Where economic theory and faith meet

March 1, 2019 -- Living City

Where economic theory and faith meet
People don’t want just to give; they want to invest in a better world

By Richard O’Sullivan

As a professional economist, I was, to put it mildly, dubious when in 1992 I first encountered the Economy of Communion, or the “Economy of Sharing” as it was then called. The EoC was founded by Focolare’s Chiara Lubich in 1991, aimed at building community through businesses.

Don’t get me wrong. I do not see the trade-off between Christian ethics and business success that many believe exists. According to some, our capitalist market system is at odds with Christian morality. For them, you can either be a good business person or a good person. Pick one.

This phenomenon was most powerfully demonstrated recently when the entire graduating class at the Harvard Business School refused to sign an ethical practices pledge, fearing that it might cost them job opportunities.

Similarly, there are those who think there is no place for business practices when working for or with a charity, especially for faith-based organizations. Applying business practices and market forces to achieve social or humanitarian objectives somehow sullies or debases charitable work.

I once heard a member of a parish council criticize the use of business planning practices saying: “You can’t treat this as a business. It’s a church.”

But a church is an organization with revenues, assets, and employees. Why should it matter if it is a faith-based or profit-generating organization when determining appropriate behavior?

Is it possible that some people have two sets of ethical standards: one that they apply when conducting business and an apparently higher standard that they only employ when they think that God might be watching? Of course not.

Doing well by doing good

These extremes, rooted in a misconception that market economies, driven by self-interest, are fueled by greed, confuse “self-interest” with “selfishness.”

For economists, self-interest is another term for “rational.” When economists say that people act in their perceived self-interests, they mean that people do not act irrationally. Offered a choice of $10 or $20, people will take the $20 bill every time. Parents who place a higher value on their children’s future than their own, rationally sacrifice their own desires for their children’s welfare.

In fact, most economists will argue that not only should one manage a business or a career according to high ethical standards — they, in fact, must do so to survive in the long-run. Unethical behavior rarely is rewarded twice.

As an economist, my initial concern with the Economy of Communion was not its objective, but how such business practices could be sustained in the long run.

When I served as an assistant director for the Center for Civil Society Studies at Johns Hopkins University, a think tank that focuses on the nonprofit sector, I raised a similar question about the “fair trade” movement that sought to bring higher returns to farmers in developing markets producing commodities such as coffee and rice.

While an admirable goal, it could do so only through a more expensive supply chain supported by higher consumer prices. When colleagues argued the contrary I asked why our breakroom was not stocked with fair trade coffee. Even those supporting the concept would not pay a higher price.

From warm glows to investments

In the late 1990s my pastor asked me to chair the parish’s development committee. I began by asking, “So why do rational people give money away?” To my surprise, I discovered that at the same time that Chiara Lubich was developing the Economy of Communion, experts in my profession were taking a long second-look at our understanding of charity.

As a student I was taught that charity was the “Philanthropy Paradox,” because it seemed to violate the assumption of self-interest. The explanation given at that time was that people donated money, time or other resources because it either made them feel good about themselves or influenced others to think more highly of them. It was called “the Warm Glow Effect.”

This explanation was found wanting, however. Although it might have, at least in part, explained why people make charitable contributions, it did not explain how people choose which kinds of charities to support. Why do some people give to schools while others support museums, for example?

Additionally, if I’m donating just to acquire warm fuzzy feelings or gain the respect of others, I should choose the easiest way of donating in the most public manner. Instead we see that people often incur great expense to create trusts to manage how the funds are distributed and make anonymous donations. There had to be another explanation.

On deeper examination, economists focusing on philanthropy determined that people do not give away money to organizations. They invest in social outcomes.

People who give to schools want to live in communities with well-educated populations or, so value their experience at a certain institution that they feel that society would be better if others could share them.

Those who support symphony orchestras and museums do so to access and share cultural experiences. With the weekly offertory contribution, a parishioner is not paying for just that hour of religious observance. Rather he is investing in the benefits to his community that he values and only a religious institution can provide.

The idea that charity is a social investment resonated and reminded me of the aspirations of the Economy of Communion. On further study of both the theory of social investment and case studies from the Economy of Communion, I saw the connection that would make the initiative sustainable.

To do so, one should not think small, but very large, and, most importantly, aim at working together with others. Nonprofit organizations need to look beyond other nonprofits — not for donations — rather for partners.

Businesses should not partner just with like businesses or those in the same supply chain, but go beyond them to find businesses and even government agencies and nonprofit organizations that would benefit from the social outcome it is trying to achieve.

From diversity comes unity

The most stunning and, as such, most emblematic example of this wide-scale approach was the Neighborhood Association of Santa Terezinha Island in Brazil, a Focolare initiative close to the city of Recife that transformed an entire island community by building a network of businesses, nonprofits, faith-based organizations and government agencies through a shared vision of hope.

One of the founding members of the association noted: “While planning a specific project, we become aware that a nearby neighborhood has problems that are much more serious than ours. Therefore we agree to help them; in doing so, we all gain.”

Together this diverse group of partners, each benefiting from the contributions of the others, over time turned a community with the well-earned name of “Hell’s Island” to a prosperous community that continues to work together in a sustainable network of cooperation.

The Santa Terezinha Island experience demonstrated that a for-profit or nonprofit activity need not limit itself to modest goals. The breadth of its efforts created multiple opportunities to work together. The key to sustainability of the Economy of Communion is the message of faith itself:  To succeed, be bold.

Richard C. O’Sullivan is the Principal of Change Management Solutions, helping civil society organizations to identify, understand, and harness the forces of change.

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