Monday 21 October 2013

Creating Wealth

Creating Wealth

The creation of wealth is at the heart of all economies and all economic theories. For without wealth it is impossible to have an economy. Put simply wealth is surplus. If you create a surplus you are creating wealth.

So what is a surplus?

A surplus is an excess of goods, it is something that did not exist before that now does. For example, if you have an apple tree and it grows only enough apples for your own use no surplus has been created. But if that apple tree grows more apples than you need you have a surplus. That surplus, in theory at least, can be bartered or sold providing you with something you did not have before. A surplus has created wealth.

A surplus of a useless good is still useless, the surplus must be of something that is needed or wanted. To be real wealth it must be able to help something else produce a surplus.

Most of us do not create wealth, no matter how hard we work or how important we are or think we are. Wealth is created by creating a surplus not by hard work or clever thinking. Either or both of those may be required but it is not either of them that create's the wealth.

Only a few select things create a surplus:

Manufacturing &

Transport is the exception because by it's self it cannot create anything, but by moving goods from somewhere that it is common to somewhere it is uncommon it can create a surplus. All of the others create things that didn't exist before. Of course apples existed before but not these particular apples and that is whats important.

There are things that we are often told create wealth but which absolutely do not create wealth, they include but are not limited to:

Real Estate
Financial Services

While they all have there role to play in the economy non of them create any surplus. What they do is they move wealth from one place to another. That is important, it is how most of us live, by transferring wealth from our employer to our wallet to the shopkeeper. Your employer is happy, your happy, the shopkeeper is happy. But it is not creating wealth.

An entire economy can be built on retail and it can work but it is not creating wealth no matter how many times it is said or heard. What it is doing is transferring wealth.

Only when we understand how wealth is created can be build an economy that will create wealth, instead of living in a bubble economy.

Upon Hope Blog - A Traditional Conservative Future

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