Only Good Stewardship Can Grow the Economy

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Fixating on spending as a measure of economic health is putting the cart before the horse.

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.

About the Author

Chris Kuiper is a member of Faith CRC in Elmhurst, Ill, and works at an investment firm. He thoroughly enjoys reading about economic theory and principles and specifically how those relate to our everyday lives as Christians.

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Comments

A very well written article.  I would only add the caveat that none of the above could occur without the protection of private property rights, which is also a biblical tenet (4th, 8th, 10th Commandments, references throughout Lev. and Deut. of property lines, and the very definition of biblical charity).

With respect to the comment on private property rights, are we not but aliens and tenants in the land which belongs to the Lord as articulated in the biblical year of Jubliee. see http://en.wikipedia.org/wiki/Jubilee_(biblical)

Year of Jubulee requires the government to provide each family with sufficient resources (property) from time to time, so that no one can be a complete monopolist. "property rights' means anyone can get properties by purchasing property and then can keep it, so that - possibly - eventually there is only one owner.

I'm sorry, but this article leaves me a little frustrated. The point doesn't seem to be saving as opposed to spending as much as it is deferred spending as opposed to immediate spending. Or perhaps strategic spending rather than impulsive spending. Or investment rather than consumption. But the net result is the same: whether it is the business or the individual, it still boils down to spending...on ourselves and/or on our economic growth. (In the Crusoe Economics illustration, the consumer is also the provider. Pardon the pun, but I think that just muddies the waters.) So good stewardship means that we grow wealthier faster?

Joseph was a good example of stewardship. He got people to save their crops. He invested in storehouses to store the grain. And as a result, he grew tremendously wealthy...and countless lives were spared from starvation. The goal was to be used as a tool by which God would save lives. The side benefit was that Pharaoh and Joseph amassed incredible wealth.

So, what is the goal of stewardship according to this author? And how does that inform my choices as I think about the upcoming election in the United States?

Great article.

Lubbert van der Laan - We may well be tenants - stewards - of what is God's.  That doesn't mitigate against what we call "private property rights".  I must have some claim of right to the wealth I use or I may not use it.  If I don't "own" the wealth represented by the money in my bank account, then I can't use it to buy groceries, pay my utilities, or the mortgage on the house.  Speaking of that mortgage, both I and the bank must be able to claim some form of right to the house or I can't live there (and they wouldn't loan me the money).  To be sure, in an ultimate sense, all of it is God's.  But if we do not allow for private property in a penultimate sense at least, then economic activity is impossible.

August Guillaume - The Year of Jubilee does not require the government to do anything.  It is established before there is a functioning government in Israel (prior to Saul) and is intended to govern the different family and clan inheritances (from the Lord) so as to avoid the kind of feudal society that came to be later in Europe.  As for your fear of monopoly, it is highly unlikely that, in a world of 7 billion people, all land will eventually fall to a single owner, particularly in a free market environment.  Land is just dirt.  It's the uses to which the land is put that creates wealth, and no single individual has the intellect, the imagination, the knowledge to put all land to its most valued use.

Calvin Friend - Yes, it does come down to spending.  Well, first we must distinguish between wealth (property, knowledge, skills, etc.) and money.  Money allows one to trade wealth more efficiently over time.  I trade my knowledge and expertise for money, not for a house, a car, a side of beef, or a barrel of ethanol.  I can then use that money to purchase those things or defer purchasing any of them, saving it for a future date (retirement, perhaps?).  So I'm not "spending".  I'm trading.  And so is the guy I'm buying things from.  It is in the process of making these millions of individual trades that resources (property, knowledge, skills, etc.) tend to move to those uses most valued by the society as a whole.

Where good stewardship comes in is in the individual decisions you make as to how you will use the wealth entrusted to you.  What do you value most?  How can you leverage your wealth (property, etc.) to further those values?  How will you trade in this marketplace?  Look at how you dispose of your money and you'll see.  In terms of politics, that means we must first ask what functions are proper to government (as opposed to other institutions/individuals).  Of these, we must then prioritize.  If there are additional resources, we might look at which functions can be done efficiently and well by government (bear in mind that governments are made up of sinful human beings, just like businesses are, and they respond to the incentives of government as such).  That doesn't answer your question about whom to vote for, but then, that's your decision, not mine or Mr. Kuiper's.

One of the key questions we should ask ourselves is whether economic growth is really necessary.

The World Happiness Report from The Earth Institute Columbia University states the following: "Higher average incomes do not necessarily improve average well-being, the U.S. being a clear case in point, as noted famously by Professor Richard Easterlin, and shown in Figure 3.2. U.S. GNP per capita has risen by a factor of three since 1960, while measures of average happiness have remained essentially unchanged over the half-century." 

Based on this it seems that all our labour for the last half century has been in vain. Maybe it's time to follow God's economic principles instead of our own personal gain.

I'm not sure what a "world happiness report" is, or whether such a thing as ephemeral as happiness is even measurable.  But, as a man's life does not consist in the abundance of things, this isn't surprising.  Whether it's relevant, is a different question.

I don't know what Easterlin is measuring, but I think it's incontrovertible that average well being in the U.S. has most assuredly improved since 1960 - medicines, surgical techniques, medical devices and technologies, food production, automobile safety, comfort in homes (new water heating technologies, improved efficiencies in air conditioning and heating, etc.), communications technology (internet, cell phones), increased life spans, and on and on.

But, say we take this advice and, as a nation, we give up economic growth.  What are the consequences - besides a bit of moral preening, I mean?  Well, what have been the consequences of the anemic to negative economic growth we've been seeing in the U.S. over the last several years?  Over 23 million unemployed.  Some 47 million on food stamps.  More people living below the "poverty line" than we've seen in nearly 5 decades.  Pensions in the tank.  The gap between richest and poorest widening.  More homeless people.  More hungry people.  More suicides.  The social and material ills resulting are legion.

It seems the absence of economic growth isn't exactly conducive to happiness either and, for millions, it most definitely means their well being takes a serious hit.

But if you wish to forego personal economic growth, by all means do so.  Take your pay raise, if any, or your social security cost of living increase, or the produce of your pension/ira/401(k) investments, and give it to those who care for the victims of this lack of economic growth.  Sell your possessions and give to the poor and store up for yourself treasures in Heaven where no moth can consume nor thief can steal. 

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