In The Socialist (1894), Ambrose Bierce claims that the socialist idea of a fixed world wealth is incorrect and that rather than feeding off the poor, the wealthy are feed on by the poor. He continues to say something along the lines of people are wealthy because they are intelligent.
I do not have much experience with world finance, but I spent some time in college studying agrarian peasant societies. While I can not say that these people were stuck in the system they were born into, they cleary were not given as many opportunities to leave nor did they live lavish lives. Of course, when I say they did not live lavish lives I mean they lived in conditions many of us would shun as well below minimal standards.
Based on my short time studying these groups, I never understood the concept that world wealth is not fixed. I understand the concept of inflation and that wealth changes over time, but when I think of wealth as being finite I consider it more as percentages rather than fixed values. Maybe I’m confusing concepts here, but is it really possibly to increase the basic standard of living of the world such that peasants have access and the funds for medicine, education, solid housing and all while maintaining the current relative difference between the wealthy and the poor?
I think it depends on how you look at wealth. If gold=wealth, then yes, there is a set amount of wealth on the planet. If, on the other hand, you use other indicators then the world does have a very large supply of wealth.
The biggest increases in wealth come from progress. People make things more efficiently and therefore cheaper. People devise new ways of doing things. They find better ways to make things. They create new technology. That is creating wealth.
For example, look at the US. It used to be that a TV was a huge purchase and only the upper classes could afford them. Now, everybody has at least one tv and most houses have more than one. Same thing with cars, computers and stereos. Heck, I can’t think of one thing that is more expensive than it used to be when adjusted for inflation except for houses*. The reason for all this is that people are continually making things more efficiently.
For an interesting on this subject read check out Julian Simon
Slee
*Housing gets complex. The last couple things I read had a lot of economist predicting a problem with the housing market. Part of the problem, at least in many parts of the country, is land and the government. For example, housing prices in Las Vegas are outragous and that is due, in part, to the governments land regulations. The land regulations are causing land prices to increase and that, along with a huge influx of new people, has caused the average house price to shoot up.
Ask any astrophysicist and they will tell you the world doesn’t encompass all of existence, the world is not infinite. Economics wouldn’t exist if we had infinite wealth.
(Working with the following definition of wealth: goods and resources having value in terms of exchange or use. If you mean it another way then my post isn’t very relevant.)
Ask a mathematician what infinity is!
No, there certainly isn’t an infinite amount of wealth.
I could discuss how technology advances and market demand make e.g. computers more powerful yet cheaper, but instead consider what will happen when the oil runs out. :eek:
Wealth isn’t infinite of course, but it is growing. We become wealthier as we learn more efficient ways to make the goods that we use, and as we invest capital in the means of production. We also become wealthier when we discover new medicines, new materials, and new processes to create goods that never existed before.
The world per-capita Gross Domestic Product has doubled since 1970. That essentially means that twice as many goods and services are created per year for each person on the planet than were created in 1970. That’s a real doubling of wealth creation per person. In terms of total wealth creation, world GDP has approximately tripled since 1970. And since world GDP is still increasing annually, we can expect it to be much greater still in the future.
And for that matter, real per capita GDP was constant from the dawn of time until about 1500 AD, at only 115 dollars per person or so. Then the industrial revolution started to kick in, and we developed the tools and political systems required to concentrate capital into factories, research, etc. From that point on, it took off and multiplied over and over again.
I’m an engineer - I know what infinity is. What I’m talking about is the counter argument to socialism; where a socialist would say something like peasants exist in China so that we can live richer lives here. That the rich are rich because they live off the poor.
If something isn’t finite, it’s infinite, right?
While I realize the standard of living in the US has risen, has it risen at the cost of other countries? Is wealth like a balloon where to make one side larger you must pinch another?
I don’t think that world wealth is finite, but unless I’m misreading Bierce from The Socialist, it would appear that the counter argument to socialism assumes an infinite wealth.
Perhaps where I’m getting lost is in how wealth is created. How does an increase in GDP translate into clean water, food and shelter? While these are possibly social issues, if the world is getting wealthier, why are 3rd world countries still so far behind?
As others have pointed out, progress usually arrives for the rich first. But it often then works its way down the economic ladder. As an example, consider books. They were once hand produced and very costly - even the wealthiest of men might have only a few dozen. Then technological progress drove down the cost to the point where even very poor people own books. But it’s not like the rich were taking books from the poor or the poor were taking them from the rich. It’s just that the cost of production went down so more were produced and wider customer base could afford them.
And while some countries are still far below the current average, the average itself has grown. Somalia might be one of the poorest countries in the world in 2006. But Somalia has more wealth today than the Roman Empire had in 100 AD when it was the wealthiest country on Earth.
Or consider food. Five hundred years ago, the total population of the world was around 500,000,000. Now it’s over 5,000,000,000. If wealth was fixed and there was always the same amount of food, that would mean that five hundred years ago, people were eating ten times as much food as they do now. Obviously, that’s ridiculous. What happened was that the amount of food being produced has expanded from what it was five hundred years ago. And if food production was able to expand tenfold over five hundred years to keep pace with population growth, why assume it didn’t expand fifteen fold in that time period and the average person now has 50% more food than the average person did then?
Little Nemo, good point. Perhaps wealth is the wrong term to use, either that or I don’t understand the socialist view that wealth is fixed. Do they mean constant forever?
Is it necessary for the poor to remain poor so that others can be wealthy?
gooftroopag–I’m not sure how you got from “wealth isn’t fixed” to “wealth must be infinite”. The amount of wealth in the world is neither fixed nor infinite. It changes over time, generally growing as population increases and technology improves, but sometimes declining during recessions or when messed-up regimes like the Soviet Union or Nazi Germany come to power.
When I think of wealth, I think of actual dollar amounts rather than surplus production. Maybe a better example of what I’m referring to is when Walmart comes into communities and drives out local competition. While good for Walmart, and maybe superficially good for some people, Walmart provides a lot of products at the reduced price and in my experience, quality. So, in the long run people must purchase more from Walmart to get the quality they could have received somewhere else. Plus, rather than spending their money in local shops people spend their money in Walmart and the profit is taken out of the local community, rather than brining money into the community.
When I lived in Seattle, the community I lived in would not allow big businesses in for this reason because rathering than increasing the dollars of the community big business is drawing money away from the community.
The question the OP is answering is “is world wealth fixed”, or “is wealth a zero-sum game”. The answer is “no”. I do not need to take from the poor to get wealthier.
GDP is a measurement of a goods produced. Those goods include houses, cars, TV sets, and other stuff we use to improve our lives.
Wealth is just a measure of value. Whenever raw materials like trees or sand are turned into lumber or microchips, value is added and wealth is created. That is why wealth isn’t finite. As advancements are made, we have the capability to add value to more raw materials.
Without getting into their specific histories, many Third World countries are catching up. China, India and other parts of Asia are growing quite rapidly. When a factory movies to China or a call center movies to India, it creates jobs that pay very well by local standards, even if not by Western standards. In many of these countries, a middle class is forming as people now have more disposible income. Eventually prices and wages will rise and an equilibrium will be reached where it is not as profitable to manufacture overseas anymore.
As a general rule of thumb, more democratic countries with free market economies tend to do better than centralized governments and command economies because a centrally controlled governments cannot (and often choose not to) react as quickly or effeciently to the wants and needs of the people as fast as the aggregated decision making ability of the market.
Wealth certainly isn’t fixed. This is an outdated notion which assumes ‘wealth’ is tied to things like gold…which certainly IS not infinite (well, unless we are talking about in the wider universe…in which case the answer to the OP certainly IS that wealth is infinite :)).
The problem is that the definition of ‘wealth’ changes over time depending on what humans find important. I was watching a program the other night discussing Stonehenge and the economy that built it. They were talking about the sea change that took place during the mid period when the folks there began changing from a stone technology culture to a early metal working culture. They had been appearently working a certain flint mine in the region prior to this with a couple of dozen miners able to mine all the flint needed. After metal working started they amazingly enough began excavating for copper at another mine…and its estimated that thousands of miners worked the mine for centuries.
The point? The amount of ‘wealth’ in their culture went up tremendously with the introduction of the simple idea of using metal instead of stone, and the techniques for mining and smelting that metal. This trend continues through to today (granted there have been a few setback in history when the amount of ‘wealth’ has dropped).
So, while the amount of ‘wealth’ isn’t infinite (unless we posit that human being will expand beyond our solar system and eventually fill the universe), we haven’t even begun to glimpse the upper limits. Even if we remain on earth alone we still have a rather long way to go before ‘wealth’ even levels off.
Economists don’t attempt to make judgments about “value” and “quality”, because your idea of quality is likely to be very different from mine. They measure wealth, income, and value in dollars and cents. This may sound cold and impersonal, but it’s the only way to avoid endless debates over whether “a downtown filled with local merchants” is worth more or less than “a place where I can buy stuff cheap”.
If this is true, then why do so many people oppose “big business” coming into their towns and neightborhoods?
Perhaps the difference is between global and local wealth, because if more money is being pulled out of a town than is flowing into it, then I would expect the town to have problems and/or degrade.
Am I mixing finance concepts or is this related to something else?
Maybe they are just wrong, or maybe they fall prey to propaganda from special interests who can’t compete, or from demagoguing politicians looking to assuage local special interests.
The fact is, people vote with their dollars. There’s a reason why big-box retailing has become so popular - it’s a very efficient way to sell products. The beneficiaries are the consumers. The losers are the old high-margin retailers who can’t compete with economies of scale and efficiencies in inventory management.
Or look at it this way - if I live in an area that employs 100 farm hands, and I invent a machine that can do the work of 90 of them, do you expect those farmhands to be happy? No. But the people who buy the goods sure will be. And if those farmhands eventually go on to other jobs, then the community is still making all the agricultural products it used to, plus whatever it is the farmhands are making now. Overall wealth increases. But a free market is dynamic - jobs are created, and jobs are destroyed. Inefficient business is punished, and efficient business rewarded. Ultimately, this is good, but the people who were punished and the workers whose jobs were destroyed don’t have to like it.
In the early 1900’s, the majority of the population was employed in the production and distribution of food. Today, only a small fraction is, because we’ve gotten much better at agriculture. But note that we don’t have 80% unemployment, because all those people who lost their jobs learned new trades and we’re all the better for it.
But back when farms were being mechanized, there was no shortage of opposition to it all.
These choices aren’t always rational. By the same token, the most cost effective solution isn’t necessarily the most aethetically pleasing option for the community.
