I’m going to start an occasional series of essays enquiring into economics by examining the notion of wealth. Adam Smith himself defined economics as “the science of wealth” and his most famous book is entitled An Inquiry into the Nature and Causes of the Wealth of Nations. We often hear of a mysterious process called “wealth creation”.
Let us begin by distinguishing wealth from money. The Pharaoh Tutankhamun, was, we can all agree, a wealthy man. His mask (shown above) is of solid gold and weighs in at 321.5 oz; at the time of writing, just the metal would set you back a tad over £469,110, even if we ignore the work that went into it and its artistic value. However, the Pharaoh Tutankhamun had no money, either in the form of coinage or of credit. Coinage would not be invented for a good six centuries after he and his mask were interred in the Valley of the Kings, and as pharaoh he owed nobody anything. His wealth consisted in owning all the land in Egypt, and taxes were paid to him in kind from its produce.
So his wealth consisted of physical goods and services. Anyone claiming to be a “wealth creator” in that kind of economy is going to find themselves up against the laws of physics, which has the interesting consequence that the wealth that such people deal in is non-physical. So what exactly might that wealth be?
I would characterise wealth as comprising the following:
- access to breathable air – without which one is dead; Tutankhamun may have been wealthy when he was alive, but I wouldn’t want to claim that he still is. Of course this isn’t a very exclusive requirement, but clearly people who are obliged to breathe the heavily polluted air of some urban environments would be considered less wealthy that those who are not.
- access to drinkable water – again, basic stuff, but plenty of people don’t have it and those people are definitely not wealthy.
- access to food – not just sufficient to keep one alive, but in more than sufficient quantity and of more than merely tolerable quality; Fortnum & Mason rather than the Trussell Trust.
- access to shelter – and again more than the bare minimum required for survival. Bill Gates does not live in a tent.
- access to medical care – within the limits of what may be available in your particular circumstances, of course.
- access to community – we are social creatures, and we need one another. If the Covid-19 pandemic has taught us nothing else, it has taught us this.
- access to luxuries – whatever those might be for us. Exactly what that means is always contingent on time, place, cultural values and personal tastes, but as the judge said of pornography, you know a luxury when you see it.
- security of tenure – we need to have some confidence that all of this won’t be taken from us at a moment’s notice. This is a relative thing, of course, as we are all ultimately going to end up the same as Tutankhamun, who doubtless expected to enjoy his wealth for rather longer than he did.
Looking at this list, we can see that there is indeed a mixture of both material and non-material things, and some of them may have quite elastic definitions. Even luxuries may be non-material. For my part, if I were to win the lottery, I would certainly not buy a Lamborghini, but I would still enjoy the luxury of never having to worry about money. This is not a tangible thing.
Again, security of tenure has both material and non-material aspects. If I did own a Lamborghini and someone took it away from me, I would be reliant both on the legal concept of ownership (a non-material thing) and on the police force (very much part of the material world) to make good my loss. Wealth is therefore not simply a matter of physical stuff, although physical stuff is always involved at some level.
This is where money re-enters the story. It may surprise you – it certainly surprised me when I started looking into it – that there is no universally accepted definition of what money is. David Graeber discusses this in some depth in in his excellent Debt: The First 5,000 Years (Melville House, 2012), especially Chapter Three, but for our purposes I’m going to define money as an abstraction of value. That is to say, it is a tool for making quantifiable and commensurable the values of different and potentially incommensurable things, as in when a company pays someone £10.00 an hour.
We take this so much for granted that we often confuse money with value itself. But of course the worth of money consists entirely in its acceptability. I remember travelling to the Netherlands in the days before the Euro and being given a bunch of these things at the Foreign Exchange desk:
I simply couldn’t take this seriously as money. Nevertheless, Dutch people all seemed quite happy to accept them and give me goods and services in return.
Nor is this just a characteristic of paper money. Try taking a bag of sestertii down your local supermarket and see how far you get. Of course you could sell your coins to a collector but then you would be exchanging them for your locally acceptable currency, effectively turning them into money even though they were minted as money in the first place.
None of this was an issue for our friend Tutankhamun, who as noted above had no money, although he had plenty of access to value. And the foundation for that was an intangible thing: his prestige as the divine ruler of all Egypt.
This gives us some context for understanding the magical phrase “adding value” which is what wealth creators claim to be doing. Again, I think we are looking at a mixture of physical and non-physical things, which I am going to call transformation and pixie dust.
A basic example of transformation would be to take a chunk of flint and turn it into a hand-axe. You can do a lot of things with a hand-axe that you can’t do with a lump of unworked rock; this is the added value. Another example would be to cut down a tree and use the wood to make a chair. This is less clear-cut, because the tree had value which it has now lost – you won’t find many birds nesting in a chair, nor is it a CO2 sink. You are exchanging one bunch of value for another. In other words, there are often trade-offs with this kind of thing, and not all of them are going to be obvious.
Where you can really cash in, though, is by adding pixie dust. This is what brands are, fundamentally. You can have two functionally equivalent items – T-shirts, say – and by the simple act of attaching a designer label to one of them you can charge far more money for it. This only works, of course, to the extent that people buy into it, which is why we have the advertising industry. Naomi Klein’s book No Logo (Fourth Estate, 2010) goes into this in depressing detail.
Another popular way to apply pixie dust is to add pointless features. Cars are an excellent example of this. At this point, we know how to do cars. There are no longer any killer features to distinguish one from another; they all cover the same essential bases. Therefore the two avenues to added value are branding (of course) and adding extra bells and whistles. Do you really need a powered cup-holder? Probably not, but you’re going to be offered one if the manufacturer thinks they can charge you a bit more for it. All of these extra bits and bobs are of course more things to go wrong.
The trouble with pixie dust, though, is it has no substance to it. If I need to go down to the shops, I don’t need a Lamborghini, and I’m going to need a lot of persuading that I do, especially as there isn’t much room for your groceries in the back of one of these:
So what is the foundation of true wealth? I think there’s a clue in the fact that all of the things on my list depend on the co-operation of others. (Including breathable air – remember the tree that was cut down to make a chair?) We are social creatures, and our well-being depends on social factors – for example, some kind of arrangement that ensures reasonable security of access to one’s needs. This doesn’t have to look like our current property laws, by the way, but that is the purpose they are intended to serve.
Now I’m not putting forward any kind of legislative programme, and I doubt any my readers are in a position to do so. What I would encourage is the development by each of us of local, personal networks that can provide mutual, practical aid and support, because we’re all going to need it. But if we have that, maybe we can not just weather the forthcoming storms but even prosper.
Comments are welcome, but I pre-moderate them to make sure they comply with the house rules.