CHAPTER 7: Compounding Labor Compounds Wealth

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So if labor is a major component of all wealth, why is it that the brick-layers, carpenters, and metal workers, tend not to be the ones with the most prosperous lifestyles? Why do executives of major corporations get paid much more than the assembly line workers, if in fact labor is such a major key? Why do small and medium-sized business owners tend to earn much higher incomes than the laborers who typically do the actual manual labor for them?

Simple. And the answer will be the next “organic” element that we will discuss extensively throughout this chapter:

Compounding Labor Compounds Wealth: The ones who increase their wealth the most are the ones who  wisely employ and compound the labor of others in order to earn more for themselves.

At first glance, some people may think that such a concept is “unfair” or “wrong.” However, the opposite is true, as we will learn throughout this article. In truth, this is a VERY biblical precept, and not one to be taken lightly. To begin our studies, we will briefly examine just two of the examples provided us in the Bible. We will begin with Abraham (initially named Abram), then pick up next with wise King Solomon.

Abraham Had Employees

As we noted within The Biblical Genesis of Money, Abraham was an astute businessman. He certainly knew how to work the marketplaces in the various areas he lived, because his wealth continued to grow throughout the Genesis account. But a key issue to point out also is that Abraham did NOT do all the work of caring for his flocks himself. In fact, at his advanced age, he probably did very little thereof. Rather, the man had hired help who did the menial work, while he oversaw the “corporation” so to speak:

So Abram departed as the LORD had spoken to him, and Lot went with him. And Abram was seventy-five years old when he departed from Haran. Then Abram took Sarai his wife and Lot his brother’s son, and all their possessions that they had gathered, and the people whom they had acquired in Haran, and they departed to go to the land of Canaan. So they came to the land of Canaan….

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Abram was very rich in livestock, in silver, and in gold….

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Lot also, who went with Abram, had flocks and herds and tents. Now the land was not able to support them, that they might dwell together, for their possessions were so great that they could not dwell together. And there was strife between the herdsmen of Abram’s livestock and the herdsmen of Lot’s livestock…. (An excerpt from Genesis chapters 12 and 13, NKJV, emphasis added)

Abram (later renamed Abraham) grew his wealth by the blessing of God upon his life, but also by the compounded labors of his staff. He was the “visionary” of the company, we might say, while the main work of the operation was performed by his hired men. Did you notice that it was Abram who was “very rich in livestock, silver, and gold” and not his herdsmen?

We read later on within Genesis that Abraham even had a trusted steward whom he could send to negotiate business deals as well. This man “ruled over all” that Abraham owned, and was trusted enough that Abraham even sent the man to find a wife for his son, Isaac:

Now Abraham was old, well advanced in age; and the LORD had blessed Abraham in all things. So Abraham said to the oldest servant of his house, who ruled over all that he had, “Please, put your hand under my thigh, and I will make you swear by the LORD, the God of heaven and the God of the earth, that you will not take a wife for my son from the daughters of the Canaanites, among whom I dwell; but you shall go to my country and to my family, and take a wife for my son Isaac.”…

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Then the servant took ten of his master’s camels and departed, for all his master’s goods were in his hand. And he arose and went to Mesopotamia, to the city of Nahor….

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So he said, “I am Abraham’s servant. The LORD has blessed my master greatly, and he has become great; and He has given him flocks and herds, silver and gold, male and female servants, and camels and donkeys. And Sarah my master’s wife bore a son to my master when she was old; and to him he has given all that he has. Now my master made me swear, saying, ‘You shall not take a wife for my son from the daughters of the Canaanites, in whose land I dwell; but you shall go to my father’s house and to my family, and take a wife for my son.’ And I said to my master, ‘Perhaps the woman will not follow me.’  But he said to me, ‘The LORD, before whom I walk, will send His angel with you and prosper your way; and you shall take a wife for my son from my family and from my father’s house. You will be clear from this oath when you arrive among my family; for if they will not give her to you, then you will be released from my oath.’ …

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Now if you will deal kindly and truly with my master, tell me. And if not, tell me, that I may turn to the right hand or to the left.” …

(An excerpt from Genesis chapter 24, NKJV, emphasis added)

Thus, one of the secrets of Abraham’s wealth was the wisdom given to him by God to compound the labor of others in order to compound his own wealth.

King Solomon certainly had enough wisdom to do the same thing as well.

Solomon’s Servants

Now Solomon made a treaty with Pharaoh king of Egypt, and married Pharaoh’s daughter; then he brought her to the City of David until he had finished building his own house, and the house of the LORD, and the wall all around Jerusalem.

(1 Kings 3:1, NKJV)

It is written in the Bible that Solomon “built” the Temple, his new palace, and even cities and other major projects. But do you think he was out there personally swinging a hammer or digging with a shovel? Not hardly! He had LOTS of help through many, many, servants:

  • So King Solomon was king over all Israel. And these were his officials
  • And Solomon had twelve governors over all Israel…
  • Solomon had forty thousand stalls of horses for his chariots, and twelve thousand horsemen
  • And God gave Solomon wisdom and exceedingly great understanding, and largeness of heart like the sand on the seashore. Thus Solomon’s wisdom excelled the wisdom of all the men of the East and all the wisdom of Egypt. For he was wiser than all men…And men of all nations, from all the kings of the earth who had heard of his wisdom, came to hear the wisdom of Solomon….
  • Now Hiram king of Tyre sent his servants to Solomon, because he heard that they had anointed him king in place of his father…
  • Then King Solomon raised up a labor force out of all Israel; and the labor force was thirty thousand men. And he sent them to Lebanon, ten thousand a month in shifts: they were one month in Lebanon and two months at home; Adoniram was in charge of the labor force. Solomon had seventy thousand who carried burdens, and eighty thousand who quarried stone in the mountains, besides three thousand three hundred from the chiefs of Solomon’s deputies, who supervised the people who labored in the work. And the king commanded them to quarry large stones, costly stones, and hewn stones, to lay the foundation of the temple. So Solomon’s builders, Hiram’s builders, and the Gebalites quarried them; and they prepared timber and stones to build the temple.

(Excerpts from 1 Kings chapters 4 and 5, NKJV, emphasis added)

Solomon was the wise visionary, but multitudes of OTHER people provided the manual labor and hands-on management. He was the wisest man in the earth—and that, by God’s Own decree (see 1 Kings chapter 3)—so Solomon had the wisdom to know how to compound the labor of others in order to compound wealth.

But is this wrong?

Well, as we have explained before, mutual exchange benefits all parties involved, and society as a whole. Look at the fruit of Solomon’s labor compounding efforts, as it is evident in ancient Israel during the peak of his wisdom and fame (i.e. before he later fell into apostasy):

Judah and Israel were as numerous as the sand by the sea in multitude, eating and drinking and rejoicing. So Solomon reigned over all kingdoms from the River to the land of the Philistines, as far as the border of Egypt. They brought tribute and served Solomon all the days of his life….

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For he had dominion over all the region on this side of the River from Tiphsah even to Gaza, namely over all the kings on this side of the River; and he had peace on every side all around him. And Judah and Israel dwelt safely, each man under his vine and his fig tree, from Dan as far as Beersheba, all the days of Solomon.

(Excerpt from 1 Kings 4:20-25, NKJV, emphasis added)

And when the queen of Sheba had seen all the wisdom of Solomon, the house that he had built, the food on his table, the seating of his servants, the service of his waiters and their apparel, his cupbearers, and his entryway by which he went up to the house of the LORD, there was no more spirit in her. Then she said to the king: “It was a true report which I heard in my own land about your words and your wisdom. However I did not believe the words until I came and saw with my own eyes; and indeed the half was not told me. Your wisdom and prosperity exceed the fame of which I heard. Happy are your men and happy are these your servants, who stand continually before you and hear your wisdom! Blessed be the LORD your God, who delighted in you, setting you on the throne of Israel! Because the LORD has loved Israel forever, therefore He made you king, to do justice and righteousness.”

(1 Kings 10:4-9, NKJV, emphasis added)

Wise people compound labor, which compounds their own wealth. However, this principle also compounds the material prosperity of all those affected thereby—even the entire economy. This is obviously a form of “justice and righteousness” in God’s eyes, as the passage above clearly states. Thus, another “organic” truth comes to light:

Compounding Labor Biblically Prospers Many: When a person applies godly wisdom to effectively compound the labors of others (i.e. according to biblical standards), the general prosperity of all parties involved increases. When this is done on a large scale, and/or in many instances within a society simultaneously, the entire economy can be prospered, and society as a whole is benefited. Thus, there are even indirect beneficiaries of this prosperity throughout society due to compounded labor.


Modern Methods of Compounding Labor

Small and medium-sized businesses and large corporations represent a form of labor compounding. We could say that these forms would represent examples of the entrepreneurial and managerial approaches to labor compounding.

Another form of labor compounding that is well-known within the USA and other countries is multilevel marketing (MLM) also called “network marketing.” This activity is often described as “time compounding” within that industry, but that is an erroneous term. What is obviously being compounded is labor and not time. This type of business could be categorized under a semi-entrepreneurial or social form of labor compounding, considering how those forms of businesses are structured with their distributor networks. (However, I will refrain from elaborating further on MLM here, as it would detract too much from our current discussion.)

In the meantime, let’s talk briefly about stocks, bonds, real bills, and futures contracts. These ingenious financial vehicles represent an investment form of compounded labor. When you turn your money (earned by your labor) into an investment such as theseif we assume a fair marketplace where “honest weights and measures” are being used and no fraud is being perpetuated by market participants or the government—then you are actually investing into the labors of others and earning a profit (hopefully) from their efforts as a result.

Here is a quick (and simplified) definition of each, but within the context of our discussion herein:

  • Stocks are each a fractional investment into the ongoing labors of those working in a company. (We’ll discuss an example of this form in a moment.)
  • Bonds are debt-instrument investments, lending money to a company or government, with an understanding that interest and principle will be paid at a later date. (Currently this is one of the worst ways to invest because of the depreciation of the global currencies and major bubbles within the global bond markets.) During sane financial times, this would be an indirect investment through debt into the future labors of a company (i.e. that they will pay the debt and interest upon the bond’s maturity). Government bonds, in contrast, are an indirect investment in the labors of the tax-base (i.e. citizens) of the country, and not directly into any productive enterprise that benefits society. In other words, government bonds keep political systems going, but do very little to improve the actual economy (with the possible exception of some bond-funded infrastructure expansion).
  • Real Bills were short-term trade credit instruments, typically payable 90-days net in gold, that once circulated widely in the world also as an investment vehicle via discounting (i.e. verses paying interest). These worked much like a commercial credit might work today, except the “net 90” discount was a market phenomenon rather than a trade discount from the creditor for early payment. Real bills were the “lubricant” (if you will) of the international gold standard that existed prior to 1914, but were erroneously abandoned with the outbreak of World War One. The failure to reinstate the international real bills markets (and fully free trade) when the gold standards of the nations were reinstated after the hostilities ended, is the primary reason why the subsequent gold standard systems failed to perform as efficiently post-war as they did for about 100 years previously. (Note: Professor Antal Fekete is one of the leading economists championing the necessity of real bills being reintroduced simultaneously today with a return to a true international gold standard.) In our discussion context, Real Bills are a financial vehicle that would be an investment into the near-future labors of the retailers who sell their high-demand goods to end consumers.
  • Futures contracts are commitments sold by commodity producers to investors for future goods not-yet-produced. These are investments into the future labors of the commodity producers (and their employees) who have committed themselves to supplying the underlying commodity (e.g copper, gold, wheat, corn, crude oil, etc.) at a future time .

A Compounded Labor Vehicle: Company Stock

Let me now illustrate how just one of these modern financial instruments can cause an investor to “reap a harvest” from the compounded labors of others. We will use an equity instrument for our example, though I caution my readers to be very wary of the stock markets in today’s highly inflationary monetary systems.

The stocks of a company are small “shares” (i.e. each a minuscule ownership percentage) of the overall company. This includes ownership of its buildings (built by labor), its intellectual properties such as patents (a result of research and mental labors), its machinery (all constructed by labor) and its manufactured products sold into the marketplace (all made by labor). If the company is profitable, in theory, you should reap a small percentage from their labors for each share of stock you own (either in dividends paid by the company, or a market value increase in the value of your owned stock, or both).

Thus, that investment income earned is in essence a percentage earned from the labors of others. Your money enabled that company to form (or function, or expand, etc.), which enabled those people to work; and through their own productivity these people earn an income for themselves (i.e. a paycheck). In return, you are compensated for enabling them to have jobs by earning a return on your investment into their labors.

Again, this is perfectly biblical. It is also mutually beneficial, for the laborers would not have had their jobs if there had not been investors (often called today, “capitalists”) who funded the company’s operations. Everyone benefited in this “win-win” mutual exchange (assuming the company is successful) just as they did within the mutual exchanges between producers within the biblical economies that we examined before in our previous discussions.

Again we see how that honest free trade can promote the general prosperity of all direct and indirect participants of each transaction, and even benefit society as a whole—even through a labor compounding investment vehicle like stock investing.

Thus, those who accuse capitalists, business owners, and corporations, as being “oppressors” of the poor or as being “hindrances” to a prosperous society, have no idea how the world really functions according to God’s “organic” laws of economics (much less any accurate understanding of the Scriptures themselves).

In the light of what we have studied within our Organic Economics™ series so far, my statement above should be quite self-evident. However, referring to our patriarch Abraham one more time, let us examine one quick illustrative Bible citation. Note what the Lord told the man would happen if he served God wholeheartedly, and followed His ways:

The LORD had said to Abram, “Go from your country, your people and your father’s household to the land I will show you. I will make you into a great nation, and I will bless you; I will make your name great, and you will be a blessing. I will bless those who bless you, and whoever curses you I will curse; and all peoples on earth will be blessed through you.”

(Genesis 12:1-3, NIV, emphasis added)

The Lord told Abraham (then Abram) that He would first bless him, and then that blessing would overflow into the lives of others. This is a very Organic™ principle from Scripture to note also in the light of what we just discussed:

Corporate Prosperity: The total wealth and prosperity of any group of people is composed of the sum of the individuals’ wealth and prosperity. When individuals are blessed by God—and allowed to prosper by their fellow men and governments—they will increase the aggregate prosperity of the entire community as well. On the contrary, when the wealth and prosperity of individuals is diminished by government intervention and/or social disruption, the aggregate condition of the community will suffer both directly and indirectly.

If just one person in a community increases financially, would he or she not buy goods and services with that money as well? If they typically will, then would not those other people/businesses prosper as a direct result of the first person? And if they will, would not their own windfalls then be spent with other people/businesses, who would then benefit as well? Though the “ripple effect” measurement diminishes the farther away we take this example from the original person, the fact that both direct and indirect “blessing” comes to others through the first person’s blessing should seem very elementary to understand.

Community Blessing

So it is important that we Christians prosper, so that we can help our families and communities to prosper. It is also important that we do not hinder the honest pursuits of others as they seek to increase their own wealth through their own labor and/or the compounded labor of others. As the Holy Spirit expressed it so well within the New Testament:

And if one member suffers, all the members suffer with it; or if one member is honored, all the members rejoice with it.

(1 Corinthians 12:26, NKJV, emphasis added)

As we learned previously in The Biblical Genesis of Trade, we are not islands unto ourselves. True lasting material prosperity is a community effort. If anything, the recent economic turmoil should have driven that point home. Entire local populations are now suffering (in degrees that vary from individual to individual, city to city, state to state, and nation to nation) due to the effects of this global economic crisis that is now unfolding more and more.

Summary:

Within this important chapter, we have learned a few key things that will be foundational to some of the things that follow:

  • Wealth is compounded when labor is also compounded. This is a biblical principle.
  • The laborers themselves are prospered when their efforts are wisely compounded by others. Even Solomon’s servants were counted “happy” and enjoyed their own material increase as a result of his wise use of their labors.
  • Modern methods of labor compounding include various investment vehicles. Whenever people are allowed to work because an investor has enabled their company to form, function, and or expand, then they are materially benefited. The investor indirectly compounded the labor of these workers when he or she enabled them to work. Therefore, he or she is due their dividends/profits for their successful investment. This process is biblical and good for all parties involved. So those who criticize “capitalism” are ignorant of both the Scriptures and how the real world functions properly according to God’s Organic™ principles.
  • The prosperity of an entire society is the sum of the prosperity of its individual members. When one person/business is successful and increases, the “ripple effect” of the original person’s blessing affects other people/businesses as well. This prosperity eventually permeates throughout the society as a whole.

Thus, in this series so far, we have now laid a very broad and solid foundation regarding trade, money, wealth, labor, and even corporate prosperity. I am very hopeful that my readers are beginning to understand how truly Organic Economies™ function, in accordance with God’s laws of creation as revealed through the Scriptures.

However, things are just now beginning to get interesting. Let us take what we have learned thus far, and discuss it further within our next chapter the Subjective Valuations in the Marketplace in order to better understand how “prices” tend to emerge. This additional insight will then allow us to study how labor (and value) can travel through space and time within the following chapter.

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For more information about Rev. Rich Vermillion, please view the brief bio at the bottom of TheWisdomOfGold.com’s Website Introduction page, or visit his public LinkedIn profile page at: http://www.linkedin.com/in/richvermillion

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