“If Christians are serious about improving the lives of the poor,” says William R. Luckey in this week’s Acton Commentary, “we must be serious about understanding the sources of wealth creation.”
If a person merely gathers food to survive, there is no way that his standard of living will increase. All his goods are used for current consumption. But if he possesses some goods that will be used to produce consumer goods for future consumption, he possesses capital. For example, if the food gatherer invents a type of plow, he will plant some of the grain he would have consumed to begin to grow his own grain, rather than stripping the land bare and moving on. The plow is a capital good. But how did he acquire this good? He had to spend time actually thinking about his invention and how it could be made and used. To do this, he had to refrain from consuming some of his current supply of grain and save it so as to feed himself during the invention-making period, where his time would be spent making and testing the plow. We call this savings. All increasing of production requires savings.