Wealth

Part 15 - DESTRUCTION OF WEALTH

There is no limit to the amount of wealth that can be created and the pervasive idea that there is a fixed amount of wealth and that it must be shared equitably is a myth. (If there was only a fixed amount of wealth, the few million people who existed 20,000 years ago would each have been each fabulously rich. Instead, by current standards they were desperately poor). 

 Wealth is destroyed by an act or omission that decreases accumulated wealth and productivity. It may be caused by interruptions in production resulting from accidents, strikes, wars, incompetence, criminal activities and natural disasters. It is also destroyed by injuries, sickness and premature death (which imposes a loss of potential wealth creation from the people involved).

We evolved from animals who needed to control an area of land which provided food and from the beginning of human history societies have been invaded by warriors from elsewhere, either as raiders intent on looting and enslaving existing populations but often as aggressive immigrants wanting more territory and people under their control as slaves.

When the victims resisted, the result was often a catastrophic destruction of wealth not only with the death of many productive workers from military conflict but also from diseases that invariable spread following wars but also the theft or destruction of crops and animals that constituted the accumulated wealth of the victims. A defeated population, unable to move away, was typically enslaved and forced to work for the invaders. 

 Although slavery has proven more expensive than employing willing workers and trade much cheaper than war. (As a Roman senator complained, buying copper and tin from the British was a fraction of the cost of invading Britain and subjugating the population). 

War might have been profitable up to medieval times but it ceased to be true after the Industrial Revolution when wars typically killed millions while devastating huge areas. 

All wealth is created by someone and it is easily destroyed or wasted by building monumental structures like pyramids that serve no productive purpose (except perhaps as a magnet for tourists).Just imagine how much more prosperous mediaeval societies would have been if the workers employed to build cathedrals had built better roads, bridges and irrigation canals or simply grown more food to guard against periods of drought.

Criminals do not create wealth but by stealing from productive people require the employment of police, lawyers and jail guards that could otherwise be employed in producing wealth.

Families and societies spend huge amounts of money to raise and educate children and this is an investment so that children can become producers of wealth in turn. This investment is lost if they are made less productive because of injuries or prevented from working by premature death.

Most politicians (sadly, often highly educated) delude themselves with the belief that they know how to spend money better than millions of people making their own decisions about what to make, buy or sell. The result is often unneeded infrastructure (essentially job creation by digging holes and then filling them) in or by building unneeded bridges or public transit systems that require continuous ongoing subsidies. This is the destruction of wealth since the money taken from taxpayers provides no permanent benefit.

Politicians also find borrowing money to be easier than raising taxes but this is simply deferring taxation into the future. This is a pernicious waste of wealth as the interest on the debt cannot be used to build better roads, schools or hospitals, or even to fund an adequate military force. Whereas if the taxpayers had kept the money they would have spent it on something useful and in the process probably would have employed the same number or more people thereby creating more wealth.