A Simple Introduction to the Nature of Wealth
You might be surprised by what you hear when you ask people to tell you what the word wealth means, particularly if you ask a liberal. Apparently, most people have some generalized concept that it is the state of having a lot of money; and in the minds of many liberals, that money was usually obtained through some underhanded scheme where the "working man" was robbed. Some define wealth in terms of concrete status goods such as big houses or fancy cars, which have become symbols of wealth, but do not define it.. Others, even some economists, view wealth as something that preexists in the world and is monopolized by a sinister few, like a canteen of water lying in the desert that once found is greedily guzzled by the finder while denying others of "their fair share."
Rarely will you find someone that understands wealth for what it actually is: surplus production. Beyond that though, wealth is the ladder that allowed mankind to climb above his savage, disease-ridden and brutal history to create the standards of living that Americans see around them every day, but take for granted. The reality is that even the poorest Americans live much easier, healthier, and longer lives than their ancestors of even 150 years ago.
In order to gain a clearer understanding of the true nature of wealth, it is only necessary to take a few short steps back to the days of the American settlers who founded this country. Imagine that you live, like some of the early settlers, at a subsistence level. You plant corn and some other vegetables and hunt a little game in order to survive. At the subsistence level, you have no wealth. Your only goal is to stay alive. And if you plan to live for longer than just that one year, you will need to set aside enough of your harvest to provide you with seeds to plant again the following year. Thus, you have some savings; but if you consume that seed now, you will likely perish following year. Again, you have no wealth, but you can afford to continue living.
If through planning, forethought, and lots of hard work you are able to grow more crops than you can consume, have enough seed to plant again the following year, and still have surplus, then you have acquired some wealth. Wealth is created by the hand of the producer and is nothing more than surplus goods. With a portion of the wealth you created, you could trade for a pair of shoes, clothes or tools. These items would then represent the surplus you created during the year by your own efforts. Perhaps you had enough foresight to expand your fields, plant more seed, and the following year you have even larger surplus (wealth) that you could use to barter for other goods. This is the method by which wealth was once created, and it remains the way that honest men create it today: through planning, forethought, and hard work at some gainful employment, enterprise, or industry.
In the days of the early settlers, however, people often bartered the actual surplus commodities that they produced with others who had produced different commodities that they either needed or wanted. Honest men traded value for value with others who were willing to trade. The concept of trading value for value between honest and willing people is the root idea of the economic system known as capitalism.
In addition to barter, early colonists also used gold and silver coins and particularly Spanish dollars, known as Pieces of Eight, so called because they were often divided into eight bits for smaller transactions. They traded gold and silver coins for labor, food, tools, lumber, tobacco, and other products. The coins, just like any of the other goods for which they traded, represented the surplus that was produced. Thus, they represented wealth. Gold and silver coins became widely used as a means of storing wealth because they were of known weight, purity, value, durability, easily divisible, easily aggregated, and easily portable.
As the colonists acquired wealth, the person that produced it was able to raise his standard of living beyond that of mere subsistence. Furthermore, when that wealth was traded, value for value, with others in the community, it served to raise the standard of living of the persons to whom it was transferred as well. As the trading continued within the community, and ultimately the nation, the standard of living was raised for all of the participants in the trading network that developed. In this way, through hard work, innovation, and the production of surplus goods, coupled with free trade among willing participants, the standard of living continued to grow to the point where we stand today — poised precariously on the precipice of history.
For those who have read this far, I'm sure most of you think, "Well that was simple. Everybody knows that." The sad truth is that while the basic principles of capitalism and wealth are indeed simple, it seems that very few people today actually do understand it; and of those that do, many would dispute it. If you actually did know and believe it, then congratulations. Start explaining it to as many others as you can. When you hear statements such as this one by Barack Obama on October 8, 2008, "We need policies that grow our economy from the bottom-up, so that every American, everywhere has the chance to get ahead," ask yourself how that fits into the definition of capitalism and the creation of wealth as described earlier in this article. How can one create a robust economy based on the upward flow of wealth from those who live below the subsistence level and who produce nothing while consuming the wealth of others. The short answer is that it can not, so long as those people continue to be held in the state of welfare bondage where they are neither encouraged or expected to produce anything of value.
