Economics 101

Why Creating Wealth Is Not Exploitative

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We have all seen the various stereotypes of the Wall Street tycoon grinding the little guy under his thousand-dollar dress shoes on his way to the top.

In the popular imagination, it is almost inconceivable to think that someone could obtain economic success or wealth without exploiting the vulnerable. And of course, greed is operative in the free market, just as it is operative wherever humans exist in this life. However, it isn’t the essence of a free and vibrant economy.

The Meaning of Profit

One often hears that businesspeople are only interested in earning profits—what they can make from the deal.

Set aside for a moment this claim and ask yourself, “Should one invest one’s time, energy, talent, and wealth into a business in order to obtain a loss on the balance sheets?” For that you could have stayed home.

Profit is an indicator to you that you are achieving what you set out to do in a sustainable way. The opposite of profit is financial loss, and any business that consistently loses money cannot survive long. Indeed, no business or society can sustainably function where more resources are wasted than created.

Earning a profit is an indication that things are going as planned in meeting the needs of clients, and conversely, that when a profit is not attained, something is going wrong.

The art and talent required for profitability is seen in those enterprises that discover creative ways to make products and services available at accessible and attractive prices, while covering their own costs and then some. These are the companies that serve their clients, the reward for which is built right into the process.

Profit and the Zero-Sum Myth

It’s easy to fall into the trap of believing that one person gains in a market only if others lose and that if there are poor people, clearly it must be because the rich have taken more than their fair share of the pie, leaving the poor with the crumbs. If that’s the case, the obvious solution is to take the pie by force and divide it up equitably.

This is a zero-sum assumption that prevents people from ever asking whether the solution to poverty might be to grow the pie. In conversations with fellow clergy who take this view, I ask, if profits are morally dubious, are losses morally praiseworthy?

But consider that maybe the pie wasn’t always just sitting there—the exact same size from all eternity. Maybe some of those who are rich didn’t take more than their fair share; maybe they made more than their fair share.

If this is the case, profits aren’t inherently immoral any more than losses are a badge of saintliness. Profits suggest that a business is using its resources wisely; losses, that it is not. This isn’t to say that profits and losses are a business’s be-all and end-all, but they do serve as first-level indicators of whether a business is serving customers in an effective, sustainable manner.

So the next time you see the stereotype of the evil, exploitative businessman, remember that making a profit is actually a good thing that helps everyone, if done in an honest fashion.

But how does one make an honest profit while benefiting those around him? I’ll discuss this in my post next week.

Editor’s note: This post was adapted from Rev. Robert Sirico’s chapter entitled, “The Moral Potential of the Free Economy,” a chapter in For the Least of These: A Biblical Answer to Poverty.

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On “Flashback Friday,” we take a look at some of IFWE’s former posts that are worth revisiting. This article was previously published on Mar. 6, 2014.

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