor wonders how we are supposed to sustain our economy by consuming (and thus employing our fellow neighbors) and at the same time care for our environment by conserving. This article is an answer to his call for answers based on biblical principles and economic fundamentals.
Consuming and conserving, I believe, are not at all in opposition to each other. That’s because an economy is not sustained or grown through consumption, but actually conservation. The first step in caring for our environment is to understand the role and place of consumption. Only then, after we understand the basic framework for a healthy economy, can we move forward with other ideas to improve the environment.
Many professional economists at universities, businesses, and in the media look at consumer spending as a way to measure the health of our economy. Seventy percent of our economy, the saying goes, is driven by consumer spending. Therefore, as consumer consumption goes, so goes the economy. This figure is a product of Gross Domestic Product (GDP), which is one of the measures economists use to monitor the growth of the economy. Its intent is to measure all of the “stuff” a country produces and includes consumption, investment, government spending, and net exports, with consumption making up the aforementioned 70 percent. While this may be a useful measure for some applications, solely focusing on this number—and ways to boost it—is dangerous.
Fixating on spending as a measure of economic health is putting the cart before the horse. Let’s look at a classic example to illustrate this point. Imagine that you and a few friends are on a deserted island that is completely undeveloped. (Economists like to call this exercise “Crusoe Economics.”) In order to survive, you must eat about 1 fish per day. You subsequently discover that you can catch one fish per day with your bare hands—fishing is hard work and it takes all day. In this economy, you are producing just enough to survive; you consume everything you produce. Your economy, thus, is 100 percent consumption. According to many economists today, this should be good. But how will you ever advance past this stage of hunter-gatherer?
Maybe you’re already thinking that a fishing net would be a good idea—yet finding appropriate materials and weaving them together into a net takes a substantial amount of time. Therefore, you will have to take a day off of fishing and go hungry while you build the net. In other words, you must defer consumption. Once you have made a net (economists call this a “capital good”), perhaps you can catch two fish per day! Life is grand and you are happy and full. But suppose instead of just gobbling up those two fish per day (and thus keeping your economy at 100 percent consumption), you decide to fish every other day and use your free time to embark on other capital-producing activities—maybe making a fish trap so you don’t have to fish at all, freeing up even more time, or building a shelter. You can see how the economy progresses; not by consuming everything available but by deferring consumption (in other words, saving), and investing in capital goods.
Today’s economy is no different. Although more advanced, the same economic principles hold true. Computers, factory equipment, and human knowledge are all capital goods that allow us to create more and higher-quality things, which in turn allows us to spend more time on other activities such as participating in church and cultural events, spending time with friends and family, or caring for the environment. It also allows us to sustain a larger and more prosperous population. But these capital goods do not come about unless we first save, which makes resources available for entrepreneurs to use. For example, if a business wants a loan, there must first be someone saving money to lend to that business. If a business wants to expand and hire more workers, they must have extra capital saved to buy more equipment and hire those people.
Notice how the example above is consistent with the mandate God has given us. God gave us a wonderful creation to enjoy—and God gave us the ability and mission to produce things from it, as evidenced by the command to “fill the earth and subdue it.” “The Lord God took the man and put him in the Garden of Eden,” says Genesis 2:15, “to work it and take care of it.” In their book Calvin and Commerce (P&R, 2009), authors Hall and Burton note, “God does not wish His creation to merely maintain stasis. Instead, He designed creation for growth, productivity, and maturation.”
Consumption is the product of a healthy economy, not the originating cause. Ecclesiastes 5:19 speaks of the gift of God, who gives us wealth, possessions, and the power to enjoy them and to “be happy” in our toil. Notice the implication that the things to enjoy come from our toil. In order for us to spend and enjoy, we must first produce. An economy does not grow simply by spending more—rather increased spending is the result of an economic foundation of savings, investment, and creation of capital goods, which in turn produces more wealth and allows us to then spend some of that wealth.
This also makes sense on a personal level. If you want to increase the income of your “home economy”—perhaps you would like more money for your children’s education or to give to charity—you need to invest in things that will bring in more income. This could be investing in education for a higher paying job, starting a small business, or taking on more part-time work. In any case, you do not create more wealth by simply spending more, and you certainly do not become wealthier by using debt to finance ever more consumption. These ideals are reflected in Scripture, which upholds prudent and diligent wealth gathering (Prov. 13:11; 10:4-5; 21:5) and warnings against debt (Rom. 13:8; Prov. 22:7). Unfortunately, many of our economists and political leaders (on both sides of the political spectrum) prescribe boosting debt and spending as the remedy to strengthen the economy.
Returning to our original question, we see that economic growth is not in opposition to good stewardship but is actually necessary outgrowth of good stewardship. Once we’ve realized how a truly sustainable economy is built—on savings and investment, not on increased consumption—and we have an economy that is producing real wealth in a way that is consistent with the values set out in God’s Word, we can begin to look at additional ways to improve our environment.