The economic success of the U.S. and other western economic nations is astounding, as are the recoveries of West Germany and Japan since 1946. Economic success elsewhere in Asian is even more remarkable, requiring half a century or less to convert nations of peasant farmers into industrialized economies. The rapid rise of the Asian tigers has caught the attention of those nations that have longed for but not achieved rapid development.

The poverty of those nations that have failed to develop raises the question: why are some nations rich and some poor? Is national poverty caused by the unavailability of technology, the lack of access to capital, or the lack of education? Perhaps it has been the oppressive system of international trade and investment through which the rich nations exploit the poor nations and keep them poor. If so, how did the Asian tigers rise so quickly? Douglass North’s (1990) "new institutional" explanation is the focus of this paper. To highlight North’s contribution, we will review what other economists have said about national wealth and poverty.

We will consider several well-known economic explanations of the wealth and poverty of nations, starting with Adam Smith. The review contrasts the classical and neoclassical emphasis on markets with the radical perspectives promoted by Marx and Lenin, and the view that culture matters. It also highlights shortcomings of each view.

Adam Smith devoted his best-known book, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), to the question of what makes a nation wealthy. His answer was straightforward. Wealth is the productive capacity of a people, not its stock of gold. Productivity increases with specialization and the division of labor, capital improvement, and technological increase. Exchange under a system of "natural liberty" and directed by the invisible hand promotes wealth creation. Government interference in commerce inhibits wealth creation.

Free-market economists who wish to emphasize the importance of ethical considerations remind us that Smith also wrote The Theory of Moral Sentiments (1759). Therefore, Smith’s ideas on free markets assumed an ethical foundation in society. Assuming a moral base, however, is quite different from explaining precisely how it affects exchange, and few commentators on Smith have explained the connection in any detail. Moreover, when the moral status of different societies, or of one society over time, is the variable in question, taking the moral climate as given is not helpful.

Neoclassical economics is the 19th and 20th-century mathematical revision of many of the principles of Adam Smith’s Wealth of Nations and the rest of Classical economics. Neoclassical economists explain that economic output depends on the level of technology and the amount of labor and capital available.1 The implication of neoclassical economics is that a nation’s growth is promoted by a growing labor force and a high rate of saving that leads to a high rate of capital accumulation. Furthermore, technological change is crucial to increasing the productivity of capital and labor.

The key to rising individual standards of living in a nation is productivity of labor. Labor’s wage depends on productivity, measured as quantity of output per laborer (Q/L). Productivity of labor depends on the quantity of capital per worker and on the technology it embodies. Standards of living will grow the fastest in those countries that have the highest rate of saving, that invest the most in capital equipment, and that use the latest technology, because productivity of labor will grow the fastest in them.

Nobel Prize winner Kenneth Arrow, however, has noted that the implications of the neoclassical model do not square with the facts of international development. Neoclassical economics emphasizes the mobility of capital and the technology it embodies. Since capital is mobile and flows to certain developing nations, and since technology is well understood and easily adapted by those same nations, why do other nations remain poor? The very existence of poor nations and rich nations together for so long proves that the automatic adjustments of neoclassical theory are hindered by unobserved factors.

What is preventing the movement of capital and the transfer of technology needed to make poor nations more wealthy? The radical economists of the late 20th century continue to blame the capitalist economic system. Karl Marx labeled the system of private ownership of the means of production and hiring of wage labor in production as capitalism. While Marx admitted that capitalism has led to the accumulation of great productive capacity, to him the question of rich versus poor nations was irrelevant. Within his theory of the exploitation of labor, the important questions are why are capitalists rich and laborers poor, and what are laborers to do about it.

Rising living standards for industrial workers in capitalist nations between 1850 and 1900, forced Vladimir Lenin to rethink Marx’s explanation of capitalism’s inevitable downfall. He developed a theory of capitalist imperialism. Capitalists in industrialized nations, Lenin reasoned, were delaying the collapse of capitalism by exploiting people in poorer countries through the "export of capital". (Lenin 1936)

In the 1960s, dependency theory arose along the lines of Lenin’s economic theory of capitalist imperialism. The system of world trade allows capitalists in the developed nations to continue to exploit the less developed countries. Developed nations maintain poor nations in a dependency status. Direct foreign investment by multinational corporations is especially damaging, and expatriation of profits to corporate headquarters in the developed countries is proof that the multinationals are taking out more than they put in. Because developing countries export mainly primary commodities (minerals, agricultural products, etc.), the developed nations turn the terms of trade against the developing nations to benefit themselves.2

Yet, just as Marx incorrectly predicted the increasing immiseration of labor, Lenin’s theory of imperialism and the theory of dependency run counter to the facts. Multinational corporations in capitalist nations such as the United States tend to invest most heavily in other capitalist nations. The greatest amount of direct foreign investment from the US, for example, goes to Canada. The capitalist nations are, in fact, exploiting each other.

And, while dependency theory has been a popular explanation of poor economic performance in Latin America, the multinational presence there is not significant at all. Furthermore, recent evidence suggests that those Latin American nations that have been most dependent on foreign trade and investment have grown the fastest. (R. R. Kaufman, et al. 1975; cited in Lawrence E. Harrison 1985: 154).

As to the perils of exporting primary products, Harrison notes that the U.S. is the world’s largest exporter of such goods. "And we must remember that the United States, Canada, and Australia all grew rapidly in the nineteenth century as exporters of primary products (and we should note, the three encouraged foreign investment, principally from Britain)." (Harrison 1985: 152)

The cultural explanation of growth is that we should look to internal factors for the reasons for poverty and wealth. External factors, such as world trade, do not cause poverty. Cultures vary, and certain cultural traits influence economic progress.

The idea that some cultural attitudes promote growth and others do not is widely accepted. The view that some cultures are inherently hostile to growth, however, seems to some to be racist. Harrison, an exponent of the cultural view, rejects the racist label. Racist explanations are genetically rooted and imply immutable differences. Cultural differences can be seen in countries whose people share the same racial background. Culture is neither intrinsic nor immutable. (Harrison 1985: 166)

Harrison reviews several cultural explanations of national wealth and poverty. Gunnar Myrdal, for example, investigated what he considered to be the myth that poor cultures are more just and caring. W. Arthur Lewis examined cultural factors that produce relatively more entrepreneurs. Max Weber, Joseph Schumpeter, and David McClelland also investigated the role of entrepreneurs in stimulating economic growth. (See Harrison 1975: chapter 2, "What Others Have Said".)

But the question remains, what are the key characteristics of societies that promote growth? Which societies will encourage entrepreneurs and why? This is similar to the question about neoclassical growth: which societies will save and invest more in future productive capacity and technological development? What cultural characteristics promote growth and encourage entrepreneurs to take risks?

Throughout the 20th century, mainstream economists and their critics have debated the theoretical significance of economic institutions. The older institutional view of, for

example, Thorstein Veblen the early 1900s was that studying the evolution of institutions was more important than studying mainstream theory of rational choice. A new institutional view is that institutions arose as exercises in rational choice. The new institutional economist and 1993 Nobel Prize winner Douglass North offers an explanation of why some nations are rich and some are poor. North’s view makes no special reference to Christian belief, but the connections are plausible.

To recap, the problem with classical and neoclassical theories of economic growth is that they stated necessary but not sufficient causes of economic growth. Adam Smith, for example, recognized the necessity of the division of labor and the exchange that it requires. Smith (Wealth of Nations, Book I, Chapter 1) and later neoclassical theorists also highlighted the necessity of capital accumulation and technological improvement.

The new institutional view is that efficient economic institutions are also necessary to promote the specialization, exchange, and investment that promote rising standards of living. A few preliminary concepts are important to understanding this view. They include the distinction between an exchange and a transaction, the meaning of an economic institution, and the potential for opportunism in commerce.

John R. Commons was one of the older institutional economists and a forerunner of current institutional ideas. Commons (1926), for example, emphasized the difference between an economic exchange and a transaction. An exchange is an instantaneous swap of products for products or products for money. A transaction involves the legal technicalities of exchange, including writing and enforcing contracts that usually cover long time periods over which risk of default or fraud is increased.

An institution is defined as a rule, regular practice, or organization. Economic institutions, therefore, are the rules, cultural practices, and organizations that influence the production, distribution, and consumption of goods and services. Most importantly, commercial rules are usually designed to lower transactions costs. For North, a society’s economic rules and customs promote growth to the extent that they make exchange more efficient.

One reason that transactions costs are so high is that human behavior tends to be opportunistic. This characteristic, though not emphasized in neoclassical theory, is highlighted by institutional analysis because many institutions are designed to protect against such opportunism. The question of which nations will be poor or rich can be reformulated as which nations will be characterized by opportunism or self restraint. Let’s see precisely why.

Formal economic institutions are those commercial codes that have been enacted into written laws. North (1990: 47) includes in his list of formal institutions written constitutions, statutes, common laws, and even individual contracts. Formal institutions "define constraints [on commercial behavior] from general rules to particular specifications."

Economists who do emphasize the role of economic institutions tend to cite the importance of the formal legal institutions: the rule of law, property rights, contract law, and so on. The theory is that, without these institutions, people will behave and market exchange will flourish. North (1990) has a less certain view of formal institutions than this. He believes that formal institutions are designed to reduce transactions costs for those who design them but that not all such institutions will be efficient.

Transactions Costs Are High. While free trade can be very beneficial, commercial transactions associated with buying, selling, borrowing, and lending are costly. Business schools and economics texts teach that the major costs of production are the costs of labor, capital, raw materials, and intermediate products. Institutionalists contend that the major costs of production are actually transactions costs. Wallis and North (1986) "found that more than 45 percent of national income was devoted to transacting" (cited in North 1990: 28). These include the costs of searching the market for a buyer or seller, the costs of writing contracts that protect the buyer and seller, the costs of enforcing contracts and preventing fraud, and the costs of preventing and prosecuting theft of merchandise and services. Transactions costs include not only the private costs of a lawyer but the social costs of maintaining police and justice systems.

Formal Institutions Reduce Transactions Costs. To reduce transaction costs and the uncertainties of commerce, traders in a market economy create formal economic institutions–the rules and customs of trade, and the organizations to enforce them, such as contract laws and a court system to adjudicate disputes. In the U.S., for example, real-estate brokers develop standard forms for realty contracts that follow accepted local, state, and national rules. When a broker sees one of these standard contracts, she knows exactly what it contains. Standardizing contracts in this way saves time and encourages trust.

A central government creates and enforces many commercial rules. Not all government-sponsored formal institutions, however, are efficient. Legislated rules may reduce transactions costs for a minority while imposing the costs of economic inefficiency on the rest of society. Formal institutions that were created to increase efficiency, for example, may be captured by those being regulated. When control of rule-making agencies passes to the regulated, the overall economic efficiency of the resulting rules may suffer. Anne O. Krueger (1996) contends that this is the case with US regulation of sugar imports.

Formal rules of commerce, while they are important economic institutions, do not always have to be imposed by a central authority. When they see that cooperation is in their best interests, individual traders will voluntarily agree to create, adapt, and abide by such rules and to join the sponsoring organizations. They realize that, when all traders play fairly, commerce can raise the average standard of living for all. The history of the rise of European trade in the late medieval period records the development of such legal systems as English common law and the "law merchant". (See Bruce Benson 1997.)

Commercial Opportunism Raises Transactions Costs. Not everyone, however, plays by the rules of commerce. A swindler exploits loopholes in the rules or breaks them outright. If such opportunistic behavior is widespread in trade, the costs of exchange will be high, and the volume of trade and its economic benefits will diminish.

In the face of opportunistic traders, the public may then demand stricter enforcement of the rules. Government may then provide a stronger police force and court system to enforce contracts and punish those who break commercial laws. To protect themselves in commerce, people will gather information about which traders are swindlers by creating other economic institutions such as the Better Business Bureau and consumer-protection groups. All these solutions, however, impose higher costs.

Certain Formal Institutions Promote Efficiency. A system of private-property rights promotes economic efficiency. Private-property protections contain important incentives that direct property to its most valuable uses and that cause owners to conserve and improve their property in productively efficient ways. Historical examples of the effects of property rights illustrate their efficiency. In colonial America, the earliest settlements at Jamestown and Plymouth both failed to thrive under systems of collective property ownership. Only when leaders instituted private property did food production increase to levels that could sustain growth. (Tom Bethell, "Plato’s Conceit: Property at Jamestown and Plymouth," 1998: 33-43)

Such cases illustrate that the importance of cultural institutions is not a theme of racism. The same racial group first starved and then thrived at Jamestown under different cultural institutions. Similarly, the Irish were kept poor and near starvation in the years before and after the potato famine not by their own inherent indolence but by British-imposed rules of property and land tenure and the uncertainty of its continuation that together rewarded shortsightedness and punished industry. When the rules changed in favor of certainty about long-term property relations, the same ethnic group became more industrious (Bethell, "Why Did Ireland Starve?" 1998: 243-56).

When governmental institutions lack efficiency, private associations may arise to fill the gap. The Law Merchant of late medieval times in Europe, for example, promoted efficiency through merchant’s formal voluntary compliance with commercial rules. The crowns’ courts in various nations offered neither speedy nor informed justice. Merchants had to move from fair to fair to maintain their business. The crown’s courts could delay a trial between disputing merchants for weeks, preventing them from earning income at subsequent fairs. Therefore, merchants agreed to be bound by the Law Merchant, in effect a private arbitrator who offered swift judgment that parties to the contract agreed was not appealable. Mercantile disputes could also be quite technical, requiring a fellow merchant who knew accepted commercial practices well to adjudicate the dispute fairly. (Benson 1997)

The garment industry provides another example. It would falter without credit and a means to enforce it. In Brazil, where the courts do not readily punish those who default on commercial debts, Andrew Stone, et al. (1996) found that private credit checks maintain commercial efficiency in the garment industry. They concluded that, while Brazil’s public justice was less efficient than Chilean justice, the two garments industries in those countries were nearly equal in efficiency due to Brazil’s private enforcement system.

As an example of efficient formal institutions, consumer groups in the U.S. demand legislated rules to improve the efficiency of retail trade. Federal laws now stipulate, for example, that food stores must post the price per unit and that manufacturers must list product contents on the package labels. By increasing information, these laws lower a consumer’s costs of comparing price and quality, and increase efficiency in exchange.

Police and courts that enforce the laws of property also promote efficiency. By punishing opportunistic behavior, they assure that its costs are borne by the guilty parties. One important issue, however, is whether the law, police, and the courts are up to the task of maintaining a high level of efficient exchange in a society where people have little or no respect for the formal institutions. This issue brings the role of informal economic institutions to the forefront.

Every society has unwritten informal codes of conduct. Similarly, traders who deal with each other repeatedly will have their own unwritten commercial codes alongside the written formal laws. Apart from the informal institutions of an economy, the formal written rules give no clear indication as to how productive an economy will be. (North 1990: 53) In short, informal institutions matter, probably more than formal institutions.

Informal Institutions Promote Efficient Exchange. Formal institutions, such as the law, courts, and police can theoretically enforce all contracts and reduce the negative effects of opportunistic behavior among traders. Such formal enforcement, however, is expensive, making complete enforcement practically impossible. In fact, formal systems of enforcement and dispute resolution may become overwhelmed by excessive opportunism.

North’s contention is that informal institutions, the customs and rules about economic activity that people pass on from generation to generation, are required for efficient exchange. Which informal institutions are economically efficient, and how do they work? As Nobel Prize winner Douglass North sees it, "Effective traditions of hard work, honesty and integrity simply lower the costs of transacting and make possible complex, productive exchange." (Institutions, Institutional Change and Economic Performance, 1990, p. 138) Internally motivated workers are more productive and less costly to monitor. Honest workers and traders with integrity also require less monitoring. Negotiating with associates who have integrity will require less costly defenses against opportunistic behavior.

A primary expression of good behavior in commerce is the self-enforcing agreement, where parties to a contract meet their obligations without coercion. Self-enforcing agreements are clearly less costly than formal dispute resolution and punishment. The widespread institutionalization of self-enforcing agreements in the behavior of traders of a culture makes exchange even more efficient.

Another expression of good behavior in commerce is protecting one’s reputation. While the Proverb says, "A good name is better than great riches," protecting reputation increases the likelihood of a continual flow of income to legitimate businesses. In rulings of the Law Merchant and in dealings in the Brazilian garment industry mentioned above, what was to prevent merchants from defaulting on their obligations? Success in business depended on good reputations (Benson 1977; Stone, et al. 1996). Concern about protecting their reputations forced merchants in medieval times to abide by unfavorable decrees of the Law Merchant. It also has forced garment firms in Brazil to pay on time. In both examples, default on obligations could lead to ruinous censure by other merchants.

Commercial Opportunism Raises Transactions Costs. The antithesis of good behavior in commerce is the opportunistic pirate mentality. Opportunism is inefficient. As an example of opportunism and its costs, assume that Jones agrees on Monday to sell a car to Smith for $15,000. The trade will take place on Friday, allowing Smith time to shop for and negotiate an auto loan. On Thursday, the bank approves Smith’s loan. By then, however, a third party, Miller, has offered Jones $16,000 for the car. If Jones accepts Miller’s offer, he is acting opportunistically. Smith will then have wasted his time and the bank officer’s time. If Smith wants to prevail, he will begin a costly law suit to take possession of the car or to recover costs and damages. In either case, Jones' opportunism is costly.

If combating opportunism through formal institutions are costly, how do informal rules of commercial conduct improve efficiency? Jones, for example, can refuse to impose the costs of such opportunism if he applies what he learned in youth, that a deal is a deal, once he has given his word. Informally teaching such cultural principles increases the net benefits of exchange. While the courts and the law are a last resort for Smith, they are much more costly to him and to society than the self-enforcing contract in which Jones keeps his word.

We are coming quickly to the point. In the absence of institutions promoting hard work, honesty, and integrity, economic exchange is much more costly and economic stagnation is more likely than economic progress. There is no institutional vacuum. If a culture does not actively promote good institutions, we can assume that it is promoting opportunism and a pirate mentality. Here lies the answer to our question about the wealth and poverty of nations.

Conclusion: Informal Institutions Explain Why Certain Nations Are Rich and Others Are Poor

If economic progress depended mainly on a high rate of saving to promote capital accumulation and increased productivity of labor, on access to resources, and on technological changes, why are all nations not equally rich? Mainstream economic analysis implies that technology should flow automatically to less developed countries to equalize profit opportunities around the world. North’s analysis implies that capital and technology will flow to and be accumulated or developed in a just nation. Entrepreneurs will avoid investing in, and savers will avoid accumulating surpluses that can be confiscated in, a pirate economy.

A just economy has informal cultural institutions that transmit high moral standards and promote self-enforcing agreements, moral restraint, and economic efficiency. Lower transactions costs in the just economy make investments there more profitable and more inviting to entrepreneurs. Since transactions costs are lower in the just economy, investments will be more profitable there than in the pirate economy.

In a pirate economy, which is without the support of efficient informal institutions, people tend automatically to be opportunistic and even predatory. Such opportunism increases transaction costs, as traders must defend themselves against it. Opportunistic cultural attitudes also promote policies of confiscation and redistribution of wealth that are unrelated to alleviating poverty and that reduce economic progress. The higher transactions costs and confiscatory taxes of a pirate economy make investment there less profitable. Entrepreneurs will avoid the pirate economy, seeking to operate in the just economy. They will be more willing to take the risks that increase the productivity of labor and promote economic growth.

According to North, informal institutions in 19th-century America were economically efficient, encouraging education, productive activity, and accumulation of capital. The economic institutions of many other nations, however, discouraged productive activity and encouraged redistributive activity, but not necessarily from the rich to the poor (most often from the politically weak to the politically powerful). Without institutional change, those nations tended to remain poor. (North 1990: 136)

Opportunism Is the Default Mode. If inefficient institutions promote opportunism and impede economic growth, why do some nations continue to have economically inefficient institutions? Two factors are important: opportunism is natural and and it is pervasive. First, North contends that inefficient institutions and the opportunism and the predatory behavior they promote are the normal state. He is not confident that a nation with efficient institutions will necessarily maintain them. Second opportunism will permeate all the institutions of an inefficient economy. Why, for example, won’t the formal economic institutions in an inefficient economy–the police and the courts–enforce the rules of a just and efficient economy? The police and court officials in such a culture will also tend to act opportunistically, demanding bribes and playing favorites instead of promoting justice and an efficient economy.

Why, then, are some nations rich and others poor? A nation’s culture has informal institutions that promote either a just economy or a pirate economy. A just economy encourages economic progress, while a pirate economy discourages it. Efficient institutions, however, must be guarded and cultivated for they are not the natural state.

Biblical Connections. "Righteousness exalts a nation, but sin is a reproach to any people." (Prov 14: 34) Some years ago, I concluded that this Proverb had important implications for economic progress. Douglass North’s explanation of the effect of informal moral training on transactions costs and economic efficiency provides a framework for the economic applications of the Proverb and to the exhortation to obey and teach the commands of the Lord.3

Nevertheless, a high current rate of economic growth does not imply a currently adequate moral standard. As the radio preacher put it, "God does not settle accounts every Thursday." Lags undoubtedly delay the effects of cultural change. Informal institutions are like an oven that gradually warms up and shares its heat and gradually cools down, with the house holding radiant heat for some time after the fire dims.

Does a just economy require Christianity? I believe it is important. England grew dramatically after the Evangelical revivals of the 1740s began. The U.S. prospered in the 1800s when, as Alexis de Toqueville said, her (church) "pulpits flamed with righteousness" of their pastors' Biblical messages. Without theoretical support, of course, such speculations commit the fallacy of assuming post hoc, ergo proptor hoc. That, however, is the importance of North’s theory, and empirical evidence suggests that faith does matter.4

As a counter example to the speculation, Japan, which was not at all a Christian nation, prospered in the late 1800s and early 1900s by adapting industrial technology from the West. Nevertheless, two points are important here. First, Japan and other Asian cultures exhibit strong tendencies toward moral behavior and high levels of trust and integrity in exchange. We are speaking about the economic effects of the law, not grace. As C. S. Lewis has noted in The Abolition of Man, many different cultures bear the imprint of the Law.

Adam Smith and later neoclassical economists offer only necessary, not sufficient, conditions for economic growth. They include specialization, exchange, investment, and technological change. Radical critics, building on Marxist theories of economic exploitation, derive theories of imperialism and dependency that simply do not fit the facts of international trade and investment.

The freedom to voluntarily trade products has the potential to increase wealth by moving resources and products to those who value it most. Yet wealth is increased only if the freedom to trade is secure against pirates, thieves, and frauds. And, while neoclassical theory points to the importance of a high rate of saving, people will be willing to make significant savings available to investors only when their savings are legally and financially secure.

Douglass North emphasizes the role of economic institutions in his answer to the question of why certain nations are rich and others are poor. Specialization and the exchange of goods and services increase standards of living. Investment in additional capital and improved technology further promote rising standards of living. Transactions costs, however, are a significant barrier to economic exchange. Economic institutions, the rules and customs of commercial behavior, reduce transactions costs. Some economic institutions are efficient, while others are not. Which ones are efficient and which nations have them? North (1990) concludes that informal institutions of "hard work, honesty and integrity" made some economies more productive than others by lowering the transaction costs of conducting exchange efficiently.

Internally motivated workers are more productive and less costly to monitor. Honest workers and traders with integrity also require less monitoring. Negotiating with associates who have integrity will require less costly defenses against opportunistic behavior. In the absence of institutions promoting hard work, honesty, and integrity, economic exchange is much more costly and economic stagnation is more likely than economic progress.

Is North’s theme racist? Not at all. The evidence is clear that people of the same race whose cultural norms change experience changing productivity. A study several years ago demonstrated that children of Asian immigrants do outperform students who are US citizens in American schools. Asian immigrants lose this academic advantage, however, as soon as they begin to watch the same amount of TV as their American counterparts. Honesty, integrity, and hard work matter at the individual and national level.

Informal institutions in 19th-century America were economically efficient, encouraging education, productive activity, and accumulation of capital. The economic institutions of many other nations, however, discouraged productive activity and encouraged redistributive activity, but not necessarily from the rich to the poor. Without institutional change, those nations tended to remain poor. When the institutions of a nation become more efficient, their economies also develop.

After explaining North’s explanation of why some nations are wealthy and others poor, and after highlighting possible relations to Christianity, I think reasonable and important questions remain. Is North’s theory a necessary cause of wealth? Is it a sufficient cause? Is Christian belief necessary or sufficient for economic progress? The important issue is to introduce to the debate about the causes of the wealth of nations a decidely moral explanation that is also grounded in economic theory.

1 Economists express this relation mathematically as a production function. One simple form is Q = A * f(K,L), where Q is quantity of output, A is a technological parameter, K is the capital stock, L is labor and f is the functional relation transforming inputs into outputs. In this simple model, output is assumed to expand only if technology improves, or if capital or labor increases.

2 Theotonio Dos Santos summarized the implications of dependency for economic growth as follows:

3 The verses in Dueteronomy 5 and 6 more clearly promise national prosperity, while Proverbs 14: 34 contrasts moral shame versus moral goodnes, not material wealth or poverty (Derek Kidner 1964). Nevertheless, combined with Jesus’ teaching in the Sermon on the Mount to "Seek first the Kingdom of God and His Righteousness, and all these [material] things shall be given to you" (Matt 5: __), the Proverb does have economic implications. Even so, the goal of righteousness is obedience and devotion rather than material gain.

4 I have yet to read Amy Sherman’s The Soul of Development: Biblical Christianity and Economic Transformation in Guatemala (New York: Oxford University Press, 1997), but Mark Amstutz’s (1999) review indicates its relevance to these questions. "Based on her empirical findings, Sherman argues that, contrary to the doctrine of cultural pluralism that endorses the moral equivalence of all cultures, some religious world views are more conducive to economic development than others. Of the six world view groups, committed Christians (Orthodox Evangelicals and Orthodox Catholics) were most likely to adopt patterns of thinking and behaving that were conducive to socio-economic progress, while Cristo-pagans and other syncretist religions were least likely to foster belief and behavior patterns that encouraged economic development." (Amstutz 1999: 477).