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The Wealth Creator?


firefly123

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Dec 8, 2009
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In a recent thread the question arose as to who creates wealth in a society. There was some debate as to what was created wealth and what was in fact recycling of existing money. I feel this might be worthy of its own thread as we did not come to a satisfactory conclusion and we started to derail the other thread.

The argument goes that if a shopkeeper has €100 of goods and sells them for €110 then he has created €10 of wealth. I stated that he hasn't as someone else has lost €10 within the economy thus meaning no new wealth has been created. THe argument was that the shop keeper pays wages and tax out of his profit thus creating wealth but has he?

In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. In otherwords I set up a widget factory tomorrow making widgets for €100 and selling them to the chinese for €110 thus adding €10 to the wealth of Ireland. Therefore wealth creators are a small enough group with the rest of us taking turns passing around the money they add to the system.

Now obviously we need shopkeepers/teachers/accountants/ firefighters as they are part of the supply chain/educate our populace making FDI more likely/help business maximise profit and pay tax/stop the widget factory burning down and without them we would not be able to buy stuff and manufacturers would not be able to sell stuff.
That raises the question if some people might be destroying wealth by selling things such as cars as the vast bulk of the money is sent out of the country.

Then there is the question of perceived wealth. A good example would be the independent media group who have seen their share value drop down to next to nothing. Does this destroy wealth in the country or is it the perception that does the damage. The same with the property bubble. Someone somewhere did well out of it. If Joe bought a house for €50,000 and sold it for €300,000 in 2006 then Joe is a lot richer and some poor sod (me) is a lot poorer. Surely that money is still out there somewhere being sat on or something?

Finally why do we insist on measuring our wealth on a solely financial basis? We should also take in to account the intangibles such as security and happiness to measure the wealth of our nation.
I am sure this is hugely simplified and I certainly don't profess any expertise on the matter but I don't see how swapping money around in a closed system creates wealth. I've heard about industry having a multiplier effect on the economy but again if we just sell things to each other how does this create new wealth.

I found this lecture by a professor Reinhard in princeton most interesting http://www.princeton.edu/~reinhard/pdfs/WEALTH-ECON-100-2002May-15-2010.pdf

I would be very interested to hear the views of other posters on here about this subject.
 

bluefirelog

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It's not just manufacturing that creates wealth. Services also generate wealth. I offer you a service e.g. technical support and you on the other side of the world pay for me to offer that service. It may not involve the physical creation of anything.
 

firefly123

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It's not just manufacturing that creates wealth. Services also generate wealth. I offer you a service e.g. technical support and you on the other side of the world pay for me to offer that service. It may not involve the physical creation of anything.
yup. I mentioned that in the OP.
In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy.
 

bluefirelog

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Oops, missed that. So you don't agree that providing technical support to people living in the country is wealth creating...
 

firefly123

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Oops, missed that. So you don't agree that providing technical support to people living in the country is wealth creating...
No I agree that its important. In fact it is a vital part of our economy but does it create any new wealth for the state? Any more so than any other service?
 

supermac2

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" In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. "

I agree

Compare and contrast Anglo Irish bank IBRC and Sean Quinn !!!!!!!!!!!!!!!!!!!1
 

firefly123

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In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy.

Compare and contrast Anglo Irish bank IBRC and Sean Quinn !!!!!!!!!!!!!!!!!!!1
Well thats a good example. When Sean Quinn was exporting cement and whatnot he was doing great. When he started trying to work his magic juggling act in Anglo it all went pear shaped. Quinn Group was a wealth creating organisation whilst Anglo seemed to just lend money to and from powerful individuals within a closed system
 

bluefirelog

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No I agree that its important. In fact it is a vital part of our economy but does it create any new wealth for the state? Any more so than any other service?
Well, if we didn't provide it domestically, would we have to import it. Would we have to get the tech support from abroad? Thus if we require a service that we have to pay for and it is provided domestically, are we maintaining the wealth domestically?
 

firefly123

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Well, if we didn't provide it domestically, would we have to import it. Would we have to get the tech support from abroad? Thus if we require a service that we have to pay for and it is provided domestically, are we maintaining the wealth domestically?
Sure I would agree with that. By providing that service we prevent money escaping the system and there is a good chance we develop skills to allow us to export that skill. But do you agree that fictional call centre does not create wealth in a strictly technical sense. Clearly the intangible wealth created by people having a job and money moving around is a good thing.
 

stopdoingstuff

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Feb 26, 2011
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22,897
Essentially I agree. Wealth is the creation of goods and services that others value. Things like retail do not create wealth but they do make people better off in that people get stuff they need. Retail can also increase wealth in the sense that an efficient retailer can get you more stuff for less and hence leave you with more money to save. Retail also helps redistribute wealth towards those who work in retail, and that's important. In the larger sense, things like retail can creaye wealth indirectly by allowing for the concentration of capital. The shop onwer makes profits, might invest those profits in other things or lodge those profits with an intermediary who loans them out to new businesses.
But fundamentally, wealth requires the creation of something that results in people being able to produce and acquire more stuff with less resources. The fundamental thing here is savings- without savings there is no investment and hence no creation of new products. In reality, the closed-system/open system distinction does not tell us too much since at the end of the day the world is one big closed system. Even if we export, we are still just moving wealth from one country to another. So within a closed system, real wealth is productivity- making more stuff with less resources. That in my view is wealth.
 

bluefirelog

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Sure I would agree with that. By providing that service we prevent money escaping the system and there is a good chance we develop skills to allow us to export that skill. But do you agree that fictional call centre does not create wealth in a strictly technical sense. Clearly the wealth created by people having a job and money moving around is a good thing.
Let's think. I'm not sure it's that clear cut. You're providing something that people perceive they need or what and are willing to fund. It's the basis for consumerism. You create the need/desire. Apart from the benefits to employees and the local economy, maybe through your provision of the service, society then advances in some way and uses the benefits from your service to undertake other enterprise e.g. create software etc.
 

fontenoy

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Where is CAEL when you need him, I'm sure his input on the creation of wealth would have been....well enlightening
 

EUrJokingMeRight

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Sep 28, 2009
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Wealth is created by production. Wealth is transferred, from the creators of wealth, by the inflation and redistribution of currency supply and derivatives thereof.

When a man, grows a tree on his land, chops it down and makes paper to sell he monetizes his wealth by selling a product. His wealth is transferred to the school teacher or the politician pushing the government agenda by incurring government rates on his property, government tax on his income, government regulation of his business etc.

Government is the destroyer of wealth. We need smaller government and smaller state to become wealthier.

Currency is not wealth.

If the euro died tomorrow Irelands wealth would still exist. Our land, our forests, our fish stock, our national herd, the natural resources, the ideas in our heads, the people with skills. These are the things that create wealth. These are our wealth.

The Euro is paper, it is not wealth. Trillions of Euro will be printed next year to buy spanish and Italian and french bonds so these governments can continue to indebt nations with deficit spending(to pay PS wages and Social Welfare) so the REAL wealth of the nations can be transferred to those operating the printing presses and controlling the money supply.
 

Radix

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Aug 31, 2010
Messages
10,031
In a recent thread the question arose as to who creates wealth in a society. There was some debate as to what was created wealth and what was in fact recycling of existing money. I feel this might be worthy of its own thread as we did not come to a satisfactory conclusion and we started to derail the other thread.

The argument goes that if a shopkeeper has €100 of goods and sells them for €110 then he has created €10 of wealth. I stated that he hasn't as someone else has lost €10 within the economy thus meaning no new wealth has been created. THe argument was that the shop keeper pays wages and tax out of his profit thus creating wealth but has he?

In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. In otherwords I set up a widget factory tomorrow making widgets for €100 and selling them to the chinese for €110 thus adding €10 to the wealth of Ireland. Therefore wealth creators are a small enough group with the rest of us taking turns passing around the money they add to the system.

Now obviously we need shopkeepers/teachers/accountants/ firefighters as they are part of the supply chain/educate our populace making FDI more likely/help business maximise profit and pay tax/stop the widget factory burning down and without them we would not be able to buy stuff and manufacturers would not be able to sell stuff.
That raises the question if some people might be destroying wealth by selling things such as cars as the vast bulk of the money is sent out of the country.

Then there is the question of perceived wealth. A good example would be the independent media group who have seen their share value drop down to next to nothing. Does this destroy wealth in the country or is it the perception that does the damage. The same with the property bubble. Someone somewhere did well out of it. If Joe bought a house for €50,000 and sold it for €300,000 in 2006 then Joe is a lot richer and some poor sod (me) is a lot poorer. Surely that money is still out there somewhere being sat on or something?

Finally why do we insist on measuring our wealth on a solely financial basis? We should also take in to account the intangibles such as security and happiness to measure the wealth of our nation.
I am sure this is hugely simplified and I certainly don't profess any expertise on the matter but I don't see how swapping money around in a closed system creates wealth. I've heard about industry having a multiplier effect on the economy but again if we just sell things to each other how does this create new wealth.

I found this lecture by a professor Reinhard in princeton most interesting http://www.princeton.edu/~reinhard/pdfs/WEALTH-ECON-100-2002May-15-2010.pdf

I would be very interested to hear the views of other posters on here about this subject.

Firstly a good and well thought out post firefly, more of which should be seen on P.ie.

Secondly, and I'll come back to this later as your OP beds down, buying and selling our houses to each other doesn't constitute "wealth creation"; that's the stuff of the institutional bubble masters who destroyed our country.

The people who "create wealth" are those who 'add value', whether that is intellectual value or physical value, and both are linked.

Well done with the OP, I'll be back later.

:)
 

Shpake

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Joined
Oct 17, 2012
Messages
5,374
One way of approaching it is that of Josef Schumpeter.
You either increase output.
You come up with an innovation and realize it... put it into operation (successfully) . this can either be a new product market process raw material, more efficient way of making something... and ditto all that with regard to a service



Another way by I forget who is arbitrage... tranfer goods from one part of the world to where they are more in demand...
Course then Brian Boru pointed out you can also increase wellbeing somehow.,.. GDP GNp is not everthing.
Shpake who does not want to sound pedantic
Or offend the highly sensitive economists out there
 

firefly123

Well-known member
Joined
Dec 8, 2009
Messages
28,155
Wealth is created by production. Wealth is transferred, from the creators of wealth, by the inflation and redistribution of currency supply and derivatives thereof.

When a man, grows a tree on his land, chops it down and makes paper to sell he monetizes his wealth by selling a product. His wealth is transferred to the school teacher or the politician pushing the government agenda by incurring government rates on his property, government tax on his income, government regulation of his business etc.

Government is the destroyer of wealth. We need smaller government and smaller state to become wealthier.

Currency is not wealth.

If the euro died tomorrow Irealdns wealth would still exist. Our land, our forests, our fiush stock, our national herd, the ideas in our heads, the people with skills. These are the things that create wealth. These are our wealth.

The Euro is paper, it is not wealth.
So anyone not involved in production is a wealth destroyer? Surely stable government allows the man to cut down his tree without fear of it being stolen or his forest burned?
 

davoid

Well-known member
Joined
Feb 16, 2011
Messages
9,711
In a recent thread the question arose as to who creates wealth in a society. There was some debate as to what was created wealth and what was in fact recycling of existing money. I feel this might be worthy of its own thread as we did not come to a satisfactory conclusion and we started to derail the other thread.

The argument goes that if a shopkeeper has €100 of goods and sells them for €110 then he has created €10 of wealth. I stated that he hasn't as someone else has lost €10 within the economy thus meaning no new wealth has been created. THe argument was that the shop keeper pays wages and tax out of his profit thus creating wealth but has he?

In my view to create wealth you must either dig something out of the ground, grow or manufacture something and export it or provide a service in exchange for foreign wealth (either through service industry or tourism) at a profit thus creating wealth for the Irish economy. In otherwords I set up a widget factory tomorrow making widgets for €100 and selling them to the chinese for €110 thus adding €10 to the wealth of Ireland. Therefore wealth creators are a small enough group with the rest of us taking turns passing around the money they add to the system.

Now obviously we need shopkeepers/teachers/accountants/ firefighters as they are part of the supply chain/educate our populace making FDI more likely/help business maximise profit and pay tax/stop the widget factory burning down and without them we would not be able to buy stuff and manufacturers would not be able to sell stuff.
That raises the question if some people might be destroying wealth by selling things such as cars as the vast bulk of the money is sent out of the country.

Then there is the question of perceived wealth. A good example would be the independent media group who have seen their share value drop down to next to nothing. Does this destroy wealth in the country or is it the perception that does the damage. The same with the property bubble. Someone somewhere did well out of it. If Joe bought a house for €50,000 and sold it for €300,000 in 2006 then Joe is a lot richer and some poor sod (me) is a lot poorer. Surely that money is still out there somewhere being sat on or something?

Finally why do we insist on measuring our wealth on a solely financial basis? We should also take in to account the intangibles such as security and happiness to measure the wealth of our nation.I am sure this is hugely simplified and I certainly don't profess any expertise on the matter but I don't see how swapping money around in a closed system creates wealth. I've heard about industry having a multiplier effect on the economy but again if we just sell things to each other how does this create new wealth.

I found this lecture by a professor Reinhard in princeton most interesting http://www.princeton.edu/~reinhard/pdfs/WEALTH-ECON-100-2002May-15-2010.pdf

I would be very interested to hear the views of other posters on here about this subject.
There is no reason to insist on measuring wealth in financial terms. But financials are in effect a unit of measurement, and are a useful method of measuring financial wealth.

But wealth, in wider sense, can encompass more than financial wealth, but measuring this can be problematic. I think that is why from time to time there are "happiness indices" and surveys and the like which do a holistic assessment of well being.

But that, imo, is a different thing from financial wealth.
 
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