Economics 101

Profits and an ‘Economy of Mutuality’

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Money is often seen as intrinsically bad or perhaps a necessary evil in the world. However, we must not forget the important role money plays in wealth creation and in facilitating the efficient exchange of goods and services.

Money and the trade it makes possible further the common good and greatly enhance our ability to love our neighbors — both local and global. Christian philosopher Dallas Willard reminded us, “Business is an amazingly effective means of delivering God’s love to the world by loving, serving and providing for one another.”

The Importance of Profit within an Economic System

The idea of profit can, at first blush, seem problematic, but upon closer reflection, we can see the importance of profit within an economic system.

When property rights are well defined and contracts are consistently enforced, profits perform important functions within modern economies. Profits provide rewards for technological innovation and resource efficiency in delivering goods and services. In this sense, profits are important incentives for promoting research and development, enabling enterprises to discover superior products and better ways to meet the needs of people.

Within a modern economy, profits are also signaling mechanisms encouraging others to devote more resources in particular market opportunities.

As a boy, I fished on one of Minnesota’s 10,000 lakes. When the fish started biting in one particular part of the lake, it didn’t take long for a crowd of boats to show up and take advantage of the promising opportunity.

Like fish that are biting, profits also draw crowds. Profits can and do at times bring out the worst in economic actors, but in many ways the profit mechanisms encourage people to look out for others and to serve them in better ways. Profits also are vital to government and nonprofit organizations because these important sectors of society all depend on the economic engine of for-profit enterprises for their success.

The Economics of Mutuality

While it is true that business and commerce often fall short of meeting the neighborly love standard, the importance of for-profit enterprises must not be minimized or discredited. Rather, I believe profit should be seen in the context of a more integral paradigm called the “economics of mutuality.”

One promising possibility for making the free market better is to move beyond approaches that look to the sole bottom line of profit and to move toward triple-bottom-line approaches, which take into account not only profit, but also promoting the flourishing of people as well as the planet. Yes, profit remains a key bottom line. But people and the planet become bottom lines as well.

Supporters of this kind of economics of mutuality are offering a salutary critique of the hyper-individualism and narrow focus of those free market systems that assert the sole purpose of business is to maximize shareholder profit.

One of the thought leaders promoting the adoption of a triple bottom line in business is Mars, Inc. The Mars company makes life more enjoyable not only by producing peanut M&Ms, but also by paving the way forward for many profitable business enterprises.

For Mars, Inc. and other for-profit companies, there is an increasing recognition of a more complex bottom line than shareholder value only. Yes, there is a good and needed desire to sustain profitability for the long haul, but not without taking into account the resulting positives and negatives on people and the planet as a whole.

Mars board Chairman Stephen M. Badger II describes his all-in commitment to a free market system and his embrace of the economics of mutuality this way:

Clearly, then, Mutuality — creating shared value for all stakeholders through a form of capitalism and responsible business practices that defines success in much broader terms than profits for shareholders — has had a profound effect on Mars, and indeed my own life.

I am hopeful that with business leaders like Stephen Badger, our free market system can function better for the flourishing of all our neighbors and neighborhoods. The economics of mutuality align well with biblical wisdom for human flourishing and suggest good possibilities for enhancing the common good.

A corporation is a good thing, but a corporation that has corporate social responsibility, not only to its shareholders but also toward the value supply chain of the local and global neighborhood, is even better.

This article originally appeared in “Faith at Work: Economic Flourishing, Freedom to Create and Innovate,” a special report released by IFWE and the Washington Times. You can download a pdf copy of the full report, or visit the Washington Times’ website, where you can share individual articles to social media or via email.

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