The Economics Underlying Stewardship: Creation and Distribution of Wealth

The following is Economics 101 for clergy by a Christian businessman and economist who believes that many clergy criticize business without really understanding and having an appreciation for how capitalism works.

In his concluding remarks, Mr. Richards states:  "It seems to me that your role as clergy is to (1) embrace the business firm as the church's natural ally, (2) celebrate the important role that your congregants in the business world play in society, (3) empathize with them as they face challenges and opportunities which all humans face, and (4) thereby you become more effective in the transformational work to which God has called you as a pastor."

The Economics Underlying Stewardship: Creation and Distribution of Wealth

Presentation at Luther Seminary Stewardship Conference
By Robert R. Richards

My message in this essay is the outcome of a past filled with guilt! For the four decades that I was in the business world, every Sunday when my family was driving home from church, I was possessed with the gnawing feeling that, if I were a real Christian, I would abandon the world of business and go become a missionary in Africa.

But, I found God saying to me, "you know, there is something missing in your thinking. You've got to find out what it is." So, in 1998 when I sold my bank, I decided to devote full time to thoroughly analyzing this issue: the reconciliation of my business profession with my religion. And I spent the next three years in full time study of the relationship of capitalism to Christianity.

Well, as an economist, I had the first part - capitalism - down cold. But the second part - Christianity - despite several decades of various church bible studies, needed a considerably better understanding. So I enrolled in the M. Div. program of Fuller Theological Seminary. The three years there were fascinatingly enriching - revealing many fundamental truths and exposing many myths. Our session today takes a look at the general fundamental concepts that underlie the relationship between economics and religion, or, more specifically for our purposes today, between wealth generation and stewardship.

But, before going any further, I must acknowledge that the climax of my study came one night when I was ensconced in the library stacks, totally absorbed in study. I was reading the story of the two Dutch priests who in the sixteenth century upon reading Martin Luther's  The Babylonian Captivity of the Church, locked the door of their church. . . as a statement that followers of Christ were to live their whole lives for God - the bricklayer with the trowel, the farmer behind the plow, the artist before the easel, the cook beside the oven, the magistrate presiding at the bench, the parent at the crib - each one was to live out his or her calling.  However, the priests had locked them out of the church as a demonstration of the lordship of Christ over every inch and second of life.

It was my discovery of Luther's assertion of the "priesthood of all believers" that was the biggest "ah ha" moment in my three years of study. I leaned back in my chair and said, "If only I had been a Lutheran, the past four decades of agony would have been avoided!" Luther declared the positive relationship between economics and religion, between vocation and ministry.

So, with that endorsement, I am now going to delve into economics, otherwise known as the dismal science, to give you a clear understanding of the economics behind stewardship. That is, how is wealth created in the first place?

This will enable you avoid the error of The Fallacy of Starting in the Middle. Many people have a tendency to focus on the distribution of income and wealth without first understanding the economic concepts and laws related to the generation of wealth in the first place. Indeed, they are so pre-occupied with who is getting how much of the pie that they give no concern to how the pie is made, and the more critical question, how we get the pie bigger so more people can eat a piece. Furthermore there is a critical ancillary question: is anything that I am suggesting about dividing up the pie going to cause the whole pie to be smaller than it might otherwise be?

Apparently, many concerned with wealth distribution just sort of assume that the wealth to be redistributed just happens into existence without any thought as to why and how it comes into being and without any thought about what stimulates more output from a given amount of inputs and without any thought to many other crucial economic questions regarding the relation of wealth. If there is a genuine concern for the poor on the part of those who profess such concern, the first step is to learn about economic output, the production of food, clothing and shelter. If one is really concerned about feeding people, one first ought to be concerned with how to bake a pie.

But too many people ignore that question. In fact the reason that so many economic puzzles remain unsolved is that most people wrestling with them are not even asking the right question. For example let's take world poverty.

See Slide 1 [World Wealth Distribution] - PDF

I have read virtually every book written on global poverty - hundreds of them. The vast majority of people who study this issue turn all of their attention to the question, "why are the poor people poor?" And that is why, after centuries of seeking answers to this question, world poverty has never been solved; in fact, hardly a dent has been made in world poverty. The pie chart above is disgraceful.
This is largely because virtually all people who have professed a concern with this subject have devoted all of their time and resources to the wrong question.

Let me explain.

See Slide 2 [Historical Development of World Prosperity and Poverty] - PDF

The five pie charts above display the historical development of world prosperity and poverty, with the portion of the population in prosperity represented by the shaded area. As you can clearly see, being in a state of poverty has been the natural condition of the vast majority of humankind for thousands of years.

The fascinating question which arises out of looking at these charts is not, why are the poor poor, but rather, why are the rich rich? What gave rise to the relatively recent and substantial increase in the number of people enjoying prosperity? To any one genuinely interested in combating world poverty, the question is not, "why are the poor poor?" The question is, "why are the prosperous prosperous?"

And that is what we're going to turn our attention to. But first let me acknowledge that, particularly for seminary students steeped in Biblical history, obviously their perspective has centered on conditions of earlier Biblical times. Most clergy's first exposure to the subject of wealth is not as economics students where they see wealth as the logical earned result of economic contribution, but rather they see wealth as the result of plunder following military conquests or the outcome of political oppression.

Given its predatory connection, it is no wonder that wealth has a negative connotation among Biblical students. At the time of history covered by Scripture, affluence was not distributed to a broad middle class characteristic of capitalistic countries today, but was possessed by a tiny group of elite. A negative perception of affluence, while perhaps valid in ancient biblical days, has no validity in today's egalitarian democratic developed nations. In Biblical times economics was a zero sum game. That is, what I gained, someone else lost. The only way I could gain was to get possession of what someone else had.

But, today the game has changed. And this is the profound difference: economics is a positive sum game. Both parties gain. The way I accumulate wealth is by providing you with what you want. In a free market economy, economics is a win-win game. The only way I can win, is for you to win. Otherwise a transaction will not occur, and I will not profit.
Now this is not to say that (1) some win more than others or (2) there are some bad actors who try to break the rules of the economics game or (3) there are some sitting on the sidelines not even participating in the game. And we will address these. But the game - the economic system - is set up so that one can win at the game only by everyone else winning. Bill Gates became the wealthiest man in the world solely by inventing a way in which we all have won immense benefits. Henry Ford became a wealthy man solely by inventing a way in which families could win by owning a car. And on, and on, and on. In the game of capitalism, the only way I can win more, is by my enabling you to win more.

And this begins to explain why the prosperous are prosperous. So, let's look further at why the prosperous are prosperous. What are the rules of the game they are playing? What are the key elements to the system of capitalism?

When we look at those societies making up the shaded piece of the pie - the prosperous societies - we see that they possess six critically important characteristics. The common societal characteristics of those nations enjoying prosperity are the following:

  • Political System -- Pluralism, Democracy
  • Social System -- Egalitarianism
  • Legal System -- Rule of Law, Independent Judiciary
  • Economic System -- Private Property, Free Market
  • Moral System -- Judeo-Christian cultural values
  • Education  System - Universal

We are talking about a broad societal structure often referred to as democratic capitalism. Also, it should be kept in mind that we are talking about contemporary economics. It is acknowledged that American business went through a stage of pretty unseemly behavior. Regretfully, many people today still view corporate leaders as akin to the "robber barons" of yore. Nothing could be further from the truth. Today's corporate executive is a professional manager, formally educated in such concepts as "participative management" and "social entrepreneurship" and possessing an enlightened regard for all of his or her stakeholders: employees, customers, suppliers and the community at large as well as shareholders. Most corporate leaders not only understand but are unequivocally committed to the concept that a socially healthy and vibrant community is conducive to maximizing profits over the long run.

So, let us take a look at how the economic system in which most of your congregants spend most of their time relates to the religious system of your congregants. Or stated another way, in the context of your next capital campaign for which you are going to raise a few million dollars, how did that wealth get there in the first place, or in the context of meeting your operating budget which includes the van to bring the elderly to church, a nursery for the little ones so their moms and dads can attend bible study, landscape maintenance to keep your church grounds pleasing to you and your neighbors, how did that flow of cash which your members are donating become generated in the first place?

It all emanates from...

Law of Supply and Demand

The free market system has been described as the eighth wonder of the world.

Every day in the United States there is a cornucopia of products and services available throughout the country. Yet nowhere is there any central official sending out memos to various people directing them to send lettuce to Manhattan or shoes to Sioux Falls or toothpaste to Denver or provide haircuts in Atlanta. It just happens - a miracle in itself.

The free market daily brings forth a response to our every desire. And the mechanism for signaling our desires is the price system.

Prices signal to suppliers what consumers want. Every second of every day the multitude of consumers "vote" for what goods and services each wants. They each vote by placing down money for a particular good or service. Those items "voted" for get produced; those items not "voted" for don't get produced; the more the "votes," the more is produced, the less "votes," the less is produced. Further, unlike the political system where the minority votes end up not having an effect because the majority rules, in the economic system every vote has an effect. Every penny spent determines what is produced. Book publishers cater not only to the majority by publishing detective stories, but also to the minority reading lyrical poetry and philosophical tracts. Bakeries bake bread not only for the majority but also for every imaginable obscure taste.

The price system, which reflects the law of supply and demand, determines how much of everything gets produced. Here's how it works.

Every good and service faces a demand curve which is the schedule of the various quantities of a good or service that are demanded at various different prices. Generally, the lower the price, the higher the quantity demanded. This is because, with a lower price, a consumer can afford more at the same level of income. It is also because, at a lower price relative to other substitutable goods and services, more of this particular product will be substituted for other goods.

Hence, the Demand Curve:

See Slide 3 [The Demand Curve] - PDF

Also, every good and service faces a supply curve which is the schedule of the various quantities of a good or service that are supplied at various different prices. The higher the price, the higher the quantity supplied. This is because at a higher price relative to other goods or services, more producers will be attracted into supplying this particular product.

Hence, the Supply Curve:

See Slide 4 [The Supply Curve ] - PDF

Note that the Demand Curve is determined by the voluntary free acts of all of the consumers and that the Supply Curve is determined by the voluntary free acts of all of the suppliers and potential suppliers.

The quantity of any particular good or service that actually gets produced and purchased is determined by the intersection of the supply and demand curves as depicted below.

See Slide 5 [Intersection of Demand and Supply Curves] - PDF

In this particular society M quantity of the good or service will be produced and sold/bought at E price. It is as simple as that. It is easiest to show why E (for "equilibrium") and M (for "market") will be the prevailing price and quantity by showing that any other level will not occur. That is, at a higher price, a higher quantity would be supplied than demanded, and the price would fall; at a lower price, a higher quantity would be demanded than supplied, and the price would rise. Hence, E is the equilibrium price, and M is the equilibrium quantity.
The foregoing relationship - the Law of Supply and Demand - is irrefutable. Further, it is not some theoretical construct that differs from reality. It explains reality. The Law of Supply and Demand is as fundamental to your life as the law of gravity or Einstein's theory of relativity.

It explains how the prices of all goods and services are determined. There are no exceptions. Years ago when I taught Principles of Economics to college freshman and sophomores, I issued the challenge that anyone who could refute the Law of Supply and Demand would receive an automatic "A" in the course. No one was ever able to.

But there it is in all of its simple elegance. That is precisely how a free market economy determines how much of each type of good or service is produced.

All of we millions of individual consumers around the country acting on our own individual tastes, values, needs, priorities and preferences generate demand curves, and similarly all of the millions of individual producers, including we as workers, generate supply curves. And the intersection of the two for every single good or service determines how much gets produced and at what price.

The amazing thing about the free market of capitalism is it is so counter-intuitive. That is, here you have chaotic inputs - millions of separate decisions by millions of individuals - yet the output is miraculously orderly, efficient, and timely. Free market economies are characterized by an abundance of goods and services and efficient production which results in relatively low prices and relatively high wages and a resulting high standard of living.

Now we are able to introduce the first connection between economics and religion. The business world is neutral. It produces what people want. It supplies both Bibles and brothels, both pews and booze. How much of each is produced is determined solely by the supply and demand curves. The relative amount supplied of Bibles and brothels and pews and booze is simply a function of supply and demand. And the demand curve is nothing other than a reflection of the aggregate wants of all consumers.

So, the extent to which any given society produces Bibles or brothels or pews or booze is determined by the wants of the individuals. And this is where the churches come in. Indeed, it is the church's role to influence people's wants.

Genius of capitalism

But let us take a look at another way in which economics relates to religion. Let us view capitalism as an economic system within Christianity as a religious system, if you will. How do these two systems relate to each other?

And in the very first chapter of the first book of the Bible we are provided with insights that have profound implications regarding economic systems. We learn that humanity has two essential elements to our nature; we humans are a dichotomy: on the one hand, we are God's creations, and on the other hand we are fallen sinners. The genius of capitalism is that it is the only economic system that satisfactorily accommodates both of these characteristics.

First, from the Standpoint of Humans as Creations of God.

God created humans in His own image. God also gave humans dominion over all other creations. After God, humankind is the end. This is intrinsic to humanity. It is in our very nature. Accordingly, it cannot be usurped.

Capitalism is an economic system which recognizes and respects the direct link between humans and God. It does not inject an intermediary, such as government, between the two. In fact, the United States, one of the world's major capitalistic countries, was founded on this premise. This is not to say that capitalism does not accept the legitimate limitations which humans place on themselves through democratically enacted government statutes and regulations. In fact, I must point out that we are discussing democratic capitalism, not some sort of unconstrained laissez faire capitalism.

In Genesis God mandated humans continue the creation process, and as far as the economic dimension of humans is concerned, the free market of capitalism unleashes and stimulates the creative powers of humanity. The Oxford Declaration, the consensus report of the Conference on Christian Faith and Economics, Oxford, England, January 4-9, 1990 attended by over one hundred theologians and economists, affirms "Production is not only necessary to sustain life and make it enjoyable; it also provides an opportunity for human beings to express their creativity in the service to others."' The ultimate economic expression of creation is entrepreneurialism, bringing into being a commercial enterprise. In this process capitalism rewards discovery and innovation.

Indeed, whether one is an artist, musician, business person, or whatever, our viewing ourselves as creations of God stimulates us to a general full actualization of our God-given talents. Because God has endowed each of us with certain attributes and resources, a purpose of one's life is to utilize these God-given resources with which one has been endowed to their maximum potential toward fulfillment of God's purpose and to the glory of God.

In this context it would be incorrect to view the human solely as pecuniary. The most wealthy entrepreneur or employee is motivated by a variety of objectives other than wealth accumulation. Commencing with Maslow's hierarchy of needs, there have been thousands of empirical studies which unequivocally demonstrate that, particularly after reaching a subsistence level of income, individuals are motivated more by non-financial rewards than by money, including the motivation to contribute to improving the well-being of one's fellow human.

This was being demonstrated abundantly as the 20th Century came to a close and we entered the third millennium. The burgeoning of multitudes of high tech companies in the 1990's was fueled largely by the exponential cumulative effect of the excitement of creativity and innovation. Indeed, Bill Gates leads a long list of immensely wealthy entrepreneurs who are simply caught up in an imaginative, creative passion, the vehicle for expression of which is the relatively small, independent, non-bureaucratic, highly flexible entity called the business firm.

So the first part of the genius of capitalism in the context of Christianity is its unleashing and stimulating human's creativity.

Second, from the Standpoint of Humans as Sinners

The second half of the genius of capitalism is its design to function with humans as we are: sinners. It makes a realistic, rather than a utopian, assumption regarding the nature of humans. Because humans are sinful, all human systems and institutions - capitalism, socialism, communism, democracy, business firms, governments, even the church - are sinful. We note David Hume's observation, "Each person loves himself more than any other person . . . (and) avarice or the desire of gain . . . is a universal passion, which operates at all times, in all places, and upon all persons."2

Perhaps our foremost characteristic as sinners is our self-interest. And here we see perhaps the greatest contribution of the free market to humankind. As observed by Adam Smith, the great Scottish moral philosopher, in his classic, Inquiry into the Nature and Causes of the Wealth of Nations, published on March 9, 1776, the free market takes the private self-interest of the sinner and converts it into a publicly responsive outcome. "As every individual . . . by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this . . . led by an invisible hand [the profit motive] to promote an end which was no part of his intention . . . By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to . . . It is not from the benevolence of the butcher, brewer, or baker but from their self-love, their regard to their own advantage, that we expect our dinner."3

The miraculous contribution of the free market is its serving as a mechanism that actually neutralizes self-interest as individuals are forced to find ways of serving the needs of others. Self-interest is channeled into the innovation of products or services which other people want. Every person in a market economy has to be other-directed. The market is one area of life where concern for the other person is required.

This, Adam Smith discovered, rather than the extent to which a country is endowed with natural resources, is what causes the wealth level of one nation to be different from the wealth level of another nation. This is why those professing an interest in the solution to world poverty would be better off studying Japan than Mexico, Singapore than Kenya.

The element of capitalism which makes it work so incredibly effectively is the free market system which allows the Law of Supply and Demand to work. Here then, we see the genius of capitalism's free market in the context of Christianity. It unleashes the creativity of humans as children of God and it forces the creativity of humans as sinners to serve others.

An Ingenious System for Both Saints and Sinners

Let me emphasize the genius of capitalism by summarizing its elegant outcomes whether or not humankind is comprised of saints or sinners. Indeed, an important advantage that economists see in the free market system is the role of prices set in the free market as coordinating signals, supplying information about people's ever-changing wants and preferences. The pursuit of profit is also required, because pursuing profit means paying attention to relative prices, as the producer gets his production as efficient as possible, enabling him to reduce prices below those of the competition.

Further, as a producer becomes more efficient, more cost-effective, the price of the product will fall, more buyers will be satisfied and the producer will sell more, receiving greater income. Additionally, as a producer creates a product of higher quality at the same price, buyers will receive greater value and the producer will sell more products, receiving greater income. In these processes, workers are employed at increasing higher value jobs enabling higher wages. Everyone wins. Hence, capitalism is a positive sum game.

Again, I must assert that the foregoing is not some vague theoretical construct. This dynamic process is occurring every second of every day as free consumers go around voting with their dollars and creative, profit-motivated producers innovate to introduce better products and to achiever higher productivity in order to lower costs.

The economics jargon applied to the foregoing phenomenon is the efficient allocation of resources. This refers to the notion that as products and services are demanded, producers seeking profit allocate resources to those products and services. The major productive resource allocated is labor; hence, workers are drawn to do that which has high economic value and therefore capable of generating high wages. At the same time, producers, in order to increase profit also organize their operations and apply technological advancements in equipment, increasing output per worker, in turn raising the amount which the producer is able to pay workers. This efficient allocation of resources is a well-known concept in economics which all economists agree, as a general outcome of the free market, accrues to the benefit of all of us in the following ways:

  • Consumers get what they demand.
  • Workers are paid relatively high wages.
  • Job opportunities arise permitting the poor to become unpoor.
  • Profits accrue to investors in return for risking capital.
  • Abundant public goods and services are provided from taxes on profits and wages.
  • The poor, the arts, and others not directly in the market system receive voluntary
    philanthropic contributions from workers' wages and companies' profits.
  • This entire process grows and improves through the reinvestment of profits.

Everyone wins.

Again, this is not just a theoretical meandering by some head in the clouds economist. It is the empirical outcome of the application of certain principles. And the proof of the validity of this model is demonstrated right before your eyes: the United States and Western Europe. But also compare North Korea and South Korea, West Germany and East Germany. These are particularly meaningful because these compared countries were identical in terms of natural resources. Or examine the question, why is the economic prosperity of Japan, with virtually no resources, towering over that of Brazil, with abundant resources? Or ask the same comparative question between, say, tiny Singapore and enormous Algeria.


It is fascinating to observe that, after all of this considerable effort to create and build better products, risking their investment capital, the entrepreneur and the shareholder, of all groups in our society, come away with the smallest piece of the pie. When we examine national income statistics for the United States in the decade of the 1990's, we see that workers, the hired employees who take little or no risk, get two-thirds of the pie!

See Slide 6 [Workers Get 2/3 of Profits] -

Recognizing that proprietors are mostly family businesses, and breaking out the portion going to corporate profits, we discover that in the 1990's corporate profits accounted for a modest 11 % of national income.4 Fascinating. All those hundreds of billions of dollars and all of that creative brainpower spent on product research and development to serve the consumer, and the only return that those organizations get for it is 11 % of the pie. Wages and salaries to employees account for 65%. (The remaining 16% is rental income, net interest income, and indirect business taxes; e.g.., sales tax.)

Clearly, we consumers have come out beautifully. All of this pre-occupation on the part of some people in our society with the "evil of obscene corporate profits" is simply misplaced in that it results from ignorance of the facts. (In fact, it has been asserted by some champions of capitalism that this enormous entrepreneurial energy and corporate resources expended for a mere 11 % of the share represents an exploitation of corporations by the rest of us, not the other way around!)

Looking at profits from another perspective, over the decade of the 1990's the average annual return on stockholders' equity of the 500 largest U.S. industrial corporations has been about 12%5 - certainly not "obscene" by any criteria.

Further, while the drive for profits creates a powerful force to increase production efficiency and improve product quality, most business people understand that profits are not the end. Profits are simply the fuel of the economic engine. This distinction regarding the role of profits was eloquently stated by Dennis Bakke, CEO of AES Corporation, a global energy producer and distributor: "Where do profits fit? Maximum profits ... are not any corporation's main goal. Profits are to a corporation much like breathing is to life. Breathing is not the goal of life, but without breath, life ends. Similarly, without turning a profit, a corporation, too, will cease to exist."6 Profits, when reinvested into the system, fuel its expansion and improvement, enabling it to accomplish its real end: advancing the standard of living of humanity. It is the aggregate reinvestment of profits - the business owners foregoing dividends and instead reinvesting in research, product development, and plant expansions and improvement that is the key element in causing the standard of living, health, education level and virtually all elements of the quality of life of humans to be as high as it is in capitalistic nations.

As Adam Smith notes, it is the retaining, rather than distributing, of profits that underlie the growth of the wealth of a nation. Interestingly, it was in Smith's earlier treatise, The Theory of Moral Sentiments, that he first identified the role of capital accumulation and related it to the moral virtue of prudence, foregoing present consumption in favor of future consumption.

Contrary to popular belief, the distinguishing characteristic of capitalism is not consumption; it is saving. All of the benefits of capitalism -job creation, productivity increases, improved products, economic growth - depend upon the reinvestment of profits. That is, capitalism, which focuses on the future, foregoes present consumption in favor of savings - retained earnings, in accounting vernacular - which are reinvested in the business. And out of all of this flow enormous public benefits.

First, the poor, through the creation of jobs and on-the-job training are given the opportunity to become unpoor. Second, through relatively high wages and relatively low costs, consumers' needs and wants are satisfied, and they enjoy a relatively high standard of living. Third, a level of income is generated which can be taxed to support public goods such as education and health care. Fourth, a level of wealth is generated which funds philanthropy. Every single dollar that has found its way into your churches was generated by God through the free enterprise system.

For either saints or sinners capitalism's free market is glorious! It empowers consumers - they, rather than producers or bureaucrats, decide what is produced. It assures maximum efficiency in the allocation of resources causing lowest possible prices to consumers and highest possible wages to workers. And it creates a base for future wealth generation. Even if all humans were saints, we would want the benefits of free prices and profits serving as important communication mechanisms of how well the economic system is serving consumers, creating opportunities for workers, and saving and reinvesting funds for raising the level of the nation's wealth.

Michael Novak, Resident Scholar in Philosophy, Religion and Public Policy at the American Enterprise Institute, sums it up this way, "The plaints and wails of poets and preachers about the sins and errors of the market system screech through intellectual history, while friendly voices are few. Yet no other form of economy has resulted in so many books being published, schools founded, churches built, philanthropies undertaken, and intellectual and religious liberties maintained. 0 This is because of the miraculously high level of wealth that is created by the free market system.

One final word on profits. We cannot leave the subject of profits without acknowledging who receives them. The shareholders of corporations are you and me. Nearly three-fourths of the households in the United States own stock in corporations directly or indirectly through pension funds. Retired folks are enjoying the fruits of their working years, young people are saving for college via mutual funds, and churches, hospitals, colleges, symphonies, opera companies. environmental organizations and soup kitchens are paying their staffs with the earnings from their endowment funds. Profits flow to a broad spectrum, reaching every corner of our society.


Often accompanying the criticism of self-interest within capitalism is the criticism of competitiveness within capitalism. But competitiveness is not unique to the economic system. Competition exists everywhere in society. Competitiveness flows from two things: the nature of humanity and the scarcity of resources. Students compete for grades, workers compete for promotions, performers compete for audiences, churches compete for members, politicians compete for votes. The beauty of the market system is its providing a rational, voluntary, peaceful method for resolving competitive situations, as buyers and sellers daily freely exchange. Furthermore, in order to prevail against competitors a business firm is required to provide cooperative, creative, responsive service to others.

Indeed, the free market system is characterized as much by community as by competition. Capitalism is an economic system of community in at least two ways.

First, note the very title of Adam Smith's famous treatise, which is the "bible" of capitalism: An Inquiry into the Nature and Causes of the Wealth of Nations." Note that the title refers to the wealth of nations, not the wealth of individuals. Smith's study and evaluation of capitalism as an economic system was within the criterion of its effect on the aggregate wealth of the nation, not on the personal wealth of individuals. It was within this community criterion that Smith found the great contribution of the free market. As sinful individuals pursued their self-interest, the saintful outcome of community well-being was maximized.

Finally, capitalism is communitarian in another sense. In order to function, the free market requires cooperative interaction among all the various members of the community: producers, consumers, workers, employers, suppliers, regulators, owners, customers, competitors within industry associations, educators - everyone - embodying such communal behavior and attitudinal characteristics as trust and love.

Indeed, the chief behavior component of the business system is cooperation. The capitalistic society is comprised of a multitude of business firms voluntarily brought into existence and comprised of virtually every culture, race, language, religion, sex, education level, societal position, and nationality of humankind. In order to function and achieve its purpose each of these millions of entities within the capitalistic society must cooperate - even business competitors which must cooperatively abide by the rules of the game. While competition in the marketplace for customers is a component of capitalism, the chief characteristic of capitalism is cooperation.

See Slide 7 [A Characteristic of Capitalism is Cooperation]

To the extent that each capitalistic entity involves intra-entity cooperation by the employees comprising the entity and inter-entity cooperation by the various entities comprising a larger unit, for example, a market, such entities are said to comprise a community. Michael Novak, whom I quoted earlier, observes, "Consider the institutions of capitalism: the corporation, the labor union, banking, the stock exchange. Each of these is communal.... Each depends upon bonds of trust which go beyond coercive force."8

Bernard Murchland, professor of philosophy at Ohio Wesleyan University, enunciates this point from a different perspective, "I have often argued with socialist friends of mine that the corporation might be considered one of the principal forms of community in our time because it allows very different kinds of people to work in harmony for common goals, to form friendships...; it generates an esprit de corps and common loyalties and it diffuses power - in brief, it affords the opportunity to practice a significant range of democratic virtues."9 It is interesting to note that the words company and companionship have the same root.

Pope John Paul II, in his 1999 Encyclical Letter Centesimus Annus, concurs, "Many goods cannot be adequately produced through the work of an isolated individual; they require the cooperation of many people in working towards a common goal . . .  It is his disciplined work in close collaboration with others that makes possible the creation of ever more extensive working communities.  Important virtues are involved in this process, such as diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships . . . "10

So we can describe capitalism in terms of its behavior requirements: cooperation, and in terms of its organizational characteristics: voluntary communities. Further, capitalism has expanded the boundaries of humanity's communities to include the globe. While governments, obviously, are organized within geographical boundaries, corporations have leaped over, crawled underneath and opened gates, broadening communication and cooperation to include the entire globe. The economics expression of humanity's global community is international trade. Can you today in your most bizarre thought-process or most wild, outlandish thinking even imagine the Japanese bombing Peal Harbor? Of course not. My even raising the question seems preposterous for one simple, clear reason: they would be attacking their best customer. The well-being of the typical Japanese family is directly related to the well being of the United States and vice versa. And everyone knows that.

The key to achieving and maintaining world peace is interdependence; that is, a condition wherein it is in each of our own self-interest to further the well-being of the other. And the institution bringing about world peace by encouraging cooperation and communication and instilling mutual dependence is a small quiet player. It is the business firm quietly, individually, without any fanfare, going all over the world creating the linkages between suppliers and consumers that is giving rise to global interdependence.

Today the most powerful force leading to world peace is not the church, nor government nor political agreements, but the business firm, providing global interdependence of people through international trade and-ownership. Granted, this is not out of altruism. I am not suggesting an extraordinary righteousness on the part of the business firm. It is in the business firm's self interest to perform this role.

So we have seen two major outcomes of capitalism: high level of wealth and community. This gives rise to two questions. What do we do with our wealth and what is the ultimate expression of community? Of course the answer to both of those questions has been provided by Jesus Christ: love one another.


And an economic manifestation of love is generosity. Generosity, of course, is an expression of the second great commandment, "You shall love your neighbor as yourself." (Mt. 22:39; Mk. 12:3 1; Lk. 10:27)

Viewing Christian love in the context of economics, practicing a high level of generosity flows from the notion that every good thing comes from God and, therefore to the extent that I give something I possess to God via giving to the less advantaged (" . . . whatever you did for one of the least, you did for me." Mt. 25:40), I am not giving something of mine to; rather, I am giving something of God's back. Further, because every good thing comes from God, to the extent that I possess some of it, I am simply in the flow of gifts from God. In turn, I have the responsibility not to block the flow, but rather to serve as a conduit through which the flow continues and grows.

In this regard the type of economic system becomes relevant to the extent that it is conducive to (1) generating the wealth with which to be generous and (2) embodying a practice of free choice in order to permit voluntary generosity to occur and therefore be expressive of genuine love.
Generosity - the voluntary transfer of wealth from one to another - is a concept that tends to resonate with the business mentality. The business person views capitalism as a positive sum game, as an ever-increasing flow of goods and services rising in greater and greater abundance. And it is this unfettered flow of money that fuels this great engine of prosperity. We can refer to this, then, as the Circular Flow.

Well, this same model can be used to describe the role of gifts. Giving money plays the same role as spending money, and not to give breaks the chain of ever-rising gifts. If one views God as the provider of the great material abundance that flows throughout humankind, then one's giving is just part of the flow, and, indeed, not to give would impede or even halt the flow. This has both practical and moral dimensions.

This concept is enunciated in both the Old Testament and the New Testament. As the wise, insightful Solomon expresses this relationship, -

"Honor the LORD with your wealth, with the first-fruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine." (Prv. 3:9,10; NIV)

"One man gives freely, yet gains even more; another withholds unduly, but comes to poverty. A generous man will prosper; he who refreshes others will himself be refreshed. (Prv. 11:24,25; NIV)

Perhaps the clearest statement of the Circular Flow is in Paul's Letter to the Corinthians regarding their providing financial support to the church in Jerusalem:

"Whoever sows sparingly will also reap sparingly, and whoever sows generously will also reap generously. Each man should give what he has decided in his heart to give, not reluctantly or under compulsion, for God loves a cheerful giver.... Now He who supplies seed to the sower and bread for food will also supply and increase your seed and will enlarge the harvest of your righteousness. You will be made rich in every way so that you can be generous on every occasion, and through us your generosity will result in thanksgiving to God. This service that you perform is not only supplying the needs of God's people but is also overflowing in many expressions of thanks to God." (2 Cor. 9:6-12; NIV)

It is instructive to read the commentary from the Dictionary of Paul and His Letters (Hawthorne, Martin and Reid, ed.): "Sowing was seen as a sign of trust in God, who could alone guarantee the harvest. In this context, any gift given to God was understood as a thank offering for blessing received.... A thankful giver gives cheerfully and abundantly, knowing that both seed and harvest come from God.... God provides everything, including the means to be generous. In fact, since liberal sowing results in liberal harvest, one can expect progressively larger harvests as one is provided with more seed to be sown. God will not only provide for the needs of the generous giver, but will multiply the giver's resources for even more generous giving." 11

As I indicated, this ever-expanding level of wealth is a concept that resonates with business people who participate in the positive sum game of capitalism. Indeed, the relationship between theology and economics is intertwined. When we regard material possessions as God's gifts, we more readily immerse ourselves in the Circular Flow, recognizing that by sharing, we are acknowledging and reaffirming the Source of our good. Furthermore, by contributing to the flow of gifts, we contribute to increasing its velocity and to an ever widening circle. Christianity is a positive sum game. As we share the love of God, the goodness of God flows through us to others, multiplying as it goes through this process. Capitalism also is a positive sum game - a win-win exercise. All enlightened business people readily understand this.

If one ever wanted to relate Adam Smith's Wealth of Nations to the Bible, this discussion of the Expanding Circular Flow accomplishes it. Capitalism is a mechanism - in fact the most effective mechanism ever devised - for converting God's resources to everyone's good fortune. Indeed, the whole theory of production and trade in a free market economy is based on a continuous circular flow of giving and receiving - a continuous voluntary flow of goods and services and money between buyers, sellers, investors, entrepreneurs and consumers. In a free market the value received by the buyer equals value given by the seller.

This circular flow mindset is fascinating to observe in individuals. People who have a genuine openness to the circular flow of wealth see their own wealth increase; those who are miserly or fearful or focusing on preserving what they have or otherwise not totally open to the flow, constrain their level of wealth. Indeed, full participation in the flow is glorious - it is the economic demonstration of the power of faith.

My minister sums up the "Circular Flow" by noting "God gave us two hands - one to receive with and one to give with; we are not made for hoarding, we are channels made for sharing." God, in return for His active, generous love of us, demands our actively generously loving others who in turn actively love others out of gratitude for the love which they receive and on and on and on, in an ever-expanding Circular Flow.


In discussing economics over the past hour, I want to leave you with the predominant message: the free market system is an incredibly effective mechanism for raising the wealth of a society. All elements of society have benefited, none the least of which has been the church. Indeed, capitalism is the natural ally of Christianity.

Capitalism is the economics of hope. Throughout the world the individual business firm - directly in its own operations and indirectly through its philanthropy - is privately (far beyond what it does indirectly through taxes) raising humanity out of poverty, healing the sick, feeding the hungry, educating the ignorant and bringing peaceful inter-dependence among all of God's people.

It is capitalism's empirically demonstrated and clearly evident record of progress that sustains continued hope - not just materialistic progress and hope, but progress and hope for many other dimensions of humanity. An immensely important consequence of the impressive achievement of capitalism as a generator of wealth and leisure is that today more and more people are able to turn to the satisfaction of a need that only you, the clergy, can satisfy: meaning and significance. Many observers view capitalistic civilization as hurling itself toward meaningless consumption and materialistic idolatry. Others, and I am among them, see capitalism as being the great liberator of civilization from preoccupation with earning a living to possessing the financial wherewithal, the time availability, and the intellectual and spiritual curiosity to come to grips with the essential questions of being a human. The great triumph of capitalism is that for the first time in human history, members of a broad middle class have the opportunity to escape from the shackles of mere existence and, if they so choose, deal with the matter of their spirituality.

It should be kept in mind that the free market system is neutral, neither intrinsically good nor bad. The ills that flow from the free market are not the fault of the system. They are the fault of us humans who function in the free market. Therefore, you can best serve your congregants by celebrating their role in the business system and inspiring them and giving them the tools to bring their faith into their business decisions.

The truth is reality: the business world has clearly demonstrated its glorious effectiveness in raising the level of prosperity of a society from which every single member of the society has benefited. And this is an accurate perception of their world by the business people in your congregation.

A great mistake that some churches make is they themselves casting a pall over the subject of money. Many clergy, who do not understand economics or how the business system really works or the values embraced within capitalism, have put many business people in a sort of catch-22; that is, damned if they do and damned if they don't. As you now know, ultimately reducing poverty, by definition, requires increasing its opposite: wealth. Providing jobs for the poor or donating goods to the poor requires first the creation of the wealth - capacity - that brings forth the jobs and the goods. I am amazed at how many present-day clergy dive into this subject of wealth in its middle - the distribution stage - without any concern for its initial stage: generation. In fact, to the extent that the clergy voice opinions about the generation stage it is usually with some sort of disdain and condemnation of the "materialism" of business people. However, the clergy then turn around and lead the charge, the battle cry of which is, "I don't understand what you do; I don't think I like what you do; but now that you've done it, give some of the fruits to me and others."

Today the implicit, if not explicit, message of too many churches regarding contributions from their members is as a form of repentance. "You have devoted five days a week to the nefarious world of business with its greedy, avaricious grubbing for money. Now we, the church, are giving you the opportunity to assuage your guilt."

I wonder what would happen to the offerings of those churches which changed their message to "we celebrate what you do! You are a beautiful child of God participating in a glorious system of community of God's people that has done more than any other institution to raise the well-being of humankind. We are grateful for your including us as a participant in the circular flow."

It seems to me that your role as clergy is to (1) embrace the business firm as the church's natural ally, (2) celebrate the important role that your congregants in the business world play in society, (3) empathize with them as they face challenges and opportunities which all humans face, and (4) thereby you become more effective in the transformational work to which God has called you as a pastor.

1 Schlossberg, Vinay and Sider, Christianity and Economics in the Post-Cold War Era: The Oxford Declaration and Beyond (Grand Rapids, Michigan: William B. Eerdmans Publishing Company, 1994), p. 14.

2 Waterman, A. M. C. "Mind Your Own Business: Unintended Consequences in the Body of Christ," Faith and Economics (Wenham, Massachusetts: Association of Christian Economists, Spring, 2000), p. 4.

3 Smith, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations (New York: Random House, Inc., 1937), p. 422.

4 U.S. Census Bureau, Statistical Abstract of the United States: 1999 (119s' edition) (Washington D.C., 1999), p. 464.

5 Ibid., p. 571.

6 "T'he Good Company," WRF Comment (Mississauga, ON, Canada: Work Research Foundation, Winter, 2000), p. 1.

7 Novak, Michael. The Spirit of Democratic Capitalism (New York: Simon and Schuster, 1982 pp. 174, 5.

8 Ibid. p. 226.

9 Murchland, Bernard, "The Socialist Critique of the Corporation," The Corporation: A Theological Inquiry, ed. Novak, Michael and Cooper, John W. (Washington D.C.: American Enterprise Institute for Public Policy Research, 1981), pp. 65, 6.

10 John Paul II, Centesimus.4nnus, Encyclical Letter. (Rome: May 1, 1991), pp. 62, 3.

11 " Hawthorne, G.F., Martin, R.P., and Reid, D.G., ed. Dictionary of Paul and His Letters (Downers Grove, Illinois: InterVarsity Press, 1993), p. 298.

Suggested Reading

Gilder, George. Wealth and Poverty. San Francisco: ICS Press, 1993.
Heyne, Paul. The Economic Way of Thinking, Ninth Edition. Upper Saddle River, N.J.: Prentice Hall, 2000.
Nash, Laura and McLennan, Scotty. Church on Sunday, Work on Monday. San Francisco: Jossey-Bass, 2001.
Novak, Michael. The Spirit of Democratic Capitalism. New York: Simon and Schuster, 1982.
Richards, Robert R. God and Business: Christianity's Case for Capitalism. Fairfax, Virginia: Xulon Press, 2002.

About the Author

Robert R. Richards is an economist currently serving on the Investment Committee of Global Partnerships which oversees the placement of funds from American investors and financial institutions into micro-finance institutions in Latin America.

He is a lecturer in economics at the University of Washington. He is a member of the Association of Christian Economists and is chairman of the Visiting Committee of the Department of Economics of the University of Washington. He served on the faculty of Whitman College and taught economics at Pacific Lutheran University.

Mr. Richards has a BA in economics from the University of Washington and an MBA in business economics from the Graduate School of Business of Stanford University.

He commenced his career as an economist with the Weyerhaeuser Company, and then served as vice president and chief economist for the National Bank of Alaska. He advanced to Vice Chairman of Alaska Pacific Bancorporation. In 1988 he was a founder of The Commerce Bancorporation in Seattle of which he served as president and chief executive officer until his retirement in 1998.

He is a former director of the national board of the YMCA of the USA and former chairman of the board of directors of the YMCA of Greater Seattle and chairman of the board of directors of the Pacific Association for Theological Studies. Mr. Richards studied theology at Fuller Theological Seminary and is a graduate of the KOINOS certificate program in Christian foundations.

He is a director of The Commerce Bank of Washington, Baker Boyer Bancorporation, Eoscene Corporation, Flow Control Incorporated, Pacific Wealth Advisors, Sko-Flow Industries and the Economic Policy Research Council of the University of Washington.

Robert and Marilyn Richards live in North Bend, Washington. Marilyn, a member of Best Friends Animal Sanctuary in Utah, devotes her volunteer work to animal rescue. They have four adult children, Michael, Paul, Jody Carroll and Sally Maskill.


Robert R. Richards, an economist currently serving on the Investment Committee of Global Partnerships, a lecturer in economics at Univeristy of Washington, member of Association of Christian Economists.

Author information was updated as of the article's post date. Author profiles may not reflect author's current employment or location.

Image credit: © Ignacio García Losa ( via Flickr. Used by permission.

previous main next

Search all stewardship resources by author, keyword or topic.

Related Articles

Generous Givers: the Macedonians

Generous Givers: the Macedonians

In this email, Grace Duddy continues her series on generous people in the Bible. Today, she focuses ...

Stewardship Planning for Fall

Stewardship Planning for Fall

This email invites you to look ahead to fall. I'm not suggesting a bypass of summer, but rather that this ...

Getting vs. Giving

Getting vs. Giving

This email and video come as a part of the Children Youth and Family stewardship series. The message ...